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Revealing the layers of beneficial ownership
Many corporations are owned by other corporations, so the real BO of the first layer ownership is hard to determine. It will be even harder to trace if the shareholder is a foreign corporation registered in a tax haven.
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Many corporations are owned by other corporations, so the real BO of the first layer ownership is hard to determine. It will be even harder to trace if the shareholder is a foreign corporation registered in a tax haven. (Shutterstock/File)
T
he issuance of Presidential Regulation No. 13/2018 on recognizing and disclosing the beneficial ownership (BO) of corporations, which aims to prevent and eradicate crimes of money laundering and terrorism, should be appreciated. These two criminal acts are indeed threats to the stability and integrity of the economic and financial system, endangering the foundations of society, nation and state. It is important to reveal the BO because corporations can be used as direct or indirect means of perpetrating criminal acts. Especially in terms of money laundering, the criminal act is a form of corruption and often related to crimes in the field of natural resources.
Corruption and natural resources are the two sides of a coin. Based on the research published by Indonesia Corruption Watch (ICW), there were 110 corruption cases related to natural resources from 2010 to 2017, with state losses amounting to Rp 2.5 trillion (US$181 million) and bribes totaling Rp 22 billion. The mode of corruption also varied, ranging from abuse of authority, misuse of budget, embezzlement, mark up, bribery and gratuities.
In many cases, the issuance of natural resource management permits is closely related to political interests and control of local economic resources. It is common knowledge that government officials and their family members and cronies benefit directly from natural resource control.
The BO disclosure is expected to prevent the use of proxies and nominee shareholders to cover the flow of money derived from corruption and tax evasion. Often, large corruption scandals have something in common — perpetrators take advantage of anonymous structures of corporate, trust and legal entities that are located in different jurisdictions as a means to transfer and hide illegal funds. Tax evasion can also be a reason to disguise the origin, control and amount of benefits received, breaking the chain of ownership to avoid some or all tax obligations.
