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Anti-Corruption Regulation in Indonesia.

25 February, 2012

 

1 What are the main bodies responsible for investigating and combating corruption, money laundering and terrorist financing?
 
The main bodies are:
 
• the Komisi Pemberantasan Korupsi (“KPK”), or the Corruption Eradication Commission;
• the Pusat Pelaporan dan Analisis Transaksi Keuangan (“PPATK”), also known as the Indonesian Financial Transaction Reports and Analysis Centre;
• the Indonesian Police and the Public Prosecutor; and
• the Satuan Tugas Pemberantasan Mafia Hukum (“Satgas Mafia Hukum”), or the Legal Mafia Eradication Task Force.
 
2 What does each of these bodies investigate?
 
The KPK was set up in December 2003 to enforce Indonesia’s anti-corruption laws in response to a perceived lack of success of the general law enforcement bodies. The KPK actively investigates and prosecutes corruption offences and oversees corruption investigations undertaken by other organisations (ie, the police and the Public Prosecutor). 
 
The PPATK was established as Indonesia’s anti money laundering watchdog in April 2002. The PPATK was set up as part of Indonesia’s effort to join other countries in eradicating international organised crime, including money laundering, terrorist financing and other criminal acts.
 
The Indonesian Police and the Public Prosecutor also have powers to investigate criminal acts such as corruption, money laundering and terrorist financing. The Indonesian Police and/or the Public Prosecutors would usually cooperate with the KPK in investigating corruption cases or cooperate with the PPATK in investigating money laundering cases.
 
The Satgas Mafia Hukum was set up in December 2009 by the Presidential Decree No 37 of 2009 to supervise and coordinate with the KPK, the PPATK, the Indonesian Police and the Public Prosecutor to speed up the eradication of corruption inside law enforcement bodies. The Satgas Mafia Hukum however does not have any power to conduct any investigation. In practice, they can suggest to the KPK and/or the Indonesian Police and the Public Prosecutor to investigate possible corruption cases involving law enforcement bodies.
 
3 What is the source of anti-corruption regulations in Indonesia?
 
• Law No. 28 of 1999 on Good Governance (“Good Governance Law”) – this Law applies to “Government Executives” such as public officials and civil servants;
• Law No. 31 of 1999 on the Eradication of Criminal Acts of Corruption, as lastly amended by Law No. 20 of 2001 (“Anti-Corruption Law”) – this Law applies to “Government Executives” as well as “everybody else” and established the KPK;
• Law No. 30 of 2002 on the Commission for the Eradication of Corruption (“KPK Law”) – this Law outlines the specific duties and the authority of the KPK;
• Law No. 46 of 2009 on the Corruption Tribunal (“Corruption Tribunal Law”) – this Law outlines the specific duties and the authority of the Corruption Tribunal; and
• Presidential Decree No. 37 of 2009 – this established the Satgas Mafia Hukum.
 
 
4 What constitutes a bribery/corruption offence under the anti-corruption
regulations in Indonesia?
 
Under the Anti-Corruption Law, the following constitute a bribery/corruption offence:
 
• the illegal act of making profit for himself, another person or a corporation which can possibly create loss to the state finance or economy;
• abuse of authority, opportunities or facilities vested in relation to his position which can create loss to the state finance or economy; the aim of the abuse being to earn a profit for himself, another person or a corporation;
• giving or promising something to a civil servant or state apparatus (i) with the aim of persuading him/it to do something or not to do something which would then violate his/its obligations; or (ii) because of or in relation to something in violation of his/its obligation, whether or not it is done because of his/its position; and
• providing “gratification” to a civil servant or public official in relation to his position in return for a favour. “Gratification” is a gift in a very broad sense and can include money, goods, discounts, interest-free loans, free medical treatment, travel tickets and other benefits.
 
5 Do local anti-corruption regulations have extra-territorial effect?
 
Under the Anti-Corruption Law, the offering to and the acceptance by Indonesian civil servants of bribes outside of Indonesia for projects related to or in Indonesia may constitute a corruption offence. The Anti-Corruption Law does not, however, regulate the bribery of non-Indonesian public officials.
 
6 Are there any statutory defences provided under the relevant legislation, eg, de minimis exceptions, payments that are legal in the country in which they are offered etc?
 
The Anti-Corruption Law provides that any gift given to a civil servant or state apparatus in relation to his/its duties and responsibilities which is not disclosed to the KPK by the relevant civil servant or state apparatus is deemed as bribery.  The anti-corruption regulations do not provide de minimis exception to gifts. The KPK may, however, give permission to the civil servant to accept and/or keep gifts that have already been provided. The KPK alone has the authority to determine whether such gift (at whatever amount) is appropriate or not.
 
7 What powers of investigation do the relevant regulatory bodies have and what are the consequences of non-compliance?
 
The KPK, the Indonesian Police and the Public Prosecutor have the general power to investigate complaints from the public regarding alleged corruption, collusion and nepotism. In doing so, they have the power to:
 
• arrest and detain a suspect;
• conduct searches and seizure;
• examine assets;
• conduct investigations;
• collect evidence; and
• compel witnesses to be present during investigations.
 
In addition the KPK also has specific powers to:
 
• tap telephone conversations;
• order travel bans;
• obtain information from banks and other financial institutions;
• freeze bank accounts where funds are suspected to have derived from corrupt activities;
• obtain financial and tax reports from relevant institutions;
• suspend transactions in which a suspect is involved, or suspend any licences or permits held by such person; and
• instruct the Interpol or a foreign law enforcement institution to search for, detain and seek evidence abroad.
 
They can also take certain measures to force a person to comply with their requests such as appearing before them.
 
8 What are the powers of arrest and detention of the relevant regulatory
authorities?
 
The Public Prosecutor in corruption cases can arrest a person and detain him for a total of 110 days. The KPK has the same authority. The Indonesian Police however can only arrest a person and detain him for a total of 60 days. This is because the police have the authority to only conduct an investigation. Under the Indonesian legal system, the prosecution process is handled by the Public Prosecutor.
 
9 Do the relevant bodies have powers to freeze properties which may be
proceeds of a bribery/corruption offence pending conclusion of their
investigation?
 
Yes. The KPK, the Indonesian Police and the Public Prosecutor have the power to freeze property pending conclusion of their investigation.
 
10 Are there any provisions requiring investigations or information disclosed during the course of investigations to be kept quiet?
 
There are no such provisions. In fact, Law No. 30 of 2002 provides that the KPK is under an obligation to inform the public of the status of an investigation from time to time. The law further provides that the public has the right to obtain information of the investigation, prosecution and trial process.
 
11 Are there protections available when responding to investigations by the relevant bodies?
 
A suspect or accused in a KPK, Indonesian Police or Public Prosecutor investigation has the right to:
 
• obtain legal assistance and be legally represented by counsel at every stage of the investigation; and
• adduce evidence from a witness or expert witness which is favourable to them.
 
12 Do the relevant anti-corruption measures relate only to the bribery of “public” individuals and/or bodies?
 
No. Anti-corruption measures can be related to non-public individuals and/or bodies where there is loss caused to the state finance or economy. 
 
13 What sanctions/sentences may the relevant authorities impose?
 
Where corruption is found under the Anti-Corruption Law, the Court may order:
 
• fines of between IDR50,000,000 and IDR1,000,000,000;
• imprisonment for up to 20 years or life imprisonment; and
• for certain extreme conditions, life imprisonment or death penalty can be imposed.
 
14 Is it possible to enter into a settlement to resolve any enforcement action/prosecution by the relevant bodies?
 
There is no formal system of plea bargaining in Indonesia.
 
15 Are there provisions for persons to appeal against any enforcement action/prosecution taken against them?
 
Yes. Corruption cases may be prosecuted by the KPK or public prosecutors at the Corruption Tribunal, which acts as the court of first instance. Appeals against decisions of the Corruption Tribunal may be filed to the Indonesian High Court and then to the Indonesian Supreme Court. All appeals are as a matter of right.
 
16 Do the Police and other local regulatory authorities assist the KPK/PPATK in their investigations?
 
The KPK and/or PPATK may request assistance from the police or other relevant institutions to conduct arrests, detentions, raids and assist in confiscation. The Indonesian Police and/or public prosecutors would usually cooperate with the KPK in investigating corruption cases or cooperate with the PPATK in investigating money laundering cases.
 
17 How do the relevant bodies interact with overseas regulators?
 
The KPK may ask for assistance from the Interpol or law enforcement agencies in other countries to search for, detain and seize goods located abroad as evidence. The KPK, Indonesian Police and/or Public Prosecutor may cooperate with foreign law enforcing bodies in investigations, indictments and prosecutions of corruption cases in accordance with the existing law or international treaty recognised by the Government of the Republic of Indonesia.
 
18 Are there any laws or regulations imposing obligations on persons to “whistleblow” or disclose suspected corruption or money laundering within an organisation?
 
The public has the “right and responsibility” to prevent and eradicate corrupt acts. There is, however, no express obligation to “whistle-blow” in respect of acts of corruption. 
 
In relation to money laundering, under Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering, financial services providers (eg, banks, financing companies, insurance companies or securities companies) are obliged to submit a report to the PPATK whenever there is a “suspicious financial transaction”, a financial transaction of IDR500,000,000 or more (executed in one transaction or in several transactions over one day) or a financial transaction whereby funds are transferred out of Indonesia. The PPATK can then impose administrative sanctions in the form of warnings or fines to companies failing to report such transactions.
 
19 What is the impact of overseas anti-corruption laws such as FCPA and the UK Bribery Act on companies and/or individuals in Indonesia?
 
The US Foreign Corrupt Practices Act (the “FCPA”) prohibits the bribery of “foreign officials”. It is extra-territorial in effect and impacts all US companies and persons as well as foreign companies and persons if they issue securities on a US Exchange or otherwise engage in activities in furtherance of a bribe in US territory. Importantly, in pursuing potentially unlawful acts under the FCPA, the US Department of Justice has adopted an expansive definition of what it means to be committing an act of bribery in the US and has interpreted it to catch the transfer of money through US bank accounts including, potentially, all US dollar transactions that are cleared through bank accounts in the US.
 
The FCPA also contains a books and records provision requiring issuers to make and keep accurate books, records and accounts, which, in reasonable detail, accurately and fairly reflect the issuer’s transactions and disposition of assets. In addition, the FCPA’s internal controls provision requires issuers to devise and maintain reasonable internal accounting controls aimed at preventing and detecting FCPA violations. These provisions apply to all companies, both US and non-US, that have their securities issued on a US exchange. They are expansive provisions and have been used to prosecute companies in cases where bribes have been paid to private individuals. 
 
The UK Bribery Act 2010 (the “Bribery Act”) covers bribery of private persons as well as public officials. It also has extra-territorial application. For example, the Bribery Act prohibits offering or accepting a bribe outside the UK provided that the offender has a close connection with the UK. Persons with a “close connection” include British citizens and Indonesia – Hiswara Bunjamin & Tandjung (in association with Herbert Smith LLP) organisations incorporated in any part of the UK. Similarly, the Bribery Act’s corporate offence – which occurs when an organisation fails to prevent those performing services on its behalf from paying bribes – applies not only to organisations incorporated under UK law, but also to any other company carrying on a business, or part of a business, in the UK, regardless of where the act of bribery takes place.
 
The fact that conduct may not constitute an offence under local law does not necessarily mean it is permitted under the FCPA or the Bribery Act. Companies doing business in Indonesia are advised not only to comply with domestic legislation, but should also be fully aware of the far-reaching extra-territorial effect of both the FCPA and the Bribery Act.
 
 



For further information, please contact:
 
Teguh Darmawan, Hiswara Bunjamin & Tandjung (HBT) in association with Herbert Smith
 
Charles Ball, Hiswara Bunjamin & Tandjung (HBT) in association with Herbert Smith

[email protected]

 

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