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Financial Services Authority (OJK) Regulation No. 13 / POJK.02 / 2018 (“POJK 13/2018”) regarding Digital Financial Innovation in Financial Services Sector originates from the government’s initiative to stimulate innovation in the digital financial services ecosystem such as equity crowdfunding, settlements, investment management, insurance, etc. This regulation classify these companies as Digital Financial Innovation (“IKD”) operators who must confirm to OJK’s regulatory sandbox. To be considered as IKD operators, a digital financial services provider must fulfil certain requirements, such as providing an innovative digital financial products and services which represents a new business process or model; activity, enhancement or efficiency which provides value to the IKD ecosystem; future-oriented through the utilization information technology and communications; useful to the public; and able to be integrated with existing financial services.
SUBJECT TO THIS REGULATION
POJK 13/2018 applies to businesses which utilize digital financial innovation in their operations. IKD operators of digital financial innovation apart from financial service institutions are required to be either a limited liability entity or a cooperative (koperasi).
IKD operators are prohibited from managing portfolio or exposure.
They are only allowed to provide a platform without facilitating financial transaction and services. Financial services institution is defined as an institution conducting activities in the banking sector, capital market, insurance, pension fund, financing institution and other financial services institution defined under OJK Regulation No. 21 of 2011. IKD operators must be listed with the OJK, unless they are already registered with and/or hold a permit from the OJK.
REGULATORY SANDBOX
Regulatory sandbox is a test mechanism conducted by OJK to evaluate the IKD products and services to determine whether they are recommended, need to modify or not recommended.⁶ The IKD operator first introduce the new business model who have wide market coverage and registered with the relevant association.
Further technical procedures and qualifications concerning the evaluation standards of regulatory sandbox will be set out under another OJK regulation in the future. Should there be any further inquiries about the implementation of the regulatory sandbox, please contact us and our team will gladly answer them for you.
IKD OPERATOR OBLIGATIONS
The IKD operators must comply with the prevailing anti money laundering and terrorism funding laws and regulations. Furthermore, IKD operators shall take into account the protection of the data and/or information of their consumers as defined under OJK regulation No. 1/POJK.07/2013 on the Protection of Consumers in the Financial Services Sector (“POJK 1/2013”.IKD operators don’t have any right to exploit users’ personal data except with the prior consent from the users. Last but not the least, The IKD Operator must station their data center and data recovery center in Indonesia.
SANCTIONS
In addition to criminal sanctions, OJK may impose administrative sanctions for the violations of POJK 13/2018 which take a form of written warnings, fines, and/or revocation of the approvals or registrations.
TRANSITIONAL PROVISIONS
Any cooperation agreement between a financial services institution and an IKD operator not listed and/or registered with the OJK may be prolonged for not more than 3 years after the POJK 13/2018 came into force.12
Although the registration procedure who are recommended to be registered with the OJK has been issued, the IKD operators still need register to the OJK by submitting their deed of establishments and copies of the identity documents of their board of management, written information about the products, data and other information about IKD activities and their business plans.
The obligation to be listed under the POJK 13/2018 is effective 1 (one) month after the POJK 13/2018 came into force.
DISCLAIMER
The information contained in this review is not intended to provide legal opinion or constitute the views of Anggraeni and Partners law firm concerning certain legal matters.
No one should think that they must act or stop acting or choose to act on a certain matter based on the information contained here without seeking advice from professionals in law corresponding with the facts and situations that they are currently facing.
22 Oktober 2018 – 008/AP-LH/X/2018 -TKK-
