FATF Says Nonprofits No Longer 'Particularly Vulnerable' - What's Next?
Date & Time
The Financial Action Task Force (FATF) has revised its Recommendation 8 on regulation of nonprofits to no longer characterize them as "particularly vulnerable" to terrorist abuse and made important changes to the Interpretive Note to this Recommendation. Non-profit groups are now wondering how their countries will react to these revisions and how they can ensure that national implementation is beneficial to nonprofits and in line with FATF's new risk-based approach.
This webinar will discuss how these changes to Recommendation 8 were developed and what the non-profit sector, including foundations, can do to help shape the road ahead.
Charity & Security Network
European Foundation Center
Norwegian Refugee Council
European Center for Not-for-Profit Law
The webinar is sponsored by the Global NPO Coalition on FATF
Global NPO Coalition on FATF
Since 2012, the Transnational NPO Working Group on FATF has helped civil society raise its voicewith FATF at the national level. It has coordinated responses to draft revisions of FATF's Best Practices Paper and Typology Report, as well as working to develop a formal consultation process with FATF. More recently, it has worked for changes in theInterpretive Note to R8 (see p. 56) and to R8 itself. JOIN the Global NPO Coalition on FATF
The Global Coalition also facilitates the Civil Society-FATF Platform. This helpful resource contains news, background and other information about FATF to ensure that civil society is effectively engaged in the Working Group's activities. The Council on Foundations is a proud member of the Global NPO Coalition on FATF and has previously written about our engagement encouraging this change to Recommendation 8. Read more abour changes in both 2015 and 2016 to FATF.
What is the Financial Action Task Force?
Formed in 1989, FATF consists of 35 member states and eight regional associate members and official observer bodies, such as the World Bank and UN agencies. It sets anti-terrorist financing and anti-money laundering standards that are used to assess the adequacy of laws in nearly every country. Because FATF is not treaty-based and has no real legal authority, there is little transparency or public accountability. Although its recommendations do not create binding international obligations, its significant power and influence come from its evaluation program, which assesses 180 countries for compliance with its standards. A negative rating by FATF can affect a nation’s international credit rating and ability to attract investors.
FATF on Nonprofit Organizations
R8 says countries should ensure that nonprofits cannot be misused by terrorist groups. Two key documents provide guidance on how FATF expects governments to implement R8. The Interpretive Note (IN) lays out objectives, principles, and the types of measures countries should take to be rated compliant. The Best Practices Paper provides details on how government should implement R8. In June 2014, FATF published a report identifying typologies of terrorist abuse of civil society. It concluded that NPOs most at risk are those engaged in service activities that operate in close proximity to active terrorist threats.
FATF Recommendations also cover financial institutions, which have increasingly been expected to act as monitoring and enforcement arms of governments to identify, track and stop illicit money flows. The cost of compliance and the threat of significant sanctions for violations have led banks to ‘derisk’ by dropping low-profit customers such as NPOs. As a result, charities and grantmakers now find it more difficult to access financial services.
Authoritarian countries have abused the FATF process to infringe on the rights of civil society, including its autonomy and ability to receive international support. Other governments have exceeded the requirements of R8 in their eagerness to get a ‘compliant’ rating in FATF’s assessment process.