Opposition parties and nonprofit organisations (NPOs) object strongly to the department of social development playing any role in maintaining an NPO register in terms of proposed legislation to combat money laundering and terrorism financing.
They say the department does not have the capacity to do this, and that extra funds promised by the Treasury to beef it up will be insufficient.
In terms of the General Laws (Anti-Money Laundering and Combating of Terrorism Financing) Amendment Bill, the department’s NPO directorate will be responsible for maintaining a register of all NPOs required to register under proposed legislation now being considered by parliament’s finance committee. The register will be a key pillar in achieving the aims of the proposed legislation.
The Treasury drew up the bill in response to the requirements of the Financial Action Task Force (FATF) in relation to disclosure and ability to track the beneficial owners of companies, trusts and NPOs. SA is threatened with greylisting by FATF if it does not strengthen its legislative and enforcement regime to combat money laundering and terrorism financing.
The Treasury amended the initial blanket, mandatory requirement for all NPOs to register. Only those that make donations to individuals or organisations domiciled in another country will be required to register, including individuals physically in SA and those that provide humanitarian, charitable, religious, educational or cultural services beyond SA’s borders.
DA finance spokesperson Dion George previously expressed concern about a “barely functional” social development department's involvement in the process.
Severe constraints
Treasury chief director of financial sector policy Vukile Davidson said at a meeting of the committee that additional resources will be made available to the entities mandated to implement provisions in the bill.
ACDP MP Steve Swart also questioned the capacity of the department and was not persuaded by Treasury’s undertaking to give it more funds. He said the department already had “severe constraints when it comes to dealing with grants. This additional burden will not be able to be implemented. I do not think the department of social development will be able to do what is required when it comes to the additional thousands and thousands of NPOs.”
NPO Working Group representative Nicole Copley told MPs that the department is not the appropriate entity to operate the NPO directorate for the registration of NPOs. “Those who support this registration under the NPO directorate are vastly underestimating the extent of intervention, improvement, overhaul, staffing, training, systems transplant, funding and time that will be required to get things up to speed in that department.”
In response Business Day queries, Copley said the NPO register now maintained by the department is 10 years out of date, and noncompliant NPOs are not deregistered as they should have been. “NPO registration is losing credibility with donors,” she said. Registration was merely a tick-box exercise with “no interrogation of the information sent, and no meaningful and useful capture of data”.
Copley said the NPO directorate’s online system is unreliable and delays in getting a certificate could be as long as a year. She said processing of NPO applications is also not always smooth sailing. Many applications are rejected initially for no good reason. “We suspect that the level of attention or expertise in the people evaluating these applications is not what it should be,” she said.
Religious organisations
Treasury director of fiscal and intergovernmental legislation Jeannine Bednar-Giyose said further consideration will be given to the role of the department in the proposals.
Freedom of Religion SA’s Daniela Ellerbeck objected to the scope of the revised requirement for NPO registration, saying it would affect thousands of religious organisations, many of which support religious organisations, missionaries and humanitarian efforts in other countries. She said the revised registration requirement is too wide.
According to a presentation by Financial Intelligence Centre (FIC) executive manager Pieter Smit, there have been instances of religious NPOs being used to raise money in SA and diverting it to overseas entities where there were suspicions of terrorist activities. Excluding religious organisations from the ambit of the bill would defeat its purpose, he said.
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