Recommendation #8 - its impact on Civil Society Organizations (CSO)
CSOs have also been directly affected by the imposition of extensive CFT requirements on banks and other financial service providers. National and international terrorist blacklists, and other sanctions lists, criminalise the provision of any financial support, including financial services to those listed. Such measures result in huge problems with due process. Because states can and do hold financial institutions and their employees liable for failure to conduct proper due diligence checks on their customers or disclose suspicions about terrorist financing, the financial sector fears litigation and has become extremely risk averse.
This situation compromises the ability of international funders and local charities to fulfil their obligations to their donors and partners. FATF Recommendations set out extensive due diligence requirements, including specific procedures for “politically exposed persons,” wire transfers, “higher-risk countries” and the reporting of “suspicious transactions.” These obligations have become so onerous that the FATF rules permit financial institutions to rely on third parties. In turn the entire process of vetting users of financial services has been outsourced to the private sector, creating a global industry already worth hundreds of millions of US dollars a year.
KeenTO brings together researchers and experts in Anti-Money Laundering (AML) solutions and consulting services.
Research and Data
Recommendation #8 from the Financial Action Task Force has changed the way Civil Society Organizations operate. Several factors that include international financing of NGOs in developing countries, country ownership, de-risking, and other factors have forced Civil Society Organizations, NGOs, and Foundations to implement processes for increase transparency.
This section provides up-to-date key research and links to knowledge on this important topic.
Accountability & Transparency
At the time of our on-site mission in Latin America, KeenTO reports that authorities have conducted little outreach or awareness- raising to protect the sector from ML and TF abuses. Limited work has been done to promote transparency, accountability, integrity, and public confidence in the administration and management of all NGOs. There are no clear mechanism in place for all authorities to share information promptly in order to take preventive or investigative action when there is suspicion of or reasonable grounds to suspect that a NGO is being exploited for terrorist financing purposes or is a front organization for terrorist fundraising.
Whats is the sector doing?
Over the past five years, KeenTO’s team and associates have explored the world of Anti Money Laundering (AML), Know Your Customer (KYC), and Terrorism Financing. The Civil Society movement has invested most of their efforts in fighting Recommendation #8 instead of also investing resources in finding key solutions that would increase transparency in the sector.
KeenTO works with the civil society movement, the banking sector, legislators, and funders to implement sustainable solutions.
This section offers concrete solutions for the sector to own the process.
Launched in late 2008, the Charity & Security Network is made up of a broad cross-section of nonprofits, including charities working on humanitarian aid, development, peacebuilding, human rights and civil liberties, along with grantmakers, donors and faith-based groups. They work to increase the operational space for nonprofit programs that address the root causes of poverty and conflict.