The Indonesian Police Authority are responsible for investigating corporate and business fraud. However, in certain and special cases, civil servant officials of the Republic of Indonesia may be authorized to conduct investigations in special cases. This includes cases in the area of frauds involving the capital markets, tax, customs, environmental, consumer protection and etc.
Corporate or fraud is something that has been going around for ages, and it is something the Indonesian government is not fond off. Having caught breaking the laws has a serious repercussion towards the targeted individuals.
Although it is not specifically regulated under the Indonesian Penal Code, criminal fraud is governed under Article 378 of the Indonesian Penal Code (Kitab Undang-undang Hukum Pidana). However, this only covers fraud committed by a person, not by a corporation or legal entity.
Some regulatory provisions do extend to corporate or business fraud, such as the regulations of the Financial Services Authority (Otoritas Jasa Keuangan (OJK)), which was previously known as (BAPEPAM-LK). Some regulations impose criminal sanctions on business actors (including individuals or entities) such as:
Article 65 of Law No. 38/2004 on Roads
Articles 107 and 115 of Law No. 7/2014 on Trading
Article 61 of Law No. 8/1999 on Consumer Protection
Article 116 of Law No. 32/2009 on Environmental Protection and Management
However, in certain and special cases, civil servant officials of the Republic of Indonesia may be authorised to conduct investigations in special cases. This includes cases in the area of frauds involving the capital markets, tax, customs, environmental, consumer protection and etc.
The separate criminal offences of fraud, theft, misappropriation, misrepresentation and deceit may be relevant to corporate or business fraud.
When such cases are spotted, a preliminary investigation may be necessary to determine whether the management of the company or the company itself will be liable for the fraud.
If a company is found to be liable for conducting fraud it can generally only be charged with strict liability offences, as it is hard to establish the necessary criminal intent for a legal entity such as a company. That being said, if a strict liability is imposed, there are no need to establish the intent of it.
Let us give you an example, corporate or business fraud involving environmental damage can be charged with strict liability offences under Article 88 of Law No. 32/2009 on Environmental Protection and Management, which adopts the strict liability principle.
Under Article 53 of the Penal Code, attempts to commit a crime is a serious offence and they are punishable by law. However, under Article 54 of the Penal Code, attempts to conduct misdemeanors are not punishable. It may be vague but this is how it is.
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Civil and Criminal Proceedings
It is possible for the state or a regulator to impose penalties on a fraudulent company including:
Restrictions on business activities
Suspension of business activities
Revocation of business license
Cancellation of approvals
Cancellations of registration
A company can be charged with a criminal offence only if it has caused loss or harm to the state and/or the public. This has to be proven and if proven guilty, the offence can be penalised.
Penalties may include imprisonment for the person who are responsible to commit the crime. A fine may also be imposed towards the corporation.
Civil suits and class actions against a corporation is also possible in Indonesia. For example in cases where a corporation causes harm to the environment and has resulted in losses occurred by local residents, as long as the claim can be specified in details and can be proven, a class action claim can be submitted to the court. Punitive damage is not recognised remedy in Indonesia. Only compensatory damages can be recovered in civil cases.