Background

The Non-Profit Organisations Act (the "proposed Act") is a new piece of legislation that is being considered in the British Virgin Islands (BVI) which will seek to bring Non-Profit Organisations ("NPOs") and Non-Financial Gain Organisations ("NGOs") which operate in the BVI in line with international standards by keeping terrorist financing away from such groups operating in the BVI.

The rationale behind the introduction of the proposed Act is based on the fact that the Financial Action Task Force (FATF) Special Recommendation VIII (SRVIII) compels the BVI to review the adequacy of its laws relating to NPOs and NGOs as these organisations could be used for terrorist financing purposes. When the BVI's Anti-Money Laundering – Combating the Financing of Terrorism regime was assessed by the Caribbean Financial Action Task Force, the territory's current NPO and NGO regime was found to be only partially compliant. The proposed Act seeks to put in place measures designed to deter terrorist organisations from posing as legitimate NPOs or NGOs or from using legitimate NPOs or NGOs for terrorist purposes.

Establishment of Registration Board

The proposed Act seeks to establish a Non-Profit Organisation Registration Board (the "Board") of not more than five (5) persons made up of both government appointees and community representatives. The functions of the board would essentially be to receive, review and determine applications for NPOs and NGOs; register NPOs and review and evaluate financial statements from NPOs.

Registration of NPOs

Under the proposed Act a Registrar of NPOs will be appointed to maintain a register containing the name, address in the BVI and telephone number of the NPO; its purpose, objectives and activities and the identity of persons who are in control of or who direct activities of the NPO. The register will be open to inspections by members of the public and the Registrar will be obligated to send a copy of the register to the Financial Investigation Agency ("FIA") for their review. NPOs will not be allowed to operate in the BVI unless the organisation is registered. An application for registration will be submitted to the Board through the Registrar and the Board together with the FIA will review the application and determine whether or not the applicant can register as an NPO.

Supervision and Monitoring of NPOs

The FIA will be responsible for the supervision and monitoring of NPOs. The main objectives of this are to protect NPOs from being used for terrorist financing and money laundering, ensuring that the FATF recommendations are applied to the NPOs and to undertake periodic reviews of the NPO sector in the BVI for the purposes of identifying the features and types of organizations that are at risk of being used for terrorist financing or money laundering.

For the purpose of monitoring compliance by an NPO, the FIA will have the power to enter the premises of an NPO to inspect its records and may take copies or extracts of those records relevant to the FIA carrying out its function. Based on its findings or on reasonable belief, the FIA may commence an inquiry with respect to any NPO which it believes is at risk of terrorist financing or money laundering activities being carried out by that NPO.

Obligations of Registered NPOs

The main obligations of registered NPOs are that they are required to notify the Board of any changes relating to the information provided to the Board. They must keep their principal office in the BVI and submit audited financial statements to the Board showing that funds have been used in a manner consistent with the NPOs purposes objectives and activities. NPOs will also be required to show the sources of its gross annual income. NPOs also have an obligation to appoint a Money Laundering Reporting Officer pursuant to the requirements of the Anti-money Laundering and Terrorist Financing Code of Practice but may be exempted from this if the organization has three or less employees.

Fees and Penalties

Application for registration of an NPO will be US$200 and US$150 for an application for renewal of registration where gross annual income does not exceed US$25000. The renewal fee increases to US$300 where gross annual income exceeds US$25000.

The proposed Act contains significant penalties. Any person who operates an unregistered NPO in the BVI will be liable on summary conviction to a fine not exceeding US$50000 or imprisonment for a term not exceeding three years or both. Failure to provide information when requested by the FIA could result in a US$30000 fine and failing to inform the Board of any changes could result in a fine of up to US$5000.

Further Information

To review a full copy of the proposed Act click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.