New Toolkit Helps CSOs Navigate  Anti-Money Laundering and Counter-Terrorism Financing Laws

To comply with international standards, countries around the world are passing laws that increase government oversight of financial systems in the non-profit sector. While financial transparency laws can reduce civil society organizations’ (CSO) vulnerability to abuse by terrorist organizations, over-regulation can restrict the general operating space of the entire sector. For example, some regulations:

 

  • Dramatically increased the quantity of documents CSOs must submit to obtain legal recognition;
  • Impose oversight mechanisms that subject CSOs to inspection at any time, day or night;
  • Establish disproportionate sanctions – including forced suspension – for even minor technical deficiencies or delays in required reporting; and
  • Require private financial institutions to conduct extreme vetting of CSOs or face severe fines, leading many banks to delay, reduce, or eliminate services to CSOs.

 

Frequently, governments contend that such onerous laws and policies are required in order to comply with the standards of the Financial Action Task Force (FATF), an inter-governmental body that is made up of representatives from 35 countries that “has established best practices, aimed at preventing misuse of NPOs for the financing of terrorism while, at the same time, respecting legitimate actions of NPOs,” according to its website.  FATF produces recommendations, conducts evaluations, and gives ratings on state compliance. 

 

Governments take FATF ratings seriously because they affect countries’ bond ratings, access to financial markets, trade, and investment. Periodic FATF evaluations – particularly those that result in or follow poor ratings – therefore challenge governments to demonstrate that they are taking action to improve their laws and policies related to money laundering and terrorism financing. The evaluations may also present governments with a pretext to crack down on CSOs through severe FATF-inspired restrictions. 

 

In 2016, following persuasive advocacy by CSOs, FATF changed its recommendation to remove its characterization of CSOs as “particularly vulnerable” to terrorism financing abuse.  Instead, countries must now: 

 

  • Evaluate CSOs to determine risk of abuse for terrorism financing and focus related laws and measures on those identified as high risk;
  • Evaluate existing laws and measures to ensure that they are appropriate, and that they do not conflict with countries’ obligations under human rights treaties or restrict the legitimate charitable activities of not-for-profit organizations (NPOs); and
  • Base AML-CTF laws and measures on information from all relevant sources, including data on risk gathered through dialogue with CSOs.

 

Most CSOs are unaware of these revised FATF standards and are ill-prepared to advocate against excessive regulations or participate meaningfully in their country’s FATF evaluation processes. To fill this need, the International Center for Not-for-Profit Law (ICNL) has collaborated with its affiliate organization, the European Center for Not-for-Profit Law (ECNL), to produce user-friendly resources in Spanish and English to help stakeholders:

 

  • Understand FATF standards, procedures, timelines, and options for engagement;
  • Map relevant laws and actors;
  • Evaluate laws related to money laundering and terrorism financing to determine how well they comply with FATF standards; and
  • Develop advocacy strategies that anticipate and counter government arguments premised on inaccurate characterizations of FATF’s revised standards.

 

“Anti-Money Laundering and Counter-Terrorism Financing Laws and the Financial Action Task Force (FATF) Standards and Procedures: A TOOLKIT FOR NOT-FOR-PROFIT ORGANIZATIONS” includes: 
 

1. A video introduction

 

This video (Spanish language) presents each toolkit component including its content, purpose, and how it can be used to inform and advance engagement at the national, regional, and global levels.

 

 

2. PowerPoint on Key Issues, Options, and Timing for Non-Profit Organizations Engagement in Procedures Related to FATF Standards

 

This PowerPoint presentation provides guidance on how CSOs can participate in and influence policy making and FATF evaluations related to money laundering and terrorism financing in the non-profit sector. It provides explanations of the FATF’s suggested actions that countries should take and a checklist of key questions to help users:

 

  • Understand the timeline for FATF country evaluations;
  • Identify where their respective country falls on the timeline;
  • Anticipate potential new restrictions as well as opportunities to engage government policymakers and FATF evaluators;
  • Options NPOs may consider for collective action and what might be gained from those actions; and  
  • What they might gain from the engagement; and 
  • Suggestions for how to approach the government and FATF evaluators.

 
CSOs can also use this presentation to consider their strategic options depending upon the sector’s relationship with the government, with separate recommendations for circumstances in which the government:

 

  • Has not demonstrated any interest in collaborating with the NPO sector on sector risk assessments or FATF peer evaluations; 
  • Has invited such collaboration; or
  • Is openly hostile to the civil society sector.

 

The presentation concludes with guidance on the importance of unified action, strategic alliances at the national, regional, and global levels, and international mechanisms and events that may serve as platforms for advocacy for improved implementation of FATF standards.

 

You can find the presentation in English here and in Spanish here.
 

3. A research tool to evaluate national anti-money laundering/counter-terrorism financing laws and FATF procedures

 

This tool is designed to help CSOs map key laws and regulations related to money laundering and terrorism financing and evaluate how well they comply with FATF standards. The research matrix includes:

 

  • Questions about recent changes in the laws; 
  • Government entities charged with CSO oversight;  
  • Key legal obligations for CSOs; 
  • Applicable sanctions; 
  • Government webpages where guidance is posted; and 
  • Impact the measures have on CSOs.

 

You can find the mapping tool in English here and in Spanish here.

 

4. A research tool to map relevant actors

 

To effectively advocate for improved laws, measures, and evaluation procedures consistent with FATF standards, CSOs must identify key actors to persuade, mobilize, educate, and, where appropriate, resist. This tool presents sample actors at the national, regional, and international levels, distinguished according to their levels of interest, influence, and knowledge on FATF standards. The tool then enables users to map out potential allies, adversaries, and influencers relevant to their own country context.

 

Guidance and examples on how to map relevant actors can be found in English here and in Spanish here. The matrix mapping tool can be found in English here and in Spanish here.

 

5. A compendium of arguments and opposing arguments NPOs can use to anticipate and counter inaccurate justifications for excessive controls

 

The lack of awareness of the revised FATF standards has made it difficult for CSOs to identify when representatives of government agencies, banks, and even civil society peers attempt to justify restrictive laws and the exclusion of CSOs from FATF procedures based on mischaracterized or outdated information. This PowerPoint presents common misstatements of FATF standards that are frequently used to support restrictive laws, measures, and procedures. For example, some will claim that CSOs are “particularly vulnerable” to abuse for the financing of terrorism. Each argument is matched with a response that can be incorporated into policy arguments. Citations are provided for each counter-argument for support and further research.

 

You can find the document in English here and in Spanish here.

 

6. Five country reports based on desktop evaluations of relevant laws and FATF procedures

 

ICNL conducted short desk review of laws that five countries—Argentina, Brazil, Mexico, Panama, and Peru—passed to comply with the Financial Action Task Force’s (FATF) legal standards and evaluations. The FATF requires that countries review their laws and regulations related to CSOs that the country has identified as being vulnerable to terrorist financing abuse. The FATF also recommends that governments conduct risk assessments and work with CSOs to develop best practices and implement measures to mitigate risk. ICNL hopes that these desk reviews will inform dialogues about these measures and how well they protect the right to freedom of association and meet the FATF standards related to civil society organizations (CSOs). 

 

The country reports are linked below:

 

Argentina (English) - Argentina (Spanish)

Brazil (English) - Brasil (Spanish)

Mexico (English) - Mexico (Spanish)

Panama (English) - Panama (Spanish)

Peru (English) - Peru (Spanish)

 

More information on FATF standards and procedures can be found at FATF and ICNL.