Banking has a strategic role in Indonesia because its primary function is collecting and distributing funds fromthe public to support the national economy. In an increasingly open and rapidly developing economy, banking services are needed that are more extensive, of the highest quality, secure and able to compete in the era of globalisation and free trade. For this reason, banks are encouraged to strengthen themselves through various efforts, including improving the payment system. Payment system is a system that includes a set of rules, institutions, and mechanisms used to carry out the transfer of funds in order to fulfil an obligation arising from economic activity. In this digital era, the payment system has developed by providing electronic banking services that aim to be faster, easier, in accordance with the customer needs, and can be done independently by customers whilst still being secure. It is necessary to reform the payment system regulation to maintain a balance between efforts to optimise digital innovation opportunities and to maintain stability to achieve the goals of electronic banking services.
Consequently in 2021 Bank Indonesia (“BI”) issued Bank Indonesia Regulation No.23/6/PBI/2021 concerning Payment Service Providers (“PBI PJP”), which aims to strengthen the payment system implementation ecosystem. This regulation is directed to regulate the provision of payment services, including access to industry, implementation, supervision, termination of the performance of activities, as well as the processing of Payment System data and/or information supported by strengthening of the functions and authorities of BI as well as PJP implementation obligations. In the aspect of access to the Payment System industry, the regulation is aimed at simplifying the scope of PJP activities and the processing and licensing requirements.
Through PBI PJP, companies wishing to establish a new payment system must fulfil all requirements and obtain pre-requite licenses. In applying for a Payment System Provider (“PJP”) license, economic considerations must be made, and with an emphasis on strict legal compliance. It is imperative and required to perform a Legal Due Diligence (“LDD”). LDD is a thorough examination of the legal, including but not limited to anything related to permits and licences activities on the company or the object of the transaction carried out by legal consultants, to obtain material information to describe the condition of the company or object of the transaction. LDD aims to assess legal risks that may arise related to transactions that the parties will carry out. This LDD process includes not only legal matters but are conducted in other matters such as financial due diligence, business due diligence, and tax due diligence. Some of the matters that are usually examined in carrying out LDD include the examination of deeds, licences, agreements, assets, free of cases, and the condition of the transaction’s object.
In PBI PJP, LDD by the legal consultant is required to check the truth and completeness of the information contained in the license requirements document submitted by PJP to BI. These documents, as regulated in Article 14 to Article 22 of PBI PJP, include the legality of legal entities, capital, management, statements and guarantees from members of the board of directors (“BoDs”) and readiness of human resources and company organizations. The documents required for legal entity requirements discover the company’s aims and objectives, the composition of the management, articles of association, the latest amount of authorized and paid-up capital, and the most recent composition of shareholders. This document can be in the form of a photocopy of the latest Amendment to the Articles of Association which contains the latest authorized and paid-up capital, along with a copy of the letter of approval/receipt of notification from the Minister of Law & Human Rights. In addition, documents showing a business permit from the relevant authority are also required, and documents showing recommendations for prospective PJPs with the supervisory authority, in this case, the Financial Services Authority. Furthermore, related to the ownership and control requirements, an up-to-date document is needed that shows the ownership and control structure of the prospective PJP up to the most updated list of shareholders.
Regarding management, a document that shows the integrity of the management is needed, including statements from each board of directors, board of commissioners, and shareholders. Shareholders here are shareholders who have shares of 25% or more of the number of shares issued by the prospective PJP and have voting rights or shareholders who have shares of less than 25% of the total shares issued by the prospective PJP and have voting rights. The document must clearly demonstrate whether the person concerned has exercised control over the prospective PJP, either directly or indirectly. The statement letter from these parties contains a statement that the person concerned has never been declared bankrupt and/or has been found guilty of causing a business entity to be declared bankrupt within the last 5 (five) years prior to submitting the application. The person must never have been convicted of committing particular crimes within the last 5 (five) years prior to submitting the application, are is not listed in the list of bad debts at the time of submitting the application, and is not included in the national denylist of drawers of cheques or blank billet giro administered by BI. Additionally, members of the board of directors are also required to make a statement and guarantee stating that the Applicant is not facing the imposition of sanctions or legal proceedings in criminal, civil, or bankruptcy cases. The statement letter is made with sufficient stamp duty.
To prove the capability of the human resources and company organisation by PJP, it is necessary to include documents in the form of an organisational structure chart, along with job descriptions, authorities and responsibilities, including units or functions that are responsible for consumer protection, implementation of anti-money laundering and prevention of terrorism financing, management risk, internal audit, and compliance. This organisational structure needs to be equipped with the number of human resources who will carry out these duties, authorities and responsibilities. The authorised directors must later approve this organisational structure.
The following process is that the legal consultant will produce a statement stating that the legal consultant has conducted LDD on the above documents. Based on the due diligence, the legal consultant must provide a statement regarding the truth and completeness of the information in the permit requirements document. This statement letter is then signed on sufficient stamp duty by a partner who has the ability to provide legal services following the laws and regulations and must be accompanied by an executive summary/resume of LDD. This executive summary must cover the objectives and scope of LDD, information on documents examined in the LDD process such as articles of association, agreements, statements, and other documents or activities carried out by legal consultants. Finally, it is necessary to attach a statement from the authorised Director that all licensing documents submitted are accurate and complete according to the company’s condition at the time of applying for a permit.
In conclusion, to obtain a PJP licence, it is required to meet the requirements of both general aspects and feasibility requirements. In addition to the feasibility aspect, the company is also required to submit a statement and guarantee letter accompanied by a due diligence report to BI. A professional and independent legal consultant must legally recognise the material in the statement and guarantee before BI accepts it. The role of a legal consultant is very much needed in conducting LDD to obtain clarity regarding the legal status of the Company and its compliance with applicable laws and regulations. The principle of openness from the audited party in the LDD is also needed to obtain the required information. The principle of responsibility in LDD is attached to the auditing party, in this case, the legal consultant, who is fully responsible for the results and accuracy of the LDD report. (JRX/QON/TWK)