SOCIAL DEVELOPMENT ANNOUNCES DE-REGISTRATION OF NON-COMPLIANT NON-PROFIT ORGANISATIONS

• The Department of Social Development, in partnership with SARS and the FIC, is enforcing compliance within the non-profit sector by deregistering non-compliant organisations to prevent misuse for money laundering and terror financing.
• Through a structured process that includes compliance verification, notices, and a right to appeal, the Department aims to uphold transparency and integrity, allowing only compliant NPOs to continue operating.
• This phased deregistration approach will be conducted over 6 to 12 months to minimise disruption, safeguard public trust, and maintain the non-profit sector’s contribution to societal welfare.

Pretoria: With the deadline approaching to submit progress on South Africa’s greylisting status to the Financial Action Task Force (FATF), the Department of Social Development has informed the Portfolio Committee on Social Development that it has started de-registering non-compliant non-profit organisations (NPOs) in a phased approach.

South Africa was greylisted by FATF at its February 2023 plenary meeting in Paris.

An Action Plan was developed, comprising 22 action items addressing eight strategic deficiencies in the country’s anti-money laundering and counter-terrorist financing regime.

South Africa has made progress on five action items, with 17 still outstanding. The country is required to address all 22 items by 2026 in order to be removed from the greylist.

One of the action items relates to the risk of terror financing and money laundering through NPOs.

FATF identified that NPOs can be vulnerable to misuse for terror financing and money laundering and recommended that South Africa develop an NPO Terror Funding Risk Assessment.

This assessment, titled The Information on the South African Terrorist Financing Risk Assessment for Non-Profit Organisations, found that the NPO sector in South Africa has a medium exposure to terror financing risks

The risk assessment also identified several threats that NPOs could face related to terror financing, including:

• NPOs raising funds or providing other support for foreign terrorist groups,
• NPOs facilitating foreign travel for terrorist purposes, and
• NPOs using the internet and online media for fundraising, recruitment, and propaganda. 

The Department of Social Development, in collaboration with SARS and the Financial Intelligence Centre (FIC), is developing monitoring mechanisms to mitigate the risk of terror financing within the non-profit sector.

NPOs are categorised as high, medium, or low risk. As a monitoring mechanism, the Department has begun deregistering non-compliant NPOs that are not classified as high-risk. For NPOs identified as high-risk for terror financing, the Department has implemented closer supervision and monitoring.

As of October 2024, the Department reported 295,052 registered NPOs, with 167,103 identified as non-compliant.

Through the Nonprofit Organisations Act 71 of 1997, as amended by the General Laws Amendment Act, the Department of Social Development provides for the registration of three types of nonprofit organisations: Trusts, Nonprofit Companies (NPCs), and Voluntary Associations.

Nonprofit organisations play a crucial role in societal development and community welfare. However, some organisations fail to comply with regulatory frameworks, undermining public trust and the integrity of the sector.

The Department is responsible for promoting adequate governance, transparency, and accountability standards within NPOs and for improving these standards where needed. Deregistering non-compliant NPOs is a requirement under the NPO Act, aimed at aligning with regulatory standards.

The Financial Action Task Force (FATF), in its Mutual Evaluation Study, highlighted the necessity of enforcing the NPO Act, as amended by GLAA legislation. Failure to deregister or cancel non-compliant NPOs increases the likelihood of these organisations being misused for money laundering and terrorist financing.

In line with section 21 (1) of the NPO Act, the Department is tasked with removing NPOs that do not comply with the Act’s provisions from the NPO Register. Deregistration primarily targets NPOs that fail to submit annual reports as required by section 18 (1) of the NPO Act. Additionally, an organisation’s registration may be cancelled if it fails to comply with its own founding document.

• The objective of deregistration or cancellation is to identify NPOs that have failed to submit annual reports.
• Issue notices of compliance to these NPOs, and, if they remain non-compliant, remove them from the NPO register as stipulated under Section 24 of the NPO Act.
• Provide deregistered or cancelled NPOs with an opportunity to appeal the Director’s decision to remove them from the NPO Register.
• The Department will enhance its awareness programme regarding the deregistration of non-compliant NPOs.

THE PROCESS 

• The deregistration or cancellation process will begin with the verification of an organisation’s compliance status.
• If an organisation is found to have overdue annual reports, it will be issued a notice of compliance detailing the reports it has failed to submit.
• The organisation will then have 30 days to submit the outstanding annual reports.
• If an organisation fails to submit the required reports or does not respond promptly to the notice, it will be removed from the NPO Register.
• Deregistered or cancelled organisations will have the opportunity to appeal the Director’s decision to cancel their registration status.
• To appeal, the organisation must submit a notice of appeal along with supporting documents.
• The notice of appeal and relevant documents will be forwarded to the Chairperson of the Panel of Arbitrators, who will distribute them to the appointed arbitration tribunal for review.
• The arbitration tribunal, appointed by the Minister in accordance with section 9 (1) of the NPO Act, operates independently.
• An appeal must be reviewed within three months of receipt.
• An appeal may either be denied or upheld. If upheld, the department will reinstate the appellant, and the organisation will be considered as never having been deregistered.
• If an appeal is denied, the organisation may pursue further review through a competent court of law.

The deregistration of non-compliant non-profit organisations is essential for upholding the integrity and effectiveness of the non-profit sector.

Through a structured process, the department aims to ensure that only compliant organisations continue to operate, thereby protecting the interests of beneficiaries and the public.

Deregistration will be conducted according to different financial years and will take place over a period of 6 to 12 months.

This phased approach is intended to minimise disruption within the sector and encourage other NPOs to submit their annual reports.

The department will continue to support NPOs by fostering an environment that enables them to operate effectively and efficiently.

ISSUED BY THE NATIONAL DEPARTMENT OF SOCIAL DEVELOPMENT