Cayman Islands Take Steps to Protect Nonprofit Sector from Bad Actors

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Seven Mile Beach, Grand Cayman / James Willamor

October 10, 2016; Cayman Compass

After years of debate, Cayman Island lawmakers approved the Charities Bill, which seeks to regulate nonprofit organizations specifically to prevent money laundering and terrorist groups from using charities as a cover for illegal operations. The bill was originally introduced in 2010, which has some people wondering, “Why now?”

Each year, a U.S. State Department Report indicates that lack of nonprofit regulation in the Caymans is a major anti-money-laundering weakness. As the Cayman Islands are just one year shy of a review by the Caribbean Financial Action Task Force (CFATF), the timing of the bill seems apt. While there were no cases of money laundering or terrorist financing reported, Cayman lawmakers believe the law strengthens their defenses against such activities and gives them a better shot at a positive review by the CFATF.

Fortunately for U.S. nonprofits with branches in the Cayman Islands and vice versa, the new legislation doesn’t present any extraordinary hurdles and is slightly more lax than U.S. reporting requirements. A component of the bill is to create a registry of nonprofit organizations operating in the Cayman Islands. The legislation defines a nonprofit organization as “any organization seeking public contributions as its primary purpose for philanthropic activities.” It does not apply to charitable organizations that are already regulated by a government agency. Organizations with more than $250,000 in annual gross revenue that send more than 30 percent of those earnings to another country must have their financial statements reviewed by an accountant submitted to the government. Organizations with income less than $250,000 will be reviewed if there is cause for concern.

According to ministry officials, the bill would “ensure that the public has access to information on all NPOs; allow for easy identification of entities that have been registered as NPOs; and facilitate investigations of, and enforcement against, bad actors within the NPO sector.”—Sheela Nimishakavi