The Financial Action Task Force’s (FATF) June 2015 update of its Best Practices Paper (BPP) incorporates almost all of the changes requested by the nonprofit organization (NPO) sector. With a new emphasis on a risk-based approach to counter-terrorism financing (CTF) regulation and specific mention of freedom of association, assembly and expression, NPOs are hailing this as long-awaited victory.
This latest BPP revision, which offers guidance on FATF Recommendation 8, on laws relating to NPOs, states at its outset that FATF recognizes “the vital importance of the NPO community in providing charitable services around the world, as well as the difficulty of providing assistance to those in need, often in remote regions.” It also recognizes the efforts of NPOs to promote transparency in their work and “to prevent misuse of the sector by those wishing to support terrorist financing and terrorist organisations.” Read more
The paper specifically states that the good practices outlined in it are not mandatory elements of the FATF standards, but rather are cited as examples only. They “should not be used as a checklist of requirements applied to all NPOs,” the paper states. It further notes that the paper is intended to assist countries with their implementation of Recommendation 8 consistent “with countries’ obligations to respect freedom of association, assembly, expression, religion or belief, and international humanitarian law.”
The BPP does not apply to the NPO sector as a whole, it explains, adding that not all NPOs are high risk. A one-size-fits-all approach would be inconsistent with a proper implementation of a risk-based approach, it notes. Existing regulations or measures may sufficiently address the terrorist finance (TF) risk to NPOs, according to the paper, which warns against overregulating the sector. “Detailed registration procedures for NPOs, additional reporting requirements, requirement of appointing a designated staff responsible for counter-terrorism compliance, and an external audit of the organization, may not be appropriate for CFT purposes for those NPOs facing little to no TF risk,” the paper states.
The revised BPP also addresses the difficulty NPOs have accessing financial services. The BPP states that implementation of its recommendations should not adversely and disproportionately affect NPOs, which rely on banking facilities and other financial services to carry out important humanitarian and charitable services. “The wholesale termination of individual customers or entire classes of customer, without taking into account their level of risk or risk mitigation measures is not a proper implementation of a risk-based approach and is not consistent with the FATF Standards,” the paper explains.
Seventy NPOs from 28 countries submitted joint comments April 24, 2015, on the draft BPP. The comments stressed that the final Paper should guide governments on how to take a risk-based and proportional approach to protecting NPOs from terrorist abuse. Similar to written comments sent in December 2014, the April 2015 joint comments emphasized that the BPP’s primary purpose should be to “provide guidance for governments” and support outcomes that do not over-regulate NPOs. They asked that the BPP be cognizant that “the overall risk of terrorist abuse of the NPO sector is very low,” both in numbers and geography. “This will improve the credibility of the paper as well as its validity among stakeholders,” the comments stated, adding that “although safety will always be a concern when working in high-risk environments, NPOs must be able to take appropriate risks without fear of drastic enforcement measures.” The joint comments were a project of the Transnational NPO Working Group on FATF. Formed in 2012, the Working Group is helping civil society raise its voice with FATF and at the national level.
NPOs have long been critical of FATF’s Recommendation 8 (R8), noting that it takes a one-size-fits-all approach and can be misused by authoritarian countries to clamp down on the rights of NPOs. FATF began to formally engage with NPOs, including members of the Working Group, in April 2013 and their input was incorporated into a June 2013 limited BPP update. The Working Group then coordinated civil society input into the final update of the BPP, including an October 2014 meeting with FATF, December 2014 written comments, a February 2015 conference call and a formal meeting in Brussels in March.
A section-by-section summary of the June 2015 BPP is available here.