In response to the COVID-19 pandemic, both the U.S. Department of Treasury and Financial Action Task Force (FATF) issued statements that emphasize the urgent need for aid in response to the COVID-19 pandemic, calling for a “risk-based approach” to counterterrorism finance and anti-money laundering measures (AML/CFT), in order avoid hindering the efforts of legitimate humanitarian organizations.
Treasury’s , April 9 statement noted that, although humanitarian organizations working in conflict regions face a higher risk of aid diversion:
“Treasury reminds the financial sector that reputable, legitimate organizations [nonprofits] implement a range of risk-mitigation measures including due diligence, governance, transparency, accountability, and other compliance measures, even in a crisis…We encourage the implementation of reasonable and risk-based AML measures to allow transparent, legitimate aid organizations to access financial services.”
On April 1, the FATF, which sets global standards for AML/CFT, stated:
“The FATF has worked closely with NPOs over the years to refine the FATF Standards to provide flexibility to ensure that charitable donations and activity can proceed expeditiously through legitimate and transparent channels and without disruption… National authorities and financial institutions should apply a risk-based approach to ensure that legitimate NPO activity is not unnecessarily delayed, disrupted or discouraged.”
Due to social distancing and travel restrictions, FATF encouraged use of financial technology (Fintech) and simplified due diligence to process payments. It also noted that international wire transfers have become a core method for addressing the issues caused by COVID-19.
In addition to derisking measures by financial institutions, U.S. sanctions have become an additional barrier for humanitarian organizations looking to bring finance and supplies to global hotspots. Since the outbreak of COVID-19 Treasury has been under increased pressure from civil society and members of Congress to relieve its sanctions which worsening the impact of COVID-19 in places like Iran and Venezuela.
In February, Treasury’s Office of Foreign Assets Control issued a new General License meant to allow humanitarian goods to enter Iran. However, critics say overly complicated licenses have caused a chilling effect for businesses and humanitarian organizations who are fearful of breaking U.S. sanctions law enforcement, and as a result are not using the license.
Treasury defended its humanitarian exemptions, claiming “Treasury’s Office of Foreign Assets Control (OFAC) continues to maintain broad exemptions and authorizations across its sanctions programs including Iran, Venezuela, Syria, and North Korea to ensure that U.S. Sanctions do not hamper the transfer and delivery of humanitarian aid.”
Treasury Secretary Steve Mnuchin said, “We are committed to working with financial institutions and nonprofit organizations in their efforts to mitigate risks and allow humanitarian assistance to flow to those who need it.” The statement also noted that Treasury is dedicated to “continual dialogue” with stakeholders on these issues. Closing the gap between Treasury’s perception that its current exemptions are adequate and the reality banks and NPOs are experiencing will require such further dialogue.
The Charity & Security Network will continue to monitor financial regulation and sanctions, and the impacts these measures have on the nonprofit sector.