AML CFT STANDARDS. In theory and practice. Combatting Restrictions On Civic Freedoms Arising From Counter -terrorism & Anti-money Laundering Rules

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1 Combatting Restrictions On Civic Freedoms Arising From Counter-terrorism & Anti-money Laundering Rules AML CFT STANDARDS In theory and practice

2 The global standard setter for anti money laundering and countering financing of terrorism FATF assumes that if countries effectively implement their standards, financial systems and the broader economy are protected from threats of money laundering and financing of terrorism Over 190 countries have committed to implementing the standards

3 FATF DEFINITION OF NPO The term non-profit organisation (NPO) refers to: - a legal entity or organisation - that primarily engages in raising or disbursing funds - for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of good works. Premise of FATF - nonprofits need to be protected by laws and regulations

4 Recommendation 1: the foundation of the FATF standards FATF REC. 1 Countries should identify, assess, and understand the money laundering and terrorist financing risks for the country, and should take action, including designating an authority or mechanism to coordinate actions to assess risks, and apply resources, aimed at ensuring the risks are mitigated effectively. Based on that assessment, countries should apply a risk-based approach (RBA) to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified.

5 RBA - what does it generally mean? FATF REC. 1 Where countries identify higher risks, they should ensure that their AML/CFT regime adequately addresses such risks Where countries identify lower risks, they may decide to allow simplified measures for some of the FATF Recommendations

6 Immediate Outcome 10: Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the NPO sector. RISK & EFFECTIVNE SS To what extent, without disrupting legitimate NPO activities, has the country implemented a targeted approach, conducted outreach, and exercised oversight in dealing with NPOs that are at risk from the threat of terrorist abuse?

7 STEPS REQUIRED Outreach NPOs that are at risk - Risk assessment Targeted approach Without disrupting legitimate NPO activities

8 High The Immediate Outcome is achieved to a very large extent. EFFECTIVENESS RATINGS Substantial Moderate Low The Immediate Outcome is achieved. to a large extent. The Immediate Outcome is achieved to some extent. The Immediate Outcome is not achieved or achieved to a negligible extent.

9 FATF REC. 8 Recommendation 8: Non-profit organisations Countries should 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 should apply focused and proportionate measures, in line with the risk-based approach, to such non-profit organisations to protect them from terrorist financing abuse, including: (a) by terrorist organisations posing as legitimate entities; (b) by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and (c) by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.

10 STEPS REQUIRED Country has identified some NPOs as being vulnerable to terrorist financing abuse Review the adequacy of laws and regulations that relate to NPOs Apply focused and proportionate measures, in line with the risk-based approach

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12 INTERPRETATIVE NOTE TO R8 Part of the FATF standard, along with R revision calls on governments to respect fundamental rights and humanitarian law, and to avoid overregulation of the NPOs IN also re-emphasizes the need for proportionate measures No using the one-size-fits-all approach which may restricted civic space and fundamental freedoms

13 A: INTRODUCTION RBA IN INTERPRETATIVE NOTE TO R8 1. Given the variety of legal forms that non-profit organisations (NPOs) can have, depending on the country, the FATF has adopted a functional definition of NPOs. This definition is based on those activities and characteristics of an organisation which put it at risk of terrorist financing abuse, rather than on the simple fact that it is operating on a non-profit basis... Without prejudice to Recommendation 1, this Recommendation only applies to those NPOs which fall within the FATF definition of an NPO. It does not apply to the entire universe of NPOs.

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15 R8/IN ASSESSMENT - CRITERIA Numbe r 8.1.a 8.1.b 8.1.c Criteria Review adequacy of laws, regulations Review the sector, or be able to get the information Review new information on the sector s vulnerabilities 8.2 Outreach to the NPO sector concerning TF issues. 8.3 Promote transparency, integrity, and public confidence in the administration and management of all NPOs.

16 Numbe r Criteria 8.4 Require large, international NPOs to R8/IN ASSESSMENT - CRITERIA 8.4.a.i 8.4.a.ii 8.4.b 8.4.c maintain information on purpose and objectives maintain information on senior staff and trustees issue annual financial statements; account for all funds 8.4.d 8.4.e 8.4.f license or register; follow a know your beneficiaries and associated NPOs rule maintain and make available records of the above

17 Number Criteria 8.5 Monitor large, international NPOs, and apply proportionate, dissuasive sanctions. R8/IN ASSESSMENT - CRITERIA 8.6.a 8.6.b 8.6.c Investigate and gather information on NPOs, including through: (a) domestic co-operation Investigate and gather information on NPOs, including through: (b) access to information on the NPO Investigate and gather information on NPOs, including through (c) sharing information where there is evidence or suspicions of TF 8.7 Share information internationally

18 Compliant (C) No shortcomings RATING SYSTEM Largely compliant (LC) Minor shortcomings Partially compliant (PC) Moderate shortcomings Non-compliant (NC) Major shortcomings

19 FATF: NGOs should be treated in the same way as other entities (not singled out) AML STANDARDS Not a standard to set up special AML requirements for NPOs But some countries impose specific requirements for NGOs

20 WHERE DO WE SEE RESTRICTIONS Framework Laws on NGOs / PBOs / Foundations Law on Assembly (preventing assembly in the name of national security or CT, sanctions for concealing face during assembly, sanctions for video-taping the police... ) Law on Cyber Security/Cyber Crime (affecting Freedom of Expression in the name of national security or CT) AML Law (any specific obligations for non profits) CT/CFT Law (definition and scope of terrorism act, specific obligations for non profits) Penal code (definition of terrorism act, sanctions, definition of money laundering, sanctions...)

21 THANK YOU European Center for Not-for-Profit This presentation is produced under the project Combatting Restrictions on Civic Freedoms arising from counter-terrorism & anti-money laundering rules managed by the European Center for Not-for-Profit Law (ECNL) and implemented in partnership with the Human Security Collective (HSC) and the International Center for Not-for-Profit Law (ICNL). The project is possible thanks to the Combatting support Restrictions of Oak Foundation. On Civic The Freedoms views expressed Arising herein From are the Counter sole responsibility -terrorism of the & Anti-money author and do Laundering not necessarily Rules represent the views of Oak Foundation and the project partners.