Prevention of Terrorist Financing With New Legislation

In order to combat terrorist financing via nonprofit organizations, the Cayman government must use knowledge as their main weapon.  Unfortunately, information is what the government is lacking and this weakness is leaving them susceptible to terrorist financing and other illicit activities.

According to the Ministry of Financial Services and Home Affairs Policy Officer, Wilbur Welcome, the government presently does not know how many nonprofit organizations operate in the territory.

In order to combat this lack of information and to help improve their anti-money laundering (AML) efforts, all of the territory’s nonprofit organizations must be listed on a public central registry by July 31, 2018, as per the new Non-Profit Organizations Law.  In preparation for this transition, Mr. Welcome and the General Registry Head of Compliance, Paul Inniss, held a seminar recently to discuss how the new legislation will affect the nonprofit sector.

Further, this new law places reporting requirements on churches, schools, and other nonprofit entities that were previously not regulated for money laundering risks.  An organization could easily take advantage of these institutions by claiming to use the donated funds for legitimate purposes but are actually using the funds to finance terrorism.  Maintaining compliance with the new law will help prevent these types of institutions from unknowingly or even knowingly using their donations to fund criminal activities.

Key benefits of this new law include:

  1. Nonprofit organizations will be subject to a financial review instead of an audit.
  2. It will be more manageable for many nonprofit organizations to operate in the territory because it limits fees for changes in the organization such as shifts in management.
  3. It will be easier for registered nonprofits to open accounts with banks, proving validity of the organization.

Inniss says in order to prevent terrorist financing through nonprofits at the volunteer level, “You have to at least know the first and last name, date of birth, and [have a] copy of ID,” for all volunteers involved with the organization.  Without this information the organization could be at risk because many nonprofits hand out t-shirts and other items to volunteers that could be used by fraudsters to collect donations for themselves or other criminal activities.  

Innis believes this new law will be added protection against Cayman-registered nonprofits being used for the financing of terrorism, which would cripple the territory’s reputation.

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