Strengthened Financial Compliance in Indonesia-A Leading Economy in the Asia-Pacific Area
In the rapidly growing digital economy of Indonesia, businesses in sectors such as e-commerce and fintech are flourishing. This expansion is not only limited to these sectors, as institutions like pawn shops and remittance service providers are also subject to stringent Anti-Money Laundering (AML) regulations.
These regulations, primarily governed by the Financial Services Authority of Indonesia (OJK) and Bank Indonesia (BI), mandate businesses to adhere to Know Your Customer (KYC) procedures, including electronic KYC (eKYC). The specific KYC requirements for remittance service providers are extensive, requiring customer identity verification, ongoing monitoring, and compliance with AML and combating the financing of terrorism (CFT) laws according to Indonesian regulations and international standards such as FATF.
Key elements of these KYC procedures include identity verification, where valid identification documents are collected from customers during onboarding. Institutions must also conduct risk-based customer due diligence, with higher-risk customers requiring enhanced due diligence and more frequent reviews.
Compliance with OJK Regulation No.12/POJK.01/2017 on AML and CFT in the financial service sector is mandatory. Bank Indonesia’s regulations, such as No.14/27/PBI/2012 and No.19/10/PBI/2017, specifically address AML/CFT and KYC for banks and non-bank payment system providers, which include remittance services.
KYC is not a one-time procedure; service providers must perform ongoing monitoring of transactions and customer behavior to detect suspicious activity. Providers must also identify and apply enhanced due diligence on politically exposed persons (PEPs) and verify ultimate beneficial ownership to prevent illicit financing.
While there are no current international sanctions against Indonesia, providers must still perform sanctions screening as part of compliance. The digital economy in Indonesia is anticipated to reach a valuation of US$124 billion by 2025, according to a recent e-Conomy report, underscoring the importance of these regulations in maintaining the integrity of the digital economy.
The digital economy and 4.0 industry in Indonesia are the fastest-growing in Southeast Asia, with over 2,000 startups. According to Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering, a wide range of institutions, including banks, finance companies, insurance companies, and e-money and/or e-wallet service providers, are obliged to comply with the country's AML regulations.
As the digital economy continues to grow, it is crucial for businesses to understand and adhere to these regulations to ensure a safe and secure environment for all participants.
Businesses operating in Indonesia's digital economy, such as those in e-commerce, fintech, pawn shops, and remittance service providers, are mandated to follow stringent Anti-Money Laundering (AML) regulations. These businesses need to comply with Know Your Customer (KYC) procedures, including electronic KYC (eKYC), identity verification, risk-based customer due diligence, and ongoing transaction monitoring to prevent illicit financing.
