AML/ATF Update
Jan 2022 Charity & NFP Law Update
Published on January 27 2022

By Terrance S. Carter, Nancy E. Claridge and Sean S. Carter

UN Report Highlights Impacts of Counter-Terrorism on Humanitarian Law

A report published by the United Nations (“UN”) provides important reflection on the adverse impacts that counter-terrorism frameworks may have on the provision of humanitarian aid. In January 2022, the UN Security Council Counter-Terrorism Committee Executive Directorate published its report “The interrelationship between counter-terrorism frameworks and international humanitarian law” (the “Report”). This 45-page resource includes a review of UN Resolutions with regards to counter-terrorism and humanitarian law; an overview of international humanitarian law provisions, such as the Geneva Conventions; and the results of a survey completed by several civil society organizations who have reported significant challenges in the provision of humanitarian aid due to counter-terrorism frameworks.

The opening pages of the Report set out the problem: “in armed-conflict contexts involving terrorist groups, counter-terrorism measures may negatively impact on the ability of humanitarian actors to operate and, by extension, on persons in need of humanitarian assistance”. Both UN humanitarian agencies and other humanitarian organizations have reported that counter-terrorism measures have “restricted humanitarian access to populations in areas where non-State armed groups designated as terrorist organizations operate”, hampering the delivery of aid.

The Report sets out the chilling effect of domestic counter-terrorism laws which criminalize the provision of humanitarian assistance or introduce legal uncertainty prevents organizations from reaching those in need, such as victims of armed conflict or terrorism. Humanitarian organizations expressed concern over being put in a difficult position, facing the possibility of “prosecution, fines or loss of funding” if they do not comply with counter-terrorism provisions and “threats, attacks, and access restrictions by non-State armed groups” if they do comply with counter-terrorism provisions and are perceived to be implementing a political agenda.

While counter-terrorism provisions are an important part of the international response to terrorism, sometimes, the Report notes, these provisions ignore the practical reality that “humanitarian organizations need to engage with non-State actors” in order to secure access to affected populations “in particular if the non-State actor in question exercises control over territory or carries out Government-like functions”. International humanitarian law and related activities should not be viewed as undermining legitimate counter-terrorism actions. Rather, states should treat the matter of “an engagement for humanitarian purposes … separately from the question of engagement with terrorist groups for political and other ends”.

The Report states that neutral, impartial and independent humanitarian activities “shall not be regarded as … recognition of, or support to, a Party to the conflict”. Although not mentioned in the Report, such a position is reflected in various provisions of the UN, including UN Security Council Resolution 2615 (2021) adopted on December 22, 2021, which decided that humanitarian assistance and other activities supporting basic human needs in Afghanistan were not a violation of Resolution 2255 (2015), which set out that Member States should ensure that no financial resource be provided (directly or indirectly) to the Taliban.

States must be aware of the relevant impacts of counter-terrorism provisions in order to find “effective ways to mitigate the impact of counterterrorism on humanitarian activities.” However, the Report notes that “awareness is at times missing or insufficiently established among counter-terrorism actors”. To improve states’ efforts in this regard, the Report lists recommendations from humanitarian organizations. These recommendations include that states offer more clarity about the scope and implications of counterterrorism measures and adopt provisions “excluding principled humanitarian activities carried out in accordance with international humanitarian law from the scope of prohibited conduct in relevant legal and policy frameworks”. States should “actively engage with the private sector” to clarify expectations about risk management. Further, the Report notes, states are recommended to consider “the establishment of permanent structures for dialogue” between relevant governments, agencies, and private sector organizations with regards to country-specific issues about the implementation of counter-terrorism measures.

The provision of humanitarian aid in conflict situations is an important part of Canada’s international obligations, along with its obligations to comply with counter-terrorism provisions. The Report is a useful tool for governments, organizations, and policy makers in Canada to dialogue together concerning what action should be taken to ensure that humanitarian organizations are not prevented from acting in situations of significant need due to legal risks posed by domestic counter-terrorism legislation.

US Federal Bank Regulators Update NPO Derisking Practices

Bank derisking has been a problem faced by non-profit organizations (“NPOs”) for at least the past decade, especially those that send money internationally in response to crises. However, banks approaches to risk may be changing, as demonstrated by the publishing of an updated chapter about NPOs in the United States federal “Bank Examination Manual” (the “Manual”) in November 2021. The Manual governs how federal bank examiners review bank compliance with AML/ATF requirements and had previously, in a 2014 version, implied that NPOs were high-risk.

As reported in greater detail in AML/ATF & Charity Law Alert No. 49, “derisking” occurs when financial institutions indiscriminately terminate or restrict business relationships with broad classes of clients as a way of avoiding, rather than managing risk. In this regard, the Manual’s updated chapter on NPOs emphasizes that banks “are neither prohibited nor discouraged from providing banking services to charities and other NPOs” and reminds bank examiners that “no specific customer type automatically presents a higher risk of money laundering, terrorist financing (ML/TF), or other illicit financial activity”.

Canada’s guidance from the Office of the Superintendent of Financial Institutions, entitled “Deterring and Detecting Money Laundering and Terrorist Financing” was last updated in December 2008 and still characterizes “charities and other non-profit organizations that are not monitored or supervised (for example, not registered with CRA)” as “higher risk”. Given what is happening in the United States, it is time for Canada to follow suit.

Read the January 2022 Charity & NFP Law Update