The obligation to disclose the identity of the Ultimate Beneficial Owner (the “UBO”) has emerged as a key standard in preventing the misuse of legal entities for money laundering (“ML”), terrorist financing (“TF”), and corruption act. Although widely adopted, the UBO disclosure is implemented differently across jurisdictions. The European Union defines a UBO as an individual holding more than 25% of shares or voting rights, the threshold in the US is generally ownership or control of more than 50%. These variations highlight the need for harmonized approaches that are adapted to national contexts.
As a member of Financial Action Task Force (“FATF”), Indonesia, is highly advised to align its legal framework with the certain standards. The Ministry of Law Regulation No. 2 of 2025 on the Verification and Supervision of Corporate Beneficial Ownership (“MOL 2/2025”) is one of the instruments to meet the standards. Previously, the UBO concept was introduced through Presidential Regulation No. 13 of 2018 on the Implementation of the Principle of Recognizing Beneficial Ownership in Corporations to combat financial crime by identifying true controllers of corporations – even if not formally registered.
Under the MOL 2/2025, UBO is defined as an individual with significant authority over a corporation, including the power to appoint or remove directors or managers, and who ultimately controls corporate funds or shares. Accurate UBO identification is essential for transparency and risk reduction. All corporations, including limited liability companies, foundations, and partnership, shall report the UBO to the Ministry of Law and Human Rights. This obligation includes annual updates and reporting any changes within 30 days, as stipulated in Articles 2 and 3, supported by documentation and electronic questionnaires.
Verifying the UBO is essential to address financial opacity exploited in ML and TF schemes through complex corporate structures. MOL 2/2025 introduces a multi-layered verification system involving corporations, notaries, and the Ministry of Law. Verification is conducted by cross-checking disclosure documents against electronic questionnaires, and where inconsistencies are identified, the Minister has the authority to designate an alternative UBO who more accurately reflects actual control.
MOL 2/2025 establishes comprehensive legal due diligence as a mandatory obligation, covering the UBO identification, verification, documentation, and reporting. Non-compliance may lead to actions such as warnings, blacklisting, and AHU Online suspension, affecting key corporate actions. However, micro, small, and medium enterprises and non-corporate entities may struggle to comply due to limited resources and awareness. To address this, the regulation introduces a tiered sanctions regime, including fines, blacklisting, suspension, and potential criminal charges for intentional falsification of the UBO data.
This reform enhances transparency and responds to past FATF criticisms by filling enforcement gaps in Presidential Regulation 13/2018 and MOLHR 21/2019. It defines the UBO clearly, expands reporting obligations, introduces verification, and imposes stricter legal responsibility on corporations and notaries. Legal due diligence becomes mandatory, with penalties for non-compliance, including criminal consequences for deliberate misinformation.
However, its success faces challenges, including limited preparedness among businesses, weak oversight, and potential ineffectiveness of gatekeepers. To ensure the enforcement, several strategic measures are essential:
1. Comprehensive education and outreach for all business entities.
2. Clear accountability mechanisms for gatekeepers including public notary, including sanctions for negligence or complicity in false reporting.
3. Proportional criminal penalties to deter deliberate manipulation of UBO data.
4. Regular evaluations and progress reviews, supported by transparent public reporting to ensure accountability.
Written by: Nurdinah Hijrah, Angelica Nathalia Marpaung, and Chatarina Adventia Ningtyas
Edited by: R. Bayu Perdana
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