GOVERNING CHARITABLE TRUSTS AND CHARITABLE SOCIETIES

Background This article has been prepared to help trustees of a charitable trust or committee members of a charitable society governing the charity more readily to understand the obligations they assume when appointed or elected. Because committee members of a charitable society are effectively “trustees” of the society they are referred to as “trustees” in the balance of this article. A trustee’s first obligation is to become familiar with: The trust instrument establishing the charity (such as the trust deed, or will, or the rules of the charitable society), generally referred to in these Notes as the charity’s constitution, which governs what can and cannot be done, especially the charity’s purposes, The charity’s property and records, Any limitations to which the charity is subject, The charity’s strategic plan and policies (which must always be consistent with the charity’s purposes), and then Never to forget the purposes and terms of the trust. It has been said that too many trustees accept appointment without fully understanding that being a trustee involves serious and onerous duties and a commitment of potentially significant time. Being a trustee may be a complex burden, involving not only an understanding of the trust but also being acquainted with relevant legal rules and principles. This article may help to redress those deficiencies, but it is of limited value for two reasons. First, this article is not specific to the circumstances of any particular charity and, second, the detail which may be found in text books cannot be included in such a relatively short article (rather more detailed notes are available to charities which are clients of Bannister...

Not-for-Profits and Anti-Money Laundering and Countering Financing of Terrorism

Risks relating to Money Laundering or Financing of Terrorism The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT) is intended to prevent money-laundering by criminals and the financing of terrorism. Societies and charitable trusts (“not-for-profits”) and those providing them with services (such as legal, accounting and banking) are now affected by this legislation: The “risk profile” of a club or society will be assessed having regard to its purpose and size and whether it is a national or local entity. If the organisation has or will have a social or local community focus, such as a sporting or cultural group, the potential risk associated with it is likely to be low. If the club’s or society’s activities are likely to be cash-intensive (with greater potential for it to be used for the placement of illicit money) the risk will be assessed as being higher. The “risk profile” of a charitable trust is considered to be higher because of the potential for trusts to be used to disguise the criminal origin of funds or the true ownership and effective control of the trust, particularly where ownership and control arrangements are sophisticated or complex. As a result, all charitable trusts are subject to what is called “Extended Due Diligence,” and any charitable trusts that are geographically or financially linked to higher risk countries, or include politically exposed persons, may have increased Money Laundering or Financing of Terrorism risks.   Lawyers and Accountants Advising Not-for-Profits and Financial institutions providing Not-for-Profits with financial services Before any lawyer or accountant provides a proposed or existing club, society or charitable trust with advice,...