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Charity registration for all

Recent moves to tighten the oversight of Jamaican charities have not been enough to satisfy money laundering watchdog Financial Action Task Force, FATF, which wants a more comprehensive approach to ensure that they are not being exploited as conduits for illicit cash.

Jamaica is in the process of addressing the shortcomings, which will be done via additional legislation, Minister of Finance Dr Nigel Clarke said recently in Parliament.

Commenting further on the issue last week, Maurene Simms, who is the point person for Jamaica’s FATF compliance programme, said the objective is to identify charities at risk of being used for terrorism financing.

But Jamaica currently has limited information on many charitable bodies as disclosures are voluntary.

“Right now, it is when an organisation is seeking a tax benefit as a charity they voluntarily provide information to the Department of Cooperative and Friendly Societies,” said Simms, who is principal adviser to the governor of the Bank of Jamaica and prime contact to the CFAFT, or Caribbean Financial Action Task Force.

DCFS is currently doing a risk assessment of charities and, so far, about 40 of the more than 1,200 bodies registered with the department are deemed to be “at risk” or vulnerable to terrorism financing.

“Having identified that subset, the DCFS targets those charities for its outreach and sensitisation sessions geared towards building awareness as to how they can be used so that appropriate measures can be put in place to protect these charities,” said Simms.

In an address to Parliament on December 19, Clarke said that although Jamaica has promulgated the Charities Act and has, in large part, identified those “at risk charities” that should be protected against abuse by money launderers, he noted that the registered bodies are only a subset of the whole. Currently, only those charities seeking a tax exemption or benefit register with the DCFS.

Clarke indicated that the Ministry of Industry, Investment and Commerce, which is already seeking to close the gap, has developed a discussion paper and drafted a Cabinet submission that has been shared with stakeholders for comments, including the Prime Contact Secretariat for the FATF programme at the central bank.

A meeting is to be scheduled to discuss the legislative strategy.

“We are looking at two options, one of which is to amend the current act to require mandatory registration; or we will do a new [Charities] Act,” said Simms.

“The decision has not been made to go with one or the other. What is clear is that we must find a mechanism,” she said.

Already, new regulations promulgated by the Ministry of Finance and the Public Service have led to updated procedures for risk management, DCFS Registrar and department head Errol Gallimore said back in September.

The Charities Regulations promulgated in December 2022 applies to charitable bodies from 2023 onwards and mandate that registered charitable organisations “use their best efforts” to confirm the identity, credentials, and good standing of persons from whom they receive financial contributions and other donations. It requires them to do due diligence checks on donors to ensure that they are above board, and they are now required to document the identity of their significant donors without breaching confidentiality.

Simms said that the new objective “is to identify charities at risk of being used for terrorism financing. Having found those charities, then you ensure you have the outreach and training for those charities to allow them to identify and put mitigating measures in place to minimise those risks and then put in measures and make them aware of what can be done to protect them,” she said.

In its most recent and ongoing assessments of registered entities, the Department of Industrial and Provident Societies said the flows to charities in 2022 was around $4.6 billion.

Meanwhile, the office of the Supervisor of Provident Societies says dozens of new charitable bodies are created each year within the sector, but the numbers have been waning in recent years.

As a general rule, charitable giving and philanthropy tend to wane in periods of economic uncertainty, and that appears to be the case for Jamaica coming out of the pandemic. The most recent data available to the Financial Gleaner shows that in 2021, ninety-one new charities registered with the DCFS, down from 116 registrations in 2020. It is also a steep drop from the 198 new bodies that were registered in 2016.

The new regulations not only require disclosure of donors and source of funds, but also impose fines for breaches and non-compliance.

Failure by registered charities to report transactions that are suspected of constituting or being related to the commission of money laundering, the financing of terrorism or other financial crimes can lead to a fine of up to $1 million on conviction in a parish court.

Now, the aim is to make the requirement for disclosure mandatory for all.

“It is simply to make registration and reporting to the DCFS mandatory. That is the FATF recommendation, and that is what we will implement for non-profit organisations,” Clarke said.

Maureen Simms said that the new regulations will also distinguish what a charitable body is and what it is not. Currently, any entity seeking tax exemptions can make use of the designation.

There are 40 FATF recommendations that constitute the international standards by which jurisdictions’ preventative measures to combat the risks posed by criminals to launder the proceeds of crime and finance terrorism and proliferation of weapons of mass destruction are assessed.

Jamaica is now compliant with 37, the finance minister said. Jamaica still needs to address issues relating to charities as well as new technologies and financial sanctions.

“Jamaica was assessed as compliant with new technologies at its 2015 mutual evaluation. However, since then, we have seen the advent of virtual assets and virtual assets providers – VASPs – and Jamaica’s rating was downgraded,” he said.

In relation to targeted financial sanctions related to nuclear proliferation, while Jamaica has promulgated regulations relating to sanctions against the Democratic People’s Republic of Korea, otherwise known as North Korea, the corresponding regulations for Iran are still outstanding.

The Ministry of Foreign Affairs and Foreign Trade has advised that it is working on a second draft of the regulations.

Clarke said that in terms of removal from FATF’s grey list, only one action remained outstanding, “which is to demonstrate the effective implementation” of the beneficial ownership regime.

“Given the work being undertaken by the Companies Office of Jamaica and its parent ministry, we are optimistic that Jamaica will clear the final hurdle by February 2024 … thus signalling the substantial completion of the agreed action plan aimed at enhancing Jamaica’s AML/CFT regime,” the finance minister said.

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