SPACES FOR CHANGE participated in the Experts Hub on anti-money laundering (AML) and countering financing of terrorism (CFT) held on January 21 -26, 2018 at the Hague, Netherlands. International Center for Non-profit Law (ICNL), European Center for Non-profit Law (ECNL) and Human Security Collective (HSC) co-organized the Experts’ Hub which brought together representatives of non-profit organizations (NPOs), advocates and independent experts from 16 countries working to combat restrictions on civic freedoms arising from the Financial Action Task Force (FATF) Recommendations, counter-terrorism and anti-money laundering rules.
On first day, participants learned about AML/CFT rules and FATF Standards, and their impact at the various country levels. Bespoke presentations and selected case studies shed further light on the key features of risk assessments and how they affect the NPO sector. Group exercises and interactive discussions made clear how countries identify, assess, and understand their money laundering and terrorist financing risks using the risk-based approach (RBA). The RBA refers to the entire gamut of processes that countries take to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified. In conducting the ML/TF risk assessments, countries are often guided by the World Bank-developed advisory package which consists of an assessment tool and a systematic and organized process, with the broad participation of public and private sector stakeholders, including NPOs.
On the meeting’s second day, discussions shifted to the theory and practice of mutual evaluations (MEs). Specifically examined was FATF’s evaluation methodology from 2014. This methodology includes an effectiveness component which reviews implementation of standards beyond mere laws and regulation. It also focuses on the impact of existing AML/CFT measures within the countries subject to evaluation. Evaluations are usually conducted by the FATF, FATF-Style Regional Bodies (FSRBs) and other assessment entities such as the World Bank and the International Monetary Fund (WB, IMF).
A determination must be made regarding the extent the country being evaluated has implemented a targeted approach, conducted outreach, and exercised oversight in dealing with NPOs that are at risk from the threat of terrorist abuse. FATF’s Recommendation 8 (R8) provides some guidance here. R8 requires countries to review the adequacy of laws and regulations that relate to non-profit organisations which the country has identified as being vulnerable to terrorist financing abuse. Countries are to apply focused and proportionate measures, in line with the RBA to such non-profit organisations to protect them from terrorist financing abuse. In doing this, countries need not disrupt legitimate NPO activities. 2016 revision of R8 calls on governments to respect fundamental rights and humanitarian law, and to avoid overregulation of the NPOs.
Selected case studies highlighted the differentials in country approaches to risk assessment and the implications for NPOs. Belgium authorities, for instance, engaged with key NPO sector actors on developing potential additional regulation to fulfil R8 requirements. In Hungary, the wordings of the mutual evaluation report (MER) were used to justify adopting restrictive legislation that targets all NGOs despite the report’s directives on the country to undertake a review of the NPO sector and conduct targeted outreach. After the evaluation, the country could be placed in either a regular or an enhanced follow-up procedure depending on its overall rating and compliance with FATF standards. Along this line, presentations elucidated on the measures taken by governments to help them comply with the recommendations of the Financial Action Task Force: specifically, FATF recommendation 8.
All MEs are preceded by a risk assessment. As required by R8, the assessment of NPO vulnerability to AML/CFT risks could either be undertaken as a standalone process or may be integrated into the overall national risk assessment process. If no outreach to the non-profit sector was conducted, and if there was no discussion about terrorism financing and risks within the NPO sector, it is difficult for the country to score well on R8. So, this presents an opportunity for NPOs to engage the process. However, a common trend observed across jurisdictions is that non-profit advocates are usually unaware of FATF regulations and therefore, do not understand how international financial regulations are contributing to the shrinking spaces for civil society/NPO operations. More tellingly, only very few organizations can engage in national risk assessments or work towards confronting the restrictions that often result from these assessments. In response to this trend, participants from the African region proposed to set up a regional hub on AML/CFT that will comprise experts on AML/CFT who can either use their collective energies to bridge capacity gaps among/within NGOs and CSOs, or fashion out a loose arrangement that allow us shift location as the need arises to help solve specific legal and non-legal problems in the region.
On third day of the program, advocates developed regional and national strategies for engaging both the risk assessment and MEs. Taking part in personalized exercises and group discussions helped to deepen understanding of how AML/CFT regulation impact NPO work on the ground, especially the perceptions of threats, risks and vulnerabilities of TF, ML and corruption awareness of any crimes or incidents; and awareness of government response, including laws, regulations, strategies and outreach. To take good work to scale, participants developed both national-focused and organization-specific strategy for country engagement on AML/CFT issues. The country action plans flagged specific problems peculiar to the country in focus and then mapped the activities and available resources for solving them. Going forward, experts are not only better equipped to take the advocacy forward in their respective countries and regions, but will now strive to ensure a proper application of the revised R8 and consistency in both risk assessments and mutual evaluations across the globe.