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Advancing Corporate Integrity Compliance and Litigation Strategies for Financial Crimes in Indonesia
In the evolving landscape of corporate accountability, understanding how compliance procedures are evaluated by financial crime authorities is paramount for businesses aiming to mitigate risks and uphold integrity. While there is no explicit “hard law” governing corporate compliance, businesses can effectively navigate the regulatory environment by developing robust compliance strategies and adhering to stringent corporate governance standards. These proactive measures not only safeguard against potential prosecution but also position companies favorably during legal assessments. This exploration delves into the intricacies of compliance evaluation by financial crime authorities and outlines practical steps that businesses can implement to protect themselves.
There is no specific hard law on this although persuasive Counsel could certainly argue robust compliance procedures in avoiding prosecution, and/or mitigating sentencing. Effective compliance processes and strong corporate governance are fundamental methods that companies may employ to safeguard themselves from violating any particular regulatory framework. The mandatory audit mandated by Law Number 40 of 2007 on Limited Liability Company as amended by Job Creation Law is that as a minimum, financial statements of a limited liability company must be audited by a public accountant registered in Indonesia. This is especially so for:
a. Companies with assets exceeding 50 billion rupiah (US$3.6 million)
b. Public companies
c. Companies that issue debt instruments;
d. The company is a state-owned enterprise; or
e. The company collects or manages public funds (such as banks and insurance companies).
What penalties do the courts typically impose on individuals and corporates in relation to the key offences listed at Q1?
Individuals that are convicted of the key offences listed at Q1, will commonly face imprisonment and/or fines. In the case of corporate entities convicted of the key offences mentioned at Q1, fines are the common penalty imposed.
Corruption
The maximum penalty for this offence according to 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 life imprisonment and a maximum fine of one billion rupiah.
Money Laundering
The maximum penalty for this offence as regulated in Law Number 8 of 2010, for an individual is imprisonment for a maximum of twenty years and a fine of up to Rp10.000.000.000,00 (ten billion rupiah) while the main penalty imposed on the Corporation is a maximum fine of Rp100,000,000,000.00 (one hundred billion rupiah).
Tax Evasion
The maximum sentence regulated in Law Number 28 of 2007, is a maximum imprisonment of 1 (one) year or a maximum fine of Rp1.000.000.000.00 (one billion rupiah).
Fraud
Violation of the provisions in Law Number 5 of 1999 as amended by Job Creation Law is punishable by a maximum fine of Rp5,000,000,000.00 (five billion rupiah), or imprisonment in lieu of a fine for a maximum of 1 (one) year.
There is no concept of stare decisis in Indonesia. It is therefore difficult to give a range of sentences for each type of criminal offence.
What rights of appeal are there?
It is possible to appeal the judgment of a first instance court (unless the appeal is for a judgment of acquittal, a dismissal of all charges relating to inappropriate application of law, or reversal of a judgment made under express procedures) according to Article 67 Law Number 8 of 1981 on Criminal Procedure. It is also possible to request cassation from a Supreme Court, in which the Supreme Court’s decision will be final and binding. A reconsideration of judgment may be filed against a final and binding decision. Public prosecutors may also submit a petition for cassation in the interest of law with respect to all judgments that have become final and binding to the Supreme Court.
In conclusion, while the Indonesian legal system may not prescribe stringent “hard laws” on corporate compliance, the importance of establishing and maintaining rigorous internal controls and audits cannot be overstated. Companies that invest in effective compliance procedures and adhere to legal requirements, such as mandatory audits, not only mitigate the risk of severe penalties but also enhance their corporate integrity and public trust. As financial crime remains a significant concern within the corporate sector, adopting a proactive compliance posture is essential for any business aiming to thrive in Indonesia’s complex regulatory environment.
For further information, please contact:
WWW.AP-LAWSOLUTION.COM
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Anggraeni and Partners, an Indonesian law practice with a worldwide vision, provides comprehensive legal solutions using forward-thinking strategies. We help clients manage legal risk and resolve disputes on admiralty and maritime law, complicated energy and commercial issues, arbitration and litigation, tortious claims handling, and cyber tech law
S.F. Anggraeni
Managing Partner
fitri@ap-IawsoIution.net
Yoga Adi Nugraha
Managing Associate Practice Group White Collar Crime and Investigation
yoga@ap-lawsolution.net
Aga Kristiana Silaen
Middle Associate
Nazaruddin Insyiroh
Trainee Associate
nazaruddin.ih@ap-lawsolution.net
