FATF has revised Recommendation 8 and its Interpretive Note at the recently concluded plenary meeting (June 2016). The revisions to the standard on NPOs have been incorporated into the FATF’s main recommendation document, which is online here. The text is on pp. 13 and 54-59.
The revision of Recommendation 8 takes out the claim that the NPO sector is ‘particularly vulnerable’ to terrorist abuse. The new language is a big improvement and a victory for the NPO sector and its sustained advocacy on the matter.
See here for the press release.
Recommendation number 8 pertains specifically to non profit organisations (NPOs). The revised Recommendation now states that:
Countries should review the adequacy of laws and regulations that relate to non-profit organisations which the country has identified as being vulnerable to terrorist financing abuse. Countries should apply focused and proportionate measures, in line with the risk-based approach, to such non-profit organisations to protect them from terrorist financing abuse, including:
(a) by terrorist organisations posing as legitimate entities;
(b) by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and
(c) by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.
(International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation: The FATF Recommendations. Paris: FATF/OECD, 2012, Updated 2016, p.13.)
Recommendation 8 also comes with an Interpretive Note. Changes made to this note are more complex and are currently being analysed by the NPO Coalition.
As mentioned, the change in wording with its attendant shift in discourse is a major victory for the Global NPO Coalition which has been advocating for the past four years to mitigate the unintended consequences of the FATF Recommendations on NPOs . (This was the core group’s initial draft suggested changes to R8 and the Interpretive Note. )
In addition, FATF made important changes to the criteria it will use to evaluate countries’ implementation of Recommendation 8 (R8). The purpose of the changes is to make it consistent with the above revision of R8. The new methodology is found in Immediate Outcome 10 at pages 117-119 of FATF’s Methodology handbook. It adds helpful new criteria to ensure countries take a risk-based, proportionate approach to any regulation of NPOs. It implicitly recognises the chilling impact such regulations may have by adding that they should not ‘discourage legitimate NPO activities’. The new methodology criteria will apply to future evaluations, implying that evaluations already underway will continue under the old Immediate Outcome 10. A comparison of the revised and old Immediate Outcome 10 is here.