This document summarizes the risks and implications of nominee arrangements in Indonesia according to anti-money laundering acts. It discusses how nominee agreements are now prohibited under investment laws, but foreign investors still use other forms of nominee arrangements to ensure ownership over their investments. However, these arrangements now carry greater legal risks under Presidential Regulation No. 13/2018, which broadly defines beneficial ownership and imposes sanctions on corporations that do not disclose this information. These sanctions can include criminal charges and penalties under the Money Laundering and Terrorism Funding Laws as well as the Indonesian Criminal Code. The document advises that legal compliance is essential for all companies operating in Indonesia.

1. REVIEWING THE BENEFICIAL OWNERSHIP
IN NOMINEE ARRANGEMENTS
SANCTIONS AND IMPLICATIONS IN ACCORDANCE WITH ANTI-MONEY
LAUNDERING ACTS
MAY 2019
It is common that a lot of foreign investors in conducting their
investment make some arrangement to ensure their dominance and
certainty of ownership in their investment.
This is can happen due several factors, one of them is due the
Negative Investment List, where their desired business sectors were
closed or open with conditions for foreign investment. While other
factor, can be in Financial matter, where creating local company
(PT) is much more pocket friendly than PT PMA company.
Thus, some investors is being advised or have an idea to make a
Nominee arrangement based on an Agreement. And, voila! they
have their own company, under other people's name, conducting
business, and live happily ever after.
Well. Unfortunately that is rarely true.
NOMINEE ARRANGEMENTS
Problems with Nominee
Arrangements
Beneficial Ownership
Sanctions and
Correlations with Anti-
Money Laundering Acts
WHAT'S INSIDE THIS ISSUE:

2. THE NON-
FULFILLMENT OF
THIS ELEMENT
RESULTED IN THE
CANCELLATION OF
THE AGREEMENT.
Nominee Arrangement can take in
many forms, some in Agreement,
some in loan form, some in time
deduction of ownership, and many
others.
The common and most traditional
one is by Agreement.
The Nominee Agreement was born
from the agreement of the parties,
arising from the significance of
contractual freedom. Due to arising
from the agreement, in order to
obtain legal protection, it must
fulfill the legal requirements of the
agreement.
As set forth in the Article 1320 of
the Indonesian Civil Code:
agreement, proficiency, particular
case and allowable cause.
The non-fulfillment of this element
resulted in the cancellation of the
agreement.
PROBLEMS WITH NOMINEE
ARRANGEMENT
Since 2007, Law No. 40 of 2007
concerning and Law No. 25 of 2007
concerning Investment, it is clearly
stated that Domestic and foreign
investors who make investments in
the form of limited liability
companies are prohibited from
making agreements and / or
statements that affirm that share
ownership in limited liability
companies is for and under
the name of someone else. And if
its exist, then by law, the agreement
is null and void.
Thus, based on that, the method of
nominee arrangement and proxies
is evolved in many ways. Certainty
of ownership and benefits is the
whole point of the Nominee
Arrangements.
However, these other forms of
Nominee Arrangements, now have
bigger risks, not just by a simple
regulation, but by major Sanction of
a regulation under the name of Anti-
Money Laundering Acts.

3. BENEFICIAL OWNERSHIP
In accordance with the Financial Action Task Force
Recommendations, Indonesia publised a new Law, compacted in a
Presidential Regulation No. 13 of 2018, concerning IMPLEMENTATION
OF PRINCIPLES RECOGNIZING OWNERS OF THE BENEFITS OF
CORPORATION IN THE FRAMEWORK OF PREVENTION AND
ERADICATION OF CRIMINAL ACTION OF MONEY LAUNDERING AND
CRIMINAL FUNDING TERRORISM.
with the new regulation in place, then all forms of other Nominee
Arrangements is a Legal Risks - higher than before.
So, based on the Presidential Regulation, a Corporations are
organized groups of people and/or assets, both legal entities and
non-legal entities.
While Beneficial Ownership, defined as Individuals who can appoint
with the new regulation in place, then
all forms of other Nominee
Arrangements is a Legal Risks - higher
than before.
or dismiss directors, board of
commissioners, administrators,
supervisors or supervisors at the
Corporation, have the ability to
control the Corporation, have the
right to and/or receive benefits from
the Corporation either directly or
indirectly, are the real owners of
Corporate funds or shares and/or
meet the criteria.
Hence, with that definition, whatever
the forms of Nominee Arrangement, it
still can fall under that kind of
definition.
But the most interesting part is not
just that broad definition of
beneficial ownership, but the other
implication of the Regulations, none
other than the SANCTIONS.

4. SUCCESS IS TRULY
MEASURED IN HOW
FAR YOU CAN GO
AND NOT THE
NUMBER OF BIG
WINS IN A SHORT
AMOUNT OF TIME.
The discovery of a corporation with
such a structure and not reporting
it to the relevant agencies is
subject to sanctions in accordance
with the provisions of the
legislation.
Article 24 of the Presidential
Regulation 13/2018 states:
"Corporations that does not
implement the provisions referred
to in Article 3 (stipulation of
beneficial owners), Article 14
(application of the principle of
recognizing Beneficiaries), and
Article 18 to Article 22 (obligation
to convey subject to sanctions in
accordance with the provisions of
laws and legislations ".
The editorial "is given sanctions in
accordance with the laws and
regulations", has a very fluid
interpretation. Corporations and
related parties who violate these
articles can not only be charged
with the Money Laundering Law
and the Terrorism Funding Law -
as the main headline of this
Presidential Regulation.
furthermore, based on that word,
than the sanctions can be
withdrawn into a whole wide
indonesian legistation, including
Indonesian Criminal Code.
To understand more about the
sanctions, we need to understand
first about Money Laundering and
its regulations.
SANCTIONS AND ANTI-MONEY
LAUNDERING ACTS
Anti-Money Laundering Acts clearly
stipulated the proceeds of crime are
Wealth that obtained from a crime:
a. corruption;
b. bribery;
c. narcotics;
d. psychotropic;
e. labor smuggling;
f. migrant smuggling;
g. in banking;
h. in the field of capital markets;
i. in the insurance sector;
j. customs;
k. excise;
l. human trafficking;
m. illegal arms trade;
n. terrorism;
o. kidnapping;
p. theft;
q. embezzlement;
r. fraud;
s. forgery of money;
t. gambling;
u. prostitution;
v. in the field of taxation;
w. in the field of forestry;
x. in the field of environment;
y. in the field of marine and
fisheries; or
z. other crimes that are threatened
with imprisonment of 4 (four) years
or more, carried out in the territory
of the State of the Republic of
Indonesia or outside the territory of
the State of the Republic of
Indonesia and the crime is also a
criminal offense under Indonesian
law.
Thus, with that description, the most
important point is on point Z.

5. INDONESIAN CRIMINAL
CODE
As we discuss before, Other crimes that threatened with
imprisonment of 4 (four) years or more, carried out in the territory of
the State of the Republic of Indonesia or outside the territory of the
State of the Republic of Indonesia and the crime is also a criminal
offense under Indonesian law is subject of Anti-Money Laundering
Acts and can receive sanction based on that regulations.
In making a Company or Invest in Indonesia, based on the Law
concerning Investment, an authentic deeds must be created.
Thus, this is where Indonesian Criminal Code come in.
Based on Article 266 Point (1) of Indonesian Criminal Code: "Any
person who enters false evidence into an authentic Deed on
something that the truth must be stated by the Deed, with the intent
to use or order others to use the Deed as if its description is in
accordance with the truth, is threatened, if the use can cause loss,
imprisonment of no more than seven years."
And Article 266 Point (2) of Indonesian Criminal Code also states
that: "With the same crime threatened, any person who knowingly
applies the act as if its contents were in accordance with the truth, if
such use could cause harm."
Please note here, that loss and harm can be in terms of material and
immaterial.
With that, the Anti-Money Laundering Acs, is in force, as the sanction
are more than four years.
based on that, Article 3, 4, 5, and 7 of Law No. 8 of 2010 concerning
Prevention and Eradication of Money Laundering Criminal Actions,
states:
In making a Company or Investing in
Indonesia, based on the Law concerning
Investment, an authentic deeds must be
created.
Article 3
Everyone who places, transfers,
diverts, spends, pays, grants, entrusts,
brings abroad, changes form,
exchanges with currency or securities
or other acts of assets that he knows
or is reasonably expected to be the
result of criminal acts referred to in
Article 2 paragraph (1) with the aim
of hiding or disguising the origin of
Assets is punished for criminal acts of
Money Laundering with a maximum
imprisonment of 20 (twenty) years
and a maximum fine of
Rp.10,000,000,000.00 (ten billion
rupiahs).
Article 4
Anyone who hides or disguises the
origin, source, location, designation,
transfer of rights, or actual ownership
of the assets he knows or is
reasonably expected to be the
proceeds of crime as referred to in
Article 2 paragraph (1) is convicted of
a criminal offense. Money with a
maximum imprisonment of 20
(twenty) years and a maximum fine of
Rp.5,000,000,000.00 (five billion
rupiah).
Article 5
(Anyone who receives or controls the
placement, transfer, payment, grant,
donation, safekeeping, exchange, or
use of assets he knows or should be
expected to be the proceeds of
crime shall be punished with the
longest imprisonment 5 ( five) years
and a maximum fine of
Rp1,000,000,000.00 (one billion
rupiah).

6. A COMPANY AND
LEGAL COMPLIANCE
IS A MUST, TO MAKE
NECESSARY
CHANGES IN
ACCORDANCE WITH
THE CURRENT LAWS
AND REGULATIONS.
Article 7
(1) The principal penalty imposed
on the Corporation is a penalty of a
maximum of Rp.
100,000,000,000.00 (one hundred
billion rupiah).
(2) In addition to criminal penalties
as referred to in paragraph (1),
additional penalties may also be
imposed on the Corporation in the
form of:
a. announcement of the judge's
decision;
b. suspension of part or all of the
business activities of the
corporation;
c. revocation of business licenses;
d. dissolution and / or prohibition of
corporations;
e. expropriation of Corporate
assets for the state; and / or
f. Corporate takeover by the state.
NOTES
The collection of people and / or
wealth that do business using the
Nominee arrangement structure,
allegedly hiding something. It could
be related to money laundering or
terrorism funding, as the main topic
of the Presidential Regulation No.
13/2018.
Based on the Regulation, Officials
can audit existing corporations, and
identify new corporations that in
process, then take action in
accordance with the provisions of
existing legislation, not limited to
the Anti-Money Laundering Act.
Furthermore, based on above
informations, a company and legal
compliance is a must, to make
necessary changes in accordance
with the current laws and
regulations.
For further information and any
compliance issues, do not hesitate
to contact Remidian
(www.remidiain-bahureksa.com) for
consultations and arrangements.