Essential Financial Crime Offences Affecting Corporations and Their Leadership: An Insight into Relevant Laws and Regulations in Indonesia

March 27, 2024

by : Setyawati Fitrianggraeni, Yoga Adi Nugraha, Aga Kristiana Silaen and Nazaruddin Insyiroh

In a climate where corporate conduct is increasingly scrutinized, it’s crucial for businesses operating in Indonesia to comprehend the framework of financial crime laws affecting them. This article sheds light on major financial crime offenses—corruption, money laundering, tax evasion, and fraud—outlining the Indonesian legislation that governs these activities. Our aim is to provide a succinct overview of these laws, focusing on the implications for corporations and their leadership, thereby aiding in navigating the complexities of compliance and corporate governance within Indonesia’s legal environment.

The key financial crime offenses are regulated in various laws or regulations as set out below:

Corruption

Law Number 31 of 1999 on Eradication of the Crime of Corruption as amended by Law Number 20 of 2001 and partially revoked with Law Number 1 of 2023 on Criminal Code is the primary legislation in Indonesia dealing with corruption, bribery, conflict of interests, and gratification. Prosecution and criminal imposition may be carried out against the corporation and or its management in the event that a criminal act of corruption is committed by or on behalf of a corporation as stipulated in Article 20 Paragraph (1).

Money Laundering

Law Number 8 of 2010 on the Prevention and Eradication of Money Laundering Crime sets out offences related to money laundering. According to Article 6 Paragraph (1), “In the event that the crime of money laundering as referred to in Article 3, Article 4, and Article 5 is committed by a corporation, the sentence shall be imposed on the corporation and/or the personnel controlling the corporation”.

Tax Evasion

Law Number 28 of 2007 on Third Amendment to Law Number 6 of 1983 on General Provisions and Procedures of Tax as amended by Law Number 16 of 2009. One example of tax evasion that is often found is taxpayers who do not report part or all of their income in their annual tax return, charge expenses that should not be used as a deduction in income with the aim of minimising the tax burden, as well as increasing costs in a fictitious way.

Fraud

Law Number 5 of 1999 on Prohibition of Monopolistic Practices and Unfair Business Competition as amended by Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation and as stipulated by Law Number 6 of 2023 concerning Stipulation of Government Regulation in Liew of Law Number 2 of 2022 concerning Job Creation to be Enacted as Law (“Job Creation Law”) is the primary legislation in Indonesia dealing with monopoly, price fixing, cartel, dominant position and other unfair business competition practices. The criminal sanctions regulated in Article 48 of this law may be imposed on business actors including individuals or entities.

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