Terrorist Financing by William Vlcek;

Author:William Vlcek;
Language: eng
Format: epub
Publisher: Lightning Source Inc. (Tier 3)

Charities and other non-profit organizations

Charities were immediately subjected to CFT measures (as explained in Chapter 3) because of al Qaida’s use of charities to collect and transfer funds to the group. In turn, charities became one focus for FATF attention, specified in the initial CFT Special Recommendation 8, which was subsequently re-established as Recommendation 8 in the revised Forty Recommendations. In an analysis reflecting on the application of these CFT measures 15 years after they first came into force, Romaniuk and Keatinge pointed out that the first version of the Recommendation “contains an unsupported empirical claim – that NPOs are ‘particularly vulnerable’ – and asks states to ensure against their abuse on that basis. No evidence was offered at the time to justify this claim” (Romaniuk & Keatinge 2018: 268). The statement that some charities are vulnerable in terms of terrorist financing remains in the latest version of Recommendation 8. The guidance now encourages states to assess the measures applied to charities (non-profit organizations [NPOs] in FATF terminology) that may be misused for terrorist financing. Situating charities in the CFT regime in this fashion led to derisking in some states and oppressive regulation in other states, particularly where they were framed as the source of undesirable foreign influence in domestic society (Romaniuk & Keatinge 2018: 275; citing Hayes 2012: 10).

There are two issues present here: first, the problem that some domestic charities experienced with maintaining bank accounts; and second, the challenges confronting charities operating in or near conflict zones such as Syria with non-state actors named as terrorist groups. As discussed in the previous section, much of the attention given derisking involved MSBs and correspondent banking accounts. But charities also were subjected to derisking activity, and in the first years following publication of Special Recommendation 8 simply being an Islamic charity was sufficient reason for financial institutions to close their account. Because of the links made between charities and al Qaida, all domestic Islamic charities were suspect and treated as potentially financing terrorism, making them risky customers for a financial institution. Despite the implementation of CFT compliance measures by such charities, they continued to be affected by derisking actions, for example, the closure of Islamic Relief Worldwide’s account by HSBC in 2015 (Keatinge & Keen 2017a: 12). As experienced by MSBs connected to hawaladars, the connection of a charity with an Islamic or Islamic-majority country was sufficient justification for closing its financial accounts to reduce the bank’s risk of any future regulatory action against it.

In terms of the challenges faced by charities operating in or near conflict zones, in Somalia, for example, the impact of derisking is felt by local MSBs and charities. The few local banks are unable to arrange and maintain correspondent banking accounts, making it difficult for them to provide international transfers for MSBs and charities. This challenge is experienced by international aid agencies providing humanitarian aid as well, affecting money transfers to local projects and beneficiaries. Bankers in Somalia acknowledge the motivations behind derisking at international

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