New Regulation Strengthens Beneficial Ownership Reporting in Indonesia

The Indonesian Ministry of Law has issued Regulation No. 2 of 2025 on the Verification and Supervision of Beneficial Owners of Corporations ("MOL Regulation No. 2/2025"), which came into force on February 4, 2025. It replaces Ministry of Law and Human Rights Regulation No. 21 of 2019.

With stricter compliance requirements, enhanced verification procedures, and the introduction of administrative sanctions, the new regulation aims to improve transparency and accountability for corporations operating in Indonesia.

Key Changes Under MOL Regulation No. 2/2025

MOL Regulation No. 2/2025 replaces the previous framework established in 2019 and introduces several key changes, including:

• New Focus: The new regulation takes a different approach, shifting from a framework that primarily served as a supervisory guideline for government oversight to one that is more corporation-centered.

• Expanded Definitions: The regulation broadens the range of corporations subject to beneficial ownership reporting. In addition to limited liability companies, foundations, associations, cooperatives, limited partnership, and general partnerships (firms), beneficial ownership reporting requirements now also apply to capital partnerships and sole proprietorships.

• Stronger Verification Requirements: Corporations must undergo a more rigorous Know-Your-Beneficial-Owner (KYBO) process, which now includes the annual submission of beneficial ownership information, where no specific frequency was previously required, the administration of beneficial ownership documents, and the completion of a beneficial ownership questionnaire. Additionally, the verification now incorporates risk-based verification of ownership data to identify risks related to money laundering and terrorism financing. Notaries are also now formally required to verify beneficial ownership information when assisting with corporate transactions and complete the beneficial ownership questionnaire, a requirement that was absent from the old regulation.

• Enhanced Government Oversight: The Directorate General of General Legal Administration will oversee compliance, using a risk-based approach to focus on potential money laundering and terrorism financing risks.

• Narrowed Government Oversight: The new regulation simplifies government supervision by removing certain requirements, such as overseeing the identification and verification of beneficial owner information and the appointment of officials for KYBO implementation. Now, government supervision focuses on submitting, updating, and reporting changes to beneficial ownership information to the Minister of Law.

• Introduction of Administrative Sanctions: Companies that fail to comply with reporting requirements may now face administrative penalties under the new regulation. Sanctions include official reprimands, blacklisting from government systems, and restricted access to corporate registration services.

Why This Matters for Businesses

MOL Regulation No. 2/2025 aims to improve corporate transparency and prevent financial crimes by strengthening beneficial ownership reporting. Businesses operating in Indonesia must take proactive steps to comply, including:

• Reviewing and Updating Internal Policies: Companies should establish robust mechanisms to accurately identify and report their beneficial owners.

• Aligning Compliance with KYBO Principles: Organizations should conduct thorough due diligence and verification procedures to meet the new regulatory standards.

• Working with Legal and Compliance Experts: Given the risk of administrative sanctions, seeking legal guidance is important for navigating these regulatory changes effectively.

With the new regulation now in effect, businesses must act swiftly to align their practices with the updated requirements. Compliance is not just about avoiding potential sanctions; it also strengthens corporate governance and enhances market credibility.

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