Strengthening AML/KYC Regulations in Indonesia - Robust Economy of the APAC Region Highlighted
In the rapidly growing digital economy of Indonesia, remittance service providers and e-commerce businesses are under increasing pressure to adhere to strict Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
The Financial Services Authority (OJK) and Bank Indonesia set and enforce these rules, with the Financial Transaction Reports and Analysis Center (PPATK) acting as the Financial Intelligence Unit. The remittance sector is governed by Bank Indonesia Regulation No. 19/10/PBI/2017, which focuses on AML and counter-terrorism financing (CFT) procedures for non-bank payment system service providers and currency exchangers. OJK Regulation No.12/POJK.01/2017 mandates comprehensive AML compliance aligned with FATF standards.
Remittance providers must conduct thorough customer identification, verify customer identities, and monitor transactions for suspicious activities in accordance with AML laws. They are also required to report suspicious transactions within 3 working days and cash transactions exceeding IDR 500 million per day. Non-compliance can result in severe penalties, including fines, license suspension, and criminal prosecution.
Indonesia's digital economy, the fastest growing in Southeast Asia, is expected to account for over US$83 billion by 2025. With over 2,000 startups, it is a vibrant and dynamic sector. Institutions operating in this space, including banks, finance companies, and e-money and e-wallet service providers, must also implement internal controls and procedures to prevent money laundering and terrorist financing. According to Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering, institutions must adhere to local AML regulations.
Notably, businesses in the e-commerce and fintech sectors are obliged to follow KYC (eKYC), a regulation that requires thorough customer identification and verification. Institutions that fail to comply with AML regulations may face penalties, including fines and revocation of licenses. They must also monitor transactions for any suspicious activity and report it to PPATK.
As the digital economy of Indonesia continues to grow, with a projected valuation of US$124 billion by 2025, the importance of robust AML/KYC programs cannot be overstated. Compliance is not only a legal requirement but also a critical step in maintaining trust and integrity within the digital economy.
Investing in the Indonesian digital economy, with its focus on e-commerce and fintech, requires adherence to strict Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Financial institutions, including remittance service providers and businesses in the e-commerce sector, must implement robust AML/KYC programs to prevent money laundering and maintain the integrity of the digital economy.
