Know-Your-Beneficial-Owners Principle is a general requirement based on Presidential Regulation No. 13 of 2018 on Implementation of Know-Your-Beneficial-Owners Principle in Connection with Prevention and Eradication of Money Laundering and Terrorism Criminal Act (Tindak Pidana Pencucian Uang dan Tindak Pidana Pendanaan Terorisme “TPPU&TPPT”). Furthermore, it is implemented based on Minister of Law and Human Rights (“MoL”) Regulation No. 15 of 2019 on Technical Guideline of the Implementation of Know-Your-Beneficial-Owners Principle of Corporations.
With regard to the implementation of Know-Your-Beneficial-Owners Principle, MoL has issued MoL Regulation No. 2 of 2025 on Verification and Supervision of Corporate Beneficial Owners ("MoLR 2/2025") previously regulated under Minister of Law and Human Rights Regulation No. 21 of 2019 on Procedures for the Supervision of the Implementation of Know-Your-BeneficialOwners Principle of Corporations.
MoLR 2/2025 aims at revamping the compliance rate of Know-Your-Beneficial-Owners Principle including maintaining the accuracy of beneficial owners' data by introducing some new initiatives.
This legal insight provides a summary on such initiatives that can be a guideline for corporations to comply with this regulation and reflect the same in their internal compliance policies.
Expanded Scope of Application
MoLR 2/2025 applies to all types of business entities, as it broadly defines a "Corporation" as any organized group of people and/or assets, in the form of either a legal entity or a business entity. This regulation notably expands the subject of the regulation by explicitly includes (i) limited liability companies, including individual companies (Perusahaan Perorangan); (ii) foundations; (iii) associations; (iv) cooperatives (Koperasi); (v) Commanditaire Vennootschap (CV); (vi) general partnerships; and (viii) limited partnerships.
Clearer Scope of Obligations for Corporations
MoLR 2/2025 introduces clear guidelines on implementing the Know-Your-Beneficial-Owners Principle, which are:
- Identification and verification;
- Determining the Beneficial Owners of the corporation; and
- Mandatory reporting of Beneficial Owners' information to MoL through the online system, managed by the Legal General Administration (Administrasi Hukum Umum or AHU).
Following the Scope of Obligations, the relevant corporations shall:
- Submit any update on the Beneficial Owners' information once a year;
- Maintain proper record and documentation on the Beneficial Owners' information; and
- Completing the questionnaire relating to the Beneficial Owners' information through AHU online system.
Know-Your-Beneficial-Owners Principle Questionnaire Requirement
In contrast to the now-revoked MoLHR21/2019, the new regulation extends the obligation to complete beneficial ownership questionnaires to notaries, who are required to submit such documentation during the following events:
- Establishment, registration, or ratification of a corporation;
- Amendments to the articles of association;
- Changes in corporate data; and/or
- Reporting, modification, or updating of beneficial ownership information.
Verification Procedures and Multi-Party Involvement
Although the verification process was generally regulated in Presidential Regulation No.13/2018 and MoL Regulation 15/2019, the implementation stage did not reflect the procedure of KnowYour-Beneficial-Owners Principle. There were still some gaps in the process on ensuring the accuracy of such Beneficial Owners information. Therefore, this new verification process is based on the risk on potential TPPU&TPPT crimes, as may be identified by AHU.
MoLR 2/2025 provides detailed guidance in doing the verification procedure confirming the accuracy of such Beneficial Owners information that is submitted in every level of the stakeholders' involvement in the implementation of Know-Your-Beneficial-Owners Principle. These stakeholders include the (i) corporations; (ii) Notary; (iii) MoL; also (iv) other authorized government agencies.
Corporations: On the level of corporations, the verification shall be made through the assessment of consistency between the submitted information on Beneficial Owners, and that of the supporting documentation. This verification must be made by the corporation when they provide the reports on the (i) corporation establishment; (ii) change of Beneficial Owners; and (iii) update on the Beneficial Owners information.
Notary: The Notary is required to do the verification when the corporation uses the notary's services in accordance with the regulation on Know-Your-Users Principle of notary services.
MoL: MoL must conduct the verification process through the examination of information on Beneficial Owners of corporations that is submitted by the corporations and/or notary, and the response to the questionnaire as completed by the relevant corporation.
Data Processing and MoL Analysis
The Minister, through the relevant Director General, is authorized to process and analyze data and questionnaires submitted electronically, based on the risk assessments. This process includes verifying information on the national ID numbers, taxpayer identification numbers, and other forms of legal identity. This MoL analysis is primarily conducted for corporations having high risks to TPPU&TPPT crimes.
If upon such analysis, there is any indication of discrepancy between the submitted information and the response provided in the questionnaire. MoL may request a direct or indirect “clarification” to the corporations. A Direct Clarification can be made through (i) a summon to the relevant company; and/or (ii) on-site inspection of the head office or other premises of the corporation, as requested. Further, a direct clarification can also be done through media teleconference, video conference or other means of electronic communication. An Indirect Clarification is made electronically through reviews of documents and/or by requests of additional information.
Notably, the Minister is now empowered to designate alternative beneficial owners based on the results of such verification and analysis.
Administrative Sanctions
Failure to submit the required reports, or submission of false information on the beneficial ownership may result in administrative sanctions in the form of:
- Written warnings;
- Inclusion into a blacklist; and/or
- Being blocked from the access to the AHU Online system.
Written warnings are issued via the AHU Online system and/or email, while a blacklist status is publicly announced on the website of the Directorate General of General Legal Administration. Access blocking is executed by disabling the corporation's access to the AHU online platform.
On going Obligations for Non-Compliant Corporations
Corporations already subject to sanctions, being blocked or blacklisted, prior to the enactment of this regulation, shall remain under such status until they fulfill all obligations as stipulated in MoLR 2/2025.
Concluding Remarks
The enactment of MoLR 2/2025 marks a significant regulatory shift towards greater transparency and accountability in corporate ownership structures in preventing TPPU and TPPT crimes in Indonesia. It introduces comprehensive verification and compliance measures that impact on, not only the corporations, but also the notaries and related stakeholders. Corporations are required to, not only report on the Beneficial Owners information, but also update the information on an annual basis. Additionally, reporting Beneficial Owners information also applies to any corporation establishment, changes of the articles of association, changes of corporation data, or changes of Beneficial Owners information, as relevant.
To mitigate risks and ensure smooth operations, it is crucial for business entities to promptly align their internal governance and reporting mechanisms with the updated requirements including maintaining the proper record and documentation on the Beneficial Owners' information, and conducting internal verification processes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
