Recommendation 8 sets out a broad framework for regulation of the non-profit sector to prevent abuse by terrorists. The premise is that NPOs are seen as being particularly vulnerable to abuse for the financing of terrorism in a number of ways that FATF Recommendation 8 sets out: e.g., by being a conduit for funds, by obscuring diversion of funds and by being a front for terrorist organisations.

Following the June FATF Plenary in Australia, the NPO sector can now expect a revision of Recommendation 8 Interpretative Note, and potentially Recommendation 8 itself. This became clear at last week’s meetings between non-profit organisations (including European Center for Not-for-Profit Law (ECNL), European Foundation Centre (EFC), Human Security Collective (HSC) and US Charity Security Network (CSN)) and the FATF secretariat as well as additional discussions between non-profit organisations and FATF members over the past weeks.

Following the June revision of the Recommendation 8 (R8) related Best Practice Paper (BPP), which took NPO concerns/comments into account, the real binding FATF document is now up for renewal. The main aim is to make it consistent with the revised BPP and to ensure the focus on the risk based approach. This is great news for our sector and it is important for NPOs to join this process as we are now getting to the heart of things, namely a revision of the actual binding FATF standard (the BPP is guidance only).
Given the June Plenary FATF commitment to engage in a more formal dialogue with the NPO sector, it will be very important to get involved in the consultation process on the envisaged revision of Recommendation 8 Interpretative Note and to get it right. According to the official FATF announcement:

“FATF is committed to continuing a constructive engagement with NPOs on these important issues, and will continue doing so on an ad hoc basis, as needed, to facilitate its technical work. The FATF also agreed to enhance its engagement by holding an annual discussion with NPOs on specific issues of common interest.”

The NPO sector and the FATF secretariat will now need to review how this announcement of a constructive engagement with the NPO sector can translate into practice. This will not be an easy task given the size and diversity of the NPO sector which has no formal structure to represent the millions of NPOs that exist worldwide. However it is crucial for FATF and the NPO sector to demonstrate that constructive consultation can work. In addition to annual consultation meetings, electronic/online consultations with the wider NPO sector with realistic deadlines for responding could be an option to ensure widespread NPO input.
In terms of timeline, we understand that some FATF members want to move fast. However if a consultation with the NPO sector is to happen (and we really do need to make this happen), an approval before June 2016 seams unrealistic. Discussions are in any case starting now. Already at the October 2015 FATF plenary initial conversations will begin and NPOs should submit initial suggestions on what needs to be changed in IN/R8. NPOs should now make the case for a revision of Recommendation 8 itself, which singles out the NPO sector as being “particularly” vulnerable to abuse for the financing of terrorism. This broad brush tarring of the entire sector is contrary to both the evidence and adopting a risk based approach and has already been criticised by the NPO sector and we need to take action to get this be changed.

The global NPO coalition spearheaded by several NPOs[1] seeks to ensure that FATF’s countering the financing of terrorism measures do not disrupt legitimate NPO activities and that there is sustained dialogue between FATF and the NPO sector. It will now also make proposals on how Recommendation 8 and its Interpretative Note should be changed. If you want to become involved, please contact: hsurmatz@efc.be

For more information on FATF, please see the coalition website on FATF/NPO matters: http://fatfplatform.org

 

[1]The activities are led by Charity & Security Network (CSN) in the US and, in Europe, the European Center for Not-for- Profit Law (ECNL), the European Foundation Centre (EFC), the Human Security Collective (HSC), the International Center for Not for Profit Law (ICNL).