The Financial Action Task Force (FATF) is an intergovernmental body that sets anti-terrorist financing and anti-money laundering standards that it uses to assess the adequacy of laws and regulations in nearly every country in the world. Since 9/11 it has increased its focus on regulation of financial services and charities.

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A 2012 report by Statewatch and the Transnational Institute showed that the FATF’s program of promoting financial regulation has been abused by repressive governments to suppress civil society, limit dissent and otherwise violate human rights. 

After examining the effects of FATF regulations in nearly 160 countries, the report found that FATF rules are being used by governments as an “instrument, to further cut back on the space of civil society…freedom to access and distribute financial resources for development, conflict resolution and human rights work.”

FATF’s initial response to civil society concerns about these findings was constructive. In October 2012 it adopted a statement saying its programs should not hurt the activities of legitimate nonprofits and in June 2013 it amended the introduction to its Best Practices Paper on nonprofit regulations to emphasize the need to protect civil society. It noted that regulations should be based on the level of risk and proportional to the threat of abuse and cited freedom of association and expression as rights that must be protected. The challenge for FATF going forward is to implement these principles.

The April 2013 UN Report of the Special Rapporteur on the rights to freedom of peaceful assembly and association, Maina Kiai, highlights concerns about laws and regulations that quash freedom of assembly and association around the world. The report focuses on access to financial resources for civil society groups and the right to hold peaceful assemblies.

The report highlights the FATF’s Recommendation 8 on nonprofits, saying it “fails to provide for specific measures to protect the civil society sector from undue restrictions to their right to freedom of association…”

Kiai states “…civil society organizations play a significant role in combatting terrorism. By their direct connections with the population and their prodigious work in, inter alia, poverty reduction, peacebuilding, humanitarian assistance, human rights, and social justice, including in politically complex environments, civil society plays a crucial role against the threat of terrorism.”

A March 2013 report by the Observatory for the Protection of Human Rights Defenders says the increasingly widespread restrictions on the funding of non-governmental organizations (NGOs) under the guise of counterterrorism efforts undermine the ability of civil society to promote and protect human rights. The report says “This worrying trend was notably confirmed by the Financial Action Task Force (FATF)” recommendations on government anti-terrorist financing regulation of nonprofits. It cites potential vulnerability of diversion of charitable funds to terrorism but has no formal mechanism to caution states that regulation of NGOs must stay within the parameters of human rights law. The report says, “The potential prejudicial character of this recommendation on the work of NGOs is aggravated by the fact that it is not accompanied by explicit guaranties of the right of NGOs to access funding.”

Examples of Laws That Harm Civil Society, Freedom of Association and Expression

Citing the need to comply with FATF recommendations, Azerbaijan, Bangladesh, Bahrain, Egypt and Russia are among countries with limits on foreign donations and government control exerted over NPO operations using foreign funds.  These laws are inconsistent with the right of association: international human rights law does not limit the right to associate only with one’s fellow citizens, but with all people.

The British Virgin Islands (BVI) require the annual registration of all nonprofit organizations. Kiai notes that unregistered associations have protection under international human rights standards and “are eligible to access funding.”  He notes that the International Covenant on Civil and Political Rights makes no distinction between registered and unregistered associations.

Russia allows unprecedented control over independent NPOs. It created an overly complicated registration procedure for NPOs and permits government officials to deny registration arbitrarily; subjects NPOs to inspections and audits at any time and without limitation and liquidates NPOs unable to obtain registration.

In Paraguay, Sri Lanka and Turkey freedom of expression is endangered by a vague definition of terrorismand a narrow, technical approach to anti-terrorist financing laws.  The result could be that asset freezing and other sanctions could be imposed on NPOs or individuals for political reasons, with the end result that FATF standards are implicated in human rights violations.

The Need for Proportionality: Evidence Shows Civil Society is Not a Significant Source of Terrorist Financing

Kiai points out that “very few, if any instances of terrorism financing have been detected as a result of CSO-specific supervisory measures.” In addition, a 2010 report from the World Bank, an official FATF Observer, said, “The rarity of instances of terrorism financing by NPOs, when contrasted against the enormous scope of the sector, does raise the question of whether, in and of itself, government regulation is the most appropriate response.”   This report questioned the necessity of implementing FATF recommendations for nonprofits: “Despite the energy put into this effort [combating terrorist financing], we are not aware of examples in which measures proposed by individual countries in implementing SR VIII and the [Interpretive Note], or similar national legislation, have resulted in detecting or deterring cases of terrorism financing.”

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