March 2019

Here is a round-up of the recent FATF/CFT and related news and events:

Contents:
• Global update: C20/G20
• Regional update: EU SNRA, Balkans
• National update: Tunisia, USA, Nigeria
• FATF news
• Resources

Global update:

G20: Coalition members will take part in the upcoming Civil Society 20 (C20) and Group of 20 (G20) meetings in Japan in April and June, respectively. This is the follow up to our 2018 initiative, when the Coalition convened government officials and international experts to discuss regulatory restrictions and financial implications affecting the NPO sector – so called ‘de-risking’ – and actions the G20 should take to address the issues, on the sidelines of the G20 Summit in Buenos Aires . The FATF Report to the G20 Leaders’ Summit (see paras 32, 33, 35) highlights concern at loss of access to banking services for NPOs, and calls for a ‘co-ordinated approach among international organisations, technical assistance providers, policy makers, standard setters, supervisors and private sector’ to address de-risking. The Coalition is currently in the process of trying to reinforce the messaging around the financial exclusion of NPOs, and how that relates to the international financial architecture, within the policy recommendations of the various working groups of the C20. The Coalition is also working, with the Japanese C20 delegation and other stakeholders, on an official side event at the June G20 Summit.

 

Regional update:

European Commission (EC) Supra-National Risk Assessment (SNRA): New Consultation Rounds (2018-2019) for revised SNRA to be published in June 2019.
The SNRA assesses the vulnerability of various entities and services, including non-profit organisations (NPOs), to risks of money laundering and terrorism financing. In an earlier (2017) iteration, the EC, though considering the NPO sector generally at significant risk for terrorism financing and money laundering, opted for a soft law rather than a regulatory approach while dealing with the sector. And this approach was to be developed with NPOs in a participatory manner.
The SNRA is updated every two years. With this in mind, two further rounds of consultation were organised for ‘NGOs, academics and civil society’ by DG Justice on 30 November 2018 and 23 January 2019, to gather input for the revised SNRA to be published later in 2019.
This was the current NPO fiche under discussion. Two questionnaires were sent to NPO representatives to be filled out prior to the consultation – one on reporting obligations and the other on the sectoral risk profile.
Comments on all of the above, raising questions around the methodology used as well as the risk rating arrived at, were submitted by a coalition of NPOs. The Global NPO Coalition, among others, are keen to see that data on the NPO sector is gathered in a way that is fit-for-purpose (the EC questionnaires did not meet that requirement), that the risk-based approach is adhered to when assessing the sector, and that existing laws and regulations are taken into account when determining mitigating measures. Best practice examples in terms of Risk Assessments conducted at the national level have been provided to the EC.
We are awaiting a revised draft text to be able to provide comments on the second round of assessment.

Western Balkans and Turkey: Coalition members took part in a two-day regional workshop for the jurisdictions of the Western Balkans and Turkey, organised by the Council of Europe, to discuss the performing of risk assessments for the sector. Highlighted was the disjunct between theory and practice, as well as the unintended consequences of AML/CFT rules and regulations on the operational environment of civil society. Risk assessment methodologies for the NPO sector were discussed, as were post-risk assessment mitigation measures. The jurisdictions present (mostly government representatives) also made rich contextual interventions. See here for more.

 

National update:

Tunisia: Members of the Coalition are working with the Tunisian Financial Intelligence Unit and the Prime Minister’s Office towards a joint government–NPO Risk Assessment of the sector, using a Risk Assessment methodology developed by one of our members. Tunisia has been identified by the FATF as well as by the EU as a jurisdiction with ‘strategic deficiencies’ when it comes to its AML/CFT framework. The country has had some positive follow-up reports. Encouragingly, these follow-up reports have directly referenced this work as evidence of progress – see para 20 of this report. There is strong motivation to work with members of the Coalition so as to be seen regionally as a leader on this issue.

USA: The US National Terrorist Financing Risk Assessment was published in late December 2018, finding measures to protect charities largely effective. Read Charity & Security Network’s analysis here.

Nigeria: The country published its AML/CFT National Risk Assessment (NRA) in 2016. Our Coalition member Spaces4Change have just concluded an analysis of this NRA, specifically examining the country’s risk assessment of the NPO sector in light of the FATF’s revised Recommendation 8. For instance, the Nigerian NRA admits in its concluding remark that while the abuse of NPOs for money laundering (ML) may seem to be potentially low, NPOs pose significant ML threat ‘due to the fact that NPO’s are not effectively regulated’. It goes on to rate the ML risk to the NPO sector as Medium High.
The analysis, which will be published shortly and also presented to key national agencies responsible for AML/CFT regulation, including the FATF-Style Regional Body for West Africa (GIABA), lays out a nuanced view of the difference between ‘threats’ and ‘vulnerabilities’, as well as presenting, very clearly, the existing legal/regulatory environment. It calls out the fundamentally-flawed identifying of NPOs as DNFBPs in the NRA and the fact that there is no reference to Immediate Outcome 10, which determines the effectiveness of existing/newly-implemented measures in line with the risk-based approach (again, something that the FATF claims to be particular about).

 

FATF news:

The FATF plenary was held in Paris between the 20th and 22nd of February 2019. These were the outcomes. And these some of the current efforts by the FATF to monitor and take action against terrorist financing

The 2019 Private Sector Consultative Forum will be held on the 6th and 7th of May 2019 at the UNODC Headquarters in Vienna. The Forum will cover topics including digital ID, virtual assets, beneficial ownership, RBA Guidance papers for various parts of the private sector, conducting customer due diligence and financial innovation (FinTech/RegTech) in the context of anti-money laundering and counter terrorist financing (AML/CFT). The Global NPO Coalition has four seats on the Forum and will be adequately represented. Updates will follow in the next newsletter.

 

Resources:

FATF Private Sector Business Bulletin: Click here

Report, UN Special Rapporteur: The UN Special Rapporteur on the Promotion and Protection of Human Rights while Countering Terrorism has just released her report on the impact of CT measures on the closing of civic space and the violation of the rights of civil society actors and human rights defenders. The Report gives an empirically-based assessment of the scale of the misuse as well as identifying trends and patterns in state practice. In it, the Special Rapporteur for the first time, presents worrisome data analysis that demonstrates that between 2005 and 2018, over 60% of counter-terrorism measures and laws globally were used against Human Rights Defenders and civil society actors. That data is cross-tabulated from a number of sources and is very robust. This finding is of considerable importance, as it can advance a serious discussion about the global misuse of CT/PVE measures. It would be important to include these numbers in general discussion with states to shift the debate and affirm that CT measures are consistently and unrelenting used against civil society. Also, the fact that serious oversight is needed to remedy the global, regional and national architectures that enable this. The Report additionally provides a mapping of the trends and patterns of CT measures and their use against Human Rights Defenders and civil society. Such analysis can help better understand and hopefully address the serious challenges in the use and misuse of CT, providing recommendations for better oversight and accountability. The Report clearly shows that targeting civil society violates human rights and undermines the fundamental interests of all states to effectively counter terrorism.

FinDev Gateway/CGAP blog: The Hole in the Bucket: The Impact of De-risking on Non-Profit Organizations (Who loses out in the global push for individual financial inclusion?)
‘While we see a global push for financial inclusion at the individual level on the one hand, whole groups are at risk of falling out of the system on the other, a veritable “hole in the bucket” which needs to be plugged with some urgency. We would like to draw attention to these organizations, as a growing body of evidence shows that the non-profit sector is bearing the brunt of de-risking decisions.’

Dutch bank ABN AMRO’s Human Rights Report highlights the issue of de-risking for non-profit organisations, especially of smaller ones working in difficult contexts.

If you have news or examples regarding similar processes or work in your country you wish to share with the members of the Global NPO Coalition, please send a short paragraph to
Sangeeta Goswami at npos@fatfplatform.org or sangeeta@hscollective.org