FATF and Civic Space: Lessons from Nigeria

Written by Victoria Ibezim-Ohaeri, Executive Director, SPACES FOR CHANGE | S4C

In Nigeria, as elsewhere in the world, the drivers of shrinking civic space are not static.  They shift with the times. During the military regime, specifically, between 1966 and 1999, civil society organizations (CSOs) as well as vocal critics of government encountered very disturbing levels of repression and brutality in the hands of state actors. Whether it is the indiscriminate arrests and incarceration of activists, or the numerous incidents of extrajudicial killings like the state-ordered execution of Ken Saro Wiwa, or the assassination of democracy campaigner, Kudirat Abiola, or the enactment of plenteous decrees that ousted the constitution, all these are sad reminders of the darkest days in the country’s civic space.

Indeed, the handover to democratically-elected civilians in 1999 brought some respite, restoring the supremacy of the constitution and civic freedoms. However, newer threats to the civic space also emerged, usually framed around the objective of national security and national interest.  The episodic skirmishes and fractured relationships between regions strained along ethnic, cultural and religious lines, and subsequently, the onslaught of insurgent groups like Boko Haram and the rise of global terrorism, accelerated the shift from military dictatorship to national security mantra. Because this standard is subjective and gives state actors a wide discretion to determine what threatens national security, that discretionary power was quite often exercised arbitrarily or invoked to justify governmental restrictions that narrowed civic freedoms and the spaces for democratic engagement.

More recently, the COVID-19 pandemic, is propelling another shift from national security to health emergency response, reconfiguring the fault lines of individual and state accountability. Nigerian organizations like SPACES FOR CHANGE | S4C are working within this context of the constantly-shifting drivers of shrinking civic space. Of them all, security-related drivers are very significant for the non-profit and charitable sector, considering the rising scope and scale of restrictions enforced in furtherance of anti-money (AML) laundering and countering financing of terrorism (CFT) measures in particular. A number of legislative proposals designed to tighten the regulation of non-profit organizations (NPOs), including non-governmental organizations (NGOs) have been introduced as part of the national AML and CFT measures, prompting push back and resistance. Not only that, AML and CFT refrains have been deployed to target critics, order the forced closure of humanitarian organizations after linking their operations with terrorism without supporting evidence. For instance, Action Against Hunger’s main offices in Borno and Yobe States, north-eastern Nigeria was closed on September 18, 2019, following an accusation of “aiding and abetting” Boko Haram, a terrorist organization. Since 2015, the database of closing civic spaces in Nigeria has been tracking and documenting the wide range of governmental restrictions closing down the civic space.  

AML and CFT measures derive inspiration from international financial regulations like the Financial Action Task Force (“FATF”). In the bid to comply with FATF’s AML/CFT standards, Nigeria has rolled out several laws, regulations and guidelines applicable to corporate persons, including NPOs, which have had the effect of imposing greater reporting and regulatory obligations on those entities. The Money Laundering (Prohibition) Act, the Terrorism (Prevention) Act, the Special Control Unit against Money Laundering (“SCUML”) Regulations, and the Central Bank of Nigeria AML/CFT Guidelines are some of the major legislations enacted in compliance with FATF requirements. An intergovernmental body, GIABA, is the FATF-styled regional body that oversees compliance with the AML/CFT obligations for countries in the West African sub-region.

Despite the surging restrictions, the majority of NPOs and NGOs in Nigeria were neither aware of the triggers of restrictive regulations nor understood the links between AML/CFT rules and shrinking civic spaces. So, few national level activists and organizations were aware of FATF, let alone know how compliance or instrumentalization of FATF by states fosters over-regulation, whether unintentional or spurious.  Consequently, the real triggers of civic space restrictions remained unchallenged for a long time. Not only that, restrictive legislative proposals continued to be introduced despite FATF Recommendation Eight’s (R8) latest requirement for a risk-based approach to eliminate blanket restrictions on all NPOs.

It is against this backdrop that SPACES FOR CHANGE | S4C is leading the FATF-focused advocacy in the country, ensuring that government regulation in the name of national security does not continue to shrink the civic space. The opportunity to put up a strong challenge and dismantle the perception of NPO's as conduits for money-laundering or the financing of terrorism emerged in the last quarter of 2019 during the FATF Mutual Evaluation and onsite visit to Nigeria. Ahead of this, Nigeria published a National Risk Assessment (NRA) for TF and ML (completed in 2016), which identified Designated Non-Financial Businesses and Institutions (DNFIs), of which NPOs are a subset, as being amongst those sectors most vulnerable to money laundering (ML) and terrorist financing (TF). A number of stringent restrictive measures proposed in the national risk assessment (NRA) for countering the ML/TF risks had enormous potential to constrain non-profit activity, thereby contracting the civic space even further. SPACES FOR CHANGE | S4C’s 2019 research report, Unpacking the Official Construction of Risks and Vulnerabilities for the Third Sector in Nigeria, challenged the official classification of NPOs as DNFIs, disputing the evidential basis for the identification and classification of ML/FT risks, threats and vulnerabilities in the sector.  This report builds on a previous 2017 study that examined the link between the Financial Action Task Force (FATF) Recommendation 8 (R8) and restrictions on civic freedoms in Nigeria.

Three interesting outcomes emerged from SPACES FOR CHANGE | S4C’s strategic research and policy advocacy. First off, the research findings laid the foundation for massive awareness-creation and sensitization of civil society and non-profit organizations on the AML/CFT drivers of governmental restrictions. Numerous capacity-development initiatives implemented across states revealed that activists and civil society organizations were either unaware, or had limited knowledge of FATF’s and GIABA’s regulatory activities around the globe and in the West African sub-region in particular. That has changed now. Secondly, the research findings attracted government attention, expanding the space for sustained dialogue and engagement between NGOs and Nigeria’s AML/CFT regulators. On June 20, 2019, Spaces for Change (S4C) and the Special Control Unit against Money Laundering and Terrorism Financing (SCUML) co-hosted a workshop, Combating Money Laundering and Terrorism Financing Risks in the Non-Profit Sector, with a facilitator from the NPO Global Coalition on FATF, GIABA and a diverse audience of 62 representatives of several federal regulatory agencies, religious groups, donor bodies, local and international non-governmental organizations operating in Nigeria’s six geo-political zones. And thirdly, and most importantly, the combination of the first two outcomes above paved the way for Nigerian NPOs to develop a sectoral response and participate actively in FATF’s/GIABA’s Mutual Evaluation processes for the first time. Previous country assessments were undertaken with minimal or no NPO sector participation.

On October 9, 2019, SPACES FOR CHANGE | S4C led a well-sensitized delegation of seven organizations, under the banner of the Action Group on Free Civic Space, to meet with FATF/GIABA assessors. The delegation comprised leaders of various subsectors of the non-profit sector: security, gender, youth, religion, civic space, extractives and urban justice. Discussions at the meeting with FATF drew inspiration from the results of S4C’s March 2019 research that analyzed the national risk assessment of the NPO sector. In one part, S4C took the lead in sensitising and galvanizing organizations to engage the Mutual Evaluation procedures. On the other part, the Action Group continues to serve as an intermediary between NPOs and national AML/CFT regulators including GIABA. Cultivating and nurturing a relationship with SCUML, NFIU and GIABA prior to the external evaluations, helped to build trust and confidence between regulator and regulated entities, enabling change to be influenced through collaboration.

FATF/GIABA’s draft assessment report on Nigeria’s Mutual Evaluation agreed with most of the submissions detailed in the Action Group’s response paper. In particular, FATF/GIABA faulted the following: (a) the failure to conduct a specific risk assessment of the NPO sector to identify NPOs at risk of ML and TF; and (b) the classification of NPOs as DNFBPs and therefore concluded that the imposition of AML/CFT requirements meant for DNFBP on NPOs, will arguably disrupt and discourage legitimate operations of NPOs. While this conclusion represents a successful outcome of evidence-based research, strategic engagement and team work by SPACES FOR CHANGE | S4C and the Action Group on Free Civic Space, more advocacy and collaborative engagements with national regulators are continuing to ensure that any mitigating measures put in place as a result of the Risk Assessment or following on from the Mutual Evaluation are effective, proportionate, and do not impact legitimate NPO activity.

With the lessons learned from its successful engagements during Nigeria’s Mutual Evaluation, SPACES FOR CHANGE | S4C extended technical cooperation, knowledge-building and solidarity to CSO colleagues in Sierra Leone, as they prepared for their own country assessment and mutual evaluation by FATF/GIABA. Matching online exchanges with offline action, S4C visited Sierra Leone between October 27 – November 1, 2019, at the request of Society for Democratic Initiatives, based in Sierra Leone. The visit afforded S4C an opportunity to meet with local civil society actors and share experiences of research-driven and legal advocacy strategies for confronting restrictive legislative proposals like the country’s Development Cooperation Framework (DCF), designed to hinder the ability of civil society, including non-government organisations in Sierra Leone, to seek and receive funding to implement programs that serve their communities and enable their sustainability.  In addition, this cross-border coordination provided the leverage for local and regional actors to learn from each other, and contribute meaningfully in global discourse and agenda-setting for reversing the trend of closing civil society space everywhere in the world.

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