STRENGTHENING NPO REGULATIONS TO COMBAT FINANCIAL CRIMES

By Precious Mupenzi

• South Africa’s non-profit organisations (NPOs) must be financially accountable and comply with all regulations to protect themselves from being exploited for financial crimes such as money laundering.
• NPOs face challenges that may make them vulnerable to financial crimes, including limited access to technology, insufficient funding, and a lack of financial management skills.
• The Chartered Institute for Business Accountants noted that while increased governance and transparency requirements will ensure NPOs maintain credibility, it also places additional administrative responsibilities on them.

The Chartered Institute for Business Accountants has emphasised the critical role of financial accountability and regulatory compliance in protecting non-profit organisations (NPOs) from being exploited for money laundering and terrorist financing.

Speaking at the symposium on the Financial Action Task Force’s (FATF) Recommendation 8, which concludes on 5 March 2025 in Johannesburg, the Chartered Institute for Business Accountants’ Technical Manager, Eszter Rapanos, outlined interventions and innovations aimed at aligning regulatory processes with the FATF’s latest measures.

She provided insight into the role of the institute as a professional body within the context of innovations and interventions relating to FATF’s Recommendation 8 measures to protect and combat money laundering and terrorist financing within NPOs.

The chartered institute’s role in combatting money laundering plays a vital role in promoting innovations and interventions to combat money laundering and terrorist financing. The Chartered Institute for Business Accountants works to protect the integrity of the financial system.

Rapanos highlighted the unique challenges faced by South African NPOs, including limited access to technology, insufficient funding, and a lack of financial management skills, which make them vulnerable to financial crimes.

“The risk-based approach must be applied throughout the process, ensuring that high-risk areas are targeted while avoiding unnecessary burdens on compliant NPOs,” she stated.

Among the significant regulatory changes, Rapanos pointed to the new requirement for compulsory registration of NPOs that operate across borders.

In addition, organisations must now maintain detailed records of their beneficial ownership and enhance governance structures to prevent individuals with a history of financial crimes from assuming leadership roles.

“The increased governance and transparency requirements will ensure that NPOs maintain credibility, but it also places additional administrative responsibilities on them,” she noted.

Despite these challenges, Rapanos stressed that the new framework presents opportunities for collaboration.

“By working closely with regulatory bodies such as the Department of Social Development, the Financial Intelligence Centre, the Companies and Intellectual Property Commission, and the South African Revenue Service, we can align compliance processes and reduce duplications,” she explained.

The Chartered Institute for Business Accountants’ recommendations include implementing a tiered risk-based approach to compliance, where low-risk NPOs face fewer administrative burdens, while higher-risk organisations undergo more stringent oversight.

Rapanos also called for increased training and capacity-building efforts to help NPOs navigate the evolving regulatory landscape.

“The goal is to strike a balance between preventing illicit financial activities and allowing NPOs to continue their essential work without being overburdened by red tape,” Rapanos concluded.

With financial integrity at the heart of regulatory reforms, the symposium underscored the importance of supporting NPOs in adapting to the new measures while ensuring their continued contribution to social and economic development.