Protecting non-profit organizations from terrorist financiers
Terrorists groups, like other criminal organizations, need money to operate. To generate funds, they often turn to drug trafficking, kidnapping, money-laundering and other illegal activities. Legal businesses can also serve as fronts for terrorist activities.
Non-profit organizations (NPOs) are not immune to terrorist abuse. In fact, the Financial Action Task Force states in its Recommendation 8 that NPOs are particularly vulnerable to being abused as conduits for the raising, transfer and diversion of funds for terrorist purposes.
Terrorist organizations may also pose as legitimate entities, and it is therefore critical that States assess the risk of abuse to their NPO sectors, introduce effective and proportionate regulations, and work in partnership with NPOs to protect them from exploitation.
The vast majority of NPOs provide vital services to communities in need and work within the law, but are vulnerable to abuse by terrorist financiers. The challenge for Government regulators is to protect NPOs without disrupting their work.
At a briefing on a two-year global project on protecting the NPO sector from terrorist financing abuse, Mr. Jehangir Khan, CTITF Director, told Member States that the financing threat continued to evolve and that suppression of terrorist financing was a vital part of the overall terrorism prevention effort.
CTED, acting on behalf of the CTITF Working Group on Tackling the Financing of Terrorism, held the briefing on 7 March 2013 to report on the project, which included expert meetings in London, Bangkok, Auckland, Nairobi, Buenos Aires, Doha and New York.
CTED’s project partners, the Charity Commission for England and Wales, the Charities Directorate of the Canada Revenue Agency and the Center on Global Counterterrorism Cooperation (CGCC) also took part in the briefing, which was divided into four sessions on, respectively, risk and proportionality, communication and outreach, oversight and investigation, and the way forward.
"Terrorist financing is a precursor of terrorist acts”, said Alastair Bland, a Director at Canada’s Charities Directorate.
He added that although the probability of NPO sector abuse might be relatively low, the consequences were “through the roof”. It was therefore crucial to disrupt the flow of funds at an early stage.
In its recently issued Typologies Report on NPOs, the Asia-Pacific Group identifies financial, material and operational risks to NPOs, as well as risks to NPO staff. For example, funds may be diverted towards terrorist financing with or without the knowledge and consent of the NPO’s directors, or NPOs may be forced to pay taxes to terrorist groups in return for permission to operate in terrorist-controlled areas. NPOs may operate in good faith, yet still be abused to promote extremism. Their programmes can be used as platforms to promote violent extremist ideologies or their facilities used by terrorist groups as safe houses. NPO staff may face the risk of being kidnapped for ransom.
Noting that it was important to assess the risks in order to mitigate them, Mr. Bland added that States faced significant challenges, one of which was the relatively low number of published cases to be drawn upon. Moreover, States had varying capacities to understand the risks involved and disseminate their findings. Involving NPO regulators was key, since it was the State actor that had most contact with the sector.
Moreover, risk assessments often involved sensitive national security information, which could not easily be shared internationally or domestically and could very rarely be made public. In the case of countries with multiple NPO regulators, it might be difficult to decide which regulator should be involved and informed.
It was important to strike the right balance in regulating the NPO sector in order to avoid suppressing or disrupting the excellent work being carried out by legitimate NPOs or allowing terrorists actors to occupy the NPO “space”, stressed Michelle Russell, Head of Investigations and Enforcement at the Charity Commission for England and Wales.
Ms. Russell added that terrorist financing abuse was criminal and should be stopped. However, law enforcement officers and investigators also faced a number of practical challenges. It was often easier, for example, to detect, investigate and prosecute such activities under offences such as fraud, corruption or bribery.
Moreover, the nature of NPO activity made it difficult to track funds, and many NPOs worked in cash-intensive environments and used alternative remittance systems. Prevention, through strong financial controls and good governance, was key, and self-regulation was also a powerful tool. As had been demonstrated throughout the two-year global NPO project, many good practices had been developed in that regard.
Conceived as a dialogue, the global project brought together around 50 States and 80 NPOs, a number of international and regional organizations, and representatives of the financial sector. Participants made a broad range of observations about the issues involved and reflected on the good practices developed by Governments and the NPO sector, including in relation to the relationship between the State and civil society in this context.
Peter Romaniuk, Senior Non-Resident Fellow at the CGCC, said that having the non-profit sector at the table had been vital, and the project had “identified areas of common interest among stakeholders while acknowledging points of contention and endeavouring to work through them in good faith, and as partners”.
Looking towards the future, Ms. Elizabeth Joyce, CTED Chief of Section, said that the two-year project had underscored the need to provide tailored assistance to States to respond to the challenges posed by terrorist financing. One of the achievements of the global project was to have provided an inclusive, collegial environment in which States and other key stakeholders had been able to self-diagnose their challenges and needs, to an unusual degree. The United Nations had been taking note and, as a facilitator of technical assistance, would be working to build capacities, as well as calling on its partners to develop spin-off technical assistance and training projects.
In addition, Ms. Joyce said, the organizers had received offers from the financial sector, private law firms and the NPO sector to take the project forward and consider the risk from sectoral perspectives in a bid to ensure that Government and civil society further strengthened their practical understanding of the risk of terrorist financing and how to tackle it.
The NPO global initiative was launched in 2011 by Mr. Mike Smith, CTED Executive Director, together with his counterparts from the Charities Directorate of Canada Revenue Agency and the UK Charity Commission for England and Wales. The regional events were made possible with the generous support of Australia, New Zealand, Sweden, Switzerland and the United States.
- Website of the 7 March 2013 Briefing on "preventing abuse of the non-profit sector for the purposes of terrorist financing