Tries again for nonprofit regulation
The Cayman Islands government will try again – likely before the end of the year – to pass legislation aimed at preventing nonprofit organizations from being set up to cover various illegal activities.
The proposal, known as the Charities Bill, has failed twice in the past five years. In 2010 it fell apart before making it to Cabinet after a number of local nonprofits complained it would effectively end charitable giving in the Cayman Islands. The charities said the provisions in the bill would make it too expensive for them to operate, forcing them to close.
Last summer, a revamped proposal was bounced from Cabinet, with lawmakers tight-lipped on whether they would eventually support the bill.
Attorney General Sam Bulgin said Monday that his office has begun consulting with accounting firms, law firms and charity groups concerning the bill, with an eye to having the legislation in place “by the end of the year.”
“There is still some misunderstanding about the scope of what government is attempting to do,” Mr. Bulgin told the Legislative Assembly on Monday. “Some people are of the view that if they do a fundraiser with hot dogs, they will be required to get the names and addresses of the persons who purchase the hot dogs as part of their due diligence exercise.
“We’re not interested in who’s buying hot dogs,” he said.
What lawmakers in Cayman, and also worldwide, are concerned about are efforts to establish a legislative framework for nonprofits that seeks to account for donations those groups receive, ensuring they are not used to assist or as a front to launder drug money or finance terrorist attacks.
Mr. Bulgin pointed out that the most recent U.S. international narcotics control report, issued in March by the State Department, flagged Cayman and “expressly mentioned that the Cayman Islands should pay greater attention to the non-profit organization sector.”
“To be forewarned is to be forearmed,” the attorney general said. “These [international] regulatory agencies are talking to each other. It is clear that there is some degree of monitoring going on and it has been established that we are not there yet.”
The new draft of the Charities Bill has not been made public, but the 2014 version of the bill did not apply to private charities, which are already regulated by the Cayman Islands Monetary Authority.
Under the 2014 proposal, public charities would have had to file annual returns with a charities registrar established by the legislation within six months of the end of their respective financial years. Charities would have been required to employ acceptable accounting standards, maintain proper records and conduct audits. However, charities that were registered companies under the Cayman Islands Companies Law would have been exempt from the 2014 bill’s audit requirements, since those are already required in the Companies Law.
The bill also required charities to maintain the names and contact information of all donors. In cases where this information was not readily available, the fundraising method used must be detailed.
The 2014 bill granted the attorney general the authority to inquire into the operations of a charity and take action when the organization may have been engaged in misconduct or committed a criminal offense.
The bill further sought to regulate how fundraising activities have to be carried out. Specifically, fundraising efforts should not unreasonably intrude on privacy, place undue pressure or make unreasonably persistent approaches to potential donors. In their attempts to raise funds, organizations were further prohibited from making false or misleading representations about the extent and urgency of funding needs, the use of funds or the activities, achievements or finances of a charity or company.
Mr. Bulgin said any such legislation that comes before local lawmakers is not an attempt to disparage the good work of the many charities that support the Cayman Islands community now.
“Nobody is trying to prevent charities from operating, quite the contrary,” Mr. Bulgin said. “The government is trying to create the necessary framework to encourage and facilitate the operations of these charitable organizations. One way of doing so is to protect them from any unnecessary international scrutiny and criticisms by ensuring they have [a] proper regulatory environment within which to operate.
“We should not sit and wait until the country is indicted or blacklisted and then we seek to react. We should be proactive about it. Some of those who are now questioning the need for the legislation will be the first to ask ‘how is that the government never saw it coming?’“