MAY 2019

REVIEWING THE BENEFICIAL OWNERSHIP

IN NOMINEE ARRANGEMENTS
SANCTIONS AND IMPLICATIONS IN ACCORDANCE WITH ANTI-MONEY
LAUNDERING ACTS

NOMINEE ARRANGEMENTS WHAT'S INSIDE THIS ISSUE:

Problems with Nominee

It is common that a lot of foreign investors in conducting their Arrangements
investment make some arrangement to ensure their dominance and
certainty of ownership in their investment.
Beneficial Ownership
This is can happen due several factors, one of them is due the
Negative Investment List, where their desired business sectors were Sanctions and
closed or open with conditions for foreign investment. While other
Correlations with Anti-
factor, can be in Financial matter, where creating local company
(PT) is much more pocket friendly than PT PMA company. Money Laundering Acts

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.

 PROBLEMS WITH NOMINEE
ARRANGEMENT
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.
THE NON-
FULFILLMENT OF
THIS ELEMENT
RESULTED IN THE
CANCELLATION OF
THE AGREEMENT.
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.
BENEFICIAL OWNERSHIP or dismiss directors, board of

commissioners, administrators,

supervisors or supervisors at the

Corporation, have the ability to

control the Corporation, have the

In accordance with the Financial Action Task Force right to and/or receive benefits from

Recommendations, Indonesia publised a new Law, compacted in a the Corporation either directly or

Presidential Regulation No. 13 of 2018, concerning IMPLEMENTATION indirectly, are the real owners of

OF PRINCIPLES RECOGNIZING OWNERS OF THE BENEFITS OF Corporate funds or shares and/or

CORPORATION IN THE FRAMEWORK OF PREVENTION AND meet the criteria.

ERADICATION OF CRIMINAL ACTION OF MONEY LAUNDERING AND

CRIMINAL FUNDING TERRORISM. Hence, with that definition, whatever

the forms of Nominee Arrangement, it

with the new regulation in place, then all forms of other Nominee still can fall under that kind of

Arrangements is a Legal Risks - higher than before. definition.

So, based on the Presidential Regulation, a Corporations are But the most interesting part is not

organized groups of people and/or assets, both legal entities and just that broad definition of

non-legal entities. beneficial ownership, but the other

implication of the Regulations, none

While Beneficial Ownership, defined as Individuals who can appoint other than the SANCTIONS.

with the new regulation in place, then

all forms of other Nominee

Arrangements is a Legal Risks - higher

than before.
 SANCTIONS AND ANTI-MONEY
LAUNDERING ACTS
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
SUCCESS IS TRULY articles can not only be charged
with the Money Laundering Law
MEASURED IN HOW
and the Terrorism Funding Law -
FAR YOU CAN GO as the main headline of this
AND NOT THE Presidential Regulation.
NUMBER OF BIG furthermore, based on that word,
WINS IN A SHORT than the sanctions can be
withdrawn into a whole wide
AMOUNT OF TIME.
indonesian legistation, including
Indonesian Criminal Code.
To understand more about the
sanctions, we need to understand
first about Money Laundering and
its regulations.
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.
 Article 3
INDONESIAN CRIMINAL Everyone who places, transfers,

CODE 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

As we discuss before, Other crimes that threatened with

result of criminal acts referred to in

imprisonment of 4 (four) years or more, carried out in the territory of

Article 2 paragraph (1) with the aim

the State of the Republic of Indonesia or outside the territory of the

of hiding or disguising the origin of

State of the Republic of Indonesia and the crime is also a criminal

Assets is punished for criminal acts of

offense under Indonesian law is subject of Anti-Money Laundering

Money Laundering with a maximum

Acts and can receive sanction based on that regulations.

imprisonment of 20 (twenty) years

and a maximum fine of

In making a Company or Invest in Indonesia, based on the Law

Rp.10,000,000,000.00 (ten billion

concerning Investment, an authentic deeds must be created.

rupiahs).

Thus, this is where Indonesian Criminal Code come in.

Article 4
Anyone who hides or disguises the

Based on Article 266 Point (1) of Indonesian Criminal Code: "Any

origin, source, location, designation,

person who enters false evidence into an authentic Deed on

transfer of rights, or actual ownership

something that the truth must be stated by the Deed, with the intent
of the assets he knows or is

to use or order others to use the Deed as if its description is in

reasonably expected to be the

accordance with the truth, is threatened, if the use can cause loss,
proceeds of crime as referred to in

imprisonment of no more than seven years."

Article 2 paragraph (1) is convicted of

a criminal offense. Money with a

And Article 266 Point (2) of Indonesian Criminal Code also states
maximum imprisonment of 20

that: "With the same crime threatened, any person who knowingly
(twenty) years and a maximum fine of

applies the act as if its contents were in accordance with the truth, if
Rp.5,000,000,000.00 (five billion

such use could cause harm."

rupiah).

Please note here, that loss and harm can be in terms of material and
Article 5
immaterial.
(Anyone who receives or controls the

placement, transfer, payment, grant,

With that, the Anti-Money Laundering Acs, is in force, as the sanction

donation, safekeeping, exchange, or

are more than four years.

use of assets he knows or should be

expected to be the proceeds of

based on that, Article 3, 4, 5, and 7 of Law No. 8 of 2010 concerning

crime shall be punished with the

Prevention and Eradication of Money Laundering Criminal Actions,

longest imprisonment 5 ( five) years

states:
and a maximum fine of

Rp1,000,000,000.00 (one billion

rupiah).

In making a Company or Investing in

Indonesia, based on the Law concerning

Investment, an authentic deeds must be

created.
 NOTES

Article 7 The collection of people and / or

(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.
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.

A COMPANY AND
LEGAL COMPLIANCE
IS A MUST, TO MAKE
NECESSARY
CHANGES IN
ACCORDANCE WITH
THE CURRENT LAWS
AND REGULATIONS.