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$4b charity sector being assessed for anti-money laundering compliance

The amount of funds flowing through Jamaica’s registered charities topped $4 billion last year, new reviews of the sector show.

The flow of those funds have long been a concern to money laundering regulators with charities, as a composite, seen as a channel that is vulnerable to exploitation as a conduit for illicit money.

But new regulations have resulted in the Department of Co-operatives and Friendly Societies, DCFS, updating its risk management procedures in relation to guidelines for policing terrorism financing, money laundering and other financial crimes, said Registrar Errol Gallimore.

And charities are currently being assessed for compliance, he said.

Last year, January to December, the total inflows to local charities was estimated at $4.63 billion, Gallimore told the Financial Gleaner.

Dozens of new charitable bodies are created each year. In 2021 there were 91 new bodies registered; 116 in 2020; and 198 in 2019.

Fines and new procedures under the new money laundering regulations will make it more arduous for the charities to collect donations.

Not only are charities required to be more open about where they get their donations, they will have to incur new costs to set up compliance and reporting structures.

Failure by charities to report transactions that are suspected of constituting or being related to illicit money and financial crimes can result in a fine of up to $1 million.

The charities regulations promulgated in December 2022 apply to charitable bodies from 2023 onwards.

They require registered charitable organisations to “use their best efforts to confirm the identity, credentials and good standing of persons who provide them with financial contributions and other donations”.

Charities are now required to disclose their donors and associated charities, and document the beneficiaries of their charitable works.

Their identity verification procedures should span its governing board, donors, beneficiaries, and any associate charities and their governing board members.

The Ministry of Finance, under which the DCFS falls, says the new regulations are intended to elicit documented evidence of the income, assets and size of the registered charitable organisations, and the frequency and amount of donations received from outside Jamaica by the registered charitable organisation.

The onus will be on the charity to ensure that it is not being exploited as a conduit for illicit money, and that it is in compliance with the Proceeds of Crimes Act, better known as POCA, under which financial crimes are prosecuted.

The new legislation imposes on charities the requirement to set up new structures for reporting of their activities to their regulator, the DCFS, and transactions they might consider suspicious, and to train staff to know what the law requires.

If the charity is unable to verify a transaction or establish the identity of the principal donor or their agent, it will be penalised.

Charities, the legal profession, and the real estate sector have come under scrutiny by the Jamaican government in recent times as it moves towards compliance with global anti-money laundering rules.

For now, Jamaica remains on a grey list until it addresses a series of issues that the global Financial Action Task Force, FATF, perceives to be problematic. Countries on such a list may face difficulties executing some cross-border transactions or face hurdles in raising funds on the international market.

“The implementation of the updated procedures has guided DCFS in improving our monitoring regime of all registered charities,” said Gallimore of the regulations issued in December.

“This is in keeping with the department’s undertaking of the Financial Action Task Force’s recommendations on international standards for combating money laundering and the financing of terrorism, as well as the proliferation for funds by entities,” the registrar said.

He added that the DCFS was in the process of assessing compliance levels.

“The regulations are also explicit regarding the responsibility of charities to comply with proper record keeping and reporting of donor funds, along with audit processes from the Charities Authority.

“The regulations also stipulated that each charity should have an officer designated as the ‘compliance officer’ to ensure adherence to the procedures,” he said.

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