Two intergovernmental events during the last week of April 2018 demonstrated growing support to address the problems nonprofits organizations (NPOs) are having with access to financial services for international programs. At both the conference on combatting terrorist financing hosted by the French government and the Financial Action Task Force’s (FATF) annual meeting with NPOs and private sector stakeholders, outcome statements emphasized the importance of addressing the “derisking” problem and ensuring that efforts to stop terrorist financing do not unduly disrupt or discourage NPO activities.

The international conference on combating the financing of Daesh and Al-Qaeda, hosted by the French government in Paris, took place April 25-26. The official summary, titled “No Money for Terror,” included a commitment to:

  • “Enhancing the traceability and transparency of nonprofit organizations (NPOs) and charitable funds. By ensuring urgently effective implementation of FATF standards relating to non-profit organizations to mitigate the risk of abuse for terrorist financing by targeted and risk-based measures, while ensuring not to disrupt of discourage civil society activities.” (emphasis added)

An opinion column about the meeting in The Economist noted the need for flexible anti-terrorist financing strategies, saying, “Another challenge is to reverse “derisking”—banks heavy-handedly pulling away from clients that pose even the slightest terrorism-related risk, leaving many legitimate charities cut off from financial services. That collateral damage must be curtailed.”

FATF’s summary of its 2018 Private Sector Consultative Forum said ““Addressing de-risking is a key FATF priority.” It went on to say that:

  • “In light of continuing concerns about the impact of de-risking, particularly in the context of the remittance and Non-Profit Organization (NPO) sectors, participants took stock of the latest market developments and ongoing initiatives to address de-risking.  Participants also discussed the remaining challenges and the potential next steps, including through coordinated action at the global level, and by national policy makers, supervisors, financial institutions and industry bodies. The importance of constructive dialogue and engagement among various stakeholders, as well as capacity building was also highlighted in this regard…” (emphasis added)

Representatives from the Global NPO Coalition on FATF made a presentation during the session on derisking that included the following recommendations:

  • Produce guidance for NPOs on compliance requirements
  • Task regulators with providing NPO-specific guidance to banks
  • Ensure that bank supervisors as well as bank guidance and practices implement the changed FATF R8 and the risk-based approach

  • Explore technological solutions, which could help lower the costs of compliance
  • Explore safe payment alternatives to correspondent banking, including through central/development banks or dedicated charity banks

  • Ensure closer coordination between all government stakeholders on international aid, counter terrorism and terrorist financing to guard against unintentional conflicting policy outcomes
  • Push for greater discussion of the interrelated issues of sanctions, AML/CFT and de-risking in international fora (e.g., G-20, G-7, UN, EU)
  • Finally, bank de-risking creates new terrorism financing risks and this needs to be acknowledged by the FATF