Learn why Indonesia is extremely attractive for business and how to stay compliant with local AML regulations.
The country’s digital economy is also anticipated to reach a valuation of US$124 billion by 2025, according to a recent e-Conomy report. A substantial portion of this growth is attributed to the e-commerce sector, expected to account for over US$83 billion to the digital economy by 2025.
As this growth continues, there is a notable emergence of new businesses, particularly in the e-commerce and fintech sectors. And these businesses are obliged to adhere to local Anti-Money Laundering (AML) regulations, one of which is KYC, or Know Your Customer.
Let’s therefore dive into the specifics of Indonesia’s AML/KYC rules.
According to the Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering, the following institutions are obliged to comply with the country’s AML regulations:
2. finance companies
3. insurance companies and insurance broker companies
4. financial institution pension funds
5. securities companies
6. investment managers
9. postal services as the current account service providers
10. traders of foreign currency
11. card-basis payment device service providers
12. e-money and/ or e-wallet service providers
13. lending and savings institutions
14. pawn shops
15. companies which run in the field of commodity future trading
17. property companies/ property agents
18. motor vehicle dealers
19. gems, jewelry, and precious metal dealers
20. antique and artistic stuff dealers
21. auction houses.
The full list of KYC/AML-related laws in Indonesia can be found on the OJK website.
Indonesia officially became a full member of the Financial Action Task Force (FATF) on October 27, 2023.
The country has significantly advanced in aligning its AML framework with FATF recommendations. As a result, the FATF is no longer actively monitoring Indonesia.
Being an FATF member, Indonesia adheres to the FATF’s risk-based approach, which means businesses are mandated to follow a number of steps including:
a. Any financial transaction that seems suspicious
b. Cash transactions of Rp500,000,000.00 (±$32K) or its equivalent in foreign currency, whether made in one single transaction or several transactions on the same day
c. Fund transfers to or from other countries.
Suggested read: The APAC Sentinel: Effective Transaction Monitoring Tactics
The KYC (Know Your Customer) process is a mandatory compliance measure according to the Indonesian Financial Services Authority (OJK), aiming to enable financial institutions to correctly verify their customers’ identities.
When incorporating KYC solutions, businesses must report their utilization to the Bank of Indonesia, implementing robust identity verification methods or technologies, and establishing effective policies and risk control procedures to adhere to regulatory requirements.
For identity verification, it is necessary to obtain the following identity verification information and certain documents (except for low-risk customers).
In accordance with the guidelines set by the Bank of Indonesia, businesses are required to gather identity information from officially recognized government-issued documents, such as:
Penalties for money laundering offenses vary based on the nature of the crime and other circumstances, but may include: