If your registered charity is designated as a protected charity, there are additional regulatory obligations and controls imposed. In this article we will dive into the obligations imposed on protected charities and what this means for your charitable organisation.

Tips for a registered charity on general compliance with the Charities Act and Charities Regulations (the Regulations) may be found in my previous article titled “How to do good: Compliance with the Charities Regulations” https://myersfletcher.com/how-to-do-good-compliance-with-the-charities-regulations/.

What is a Protected Charity?

Protected Charities are registered charities that have been designated as a protected charity by the Minister of Industry, Investment and Commerce, having been considered to be at an increased risk of being misused or exploited. This designation is made by the minister on the recommendation of the Department of Co-operatives & Friendly Societies (DCFS), after carrying out relevant risk assessments and inter-agency consultations with the chief technical director of the Financial Investigation Division (designated authority), the commissioner of police, Tax Administration Jamaica and any other relevant department, agency or public body.

In making the recommendation to the minister, the DCFS must have reasonable grounds to believe that the registered charity is vulnerable and is likely to be at high risk of being used for the commission of financial crimes. In assessing the level of risk, the DCFS considers some of the following:

a) whether the registered charity receives donations from or provides funding to a listed entity (ie an entity designated under the Terrorism Prevention Act by virtue of it being designated as a terrorist entity by the United Nations Security Council);

b) whether a person connected to the registered charity is established or resides outside of Jamaica or is a politically exposed person;

c) the frequency and amount of donations received from outside of Jamaica by the registered charity and the income, assets or size of the registered charitable organisation; and

d) the registered charity’s non-compliance with the provisions of the Charities Act and Regulations.

Additional Regulatory Controls

Along with the usual responsibilities that registered charities have, protected charities must also implement and follow specific programmes, policies and procedures that are designed to detect, prevent and reduce the risk of being misused for the commission of financial crimes. The policies and procedures must be aimed to stop the fraudulent use of charitable donations intended for legitimate purposes to the financing of terrorism.

The procedures and protective measures that must be implemented by protected charities in accordance with the regulations include:

a) Establishing identity verification procedures to obtain information to confirm the identity, credentials and good standing of donors, beneficiaries of charitable donations to the protected charity, any associate charitable organisation and the governing board members of the protected charity;

b) Developing internal reporting procedures to identify and report to the designated authority transactions suspected of constituting or being related to the commission of financial crimes;

c) Implementing procedures for transaction verification, record-keeping, accounting and financial reporting;

d) Arranging for the conduct of an annual independent audit to ensure the appropriate measures are being implemented.

Failing to comply with the protective measures set out in the regulations is considered an offence and the registered charity would be liable on summary conviction to a fine not exceeding $1 million.

A protected charity is required to enforce similar ‘Know Your Client” requirements as those done by a financial institution. It must not form donor-recipient relationships or carry out one-off transactions unless it maintains procedures in relation to identification and transaction verification, record-keeping, internal reporting and carries out the appropriate training of employees who handle the protected charities’ financial business in accordance with the regulations. Failing to comply with this requirement is considered an offence and the registered charity would be liable on summary conviction to a fine not exceeding $1 million.

The regulations also outline other obligations such as keeping up to date donor information, maintaining records relating to electronic funds transfers as well as carrying out identification procedures where a person is or appears to be an agent of a donor.

Why this Matters

The designation of protected charities reflects an increased focus on the integrity of charitable organisations. By imposing these stringent measures and controls, the regulations aim to protect the charitable sector from being compromised and to ensure public trust in the charitable work being done in Jamaica.

By complying with the Charities Act and Regulations, a protected charity is better able to protect their operations from misuse and to ensure all its efforts are directed solely to its charitable purposes. Understanding what is required of your protected charity is therefore very important.

Rachel Poole is an associate at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Rachel may be contacted via Rachel.poole@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.