Column written by WPP Staff
Over the summer, crucial decisions were taken related to shrinking space for civil society. Many may have never heard of the Financial Action Task Force (FATF), yet its decisions affect all of us. This column will explore the recent changes made to the FATF’s Recommendation 8, which concerns the regulation of civil society in an effort to counter terrorism financing. It will look at the improvements made, and the road still ahead.
The Financial Action Task Force (FATF) is arguably one of the most influential institutions in existence, yet it’s inner workings are unknown to much of the public. Established in 1989 by the G7, the FATF’s mandate was to tackle money laundering through the international banking system. After the September 11 attacks, the FATF’s mandate grew to create a global framework for the detection, prevention and suppression of the financing of terrorism and acts of terror. To date, the recommendations drafted by the FATF have become the international standard for combatting terrorist financing and money laundering. Over 190 countries have endorsed this standard.
The FATF stimulates countries to comply with its recommendations through its rating system. Not meeting the standards can have negative consequences for a country’s economy, influencing its financial standing, foreign investments, etc. As such, many countries have translated the standard into national laws, rules and regulations. Countries’ compliance with the recommendations is regularly evaluated, and a ‘deficient’ rating can have negative consequences on their financial standing.
In the 2001 FATF Special Recommendations report, Recommendation 8 (R8) is entirely devoted to the NPO sector’s supposed vulnerability to being misused for terrorist financing. This was further elaborated on in its 2014 typologies report Risk of Terrorist Abuse in the Non-Profit Organizations. According to the FATF’s R8 at the time “[NPOs] possess characteristics that make them particularly attractive to terrorists or vulnerable to misuse for terrorist financing”.
Civil society strongly disputed these assertions, citing a lack of convincing evidence to back up these claims, and warning that this recommendation would and has worked to stifle civil society’s activism and on-the-ground interventions focusing on providing humanitarian aid, building peace and defending human rights.
Labeling the entire NGO sector as at-risk for terrorist financing not only led to added bureaucratic pressures (taking time, energy and resources away from NGOs much needed work), it directly put the work of some NGOs in harms way. For example, in March of this year, a Thomson Reuters investigation revealed that 21 international and local NGOs (including a consortium of 90 Syrian NGOs) reported that counterterrorism finance policies were forcing aid agencies in Syria to avoid communities controlled by extremist groups, making it even more difficult to deliver life-saving supplies, leaving locals at the mercy of the warring factions for vital help.[1]
Research on the topic - including from institutions such as the US Treasury, European Commission, the World Bank, and even FATF’s own mutual evaluations - has demonstrated that NGOs actually pose little to no risk for terrorist financing. [2] Nonetheless, in practice, the measures advocated by the FATF’s R8 have impacted the operating space for civil society worldwide[3]. In practice, it has led to increased financial surveillance and profiling, increasingly complicated financial processes, and sometimes even loss of financial access.
For example, countries seeking to restrain the – often critical - work of civil society organizations have regularly done so under the guise of combatting terrorist financing and complying with the recommendations of the FATF. Many countries have seen a rise in restrictive NGO policies and legislation leading up to or right after an FATF evaluation. Although countries have often denied that it is the FATF standard that forces them to design and enact laws and regulations that go against civil liberties and civil society freedoms, mounting evidence has shown that upcoming FATF evaluations have a preemptive effect on civil society space. This is a direct result of governments’ desire to show the FATF that they are capable to prevent terrorist financing abuse through their NGO sector. In addition, some countries have passed more restrictive NGO laws after an FATF evaluation - as if the evaluation was needed to legitimize the drafting of such laws.[4]
In 2014, United Nations Special Rapporteur on the Rights to Freedom of Peaceful Assembly and of Association Maina Kiai expressed concern that Recommendation 8 and FATF’s assertion of NPO vulnerability posed ‘a serious, disproportionate and unfair threat to those who have no connection with terrorism, including civil society organizations’[5].
In the years after the implementation of the Recommendation 8, civil society organizations used their influence both individually and collectively to raise awareness about its impact and to advocate for change. In order to advocate for changes in the FATF’s recommendations affecting civil society, the Global NPO Coalition on FATF[6] was created in 2013. Over 200 non-profit organizations (NPOs) worldwide have endorsed the work of the Coalition. With the advent of increased research on the effects of R8 and through the establishment of regular engagements between the FATF Secretariat and NPOs, the FATF agreed to set into motion a process to review and update R8, based on civil society input.
In June 2016, the new R8 was presented. Changes included the removal of the characterization of non-profits as “particularly vulnerable” to terrorist abuse from R8, and various changes to the Interpretative Note, which accompanies this Recommendation. Recommendation 8 now states that:
“Countries should review the adequacy of laws and regulations that relate to non-profit organizations which the country has identified as being vulnerable to terrorist financing abuse. Countries should apply focused and proportionate measures, in line with the risk-based approach, to such non-profit organizations to protect them from terrorist financing abuse […]”
The new Interpretative Note states that “given the diversity within individual national sectors, the differing degrees to which parts of each sector may be vulnerable to terrorist financing abuse, the need to ensure that legitimate charitable activity continues to flourish, and the limited resources and authorities available to combat terrorist financing in each country”. It also emphasizes the importance of “flexibility in developing a national response to terrorist financing abuse of NPOs.”
The removal of the designation of NPOs as being ‘particularly vulnerable’ to terrorist financing, and the inclusion of civil society voices in the FATF process is no doubt a very important step in the right direction. That designation resulted in over-restrictive recommendations, and national legislation and practices being enacted to curb the important work of civil society worldwide. This step is a testament to the advocacy work and dedication of civil society, which stood together to demand change on behalf of civilians around the world.
Although there have been significant improvements to the R8, there are still some worrying components that deserve a closer look. The new R8 moved from a blanked categorization of all NPOs as vulnerable to terrorist abuse, to the vague categorization of at-risk NPOs being vulnerable. However, the guidance of FATF on how to determine which NPO is at risk for terrorism financing, leaves this categorization to the discretion of the countries. Countries are not required to provide an explanation in writing on how “at risk” is defined. The FATF evaluations will look into the way the government conducted a national risk assessment and will determine whether outreach to all relevant sectors, which includes NPOs, has taken place in relation to the outcome of the risk assessment.
Certain quality and consistency checks are thus in place in the evaluation methodology of the FATF but at the same time it can be argued that the indistinctness of “NPOs at risk” could further open the door to the targeting of NPOs that the government deems “undesirable” because of their critical stance towards government policies, legitimizing their categorization of which civil society sector is dangerous or “at-risk” and which isn’t.
Also, it remains to been seen to what extent the change in R8 will impact the banking sector, which has become increasingly risk averse in response to counter terrorism regulation over the past years. For example, in several countries in the West, banks have denied financial services to Islamic NGOs, by denying transfers and sometimes even closing their accounts, mostly without any warrant or proof of wrongdoing[7]. Smaller, activist groups, including women’s rights groups, increasingly encounter challenges in terms of financial access, which greatly impacts their work on the ground[8].
In addition, countries with draconian NGO laws could still argue that their laws comply with this new designation, as it is up to them to determine who is at risk and what “appropriate measures” are required to deal with that risk. Again, due to the vagueness of the term, “appropriate measures” can mean whatever a country deems necessary.
Civil society has made great strides in engaging with the FATF, and ensuring that civil society’s voice is heard, which has paid off as the recent changes to R8 demonstrate. However, in practice, direct engagement with the FATF is often only possible for larger, often northern-based NGO’s, which have the resources to attend consultation meetings. Necessary steps have to be taken to ensure that groups from the South, as well as representatives of activists groups and marginalized communities can also engage in direct conversation. These groups often face very specific challenges with regards to the effects of the FATF’s Recommendation 8, with devastating impact on their important work on the ground. Although the FATF website and platform provide an outreach and communication tool to engage on R8 and FATF, opportunities for direct engagement are important in order to engage in mutual, continuous learning on this complex topic.
Although the new R8 is a welcome and much-needed improvement of the first version, there is still a lot of work to be done. This includes raising awareness amongst a larger and diverse pool of civil society representatives, which are currently still unaware that R8 plays a role in the shrinking of their civil society space, and which will need to find ways to engage. It requires civil society to continue engaging in ongoing monitoring, to track whether the revision of R8 results in actual changes on the ground, and reopens spaces where these have been closing down.
More importantly, however, civil society needs to continue to be the voice that urges all to go beyond the specificities of policy language and concentrate on the bigger picture. As a society in general, in our response to the challenges and threats we face, we are becoming increasingly risk averse.
Yet, engaging in effective human rights and peace activism, movement building and mutual solidarity has always involved a great deal of risk. Trying to avoid all risk within the civil society sector will inevitably stifle progressive movements and activism, the “forces from within” that contribute to lasting social change and the wellbeing of all. These agents of change thrive on flexibility, taking risks, and freedom of association and assembly. As such, current risk avoidance practices contribute to a stifled progressive civil society sector, which in turn fosters a climate that is actually conducive to those with bad intentions. It is this kind of risk-taking that requires more of our focus and discussion.
[1] Reuters. 2016. Syrians suffer as anti-terror laws squeeze charities - survey - http://uk.reuters.com/article/mideast-crisis-syria-banking-idUKL8N15M0GV
[2] Transnational Institute / Statewatch. Ben Hayes. 2012. Counter-terrorism, ‘policy laundering’ and the FATF: legalising surveillance, regulating civil society - http://www.statewatch.org/analyses/no-171-fafp-report.pdf p.27
[3] Transnational Institute / Statewatch. Ben Hayes. 2012. Counter-terrorism, ‘policy laundering’ and the FATF: legalising surveillance, regulating civil society - http://www.statewatch.org/analyses/no-171-fafp-report.pdf p.27
[4] See also papers submitted to the conference on “Regulation or Repression: Government Policing of Cross-border Charity”, at the National Center on Philanthropy and the Law of the NYU, in 2014 (in press).
[5] UN General Assembly. 2014. Report of the Special Rapporteur on the rights to freedom of peaceful assembly and of association - http://freeassembly.net/wp-content/uploads/2014/10/Multilaterals-report-ENG.pdf
[6] FATF Platform Website - http://fatfplatform.org/about/
[7] BBC News. 2015. Why did HSBC shut down bank accounts? - http://www.bbc.com/news/magazine-33677946
[8] “Counterterrorism Measures and their Effects on the Implementation of the Women, Peace and Security Agenda” – Women Peacemakers Program – see also https://www.womenpeacemakersprogram.org/assets/CMS/Resources/Reports/Policy-brief-CTM.pdf
In March 2017, the Women Peacemakers Program (WPP), together with International Human Rights Clinic, Duke University School of Law, will launch a research on the effects of financial counterterrorism measures on women’s organizing, rights and gender equality worldwide. We are excited to share our findings with you, and will announce more information soon.
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