The Government of Jersey and the Jersey Financial Services Commission (“JFSC”) have concluded their consultation on amendments to certain requirements in the Non-Profit Organisation (Jersey) Law 2008, (“NPO Law”) and the introduction of:
- The Non-Profit Organisation (Prescribed NPOs – Additional Information) (Jersey) Order 2022 (“Prescribed NPO Order”); and
- A new section to the AML/CFT/CPF Handbook, Section 17
Both became effective on the 1 January 2023.
A NPO is defined as a NPO if:
- It is established solely or primarily for charitable, religious, cultural, educational, social, or fraternal purposes with the intention of benefiting the public or a section of the public; and
- It raises or disburses funds in pursuance of those purposes.
In addition to the new requirements, the NPO Law has been updated to remove Article 2 which exempted a NPO which raised less than £1,000 in a 12 month period from registering with the JFSC.
If your NPO has previously filed a registration form with the JFSC, you will have been allocated an NPO number and do not need to register again. If you have not previously registered, you will need to register through the JFSC website.
Further guidance on whether an organisation is a NPO and whether it needs to register can be found via the following link under the Non-Profit Organisation section of the JFSC’s website:
Article 1 of the Prescribed NPO Order advises that a NPO will be considered a Prescribed NPO where during the previous 12 months it has:
- Raised NPO funds exceeding £1,000 from outside of Jersey, Guernsey, the Isle of Man, Scotland, and England and Wales; or
- Disbursed funds exceeding £1,000 outside of the jurisdictions
If the NPO does not meet this criterion then it will not need to adhere with the Prescribed NPO Order, however it should assess on an annual basis if it continues to remain out of scope.
The new requirements aim:
- To prevent terrorist financing and
- Have minimal impact on those in the NPO sector (which includes charities), allowing them to continue their work
Diversion is the principal way in which NPOs may be abused for terrorist financing. Diversion risk is defined as “transactions by NPO Representatives or external parties such as Associate NPOs that divert funds aware from the NPOs legitimately intended purposes to a terrorist, terrorist cell or terrorist organisation for them to benefit from, directly or indirectly”.
Prescribed NPOs will be supervised by the JFSC on a risk based approach and required to meet certain additional requirements, these requirements are set out in the Prescribed NPO Order, some of these measures may already be in place within your NPO:
- Article 2 – To prepare annual financial statements
- Article 3 – To have appropriate accounting systems and controls
- Article 4 – To keep records of owners, controllers etc. sufficient to identify them
- Article 5 – To keep a record of significant donors
- Article 6 – To take reasonable steps to identify other NPOs with whom the NPO is working (being Associate NPOs), the beneficiaries, activities, and the nature of the relationship
Section 17 of the AML/CFT /CPF Handbook
This new section sets out Codes of Practice and guidance to meet the above requirements. The statutory requirements and the
“Codes of Practice are mandatory. The Guidance Note sections are not mandatory but provide examples of how Prescribed NPOs may demonstrate compliance with the statutory and Code requirements.
Prescribed NPOs must apply the requirements of the Prescribed NPO Order and this section of the Handbook to all of their relationships with NPO Beneficiaries and Associate NPOs, not just those which are connected to higher risk jurisdictions. However, a Prescribed NPO should apply a risk-based approach and therefore how each Prescribed NPO will adhere with the above requirements will vary and will depend on the work they are undertaking, as well as the potential terrorist risks posed to that NPO.
All section references are to section 17 of the AML/CFT/CPF Handbook.
NPO Programme Risk Assessment (“NPO PRA”) and associated activities (17.3.1) – each Prescribed NPO must:
- Assess and mitigate the risks of being used to assist terrorism, or the financing of terrorism, or becoming likely to assist or being used to assist terrorism or the financing of terrorism
- Define and document their approach to terrorist financing diversion risk in a Risk Appetite Statement
- Have internal systems and controls in place to mitigate diversion risk
An NPO PRA can be undertaken per programme of activity or may cover a number of NPO programmes. The NPO PRA should be undertaken as soon as reasonably practicable before the NPO commences the programme and should be recorded to assist the NPO in demonstrating its rationale. A regulated Trust Company Service Provider may consider it appropriate to integrate the Prescribed NPO’s NPO PRA into the BRA and compliance monitoring testing.
Ongoing Risk Monitoring of the NPO Programme (17.3.2) – this is a requirement to conduct ongoing risk monitoring of a NPO programme and keep a record of monitoring activities. The AML/CFT/CPF Handbook recommends that a periodic review of a NPO’s risk is conducted at least annually.
NPO Beneficiaries, and Associate NPOs (17.4.1 and 17.4.2) – this section sets out the information to be obtained on the identity of each NPO Beneficiary/Associate NPO, the nature and purpose of the relationship with the NPO Beneficiary/Associate NPO and confirming that NPO Beneficiaries/Associate NPOs are not involved in terrorism.
Trust Company Service Providers will apply diligence measures in accordance with their existing policies and procedures which should follow sections 3 and 4 of the AML/CFT/CPF Handbook.
NPO Donors (17.4.3) – Prescribed NPOs must document the identity of their significant Donors who during the previous 12 months have donated (as a single transaction or cumulatively £10,000 or above, or 50% of total donations made during that period).
Identifying NPO Owners and Controllers (17.5.2) – Prescribed NPOs must maintain information on the identity of the persons who own, control and direct their activities, including charity governors, board members, trustees, senior officers (or equivalent), whether or not they are remunerated
Screening of relevant volunteers, relevant employees and controllers (17.5.3) – this section defines a “relevant employee” who is working under a contract of employment and undertakes one or more of the following as part of their role:
- Acts as a NPO Controller, and/or
- Is responsible for the disbursement of, and/or raising of NPO funds outside of Jersey, Guernsey, the Isle of Man, England or Wales, or Scotland
It includes temporary and contract employees, and the employee of any external party fulfilling a function under an outsourcing agreement. Screening should be conducted against UK and Jersey lists of prescribed terrorist organisations.
Training and awareness (17.5.4) – each Prescribed NPO must consider who will be captured as a relevant volunteer or employee. Individuals who act as NPO Controllers will be captured, however the roles of other employees/volunteers should be assessed to consider the role/duties performed and where the individual will be working/based. Roles that may be considered non-relevant may include:
- Volunteering to collect funds in Jersey as part of a “flag week” or similar
- Volunteering in a Jersey-based charity shop
- An Individual working/volunteering for an NPO Programme based in Jersey, with no overseas engagement
Accounting for Funds (17.6) – A Prescribed NPO must maintain accounting records that are sufficient to shown and explain its transactions. The accounting records must:
- Disclose with reasonable accuracy, at any time, the financial position of the NPO at the time, and
- Enable the Prescribed NPO to verify that funds have been received and spent in a manner consistent with the purpose and objective of the Prescribed NPO.
Record-Keeping (17.7) – this section sets out which records must be maintained. It also sets out requirements for the access and retrieval of records.
Firstly, check by using the JFSC website if your NPO is a Prescribed NPO. If it is, the next step is to review your existing governance framework against the new requirements to identify if there are any gaps. We understand that the JFSC will contact Prescribed NPOs directly.
If you have any queries or would like to discuss the appropriate steps to take to ensure compliance in this area, please do get in touch.
- Non – Profit Organisations – https://www.jerseyfsc.org/industry/sectors/non-profit-organisations/
- Prescribed NPO Handbook – Prescribed NPO Handbook — Jersey Financial Services Commission (jerseyfsc.org)
- Prescribed NPO Programme Risk Assessment Checklist – npo-pra-checklist.pdf (jerseyfsc.org)
- Terrorist Financing Diversion Risk Register Templates – draft-tf-diversion-risk-register-template.pdf (jerseyfsc.org)