New PBO Act to help Kenya curb terrorism financing, boost NGO accountability

Kenyan currency in notes. [File, Standard] It will soon be easier to identify Public Benefit Organisations (PBOs), formerly NGOs, that might be misused to fund terrorism, thanks to a new risk-based monitoring system developed by the Public Benefit Organizations Regulatory Authority (PBORA). According to PBORA Director General Dr Laxmana Kiptoo, the plan is part of Kenya's wider national effort to better regulate the non-profit sector, protect organisations from misuse. This will eventually lead to getting Kenya off the Financial Action Task Force (FATF) "grey list" of countries being closely watched for money laundering and terrorism financing. "The Authority has completed a framework to pinpoint organisations that could be at risk of being misused for terrorism financing. It's risk-based and fair, meaning it doesn't label or stereotype the whole nonprofit sector but focuses on those that actually need training, support, and awareness," said Dr. Kiptoo during the validation of the PBO Act Regulations. According to Kiptoo, PBORA's new framework will help categorise organisations as high, medium, or low risk based on factors like where they operate, how they're funded, and how they're governed. The framework was developed with input from civil society through the Non-Profit Organizations Working Group which aligns with the FATF Recommendation 8, which urges governments to stop non-profits from being misused for terrorism or illicit funding, while still supporting their legitimate work. "For example PBOs working in Lamu or North-Eastern and North Rift maybe considered higher risk. When a PBO gives out its proposal, a donor with an ulterior motive can be able to use that CBO without knowing," said Kiptoo. He added that a coordinated, multi-agency approach, bringing together PBORA, the Registrar of Societies, the Ministry of Social Services, and financial intelligence units to improve information sharing, accountability, and oversight. "We will be carrying out sensitisation to all the BPOs in the country to make them aware that even though they are out there to do good deeds, they can be complacent and be conduits of money laundering therefore they should be able to be very careful," said Kiptoo. Besides curbing terrorism financing, the Principal Secretary for Internal Security and National Administration, Dr Raymond Omollo said PBO Act is a progressive law that provides for a facilitative environment for charitable organisations. In a speech read on his behalf by Ms. Beverly Opwora, the Principal Administrative Secretary, National Administration, Omollo said the law provides for enhanced transparency, accountability and improved regulation of the charitable sector. Omollo outlined a raft of reforms aimed at making the registration and reporting process for Public Benefit Organisations (PBOs) faster, fairer, and more transparent. One of the key changes is reduced registration period, introduction of an e-filing system which will allow PBOs to register, renew, and submit annual reports entirely online and asset management. "Of the roughly 14,000 registered PBOs, only 4,000 are compliant. These regulations give us a solid foundation to boost compliance and improve cooperation between government and civil society," said Omollo. "These reforms are about creating a transparent, efficient, and sustainable environment for public benefit organisations. The sector exists for the public good, and our goal is to ensure it operates with accountability, integrity, and resilience," he added. In addition, the regulations simplify tax exemption procedures for organizations that comply with governance and financial reporting standards. By linking tax relief to ethical conduct, the reforms aim to reward transparency while motivating more organizations to stay compliant with national regulations. "The sector we oversee exists to serve the public. These reforms ensure organisations remain accountable, transparent, and sustainable, while keeping their focus on helping society," said the PS. Notably, PBO Act opens the door for PBOs to engage in income-generating or social enterprise activities for sustainability, provided that all profits are reinvested into their public benefit missions. Civil society representatives at the validation meeting welcomed the PBO Act calling it timely and transformative. Peter Kiama, Executive Director Haki Yetu and a representative of the Civic Freedoms Forum praised the new law's focus on ethics, self-regulation, and sustainability. "For the first time, we have clear guidance on how to self-regulate while remaining accountable. Even as we implement the constitution, we have a responsibility as organisations within the non-profit sector to self-regulate ourselves, to embrace ethical practice and ethical conduct in our governance of institutions," said Kiama. Kiama noted that the provision of the Act that allows the sector to carry out business looks into the sustenance and reduce overreliance on donor funding from outside Kenya. "Most of the money that we spend to support our people comes from Europe and North America. Now, the game is changing. We need to start tapping into local sources of funding for PBOs," Kiama added. On the provisions on tax exemptions and support for social enterprises, he said PBOs can become self-sustaining rather than relying only on foreign funding. "With the Act in place, PBO authority can be able to facilitate tax exemption for PBOs that are compliant with the law. So we are really looking forward to that as an incentive because we are not here for profit, yet we pay taxes like anybody else who is doing business for profit," said Kiama. The draft regulations and regulatory impact statement had earlier been subjected to public participation after the implementation of the PBO Act last year. The next step will involve submitting the Regulations to parliament for approval before full operationalization of the Act.

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