NEW ANTI-FRAUD FRAMEWORK: DEADLINES AND REPORTING OF LJK POJK 12/2024

The Financial Services Authority (Otoritas Jasa Keuangan – OJK) has issued Regulation Number 12 of 2024 on the Implementation of Anti-Fraud Strategies by Financial Services Institutions (Lembaga Jasa Keungan – LJK)  (POJK 12/2024), aimed at strengthening efforts to prevent and address fraud in the financial services sector.

According to Article 1, paragraph 4 of POJK 12/2024, fraud is defined as any deviation and/or omission deliberately carried out to deceive, mislead, or manipulate LJK, Consumers, or other parties, occurring within the LJK environment and/or using LJK facilities, resulting in losses to LJK, Consumers, or other parties and/or allowing the perpetrator of the fraud and/or other parties to gain benefits directly or indirectly.

The Anti-Fraud Strategy that must be developed and implemented by LJK consists of four main pillars, as stipulated in Article 5, namely: a. prevention; b. detection; c. investigation, reporting, and sanctions; and d. monitoring, evaluation, and follow-up.

This regulation is expected to provide a strong foundation for LJK in protecting themselves from various fraud risks and increasing public confidence in the financial system.

Implementation of Anti-Fraud Strategy

POJK 12/2024 mandates that all Financial Services Institutions (LJK), including commercial banks, Islamic banks, insurance companies, financing companies, and other financial institutions, develop and implement an anti-fraud strategy. This strategy must be formulated based on an assessment of past fraud incidents and take into account potential future fraud risks. It is designed to prevent, detect, and address various types of fraud, such as corruption, bribery, asset misappropriation, financial statement fraud, and the leakage of confidential information.

Replacement of Previous Regulations

With the enactment of POJK 12/2024 on October 31, 2024, this regulation will repeal and replace several previous regulations governing fraud control, including POJK 39/2019, POJK 10/2019, POJK 35/2018, POJK 55/2017, and POJK 69/2016. The new regulation consolidates and sets standards for various anti-fraud strategies that have been implemented in the banking, insurance, and financing sectors. Additionally, POJK 12/2024 introduces new standards for other sectors that previously lacked specific anti-fraud regulations.

In POJK 12/2024, various acts classified as fraud are detailed in Article 2. These acts include:

1. Corruption, which includes: i. Conflicts of interest that harm the Financial Services Institution (LJK) and/or consumers; ii. Bribery; iii. Unauthorized acceptance; and/or iv. Extortion.
2. Asset misappropriation, including: i. Misuse of cash; ii. Misuse of inventory; and/or iii. Misuse of other assets.
3. Financial statement fraud, which consists of: i. Overstating net assets and/or net income; and/or ii. Understating net assets and/or net income.
4. Deception.
5. Leakage of confidential information.
6. Other acts that can be equated with fraud according to the provisions of the applicable laws and regulations.

With this regulation, OJK aims to strengthen fraud control and prevention across the financial services sector, providing clearer and more integrated guidelines for financial institutions to protect themselves from fraud risks.

Reporting Obligations

POJK 12/2024 requires LJKs to report the anti-fraud strategies they implement and any fraud incidents with significant impacts to OJK. These reports must include information about the type of fraud, modus operandi, incurred losses, and the measures taken to address it. Reporting is conducted periodically, depending on the type of LJK:

1. Banks, insurance companies, and financing companies: Reports must be submitted semi-annually, for the end of June and December positions, no later than the 31st of the following month.
2. Other financial services institutions: Reports are submitted annually, for the end of December position, and must be submitted no later than January 31st of the following year.

In addition, if there are any errors or changes in the information, LJKs are required to make corrections or updates within 15 working days after they are discovered.

Sanctions

Failure to meet reporting obligations may result in administrative sanctions, which can include written warnings or fines. If a Financial Services Institution (LJK) continues to fail to meet its obligations after the initial sanctions, OJK may impose further sanctions, such as prohibiting the issuance of new products or freezing certain business activities

Conclusion

POJK 12/2024 is a significant step in strengthening fraud control mechanisms within Indonesia’s financial services industry. With stricter implementation and reporting requirements, and a phased approach through reporting deadlines, it is expected that fraud risks will be minimized, thereby providing better protection for the industry and the public.

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