The Charity Commission is urging UK-based charities to take part in a consultation launched by the standards body the Financial Action Task Force (FATF) on revising its recommendation designed to protect charities against terrorist abuse, amid concerns that some sham charities may be used as funding sources, or that legitimate charities are being used as a cover to pass on funds
FATF is the global standard setting body for anti-money laundering and counter terrorist financing, and its recommendation 8 (R8) focuses on non-profit organisations (NPOs) and the implementation of measures so that they cannot be abused for the financing of terrorism.
The current version of R8 say countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism.
It says NPOs are particularly vulnerable, and countries should ensure that they cannot be misused by terrorist organisations posing as legitimate entities.
R8 also states that countries should take steps to ensure legitimate charities are not open to exploitation as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and they should also make sure charities are not used to conceal or obscure the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.
The Charity Commission says it believes that charities which work internationally to provide services or which fund overseas partners to do so - particularly in conflict zones or in close proximity to terrorist groups - will find this consultation of particular interest.
A Typologies Report produced by FATF in June 2014 identified that service NPOs which operate in close proximity to an active terrorist threat present the most desirable targets for terrorist entities because of the types of resources involved in their operations, the geographic breadth of their operations, and their access to vulnerable populations.
This was followed by to a comprehensive revision of FATF’s best practices paper on combating the abuse of Non-Profit Organisations (Recommendation 8) which was completed in June 2015.
The latest consultation is designed to ensure that R8 is in line with this thinking, but does not operate in such a way as to disrupt or discourage legitimate charitable activities. In particular, it will look at the issue of how NGOs should be defined, and the risk-based approach to be taken, and states that R8 ‘only applies to those NPOs which fall within the FATF functional definition of a non-profit organisation, and not a country’s entire universe of NPOs’.
The consultation will consider responses and proposed amendments to the wording of R8. It closes on 29 April. The FATF consultation is available here
FATF Typologies Report is here
FATF best practices report is here
