What is a non-profit organisation (“NPO”)?
The Non-Profit Organisations Act, 2012 (“NPO Act”) defines an NPO as a body of persons, whether incorporated or unincorporated, established solely or primarily for the promotion of charitable, religious, cultural, educational, social or fraternal purposes, or other activities or programs for the benefit of the public. It is further defined as a section of the public that raises or disburses funds in pursuance of its objectives primarily within the Territory of the Virgin Islands (“the Territory”).
NPOs are generally recognised for the vital role that they play in communities, within the Territory as well as around the world. However, they have also been globally identified as being vulnerable to activities of money laundering and terrorist financing and to a lesser extent proliferation financing. This means that criminals may try and use NPOs to move their funds through an NPO for the purposes of legitimizing those funds. Additionally, there is a risk that terrorists and/or terrorist organisations may exploit the NPO sector to raise and move funds, provide logistical support, encourage terrorist recruitment, support terrorist organisations and operations or participate in fraudulent fundraising activities for financial gains.
This form of exploitation and abuse demoralises donor confidence and underpins the integrity of NPOs operating not only within the Territory but also globally. Therefore, the Financial Investigation Agency’s (“the Agency”) aim is to protect and preserve the NPO sector within the Territory from terrorists as well as money laundering abuse.
As such, NPOs operating within the Territory are subject to the laws relating to money laundering, terrorist financing and proliferation financing, and must ensure they remain in compliance with them.
The Financial Action Task Force (“FATF”) sets the international standard in relation to anti-money laundering and combating the financing of terrorism (“AML/CFT”). FATF Recommendation 8 and Immediate Outcome 10 refers directly to the NPO sector.
Very shortly, the Virgin Islands is expected to be assessed by the Caribbean Financial Action Task Force (“CFATF”) against the standards put forth by the FATF. This assessment will seek to test the Territory’s level of effectiveness in mitigating money laundering and terrorist financing risks. Therefore, it is of paramount importance that all NPOs understand their role and adhere to the relevant obligations placed on them.
Relevant Legislation for NPOs
Proceeds of Criminal Conduct Act, 1997 as amended (“POCCA”)
POCCA is the primary anti-money laundering and counter terrorist financing legislation from which many of the other specific AML/CFT legislation derives. The POCCA defines money laundering and terrorist financing within BVI legislation and criminalises tipping off, which is where a person knows or suspects that an investigation is or is about to be conducted into money laundering/terrorist financing activities and discloses information to any other person which is likely to prejudice the investigation. The POCCA also makes it a crime not to report a suspicion of money laundering/terrorist financing.
Financial Investigation Agency Act, 2003 (“FIA Act”)
The FIA Act is the BVI legislation that established the Agency as an autonomous Agency and outlines its powers and authority.
Non-Profit Organisations Act, 2012 (“NPO Act”)
The NPO Act is a piece of legislation that provides for the registration, supervision and monitoring of NPOs and other matters related thereto. It explains that all NPOs operating within the Territory must be registered. It also outlines the Agency as responsible for the supervision and monitoring of NPOs.
Anti-Money Laundering and Terrorist Financing Code of Practice, 2008 as amended (“the AML Code”)
The AML Code is the BVI anti-money laundering and terrorist financing legislation that spells out in detail what an NPO, its management and staff are required to do to combat money laundering and terrorist financing. It sets out the policies, processes and procedures required by NPOs. As a starting point all NPOs should review Section 4A and Schedule 1 of the AML Code.
What is Money Laundering (“ML”)?
Money Laundering is the act of concealing, retaining, converting, transferring or in any other way moving funds acquired, directly or indirectly, from an unlawful activity or otherwise from an unlawful source.
Money laundering is practically the process by which acquired illegitimate funds are integrated into the financial system to make it appear as though the funds originated from a legitimate source.
The three stages of the money laundering process are:
- Placement - getting the proceeds of crime into the banking system;
- Layering - moving the money through different transactions, accounts (layers) to complicate the tracking process; and
- Integration - using the money to purchase legitimate assets which effectively “cleans” the proceeds of crime.
More specifically, within BVI legislation:
“money laundering” means the act of concealing, retaining, converting, transferring or in any other way moving funds acquired, directly or indirectly, from an unlawful activity or otherwise from an unlawful source, and –
- relates both to a primary offence and any ancillary offence;
- includes any activity or offence prescribed as money laundering under the Proceeds of Criminal Conduct Act, 1997 or any other enactment; and
- < li>includes drug money laundering as provided in section 2 (1) of the Drug Trafficking Offences Act, 1992.
What is Terrorist Financing (“TF”)?
Terrorist Financing is:
- Using funds (whether those funds are derived from legal and or illegal means) for the purposes of sponsoring or facilitating terrorist activities; or
- Acquiring, possessing, concealing, converting or transferring any funds that are intended to be provided or used for the purposes of terrorism (whether directly or indirectly).
More specifically, within BVI legislation:
“terrorist financing” means –
- the provision or use of funds for the purposes of terrorism; or
- the acquisition, possession, concealment, conversion or transfer of funds that are, directly or indirectly, intended to be provided or used for the purposes of terrorism;
- Submit an application for Registration to the NPO Board
Section 11(1) of the NPO Act requires all NPOs operating within the Virgin Islands to be registered with the Non-Profit Organisation Registration Board. This means that all NPOs must maintain an active registration at all times if they are in operation. Failure to do so is a criminal offence
Details of the registration process and guidelines on the NPO Act can be obtained from:
Non-Profit Organisations Registration Board
Ministry of Health and Social Development
Road Town, Tortola VG1110
British Virgin Islands
- Contact the Financial Investigation Agency
Section 18(1) of the NPO Act notes that the Agency is responsible for the supervision and monitoring of all NPOs operating in the Territory. To fulfil our mandate all NPOs are advised to contact the Agency and advise them of their operations. The Agency will undertake a risk assessment of the NPO and its operations and advise of next steps.
Our details are:
strong>Supervision and Enforcement Unit
- Appoint a Designated Person
NPOs are not required to appoint a Money Laundering Reporting Officer, however, given the importance of suspicious activity reporting, NPOs are required to appoint a Designated Person – who will be responsible for carrying out the reporting function, outlined within the AML Code.
The Agency has further provided guidance in the form of a Public Notice. The notice informs all NPOs that they are required to appoint a Designated Person who will be responsible for any AML/CFT matters within the organisation. The Designated Person is responsible for the filing of suspicious reports to the Agency. In addition to appointing a Designated Person all NPOs are required to inform the Agency of who that individual is.
- Report suspicious transactions or suspicious activities to the Agency
Section 4A(6) of the AML Code provides guidance on reporting a suspicious activity or transaction to the Agency and clearly notes that once there is a suspicion the donation should be refused by the organisation. Internal reports should be reported to the Designated Person, who may or may not, based on their investigation, externalise the suspicion to the Agency.
Please note that the Agency has recently updated its suspicious activity report form.
- Put in place controls to forestall and prevent money laundering and counter the financing of terrorism
Section 4A of the AML Code details the specific requirements for NPOs to establish internal control systems. This should include policies, processes and procedures for the prevention of money laundering and countering the financing of terrorism.
NPOs are thereby required to:
- establish and maintain a written and effective system of internal controls;
- effect customer/donor due diligence measures;
- maintain proper records; and
- provide appropriate AML/CFT training for employees and/or volunteers.
These requirements should be contained within a formal document, often referred to as a Compliance Manual. The Compliance Manual Checklist should be used as a guide when completing the manual. You can obtain a copy of the Checklist by emailing email@example.com.
- Undertake due diligence
Due diligence is knowing who you are dealing with. NPOs are required to undertake due diligence in their dealings with applicants for business. Section 4A(3) of the AML Code provides guidance on this obligation where a single donation or a series of donations from the same donor exceeds $10,000 within a one (1) year period. This obligation also applies to non-financial donations or assets which are of the same value. Equally, there may be instances which warrant enhanced due diligence, where there is a greater risk for money laundering or terrorist financing, such as engaging in a business transaction with a politically exposed person or an individual from a high-risk jurisdiction.
- Provide training to members/volunteers in relation to money laundering and terrorist financing
Section 47 – 49 of the AML Code offers clear guidance in relation to staff training. All members/volunteers are required to be trained at least annually in anti-money laundering and countering the financing of terrorism. Such trainings should be proportionate to the responsibilities of the member/volunteer. Penalties are enforced if such requirements are not met.
- Maintain records
Section 23(1) of the NPO Act notes the importance of maintaining records as well as the minimum retention period for retaining such records. Schedule 4 of the AML Code outlines the penalty for having insufficient records.
The Agency is committed to providing the necessary support and guidance to all NPOs, in order to ensure that the sector and the Territory are fully compliant with both regional and international AML/CFT standards. Therefore, all NPOs are encouraged to familiarise themselves with the NPO Act, the AML Code and the other AML/CFT laws which govern their operations within the Territory.
Under the laws of the Territory, all NPOs operating within or from within the Territory are subject to the AML Code.
Additionally, under the laws of the Territory, all persons who may have reasonable knowledge or a reasonable suspicion that another person is engaged in money laundering or terrorist financing are required to make a Suspicious Activity Report (“SAR”) or a Suspicious Transaction Report (“STR”) with the Agency.
This requirement extends to NPOs.
As per the Code, all NPOs are required to put in place systems for the reporting of SARs/STRs to the Agency.
Designated Person to be appointed
NPOs are not required by law to appoint a Money Laundering Reporting Officer. However, as a means of best practice and ensuring that the NPO’s reporting requirement is complied with, the Agency strongly advises that all NPOs appoint a Designated Person for the purposes of carrying out the reporting function as well as to act as the NPO’s primary contact with the Agency.
The NPO’s Designated Person is responsible for ensuring that SARs/STRs are made with the Agency in a timely manner. The role of the Designated Person is therefore an important one.
To provide guidance for NPOs in determining who would be the most suitable person to appoint as the Designated Person, the Agency has set out the following criteria:
The Designated Person must:
- be a person with sufficient seniority within the NPO;
- know and have a clear understanding of the activities and operations of the NPO; and
- attend, at least on an annual basis, relevant training on AML/CFT matters.
Given the importance of the role and the responsibility held, the Agency is strongly of the view that the Designated Person must be someone who is senior enough within the NPO and who has the in-depth knowledge of the operations of the NPO in order to effectively carry out the reporting function.
Additionally, in order to carry out the role effectively, it is important that the Designated Person has an understanding and knowledge of AML/CFT matters. Hence the reason why the Agency recommends that the Designated Person attends relevant training, at least on an annual basis. The Agency has chosen not to outline which training needs to be attended simply because the nature of AML/CFT is constantly evolving. It would be up to the NPO and the Designated Person to decide what is relevant training.
Once your NPO has appointed a Designated Person, you can use the NPO Designated Person appointment form to notify the Agency of their contact details.
The form must be submitted to the Agency within 14 days of appointment.
How does the Agency supervise NPOs
As the designated supervisory authority for NPOs operating within the Territory, the Agency takes a risk-based approach to its supervision of this sector.
This effectively means that although the Agency supervises all NPOs, not all NPOs will receive the same level of supervision. Resources are therefore proportionate and effective in managing and mitigating the level of money laundering and terrorist financing risk associated with NPOs.
The Agency has a Supervision and Enforcement Unit, which is responsible for supervising NPOs for the purposes of anti- money laundering and countering the financing of terrorism.
They can be contacted at:
Supervision and Enforcement Unit
The supervisory process begins by the Agency gathering information about your NPO. This is done through a risk assessment questionnaire that is completed and sent back to us. The purpose of the questionnaire is to assist the Agency in understanding your NPO, its operations, its size as well as gain an understanding of the types of risk management frameworks in place. This helps the Agency to assess the level of risk that the NPO may be exposed to with regards to money laundering and terrorist financing. Therefore, it is important that you complete the questionnaire and provide the Agency with as much information as possible.
Following the risk assessment exercise, if the Agency has any particular concerns or considers that there are high-risk factors, we may ask to review the NPO’s compliance manual. Should the Agency undertake this step, a comprehensive desk-based supervision review of the NPO’s policies, processes and procedures follows. If any gaps are identified, the Agency would then write to you and explain. The Agency would then work with you in ensuring that the NPO’s compliance manual meets the regulatory requirements.
There will also be instances where the Agency decides to conduct an examination (inspection) of your NPO. Examinations can be offsite (that is we undertake them from our office) or onsite (that is we come to your NPO’s place of business).
Should your NPO be chosen for an examination (either offsite or onsite), the Supervision and Enforcement Unit will contact you to notify you of this examination. You will also be given more information about the examination at this point.
We understand that going through an examination can be a stressful process. Examinations are a usual part of our supervision of NPOs. However, we have devised our processes with this in mind and our aim will always be to ensure you are kept up to date about what happens.
Should you have any questions about any part of the supervision process, please feel free to contact the Agency.