Government is trying one more time to regulate nonprofit organizations.
Since 2010, a proposed Charities Bill had to be pulled on two occasions before lawmakers were able to debate it. Charities and churches claimed they would not be able to afford the additional expense for record-keeping and annual external audits called for by the bill.
The groups warned the law could bring an end to charitable giving in Cayman.
In preparing another attempt to bring a new Charities Bill, Attorney General Sam Bulgin told the Legislative Assembly last year that there was some misunderstanding about the scope of what government is attempting to do. The main reason for the regulation of charities is the potential for money laundering and terrorism financing in this as yet unregulated space, he said.
A U.S. State Department report on international narcotics control highlights each year the “weak supervision of nonprofits and non-financial organizations” in Cayman as a major anti-money laundering weakness.
A national evaluation of money laundering risks also identified the regulation of charities as a significant vulnerability. The National Risk Assessment was carried out last year with the assistance of the World Bank to prepare for an inspection by the Caribbean Financial Action Task Force, an inter-governmental body that develops and promotes policies to combat money laundering and terrorist financing.
A law regulating the financial activities of charities is needed before the CFATF will make its scheduled assessment of Cayman’s anti-money laundering regime early next year.
The bill for the regulation of nonprofit organizations, released on April 29, seeks to create a registration system which will deal with the regulation and monitoring of nonprofits.
The proposed law defines a nonprofit widely as any organization that solicits contributions from the public and that is established primarily for the promotion of charitable, philanthropic, religious, cultural, educational, social or fraternal objectives, or any other activities and programs for the benefit of a section of the public.
The bill does not apply to charitable or voluntary organizations that are regulated by a government entity, trusts that are registered under the Banks and Trust Companies Law and any other entities that are exempt through an order of Cabinet.
Only registered organizations will be able to raise funds from the public if the bill becomes law.
The register of nonprofit organizations will collect the name and contact details of the organization and the identity of the individuals who own, direct or control it.
Charities and other nonprofits will have to maintain proper accounts for the donations and other funds they receive, for the proceeds from the sale of property, and for any expenditures and non-monetary transactions.
Nonprofit organizations with a gross annual income of more than $250,000 must have their books audited by a qualified or licensed accountant.
However, it is within the discretion of the registrar to demand the audit of nonprofits that have annual income of less than $250,000.
All organizations must submit an annual return to the registrar within three months of the end of the financial year.
To enforce the law, it is proposed that the registrar can apply a penalty of $3,000 if organizations do not comply with bill’s provisions for registration, record-keeping, audit and annual returns.