Mandatory Implementation of KYC Principles for Futures Brokers

The Head of the Commodity Futures Trading Regulatory Agency (Badan Pengawas Perdagangan Berjangka Komoditi– “Bappebti”) recently issued Regulation No. 2 of 2016 on Know-Your-Customer Principles for Futures Brokers (“2016 Regulation”).The 2016 Regulation provides sets out comprehensive guidelines for futures brokers relating to the implementation of so-called Know-Your-Customer (“KYC”) principles in order to ensure healthy commodity futures trading activities, as well as to prevent activity relating to money laundering and the funding of terrorism. [1] The Regulation is of relevance to directors, commissioners and representatives of future brokers, as well as to customers of commodity futures traders in general.Implementing KYC PrinciplesKnow-Your-Customer (“KYC”) principles are applied by future brokers in order to understand their customers’ backgrounds and identities, as well as to monitor customer accounts and transactions. Any suspicious customer transactions should then be reported to the relevant government agencies (e.g. the Indonesian Financial Transaction Reports and Analysis Centre/PPATK). [2] In order to implement the KYC obligation, futures brokers must first identify, verify and monitor their customers’ data and information, a process commonly known as Customer Due Diligence (“CDD”). This measure must be undertaken whenever a customer opens an account and/or engages in a transaction, or whenever there is any doubt surrounding the information provided, or if there is any indication of activities relating to money laundering or the funding of terrorism. [3] The CDD process generally involves acquiring the following information from prospective customers: [4]