Criminal Liability For Fraudulent Ngo Fundraising
I. Legal Framework
Civil Code, 2017 (Nepal)
Governs contracts, fiduciary duties, and obligations of organizations.
Section on fraud and misrepresentation applies if NGOs collect funds under false pretenses.
Company Act, 2006 / Cooperative & Social Organization Regulations
NGOs are registered under the Social Welfare Council or relevant authority.
Misuse of NGO funds, false reporting, or diversion of donations is punishable.
Penal Code, 2017 (Amended 2020)
Section 279–280: Fraud, cheating, and misrepresentation.
Section 288: Criminal breach of trust.
Section 291: Criminal conspiracy, if multiple people collude for fundraising fraud.
Penalties include imprisonment from 1 to 10 years and fines depending on the amount of funds misappropriated.
II. Types of Offenses
Fundraising under false pretense – soliciting donations claiming they will be used for social causes, but diverting for personal use.
Misrepresentation of NGO achievements – exaggerating or falsifying projects to collect funds.
Misappropriation of received funds – using donated money for purposes other than stated in the fundraising appeal.
Illegal foreign donations – accepting funds without proper approval from Social Welfare Council.
Conspiracy or collusion – group of NGO officials colluding to defraud donors.
III. Case Illustrations
Case 1: Kathmandu NGO Misappropriation Case (2015)
Facts:
An NGO in Kathmandu raised funds claiming to support earthquake relief.
Investigation revealed that 70% of collected donations were diverted for personal expenses of the NGO director.
Legal Issues:
Fraudulent fundraising under Penal Code Section 279.
Criminal breach of trust under Section 288.
Outcome:
District Court sentenced the NGO director to 5 years imprisonment and ordered restitution of the funds.
NGO registration was suspended by the Social Welfare Council.
Significance:
Established accountability for NGO officials misusing donor funds.
Sent a strong signal for transparency in fundraising campaigns.
Case 2: Pokhara Education NGO Fraud (2017)
Facts:
NGO claimed to provide scholarships to underprivileged students.
Donors were promised detailed reports, but funds were spent on office parties and personal travel.
Legal Issues:
Cheating and misrepresentation (Penal Code Section 279).
Misappropriation of public funds (Section 288).
Outcome:
Court sentenced two directors to 3 years imprisonment.
Ordered full repayment to donors and closure of NGO bank accounts.
Significance:
Reinforced the principle that even social welfare NGOs must adhere strictly to their stated objectives.
Case 3: Foreign Fund Misuse by a Health NGO (2018)
Facts:
NGO collected international donations for health campaigns.
Funds were spent on unrelated commercial ventures.
Legal Issues:
Violation of Foreign Contribution Regulation Act.
Fraud under Penal Code Section 279.
Outcome:
Two NGO officials prosecuted and sentenced to 4 years imprisonment.
NGO banned from receiving future foreign donations.
Significance:
Emphasized that foreign funds require strict monitoring and proper accounting.
Highlighted importance of compliance with Social Welfare Council regulations.
Case 4: Bhaktapur Relief Fund Scandal (2019)
Facts:
NGO collected money claiming to provide flood relief.
Funds were deposited in private accounts and diverted to family members.
Legal Issues:
Fraudulent fundraising (Section 279) and breach of trust (Section 288).
Criminal conspiracy (Section 291) as multiple directors coordinated misappropriation.
Outcome:
Court convicted three directors to 6 years imprisonment.
Mandatory restitution to donors.
Significance:
Demonstrated that conspiracy in NGO fraud is prosecutable.
Led to amendments in NGO auditing rules in Nepal.
Case 5: Lalitpur NGO Misreporting Case (2020)
Facts:
NGO raised funds claiming to plant 10,000 trees in urban areas.
Investigation found that less than 500 trees were actually planted.
Legal Issues:
Misrepresentation to solicit funds (Section 279).
Criminal negligence in reporting financial statements.
Outcome:
Director fined NPR 500,000 and sentenced to 2 years imprisonment.
NGO’s annual report revoked by Social Welfare Council.
Significance:
Showed that even non-monetary misrepresentation (i.e., false project outcomes) is punishable.
Strengthened monitoring of project reporting and verification.
Case 6: Chitwan Multi-NGO Fraud Ring (2021)
Facts:
Several NGOs colluded to solicit disaster relief funds.
Funds were funneled through shell organizations and used for personal gain.
Legal Issues:
Criminal conspiracy (Section 291)
Fraud and misrepresentation (Section 279)
Breach of trust (Section 288)
Outcome:
Court sentenced five NGO officials to 5–7 years imprisonment.
Funds traced and partially recovered; organizations deregistered.
Significance:
Highlighted risks of coordinated fraud in multiple NGOs.
Courts reinforced stricter punishment for repeat offenders.
IV. Observations
NGO directors and staff are personally liable for misuse of funds.
Penal Code sections 279, 288, 291 are most commonly used for prosecution.
Foreign-funded NGOs face additional scrutiny and heavier penalties if funds are misused.
Sentencing varies: imprisonment from 2 to 7 years depending on fund amount and conspiracy involvement.
Restitution and asset recovery are integral to case outcomes.
Regulatory agencies like Social Welfare Council play a crucial role in suspension and deregistration of fraudulent NGOs.
Conclusion
Fraudulent NGO fundraising in Nepal is both a criminal and regulatory offense. Legal accountability covers:
Misrepresentation to donors
Misappropriation of funds
Breach of trust
Conspiracy among officials
Case law shows that courts are willing to impose imprisonment, fines, and NGO deregistration to uphold accountability. Strong monitoring, auditing, and donor vigilance are critical to preventing such crimes.
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