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Charities and terror financing: we need to remain vigilant

Posted By on October 4, 2017 @ 11:00

The recently released [1] national risk assessment on money-laundering and terrorism financing in Australia’s non-profit organisation (NPO) sector found that the risk of terrorism financing has fallen from high to medium, compared to the regional terrorism financing risk assessment [2] released just last year. However, that doesn’t mean that NPOs or government authorities should be complacent. The risk that money given to a good cause ends up in the pockets of terrorists stills exists, and the consequences are serious—for communities and NPOs themselves.

The medium risk rating is based on intelligence held by government, suspicious-matter reporting to AUSTRAC—28 reports with a value of $5.6 million between 2012 and 2016—and the number of NPOs linked to persons of interest identified during counterterrorism investigations.

The assessment explains that the lower risk rating ‘reflects shifting terrorism financing behaviour’ towards self-funding activity and away from historical methods that include NPOs being used to raise and send large amounts of money to support large global terror organisations such as al-Qaeda [3].

But the misuse of NPOs is still an issue in the contemporary terrorism financing environment. Last year the head of World Vision in Gaza was charged by Israeli authorities with allegedly diverting funds to Hamas [4]. Indonesia’s financial intelligence unit, PPATK, identified [5] $500,000 of charitable donations raised in Australia and transferred to Indonesia for terrorist recruitment, training and weapons procurement, and to support the families of terrorists who died. Members of an Australian charity are under investigation [6] for alleged links to Islamic State. One of them was arrested on terrorism charges, including fighting, fundraising and recruiting. And the risk assessment itself notes the ‘deliberate and prolonged attempts’ to infiltrate three separate NPOs in Australia by three different individuals, who then diverted funds to support terrorism once in a position of trust.

Exploiting NPOs can be very lucrative for terrorist groups. NPOs can generate large amounts of money. The assessment notes that Australian registered charities have an annual income of over $134 billion and send $1.5 billion overseas each year in donations and grants. Siphoning off even a small proportion of that money to terrorist groups would boost their capabilities and cause serious harm to communities.

The consequences of an NPO being implicated in terrorism financing are also serious for the individual NPO concerned, and the sector generally. Reputational damage and loss of public confidence could lead to a serious drop in donations. In the World Vision case, the Department of Foreign Affairs and Trade suspended funding [7] to the charity, having given more than $5 million in the previous three years. Obtaining or retaining banking facilities may be threatened by risk-averse banks seeking to de-risk [8].  The Australian Charities and Not-for-profits Commission (ACNC), the sector regulator, can revoke NPOs’ registration. And regulatory or law enforcement action [9] could follow. Those negative consequences ultimately flow on to the beneficiaries of the NPOs work.

So what should the sector and the government do to protect NPOs from being exploited to fund terrorism?

Fortunately, the government is heading in the right direction. The ACNC, which co-authored the risk assessment with AUSTRAC, is doing good work in overseeing [10] and providing outreach [11] and education [12] to the sector. The ACNC’s work includes [10] internal forensic accounting capacity, and it works closely with the Australian Taxation Office, the Australian Federal Police and AUSTRAC.

This cooperation and information-sharing will be further enhanced thanks to a bill before parliament [13] to make the ACNC a ‘designated agency’ under the Anti-Money Laundering and Counter-Terrorism Financing Act. NPOs are not directly covered under the act, and AUSTRAC’s visibility of NPO financial activity is limited to where they interact with the regulated banking and financial services sector—for example, when making bank deposits or international funds transfers. As a designated agency, the ACNC will have direct access to AUSTRAC information, enabling it to better detect and act against terrorism financing and other crimes.

The terrorism financing risk profile of individual NPOs differs depending on their activities. For example, those working in countries with a significant terrorist problem are at greater risk. The risk assessment identified Australia’s higher-risk terrorism financing NPO subset, which will allow for better targeted monitoring, outreach and education.

NPOs also need to take steps to protect themselves. Worryingly, the risk assessment made clear that many NPOs don’t understand the terrorism financing risk they face. So they should seek to better understand those risks, leveraging the ACNC’s support. They should ensure that effective due diligence is undertaken on employees, volunteers, contractors, partners and beneficiaries. And they should maintain strong internal controls, recordkeeping, and training and monitoring of staff. This may be challenging for smaller NPOs with limited finances and corporate governance expertise. However, the failure to implement appropriate controls that enables terrorism financing can be immensely damaging to NPOs and their beneficiaries.

Charities and NPOs undertake vital work. It’s important for them, the sector and their beneficiaries that they’re not undermined by terrorist groups and their financiers.



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URL to article: https://www.aspistrategist.org.au/charities-and-terror-financing-we-need-to-remain-vigilant/

URLs in this post:

[1] recently released: http://www.austrac.gov.au/australias-npo-sector-risk-assessment

[2] regional terrorism financing risk assessment: http://www.austrac.gov.au/sites/default/files/regional-risk-assessment-SMALL_0.pdf

[3] such as al-Qaeda: https://govinfo.library.unt.edu/911/staff_statements/911_TerrFin_Monograph.pdf

[4] allegedly diverting funds to Hamas: https://www.theguardian.com/global-development/2016/aug/05/australia-suspends-world-visions-palestine-aid-after-allegations-funds-were-diverted

[5] identified: https://probonoaustralia.com.au/news/2016/01/australian-charity-donations-supporting-terrorism-indonesia/

[6] Members of an Australian charity are under investigation: http://www.abc.net.au/news/2015-07-03/australian-charity-investigated-for-alleged-is-links/6591174

[7] suspended funding: http://www.abc.net.au/news/2016-08-05/world-vision-boss-gaza-accused-by-israel-diverting-money-hamas/7692594

[8] risk-averse banks seeking to de-risk: https://www.theguardian.com/money/2017/may/08/banks-charity-accounts-shut-without-notice-money-laundering

[9] law enforcement action: http://www.nytimes.com/2008/11/25/us/25charity.html

[10] overseeing: http://www.huffingtonpost.com.au/susan-pascoe/are-australian-charities-at-risk_a_21462478/

[11] outreach: https://probonoaustralia.com.au/news/2016/11/acnc-assess-risk-terrorism-financing-nfps/

[12] education: http://www.acnc.gov.au/ACNC/Manage/Protect/ProtectingTF/ACNC/Edu/ProtectTF.aspx

[13] bill before parliament: http://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r5767_ems_40bd06e8-a029-4e5b-aecd-2d940a1c52ea/upload_pdf/606093.pdf;fileType=application%2Fpdf

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