Increasing risks of financial crime impacting Australian charities and Not for Profits

Introduction

The Not for Profit sector contributes around $43 billion to Australia’s gross domestic product, derived from approximately 600,000 organisations[1]. This is an attractive sum of money for people intent on unlawful gain, which typically occurs through theft, fraud, bribery and corruption, money laundering and the financing of terrorism.

Charities and other Not for Profit organisations are too often an easy target for financial crime due to the trusting nature of many sector employees and those charged with governance, whose priority is the passionate and well-meaning delivery of services to those in need. Further, in maximising the benefit of such services, sometimes resources applied to risk management can be less than what is ideally required to protect the assets, integrity and beneficiaries of Not for Profits.

This article discusses key findings of various reports issued in 2014 and 2015 by the Australian Government and overseas bodies that all identified the rising risk of financial crime impacting Australian charities and other Not for Profit organisations.

Compliance

It is critical for those charged with the governance of Not for Profits to understand their obligations. They may be personally liable, along with their organisations, for failing to comply with the various pieces of legislation introduced to protect their organisations from financial crime.

For example:

  • The Corporations Act 2001 ss 180−184, s. 286 and ss 588G and J provide penalties in respect of care and diligence, good faith, use of position and information, acting recklessly, intentional dishonesty, books and records as well as insolvent trading.
  • The Australian Charities and Not for Profits Amendment Regulation 2013 (No. 1) under Governance standard 5: Duties of responsible entities (Div. 45.25), provides very similar obligations as the Corporations Act 2001, plus disclosure of conflicts of interest.
  • The Criminal Code Act 1995 (Cth) under Div. 70 prohibits bribery of foreign and Commonwealth public officials, including soliciting bribes.
  • The Foreign Corrupt Practices Act 1977 (US) also prohibits bribery of foreign officials and applies to Australian charities and other Not for Profit organisations operating anywhere in the world if they also conduct activities within the jurisdiction of the United States.
  • The Bribery Act 2010 (UK) prohibits bribery, facilitation payments (fast-tracked routine services) and promotional expenses in both the public and private sector. It also creates a corporate offence for failing to prevent bribery of both public officials and private persons and applies to Australian Not for Profits operating anywhere in the world if they also conduct activities within the jurisdiction of the United Kingdom.

Find out more about the rising risk of fraud and corruption in the charities and Not for Profit sectors: