Nov 2017 Charity & NFP Law Update
Facilitation Payment Exemption in Corruption of Foreign Public Officials Act Repealed
As reported in our February 2013 Charity Law Update and further discussed in Charity Law Bulletin No. 323 dated October 29, 2013, Bill S-14, An Act to amend the Corruption of Foreign Public Officials Act received Royal Assent on June 19, 2013, and introduced important amendments to the Corruption of Foreign Public Officials Act (“Act”). One amendment included the repeal of subsection 3(4) that had established the “facilitation payment” exemption on a date to be fixed by order of the Governor in Council. On October 26, 2017, Global Affairs Canada published an order fixing October 31, 2017 as the day on which this exemption would be repealed and facilitation payments would be prohibited.
While the Act prohibits bribery of foreign public officials, the facilitation payment exemption had previously allowed for “facilitation payments” to be made in order to “expedite or secure the performance by a foreign public official of any act of a routine nature that is part of the foreign public official’s duties or functions.” The Explanatory Note accompanying the order explains that the intent of the four-year delay in the repeal was, in part, to give Canadian organizations operating abroad sufficient time to transition their internal policies and procedures to ban facilitation payments in their day-to-day operations abroad. Now that the exemption has been repealed, charities operating abroad that have made use of the exemption may now be exposed to potential criminal liability in instances where they continue to make facilitation payments. For charities which operate in conflict zones, developing countries, or those which deliver disaster relief, “facilitation payments” were and continue to be a consistent reality and charities need to understand the consequences, which under the Act may include imprisonment for a term of not more than 14 years. Charities that have not stopped such practices yet should take immediate steps to amend internal policies and procedures to ensure that no facilitation payments are made by themselves, or by their agents, in the future. This should also be of note to for-profit businesses too, especially those with divisions that operate internationally, particularly those in the developing world.
FATF Adopts Guidance on AML/CFT Measures and Financial Inclusion
The Financial Action Task Force (“FATF”) held its November 2017 plenary meeting (“Plenary”), where it adopted a supplement to the 2013 FATF Guidance on AML/CFT Measures and Financial Inclusion on customer due diligence (“Supplement”). While the Supplement is not intended specifically for charities and not-for-profits, it recognizes that the due diligence required of financial institutions by the FATF standards can have unintended consequences of excluding legitimate participants, including charities and not-for-profits, from the regulated financial system. The Supplement states that its objective is “to encourage countries to implement the FATF Recommendations and the [risk-based approach] in a way that responds to the need to bring the financially excluded into the regulated financial sector.” The Supplement also provides country examples of customer due diligence measures adapted as incentives to financial inclusion, such as entry-level types of financial products and limitations on certain product’s functionality or availability. The Plenary also published a statement expressing its support for responsible financial innovation in line with FATF Standards (“FinTech Statement”). The FinTech Statement builds on the principles that were discussed by the participants of the 1st FATF FinTech & RegTech Forum held in May 2017, namely to:
- Fight terrorism financing and money laundering as a common goal;
- Encourage public and private sector engagement;
- Pursue positive and responsible innovation;
- Set clear regulatory expectations and smart regulation which address risks as well as allow for innovation; and
- Fair and consistent regulation.
These developments show that financial inclusion continues to be a top priority for the FATF. However, the Supplement does not specifically address the concerns of charities and not-for-profits working in remote areas where only limited or no formal financial infrastructure exist. In addition, charities need to be aware of the ultimate consequences of a multi-national financial services information collection and sharing regime, organized by multi-national policy making institutions like the FATF, which can potentially have unintended consequences, particularly for those working in conflict zones or disaster areas where prohibited organizations may operate.