OJK Draft Regulation on Financial Services Enforcement Task Force

To implement one of the Financial Services Omnibus Law’s mandates, Indonesia’s Financial Services Authority (OJK) has issued a draft regulation on establishing a financial services enforcement task force authorised to take action against illegal and unlicensed financial services activities.

The draft regulation - available on OJK’s website in the Indonesian language - represents a step up from the current regime, which lacks a clear regulatory framework for dealing with illegal and unlicensed financial services activities.

OJK’s current rules cover the enforcement and monitoring of licensed and regulated entities. This welcome development indicates OJK’s concrete plan to enhance the robustness of Indonesia’s rapidly maturing financial services industry.

The key points in the draft regulation are summarised below.

1. Joint task force. The task force is set up as a joint task force between OJK and other government agencies. It is likely to include law enforcement agencies such as the police and state prosecutors.
2. Broad definition of illegal activity. “Illegal” or “unlicensed” activity is defined as any in-scope financial services activity (eg, banking, savings, financial products) without underlying licensing, approval, registration or ratification by OJK. This covers all activities that fall under the OJK regulatory regime, including cryptocurrency, which will be under OJK’s supervision by the end of 2024, and payment systems, which will continue to be supervised by Bank Indonesia. It also covers illegal financial instruments and products.
3. Public interest. The draft regulates not only illegal activity but any financial services activity that “could harm the public interest”. Considering the abstract language used in the draft, the threshold for “harming the public interest” is distinct from that for “illegal” activities, and does not expressly exclude licensed activities from the assessment. The task force might therefore be considered as authorised to launch inquiries against licensed entities whose actions “could harm the public interest”. Further clarity will be needed on this point.
4. Database creation and data sharing. In addition to creating a centralised national database of illegal activities and acting as a “crisis centre”, the task force is authorised to convey its “recommendations” to law enforcement agencies. The task force members (government agencies) are authorised to exchange “any information required” to support the task force’s objective of preventing illegal activities. This includes sharing data on transactions, accounts and individuals that might relate to illegal activities.
5. Potential challenges. One potentially challenging issue is that the task force may follow up allegations of (a) illegal activity or (b) activity potentially harmful to the public interest, based on an allegation or submission of information by the “public”. The term “public” is not defined in the draft. Unless careful review and vetting is put in place, a bad-faith business competitor could abuse this process by giving the task force misleading information that triggers a “clarification” process by the task force, involving a preliminary inquiry of the reported party. The task force may then request “necessary information” from the reported party, and all entities regulated by OJK would be mandated to comply.

It remains to be seen how the final regulation will look. The draft was made available for public consultation in January 2024, so it may take another month or so before OJK turns it into a binding regulation.