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FORMOSA NEWS - JAKARTA - IPO Prospectuses Still Weak on Transparency, Money Laundering
Risks Lurk in Capital Market. Research conducted by
Paltiada Saragi of the Christian University of Indonesia was published in
the International Journal of Law Analytics (IJLA) in 2026 research highlights
how beneficial ownership (BO) disclosures in IPO prospectuses are not fully
capable of detecting fictitious controlling shareholders used to disguise
illegal funds. This is crucial because the capital market is one of the most
strategic entry points for large-scale fund flows, including proceeds of crime.
Capital Market Transparency Under Pressure
The capital market depends on the principle of full disclosure. During an IPO, a prospectus serves as the primary document that informs investors about a company’s financial condition, business risks, and ownership structure. However, research reveals that the disclosure of ultimate beneficial owners (UBO) often stops at the level of corporate entities rather than identifying the natural persons who ultimately control or benefit from the company. This gap creates an opportunity for the use of nominee shareholders individuals whose names appear in official documents while the real controlling party remains hidden. Such arrangements can be used to conceal illicit funds entering the financial system. Although Indonesia adopted Beneficial Ownership transparency through Presidential Regulation No. 13 of 2018 and strengthened financial sector regulations under Law No. 4 of 2023 (P2SK Law), implementation in IPO prospectuses remains inconsistent.
Research Method: Reviewing 20 IPO Prospectuses
Research happlied a normative juridical method using statutory and conceptual approaches. The study examined 20 IPO prospectuses issued on the Indonesia Stock Exchange between 2020 and 2024. The selected companies had foreign ownership structures or used Special Purpose Vehicles (SPVs), which are considered higher-risk categories for ownership concealment. Each prospectus was evaluated by analyzing the “Ownership Structure” and “Shareholder Information” sections. A compliance score was assigned based on the depth and transparency of Beneficial Ownership disclosure.
Key Findings: Majority Only Meet Formal Requirements
The results show that most issuers have not achieved substantive transparency.
Capital Market Transparency Under Pressure
The capital market depends on the principle of full disclosure. During an IPO, a prospectus serves as the primary document that informs investors about a company’s financial condition, business risks, and ownership structure. However, research reveals that the disclosure of ultimate beneficial owners (UBO) often stops at the level of corporate entities rather than identifying the natural persons who ultimately control or benefit from the company. This gap creates an opportunity for the use of nominee shareholders individuals whose names appear in official documents while the real controlling party remains hidden. Such arrangements can be used to conceal illicit funds entering the financial system. Although Indonesia adopted Beneficial Ownership transparency through Presidential Regulation No. 13 of 2018 and strengthened financial sector regulations under Law No. 4 of 2023 (P2SK Law), implementation in IPO prospectuses remains inconsistent.
Research Method: Reviewing 20 IPO Prospectuses
Research happlied a normative juridical method using statutory and conceptual approaches. The study examined 20 IPO prospectuses issued on the Indonesia Stock Exchange between 2020 and 2024. The selected companies had foreign ownership structures or used Special Purpose Vehicles (SPVs), which are considered higher-risk categories for ownership concealment. Each prospectus was evaluated by analyzing the “Ownership Structure” and “Shareholder Information” sections. A compliance score was assigned based on the depth and transparency of Beneficial Ownership disclosure.
Key Findings: Majority Only Meet Formal Requirements
The results show that most issuers have not achieved substantive transparency.
Out of 20 prospectuses analyzed:
- 60 percent fell into the low compliance category. Disclosure stopped at foreign corporate entities without identifying the natural persons behind them. Strong indications of nominee use were found.
- 25 percent showed medium compliance. Companies provided Beneficial Ownership declaration letters, but inconsistencies were detected in audited financial statements, and ownership tracing stopped at the second or third layer.
- Only 15 percent demonstrated high compliance, disclosing the full ownership chain up to the Ultimate Beneficial Owner as a natural person, supported by information about the source of funds.
Research describes this pattern as
“paper compliance” formal adherence to
regulations without substantive verification.
Policy Implications
Based on the findings, the study
proposes three strategic reforms:
- Strengthen risk-based due diligence requirements in IPO regulations.
- Integrate national Beneficial Ownership databases with capital market oversight systems.
- Impose stricter sanctions, including postponement or cancellation of IPO approvals if concealment of ultimate owners is detected.
These measures aim to close
regulatory loopholes and ensure that capital market instruments cannot be
exploited for laundering criminal proceeds.
Author Profile
Paltiada Saragi, S.H., M.H., is a
legal scholar and researcher at the Faculty of Law, Indonesian Christian University, Jakarta.
His expertise includes: capital market law, corporate
criminal liability, anti-money laundering regulation, and financial sector
governance.
 Prospectuses: A Strategy to Mitigate Money Laundering Risks Posed by Fictitious Controlling Shareholders){kind=link}
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