Unofficial Translation

BANK INDONESIA REGULATION

NUMBER 5/23/PBI/2003
ON
THE IMPLEMENTATION OF KNOW YOUR CUSTOMER PRINCIPLES
FOR RURAL BANKS

THE GOVERNOR OF BANK INDONESIA

Considering:

a. that in running its business activity, Rural Banks face various

business risks;
b. that to minimize business risks, Rural Banks must apply the principle
of carefulness;
c. that as an effort to apply the principle of carefulness, Know Your
Customer Principles must be applied;
d. that based on the above statement, it is necessary to regulate some
stipulations concerning the application of Know Your Customer
Principles in Bank Indonesia regulation.

Regarding :

1. Act Number 7 of 1992 on Banking (The State Gazzette of the

Republic of Indonesia of 1992 Number 31, The Appendix of the
State Gazzette Number 3472) which has been annulled by Act
Number 10 of 1998 Number 182, The Appendix of the State
Gazzette Number 3790);
2. Act Number 23 of 1999 on Bank Indonesia (The State Gazzette of
the Republic of Indonesia of 1999 Number 66, The Appendix of the
State Gazzette Number 3843);
3 Act Number 15 of 2002 on the Crime of Money Laundry (The State
Gazzette of the Republic of Indonesia of 2002 Number 30, The
Appendix of the State Gazzette Number 4191) which has been
annulled by Act Number 25 of 2003 (The State Gazzette of the

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Republic of Indonesia of 2003 Number 108, and the Appendix of the

State Gazzette Number 4324).

DECIDES:

Declares:

BANK INDONESIA REGULATION ON THE APPLICATION OF

KNOW YOUR CUSTOMER PRINCIPLES FOR RURAL BANKS

CHAPTER I
GENERAL REGULATION
Article 1

In this Bank Indonesia Regulation, the meaning of:

1. Rural Banks, which from this time onward shall be mentioned as BPR is the BPR
that is mentioned in Act Number 7 on 1992 on Banking which has been annulled by
Act Number 10 on1998.
2. Know Your Customer Principles are the principles applied by BPR in order to know
the identity of each customer, monitor the customers transactions, and also to report
any transactions that are suspicious.
3. The Center for Reporting and Analyzing Financial Transactions which from this
time onward shall be stated as PPATK is an independent organization formed to
prevent and eliminate money laundry as meant by Act Number 15 of 2002 on
Money Laundry Crime which has been annulled by Act Number 25 of 2003.
4. A Customer is the party that uses the service of the BPR.
5. The Result of Crime is wealth generated from crimes that are stated in Article 2 of
Act Number 15 of 2002 on Money Laundry Crime which has been annulled by Act
Number 25 of 2003.

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Article 2

1. BPR is obliged to apply Know Your Customer Principles.

2. In the application of Know Your Customer Principles as mentioned in Verse (1),
BPR is obliged to:
a. establish the policy for Customer acceptance;
b. establish the policies and procedures to identify the customers;
c. establish the policies and procedures to monitor the account and transactions of
the customers;
d. establish the policies and procedures of risk management related to the
application of Know Your Customer Principles

Article 3

(1) The directors of BPR is responsible for the application of and monitoring the
implementation of Know Your Customer Principles
(2) The directors of BPR is responsible for transferring knowledge and give training to
their employees about the implementation of Know Your Customer Principles.
(3) The directors of BPR is responsible for dealing with high-risk Customers, including
government officers, and or any transactions that can be categorized as suspicious
transactions as exemplified in the Appendix.

CHAPTER II
THE POLICY FOR ACEPTING AND IDENTIFYING CUSTOMERS
Article 4

(1) Before executing a business contact with a Customer, BPR must inquire
information about:

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a. the identity of the Customer;

b. the intention and objective of the Customer for initiating a business with BPR;
c. other information that enables BPR to inquire the profile of the potential
Customer; and
d. The other partys identity, if the potential Customer acts for and on behalf of
another party.
(2) The identity of a potential Customer as mentioned in verse (1) must be proven by
supporting documents.
(3) BPR must investigate the validity of the documents supporting the identity of a
potential Customer as mentioned in verse (2).
(4) The BPR that have used electronic media in their banking service must initiate a
meeting in person with the potential Customer at least during the opening of the
account.

Article 5

The supporting documents as mentioned in Article 4 verse (2) for:

a.

Individual Customer, at least consists of:

1) the Customers identification retaining:
a) name;
b) permanent address;
c) date and place of birth;
d) nationality;
2) information about occupancy;
3) specimen of signature; and
4) information on the source and objectives of the fund usage;

b.

Company customer, at least consists of:

1) a deed of establishment / a statute for a company that is regulated by the existing
law;

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2) a business permit from an authorized institution;

3) the name, signature specimen and the authorization to the parties appointed are
empowered to act in and by the name of the company in its business with the
BPR;
4) the information on the source and objective of fund usage;
5) tax number (NPWP);
6) the document containing the identity of the manager who represents the
company.
c.

A governmental institution, international institution, and representatives of a

foreign country who are applying to be a Customer must submit the name,
specimen of signature and a letter of appointment for their representatives in order
to speak for the institution in their attempt to open a business with the BPR;

d.

Bank as a Customer, consists of the customary documents in a transactional

relationship between banks, are:
1) a deed of establishment / a statute of the bank;
2) a business permit from an authorized institution;
3) the name, signature specimen and the authorization to the parties appointed are
empowered to act in and by the name of the bank in its business with the BPR;

Article 6

(1) If the potential Customer acts as a mediator or is authorized by another party

(beneficial owner) to open an account, BPR is obliged to obtain the documents that
support the Customers identity as stated in Article 5. BPR is also obliged to obtain
other documents containing the explanation of legal connection, assignment, and
the authorization to act as a mediator or representation of the other party.
(2) If the potential Customer in verse (1) is another bank, then the verification or
confirmation of the beneficial owners identity shall be executed by the bank that
acts as the potential Customer.

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(3) If the Customer is not included in the above verses of (1) and (2), BPR must obtain
the evidence of identification from the beneficial owners, source and objective of
fund usage and other information about the beneficial owner from the Customer,
such as:
a. for individual beneficial owner:
1) documents of identity as mentioned in Article 5 letter a;
2) the evidence of authorization to the Customer
3) a statement from the potential Customer that an investigation on the
reliability of the identity of the source of funding from the beneficial
owner has been performed.
b. for companys beneficial owner, including banks:
1) the document as stated in Article 5 letter b or d;
2) documents of identification of the authorized manager representing the
company.
3) document of identification of the controlling shareholders of the company.
4) the evidence of authorization to the Customer including the one to open an
account.
5) A statement from the Customer concerning an investigation on the
reliability of the identity or source of funding of the beneficial owner that
has been performed.
(4) If BPR doubts or is uncertain about the identity of the beneficial owner, BPR must
refuse to have a business contact with the potential Customer.

Article 7

BPR is restricted to have a business contact with a potential Customer who cannot fulfill
the requirements in Article 4, Article 5, and Article 6.

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CHAPTER III
MONITORING CUSTOMER ACCOUNT AND TRANSACTIONS
Article 8

(1) BPR is obliged to update data if there is an occurrence of change as stated in Article
5 or Article 6.
(2) BPR must manage the documents as stated in Article 5 and Article 6, until at least 5
(years) after the Customer close the account in the BPR.

Article 9

BPR must own a record system that can identify, analyze, monitor and provide effective
reports on the characteristics of the transactions performed by the Customer.

Article 10

BPR must protect the profile of the Customer regarding at least the information of:
a. occupation or business sector;
b. amount of income;
c. another obtained accounts, if it is available;
d. normal transactional activities; and
e. the objectives of opening the account.

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CHAPTER IV
REPORTING
Article 11

BPR must deliver the copy of policies and procedures as stated in Article 2 verse (2) to
Bank Indonesia at leat 6 (six) months after the declaration of this Bank Indonesia
Regulation.

Article 12

(1) BPR is obliged to report any Suspicious Financial Transaction to PPATK at least 3
(three) working days after BPR finds out the existence of any elements of a
suspicious financial transaction.
(2) A report of a Suspicious Financial Transaction as stated in verse (1) shall be
performed according to the prevailed guidelines.

CHAPTER V
ADDITIONAL STIPULATION
Article 13

(1) The stipulations in this Bank Indonesia Regulation does not prevail for the
Customers who do not own an account in the BPR. With the condition that the
amount of transaction does not exceed Rp. 100.000.000,00 (one hundred million
rupiahs) or with the same value as that, and this transaction is executed either at one
time or several times in one day.
(2) A change in transactional value as stated in verse (1) is stipulated in a Circular of
bank Indonesia.

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CHAPTER VI
SANCTION
Article 14

A violation of the stipulation in Article 2, Article 3, Article 4, Article 6, Article 7,

Article 8, Article 9, Article 10, Article 11, Article 12, Article 13, and Article 15 shall be
given administrative sanction as mentioned in Article 52 verse (2) letter b, letter c, letter
e, letter f, and or letter g of Act Number 7 of 1992 on Banking that has been annulled by
Act Number 10 of 1998.

CHAPTER VII
SHIFT STIPULATION
Article 15

BPR is obliged to implement the existing Know Your Customer Principle including to
update Customer data in at least 6 (six) months after this Bank Indonesia Regulation is
activated.

CHAPTER VIII
CLOSING STIPULATION
Article 16

The stipulations in this Bank Indonesia Regulation does not prevail for the Rural Banks
established based on Staatsblad Year 1929 Number 357 and Rijksblad Year 1937
Number 9.

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Article 17

This Bank Indonesia Regulation is activated since the date of its establishment.

Established in Jakarta
On October 23, 2003

THE GOVERNOR OF BANK INDONESIA

Signed

BURHANUDDIN ABDULLAH

LEMBARAN NEGARA REPUBLIK INDONESIA TAHUN 2003 NOMOR 116

DPBPR/BPS

Unofficial Translation

EXPLANATION
OF
BANK INDONESIA REGULATION
NUMBER 5/23/PBI/2003
ON
THE APPLICATION OF KNOW YOUR CUSTOMER PRINCIPLES

I.

GENERAL
In running its business, a BPR faces a lot of risks, such as risk of reputation, legal

risk, and concentrated transaction risk.

To overcome a potential risk, BPR must apply the principle of carefulness in its
operation. One of the efforts to execute the principle of carefulness is the application of
know your customer principle.
Based on these reasons and considering that Know Your Customer Principle is an
integral part of the risk management system, BPR needs to establish some rules on
Know Your Customer Principle for BPR.

II.

ARTICLE BY ARTICLE

Article 1
Sufficient.

Article 2
Verse (1)
Sufficient.
Verse (2)
Letter a and letter b
In determining the policy to accept a Customer, the
considerations are the Customers background, citizenship,
business field, position, occupation or any other risk indicators
(for example: information about crime involvement).

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Letter c
Monitoring Customers account and transaction is executed by
organizing Customers documents, updating Customers data,
ownership of a record system that can identify the characteristics
of the Customers transactions, and securing the Customers
profile.
Letter d
The policies and procedures of risk management are as follows:
a.

monitoring by the management;

b.

delegation of authority, including the limitation of Bank

officers authority in terms of account management and
Customers transaction;

c.

a clear separation of duties, including the separation of

management and dividing functions.

d.

internal monitoring that operates the monitoring process

regularly, whose function is to evaluate the exist policies and
procedures of Know Your Customers Principle. It also
functions to give independent judgement on Bank policies
and procedures including that to fulfill the general
requirements and the existing law.

e.

A continuous employee training program.

Article 3
Verse (1)
The directors of BPR must be fully committed to implement Know Your
Customer Principle effectively. Know Your Customer Principles
influence the effort to protect the business existence of BPR, because
Know Your Customer Principles:
a.

is a foundation to identify, limit and control the asset risk and BPR
liabilities;

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b.

Helps maintaining BPR reputation and the integrity of banking

system by preventing the chance of making BPR a mean or target
of financial crimes.

The monitoring of Know Your Customer principle in practice is

integrated in BPR internal monitoring.
Verse (2)
Sufficient.
Verse (3)
In the application, the Directors of BPR shall appoint an officer to
identify and report any suspicious financial transactions.
What is meant by the state government is the government as stated in Act
Number 28 of 1999 on the Clean and Free of Corruption, Collusion and
Nepotism State Government, that is the government official that
functions as an executive, legislative, or judicial body. It also means
other officers whose function and main duty is related to governing the
state based on the existing law and other parties related to governing the
state such as:
a. company owned or organized by the government officer;
b. the family members of the government officer that consist of kin,
children, parents, wife or husband, parents in-law and son or daughter
in law ; and
c. the people that commonly known to be related to the government
officer.
The meaning of a suspicious transaction is the transaction that deviates
from the profile, characteristics and habits of the Customers transaction.
This includes the transactions by the Customer which is suspected to be
executed in order to avoid being reported by the BPR as it is obliged to
do by Act Number 15 Year 2002 on the Crime of Money Laundry that is
annulled by Act Number 25 Year 2003. Therefore, the main factor that
determines a transaction to be suspicious is the knowledge of the

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common / usual transaction done by the Customer, including a financial

transaction done or cancelled that uses assets from a criminal act.

Article 4
Verse (1)
Sufficient
Verse (2)
BPR can administer the copy of supporting documents that is proved by
the real document showed by the Customer.
Verse (3)
The meaning of investigation of the documents supporting the
Customers identity is in the least covering the investigation of all
documents related to the identity of the Customer. If necessary, BPR may
have an interview with the potential Customer to search and to be
convinced of the supporting document.
Verse (4)
The meaning of banking service using electronic media is transactions by
phone (phone banking), e-mail, and electronic banking. Meetings
between BPR and the Customer can be executed through a special officer
or another party representing the BPR to ensure BPR of the Customers
identity.

Article 5
Letter a
Number 1)
Document of identification of the Customer in the form of
Identity Card (KTP), Temporary Residential Permit (KIMS),
Driving License (SIM) or passport completed by an information
on the permanent address if it is different from the one in the
document.

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Number 2)
The explanation of the Customers occupation retaining the
address of the company where he/she works and the business field
operated by the company. In the case of unemployed Customer,
the required data is about the source of income.
Number 3)
Sufficient
Number 4)
Sufficient.
Letter b
The meaning of company here includes foundation and any other similar
institution.
Number 1)
Sufficient.
Number 2)
Sufficient.
Number 3)
Sufficient.
Number 4)
Sufficient.
Number 5)
If at the time of aplication to become a Customer, he/she
has not obtained a NPWP, the party can submitt the copy
of NPWP application and soon after the Customer gets the
NPWP, BPR must request it to the Customer.
For the Customers who is not obliged to have an NPWP,
the party must submitt a declaration that he/she is not
obliged to obtain an NPWP.
Number 6)
Sufficient.

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Letter c
Sufficient.
Letter d
Sufficient.

Article 6
Verse (1)
Sufficient.
Verse (2)
Sufficient.
Verse (3)
Letter a
Number 1)
Sufficient.
Number 2)
In letter of authorization, the legal relationship is also
explained.
Number 3)
Sufficient.
Letter b
Number 1)
Sufficient.
Number 2)
Sufficient.
Number 3)
Sufficient.
Number 4)
In the letter of authorization, the legal relationship is also
explained.

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Number 5)
Sufficient.
Verse (4)
Sufficient.

Article 7
Sufficient.

Article 8
Verse (1)
Sufficient.
Verse (2)
The document in this article is the document of identification of the
Customer which is not a financial document as administered in Act
Number 8 Year 1997 about Company Documents.

Article 9
The record system that is applied must enable BPR to track down each
individual transaction, if necessary, both for the internal and or Bank Indonesia,
PPATK needs or the needs in a trial case.
What are being included in the transactional track down are the tracking down of
Customers identity, the identity of the partner in the Customers transaction,
transactional instrument, date of transaction, the number and denimination of
transaction, and the source of fund used for the transaction.
By tracking down the Customers transaction, BPR shall find out the
characteristics of the transaction.

Article 10
Sufficient.

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Article 11
The address for the submission of the copy of policies and procedures is:
a. DPBPR, Jl.M.H.Thamrin No.2 Jakarta 10110 for the BPR in Jakarta, Bogor,
Depok, Bekasi, Karawang and Banten.
b. Bank Indonesia regional offices for the BPR outside the areas that are stated
in letter a.

Article 12
Verse (1)
Sufficient.
Verse (2)
The meaning of prevailed guidelines is the Act on the Crime of Money
Laundry and PPATK stipulation.

Article 13
Verse (1)
The Customer that does not obtain an account but uses the service of the
BPR such as transfer service.
Verse (2)
Sufficient.

Article 14
Sufficient.

Article 15
Sufficient.

Article 16
Sufficient.

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Article 17
Sufficient.

THE APPENDIX OF THE STATE GAZETTE OF THE REPUBLIC OF

INDONESIA YEAR 2003 NUMBER 4328
DPBPR/BPS