Indonesian Central Bank Issues Regulation on Reporting of Foreign Exchange Activities

Indonesia's central bank, Bank Indonesia ("BI"), has issued BI Regulation Number 21/2/PBI/2019 concerning the Reporting of Foreign Exchange Activities ("Regulation 2/2019"). This new regulation introduces several changes from the previous regulation on said activities, BI Regulation Number 16/22/PBI/2014 on the Reporting of Foreign Exchange Activities and the Reporting of Prudential Principles Activities in the Management of Offshore Debts of Non-Bank Corporations ("Regulation 22/2014").

The implementing regulations for Regulation 22/2014, including BI Circular Letter No. 17/4/DSta regarding the Reporting of Foreign Exchange Activities in the Form of Offshore Loan Plan and its Amendment ("CL 17/4"), and BI Circular Letter No. 17/26/DSta regarding the Reporting of Foreign Exchange Activities Besides Offshore Loan ("CL 17/26"), shall remain valid as long as they do not contradict Regulation 2/2019.

Background of the New Regulation

Regulation 2/2019 is enforceable starting March 1, 2019 and will affect the March 2019 reporting period (which is due in April 2019). It revokes and replaces Regulation 22/2014. Regulation 2/2019 specifically regulates the reporting of Foreign Exchange Activities ("LLD"). It does not regulate the reporting of Prudential Principles Application Activities ("Prudential Reporting"), as Regulation 22/2014 did. Parts of Regulation 22/2014 regarding Prudential Reporting remain valid.  The new regulation also seeks to strengthen the implementation of offshore loans and banks' other foreign exchange obligations. Officials have expressed hope the new regulation will improve LLD reporting and its supervision.

Differences under Regulation 2/2019

Unlike Regulation 22/2014, which was further implemented by circular letters issued by the central bank, Regulation 2/2019 is subject to both regulations of the BI Board of Governors and the circular letters under Regulation 22/2014, so long as the circular letters do not contradict the BI Board of Governors regulations. Regulation 2/2019 clarifies and makes several changes from the previous regulation, particularly related to the scope of LLD reports, the submission and correction of reports, and reporting supervision and administrative sanctions.

Content of LLD Reports

LLD Reports under the new regulation, similar to Regulation 22/2014, include all the activities carried out both for the interest of the reporting parties and other parties. The reports carry information such as (i) the activities of goods, services, and other transactions between residents and non-residents ("Activities Data"); (ii) the position and amendment of Foreign Financial Assets (Asset Finansial Luar Negeri or "AFLN") and Foreign Financial Liabilities (Kewajiban Finansial Luar Negeri or " KFLN"); and (iii) the plan and/or amendment of Offshore Loan (Utang Luar Negeri  or "ULN").

However, Regulation 2/2019 adds four other pieces of information to be included in LLD Reports: (i) primary data on ULN and/or Risk Participation Transactions (Transaksi Partisipasi Resiko or "TPR"); (ii) withdrawal and/or payment plan on ULN and TPR; (iii) withdrawal and/or payment realization on ULN and TPR; and (iv) position and amendment of TPR.

LLD Reporting Parties

The term Reporting Parties is not elaborated in Regulation 22/2014. However, Regulation 2/2019, consistent with CL 17/4 and CL 17/26, provides that Reporting Parties include: (i) financial institutions (banks and non-bank financial institutions), in the form of a state-owned enterprise, regional-owned enterprise, or private enterprise; (ii) non-financial institution business entities, legal entities or non-legal entities; (iii) entities other than other entities; and (iv) individuals.

If the Reporting Party is carrying out the Foreign Exchange Activities in the interest of other parties, the Reporting Party may request the relevant data and information and the other parties must provide such information.

On a separate note, although not required under Regulation 22/2014, pursuant to the new regulation, Reporting Parties that are in the middle of a bankruptcy process and are no longer operating must nevertheless report Foreign Exchange Activities to Bank Indonesia. Reporting Parties are also obliged to submit to BI their profile, information, and/or any amendments.

Submission and Correction of LLD Reports

LLD Reports must be submitted through the BI website (https://www.bi.go.id/lkpbuv2). If the submission or correction deadline falls on a Saturday, Sunday or a public holiday or joint leave day as determined by Bank Indonesia, the submission shall be made the following day.

Reporting Parties are obliged to submit all LLD Report data, besides the ULN plan and any amendments, on a monthly basis on no later than the 15^th of the next month. The submission of a ULN plan shall be at the beginning of the year, no later than March 15. Any ULN amendment shall be made no later than June 15. This is earlier than the submission deadline under Regulation 22/2014, which allowed submission of ULN amendment up until July 1.

As was the case under Regulation 22/2014, if there are any mistakes in the submitted LLD Report, corrections shall be submitted no later than the 20^th of that monthly report.

Late and No Submission of LLD Reports

A Reporting Party is deemed to be late in its LLD Report submission if submission was done after the prescribed deadline but before the end of that particular month. However, if after the end of that month there has not been any submission made, the Reporting Party is deemed to have failed to submit an LLD Report, but is still required to submit nonetheless. This is consistent with Regulation 22/2014.

Supervision of LLD Reporting

Under Regulation 22/2014, Bank Indonesia was authorized to research the accuracy of LLD Reports. Similarly, Regulation 2/2019 authorizes the central bank to supervise LLD Reporting activities and it may conduct indirect supervision and/or examination by way of, among other actions, requesting explanations, evidence, records, and/or supporting documents, with or without involving the relevant institutions.

In response, Reporting Parties must provide the requested documents, failing such the submitted LLD Report will be declared as incorrect and non-submitted.

Administrative Sanctions

Bank Indonesia was authorized under the previous regulation to impose sanctions in the form of fines (ranging from the rupiah equivalent of US$4 to US$850), notification to other relevant authorities and reprimands. However, under Regulation 2/2019 its imposition of sanctions is confined to reprimands, which imposition must be provided with written notice to the relevant authorities and subject to further restrictions:

1. There was no supplementary corrections following the submission of an erroneous LLD Report;
2. Late and/or no submission;
3. Only applicable to new Reporting Parties and Reporting Parties that have not submitted LLD Reports following three reporting periods;
4. Only applicable to Reporting Parties regarding new ULD plans following one reporting period.

Reporting Parties in the process of bankruptcy may request an exemption from reprimand and those parties that are late or failed to submit due to a technical error are exempted.

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