ngoLAW Brief - extract from their newsletter, last quarter of 2022

This extract from the last newsletter of 2022 is an update on (and some practical advice coming out of) the major legislative changes that we have been engaged with government over, in an effort to:

1.    avoid grey-listing of our country by the  Financial Action Task Force (FATF); AND

2.    limit unnecessary, not useful and potentially harmful extra regulatory requirements which were being unilaterally imposed on the non profit sector.

To see the rest of the newsletter and to view previous ‘briefs’ with practical advice for nonprofits visit https://ngolawsa.co.za/news-views/ . If you would like to subscribe to the newsletter use the field at the bottom of that page, or email dorothy@ngolawsa.co.za.  

The Octopus Bill update and impact

The dust has all but settled on the submissions and responses on “A” (for Alarming 😊)and then the updated, “B” version of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill. We have taken to calling this Bill the ‘Octopus Bill’ because of its impact on multiple Acts, many of which affect the nonprofit sector.  For the background, see https://ngolawsa.co.za/urgent-call-for-submissions-on-the-anti-grey-listing-compulsory-npo-registration-bill/.

The most important result of our engagement has been the removal from the Bill of the proposed mandatory registration of all non-profits in South Africa. In the “B” version of the Octopus Bill (which we anticipate will be passed into law shortly) compulsory NPO registration has been limited to the ‘at risk’ category of non-profits, as per the proposed amendment to section 12 of the NPOAct:

(b) A nonprofit organisation must be registered under this Act if it—

(i)         makes donations to individuals or organisations outside of the Republic’s borders; or

(ii)        provides humanitarian, charitable, religious, educational or cultural services outside of the Republic’s borders.

Take-aways from the Octopus Bill process for the sector as a whole

• Civil society, and all of it, needs to be able to speak to government and proposed changes with an informed, coherent andbroad-based voice.  We will not always agree on all aspects, but we should be more active in finding common ground and being able to show government departments and parliamentary committees the number and extent of organisations we speak for.  In the process just ending, a fabulous effort was made around this in the very short time available.  (When we complained that we had not had enough time for proper responses and were asked ‘but what would more time have allowed you to do better?’ our answer was – ‘consult more broadly, engage and inform more extensively, consolidate a joint response in a more considered fashion’.)
• Despite the short time given, when we apply ourselves to making practical, engaging and relevant responses, our voices are heard and even appreciated. Government is often disconnected from the reality of life and struggles in South Africa, and civil society is a very useful window to reality.
• The non-profit sector needs to have people who are dedicated to doing long-term, big-picture work on behalf of the entire sector on an ongoing basis.  The Octopus Bill may have come at us suddenly, but there was, really, plenty of advance warning of the brewing FATF process.  But there was no-one on the look-out on behalf of the non-profit sector with the spare time and energy to galvanise an earlier response or pro-active actions.
• Imagine a world where, instead of Treasury driving the FATF response, a collaboration of non-profits had already undertaken a detailed risk analysis, survey and research and had proposed an action plan and even a private Bill, if we thought it necessary.   In our view, this is the main lesson to be learnt here, that there are opportunities to be more pro-active and to lead the way, and we need to lift our heads up long enough to spot them, and then work together to get them done.
•  Being  more pro-active can start now.  We could:
  - drive greater participation in the survey and risk analysis already undertaken by Treasury;
  - commission and conduct our own research and analysis;
  - come up with our independent recommendations on appropriate and implementable steps to meet the ongoing FATF requirements and standards;
  - come up with our own set of risk factor‘red-flags’ for organisations to watch out for and make sure that they do notfall prey; and
  - develop materials and tools to allow non-profits to assess, evaluate and report on the identified risk factors and how, if they arose, they were dealt with.

ngoLAW has been leading the legal analysis and submissions of and supporting the NPO Working Groupt hroughout this process. The NPO Working Group is already engaging independently with various international FATF meetings and reviews of their proposed approach to the non-profit sector worldwide and invites interested organisations to join the network, support, assist and stay informed.  Email suzanne@inyathelo.org.za  to get onto the mailing list and see the  history of the work done at Inyathelo | The South African Institute for Advancement -NPO Amendment Bill.

Take-aways from the Octopus Bill process for individual organisations

1. FATF has highlighted the risks of non-profit organisations being abused for money laundering, terrorist financing and other fraud.If you do not do already, make risk assessment a routine board topic andannual agenda item.  Add to your risk register and evaluate the probability of and put in place mitigations against being abused for money laundering, terrorist financing or other fraud;
2. Conduct background checks on existing and potential board members, to ensure that they all have the sorts of clean records required by the imminent updates to the Trusts, NPO or Companies Acts;
3. To align with new requirements regarding disclosure on who controls organisations, make sure that, if the organisation has members, the member register is up to date. Also, if there are persons or organisations which appoint people to the board or who have veto powers, have the details of those to hand and up to date;
4. If the organisation has beneficiaries or projects outside of South Africa and is not yet registered as an NPO, beat the rush and make an application now; and
5. For organisations who may be be hand with their NPO reports, catch up as soon as possible, as the long-overdue clean-up of theregister will commence soon.