SECP to formulate regulations for non-profit organizations

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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has taken measures to regulate non-profit organizations (NPOs) to enhance transparency in the sector, as a large segment of the NPO sector is seen as having a significant inherent vulnerability for terrorist financing (TF).

A report published in Business Recorder claims that one of the SECP’s top priorities is to improve regulations of the NPOs through proper assessment of the said sector. The assessment of the NPOs has been done to check cash-based source of funding, social media funding and unregistered charities.

According to the report of the SECP, the ultimate objective of the NPOs regulation is to enhance the transparency of the sector, the people in-charge of NPOs, their source of funds and particularly the way those funds are spent.

Financial Action Task Force (FATF) Recommendation No 8 defines an NPO as a legal person or arrangement or organization that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of-good works. This recommendation only applies to those NPOs which fall within this definition of an NPO. It does not apply to the entire universe of NPOs.

More than half of the functionally active NPOs in Pakistan fall under the FATF defined NPOs as they are involved in service-type activity, and are also involved in raising or disbursing charitable funds. Based on the data collected through the mapping exercise of NPO sector of Pakistan, 55% of NPOs operate in the services sector. Overall, a large segment of the NPO sector in Pakistan is seen as having a significant inherent vulnerability for TF. Given the significant TF threats in Pakistan the overall TF risk is also very significant, SECP report added.

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