Human Rights Tribunal Awards $75,000 in Damages to Unpaid Intern
The Impact of Anti-Terrorism Legislation on Charities in Canada: The Need for Balance
The Impact of Anti-Terrorism Legislation on Charities in Canada: The Need for Balance
Charity & NFP Law Update – April 2018
Anti-Terrorism/Money Laundering Update
Mar 2018 Charity & NFP Law Update
FATF Publishes Financing of Recruitment for Terrorist Purposes
The Financial Action Task Force (“FATF”) published “Financing of Recruitment for Terrorist Purposes” (the “FATF Report”) in January 2018. To provide an understanding of the role of anti-terrorist financing measures in disrupting terrorist recruitment activity, the FATF Report discusses the role of funding in the process of terrorist recruitment (“Recruitment Financing”). In this regard, the FATF Report identifies common Recruitment Financing techniques and their associated costs, specifically identifying donations and the misuse of “non-profit organizations” (“NPOs”) as one of the main sources of Recruitment Financing.
Recruitment techniques can be either active, involving direct personal contact between the recruiter and recruitment target, or passive, involving more indirect means. Passive recruitment methods include using password-protected websites and restricted access Internet chat groups to appeal for material support, collect donations, and to exchange sensitive information, such as bank account information or the true purpose of purportedly charitable donations.
Specifically concerning the misuse of NPOs, the FATF Report states that NPO-funded programs and facilities can be abused for Recruitment Financing and misused to provide justification for moving funds to terrorist organizations, though not all NPOs are at risk of abuse. In this regard, the FATF Report provides various case studies showing where both legitimate and illegitimate NPOs and NPO facilities, including NPOs’ social media, have been misused by terrorist organizations to recruit and train individuals, function as a meeting place for terrorist entities, and publish materials in support of terrorism.
Charities and not-for-profits in Canada should become familiar with the various methods of Recruitment Financing that impact the not-for-profit sector in order to best protect themselves from the risk of abuse. The FATF Report, and the case studies in particular, are a helpful tool illustrating how charities and not-for-profits can become subject to abuse by terrorist organization for Recruitment Financing purposes.
FATF International Stakeholder Dialogue on Financial Services for NPOs
On February 15, 2018, the Dutch Ministry of Finance, the World Bank and the Human Security Collective held an International Stakeholder Dialogue on Ensuring Financial Services for Non-Profit Organizations the (“Stakeholder Dialogue”) to discuss what public- and private-sector stakeholders, including banks, humanitarian organizations, government policymakers and regulators, as well as international organizations, can do to ensure legitimate NPOs are not negatively affected by “de-risking” by banks and financial institutions, and that access to financial services can be safeguarded for them. In this regard, a background paper (“Background Paper”) was prepared for the Stakeholder Dialogue to discuss the de-risking of NPOs and identify ways in which access to financial services can be continued.
NPOs operating in high-risk countries with exposure to threats of terrorist financing and money laundering are particularly vulnerable to de-risking, whereby banks and financial institutions terminate or restrict business relationships to avoid, rather than manage, risks. When de-risking, banks and financial institutions may refuse to on-board clients or to perform financial transactions, including international wire transfers, which can lead to NPOs’ operations being undermined. This can ultimately create challenges for NPOs attempting to access the funds needed to conduct their activities and provide critical humanitarian assistance abroad.
The Background Paper identifies various drivers of de-risking, including concerns for reputational and liability risk, profitability, business strategy, the cost of implementing anti-terrorist financing, anti-money laundering and sanctions and other regulatory requirements, as well as exposure to penalties by supervisory and law enforcement authorities. Interestingly, it also identifies “outdated perceptions of risk associated with NPOs” as a factor, referencing the 2016 revisions to FATF’s Recommendation 8 that no longer identify NPOs as “particularly vulnerable” to terrorist abuse, as outlined in Anti-Terrorism and Charity Law Alert No. 46.
With regard to potential solutions to de-risking challenges, the Background Paper states that there is no single clear-cut solution that will resolve the issue and therefore encourages stakeholders to work together to investigate de-risking as a “series of issues that need to be investigated in multi-stakeholder settings”. In this regard, the Background Paper provides general categories of actions for stakeholders to explore, including raising awareness and promoting greater understanding of the issues surrounding de-risking of NPOs, encouraging governments to provide regulatory guidance on the implementation of the risk-based and proportional framework, exploring incentives for financial institutions to keep NPO accounts and engage with NPOs, creating safe payment channels, improving humanitarian licensing and exemptions, exploring technological solutions to facilitate NPO transfers, conducting new research to examine de-risking in other jurisdictions, and providing capacity assistance to stakeholders, and countries in particular, to explain regulatory requirements and compliance obligations.