Presidential Regulation on The Enactment of Beneficial Ownership is Momentum for Accelerating the Eradication of Corruption

Jakarta – National Coalition Publish What You Pay (PWYP) Indonesia gives a positive appreciation for the issuance of Presidential Decree Number 13 Year 2018 about Principle of Recognizing Beneficial Ownership of Corporation in the Framework of Prevention and Eradication of Criminal Act on Money Laundering and Criminal on Terrorism Funding. This signed beleid by President Joko Widodo on 1 March 2018 is requiring every corporation (such as LLCs, foundations, associations, CVs, firms, and other form of corporations) to enact, report, and update their corporate’s beneficial ownership..

Corporate’s beneficial owner in this presidential regulation has been regulated by its own criteria in each type of corporation. The following criterion such as: the beneficial owner has shares, has the right to vote, get profits/dividends/net income, has an initial capital, takes part as a fund source/capital whether in money or assets more than 25% to corporation, has a competency or influence to dismiss the directors, commissioners board, administrator, corporate’s supervisor; has an ability to control corporation; entitled with and/or accepting beneficiary from corporation whether directly or indirectly.

Maryati Abdullah, National Coordinator of PWYP Indonesia said that the issuance of Presidential Regulation 13/2018 which has been awaited by many stakeholders, is strengthening the prevention and eradication of money laundering effort which is believed as part of accelerating the corruption eradication, preventing tax evasion and tax avoidance, as well as preventing illicit financial flow and other criminal acts. The information of Beneficial Ownership could be used for various institution whether in the central government or regional government to increase the corporate’s compliance, avoiding monopolism, or preventing risks in trading as well as economical activities. Moreover public is able to access information on the Beneficial Ownership provided by ‘authorized institution’ according to Public Information disclosure provision, as confirmed in this Presidential Regulation.

Maryati said that the issuance of Presidential Decree 13/2018 also has shown the commitment of the government to take a significant role in the landscape of financial and global taxation reform. For instance, Indonesia as a member of G20, which in 2014 Indonesia has agreed on High Level Principle on Beneficial Ownership and Transparency in which highlighted the importance of transparency, accuracy, and publicly accessible of Beneficial Ownership (BO) information by the authorized institution. As a member of Asia Pacific Group of Money Laundering (APG), Indonesia also committed to have a domestic regulation in which parallel with FATF Standard (Financial Act Task Force) – especially in boosting the tax income by exchange of information with other countries with different jurisdiction.

Dadang Trisasongko, General Secretary of Transparency International (TI) Indonesia said that Indonesia has many corruption cases due to the politics and business relation. The absence of law on prevention and handling the conflict of interest has open a big chances for politicians, governor, major, bureaucrats, and businessmen to do collusion and corruption.

“The issuance of Presidential Regulation no 13/2018 is actually can be used as a reference for the user of public goods and services to actively ask the information on Beneficial Ownership, carrying out the due diligence and ensure that the ownership of natural resources is free from corruption practices. Beneficial ownership transparency is a significant step for the government to eradicate political corruption practices which slowing down the increasing of Corruption Perception Index (CPI). The synergy between Presidential Regulation and any other anti-corruption efforts hopefully can accelerate the achievements and targets on corruption eradication,” said Dadang.

In sectoral domain, Aryanto Nugroho – CSO representative in EITI Indonesia added that the extractive industry sector such as oil, gas and mining sector have started its effort to compose the road map of Beneficial Ownership Transparency under the platform of Extractive Industries Transparency Initiative which led by Coordinating Ministry of Economics. In fact, Indonesia became the host country of international conference on Beneficial Ownership Transparency in Jakarta, last October 2017. Ministry of Mineral and Energy Resources (MEMR) Ignasius Jonan has issued Ministerial Regulation No 48 Year 2017 about Monitoring the Business in Energy and Mineral Resources sector, which mandated the corporation to complement the application of ownership and director boards approval with the beneficial owner/controller of corporate information. On the other hand, “Corporation does not need to worry that such regulation will inhibit the investment, it would complement other regulations that have been issued,” said him.

Meanwhile, Nurkholish Hidayat, Board of Lokataru and Tax Justice Forum activist, expressed his concerned, “Substantively, the regulation of Beneficial Ownership criterias in this decree (Article 4) should not be bias, the decision of Beneficial Ownership criteria should refer to the factual condition, which is the de facto ownership, not only the formal ownership based on papers and legal documents or any other administration. Nurkholis hopes, this regulation also covers the de facto ownership, in which include indirect relations between the beneficial owner and the third party that formally registered as the corporate owner. For instance, the wife and the children, or any other agent in which doesn’t even have any correlation with the real owner, but factually the ownership is under the beneficial owners’ power. “Many corruption and money laundering motives are using this indirect relations” added him.

However, Nurkholish added that this regulation strengthen other regulations that has been issued by Financial Services Authority (OJK) or Directorate General of Tax. For example, OJK regulation, DG Tax decree, or POJK Number 11/POJK..4/2017 about Ownership Report or Any Changes in Company Ownership and POJK No. 12 /POJK.01/2017 about the Implementation of Anti Money Laundering Program and Prevention of Terrorism Funding in Finance Services Sector; the circulate letter of DG Tax No. SE – 04/PJ.34/2005 about The Instructions on the Application of Beneficial Ownership as it was stated in Double Tax Avoudance Agreement (P3B) between Indonesia and other countries as was recently amended by Peraturan DJP No. PER–25/PJ/2010; also BKPM decree Number 13 Year 2017 about Guidelines and Procedures of Permits and Facility of Capital Investment which included beneficial ownership provision.

In general, civil society coalition urged the government so that the issuance of Presidential Regulation no 13 Year 2018 is followed by effort in accelerating the improvement and development of the whole support system. As for instance by applying single identity number as the foundation to establish the integrated data in Indonesia; ensuring the accuracy of data and developing Beneficial Ownership reporting system or the law enforcement for not excercising the Beneficial Ownership transparency.

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