Government meets with banks to discuss requirements for charities

Officials from the General Registry and the Ministry of Financial Services have met with local banks to address concerns over onerous banking requirements for charitable organizations, specifically in relation to problems experienced by nonprofit organizations to open bank accounts.

Paul Inniss, the General Registry’s head of compliance, said, “The public has expressed to the General Registry, specifically the Registrar of NPOs, along with the wider Ministry, issues experienced by [nonprofit organizations] with regard to opening bank accounts at local banks and maintaining general banking relationships.”

He said the meetings had shown that local financial institutions need more clarity around their efforts regarding anti-money laundering and countering of terrorist financing with regard to non-profits.

“We hope the banks can now tweak their measures to better facilitate NPO business,” he said.

The ministry said in a press release that meetings were held before the Non-Profit Organisations Law came into force last year and again before the passage of two pieces of legislation in the Legislative Assembly in November.

Feedback from these meetings had helped government formulate the Companies (Amendment) Law, 2018, which allows the Registrar General to process and approve applications under section 80 of the Companies Law (2018 Revision), instead of Cabinet.

The result will be a more efficient process, with a shorter turnaround time for applications, by eliminating the need for Cabinet approval, the ministry said.

In addition, the NPO (Amendment) Law, 2018 was created to provide clarity about which organizations are within the scope of the law.

The law also gives the registrar of nonprofit organizations the right to periodically assess Cayman’s nonprofit sector for jurisdictional vulnerabilities around terrorist financing activities.

The registrar’s previous lack of power to carry out such an assessment was highlighted as a shortcoming by the Caribbean Financial Action Task Force’s inspection of Cayman’s anti-money laundering regime in December 2017.

The inspection and related concerns around money laundering were one of the main drivers for the creation of the Non-Profit Organisations Law last year.

The ministry said, although charities are generally considered low risk, the CFATF evaluation called for a registration process for local charities to gather empirical evidence on nonprofits confirming that their money laundering risk is indeed minimal.

Since the NPO law was passed in August 2017, more than 400 churches, sports clubs, philanthropic organizations and community groups have registered with government.

“With such a significant portion of Cayman’s community being affected, it is important the banks continue to review their on boarding and account maintenance process, considering the specific risk posed by each [nonprofit organization],” Mr. Inniss said.

Banks should note that following an informal and positive review of charities in the Cayman Islands, the registrar of NPOs will undertake a formal assessment of the nonprofit sector, which will ultimately lead to the issuance of industry guidance, he added.