Report: The Impact of FATF Recommendation 8 on Civil Society in Europe and Asia

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August 20, 2015

Foreign policy concerns regarding an “enabling environment” for civil society organizations (CSOs) are “frequently contradicted by the actions that states demand in the name of ‘counter-terrorism’,” according to an August 2015 report by Statewatch and the Human Security Collective, Countering terrorism or constraining civil society? The impact of Financial Action Task Force recommendations on non-profit organisations in Central and Eastern Europe and Central Asia.

The new report is published as a follow-up to Statewatch's 2012 study, Legalising Surveillance, Regulating Civil Society. The new report looks at implementation of Financial Action Task Force (FATF) Recommendation 8 on combating the potential abuse of non-profit organizations (NPOs) for the purpose of terrorist financing, specifically in Central and Eastern Europe (CCEE) and Central Asia. It is intended to determine the impact of Recommendation 8 on the regulatory framework for NPOs in the studied countries, and how this in turn affects the freedom of association and expression of NPOs.

Pro-democracy movements, the EU endowment for Democracy, the U.S.’s Stand with Civil Society initiative and the UN’s Millennium Development Goals initiatives have galvanized support for civil society organizations (CSOs). At the same time, these groups are seeing a rise in restrictive laws, which can prohibit or impede the formation of CSOs, restrict their access to domestic and international funding and hinder their day-to-day operations.

The International Center for Not-For-Profit Law (ICNL) and other groups have documented the introduction of repressive laws in more than 50 countries. Many of these new laws are enacted as counterterrorism measures, which “provide a justification for less democratic and repressive governments to introduce restrictive laws and regulatory environments for CSOs,” the report states. These laws “advance the hypothesis that non-profit organisations are particularly vulnerable to abuse or exploitation by terrorist groups,” which leads states to enact strict laws to combat this “threat.”

“The obvious danger in encouraging less democratic and repressive states to adopt new civil society laws and non-profit regulations in the name of counter-terrorism is that it encourages such regimes to adopt wide-ranging laws that restrict the legitimate activities or ‘political space’ of CSOs when transposing the requirements,” the report notes.

The report found that the mutual evaluations of R8 in the countries studied have had a significant impact. Fifteen of the 17 countries examined for the report adopted legislative amendments to their NPO regulatory frameworks, or proposed new legislation, following or in anticipation of their evaluations. The report concluded, among other things, that: Recommendation 8 is a vehicle for NPO regulation; evaluators are influence by lack of regulation rather than risk assessment; and there is a restrictive impact on the political space of NPOs.

Of particular concern is the finding that where states did undertake a risk assessment and concluded that their NPO sectors face a minimal risk, “the evaluators still called upon those countries to introduce new NPO regulations.” In addition, while R8 is supposed to be limited to a small subset of a country’s nonprofit sector (i.e., excluding small and informal organizations, advocacy groups and many others), in practice these states did not their regulation or supervision to this subset. This overbroad regulatory approach “has been of only minimal concern to the evaluators,” the report states.

The report recommends that FATF develop detailed guidance on how to safeguard civil society space and avoid unnecessary restrictions when enacting counterterrorism measures. This guidance should “clearly explain how states can limit the impact of CFT measures to only those NPOs that represent a ‘significant portion of the financial resources and a substantial share of the sector’s international activities’ in accordance with the requirements of R8,” the report notes. It also recommends that the current round of mutual evaluations ensure that the risk-based approach is properly applied and that states that identify no tangible risk of terrorist financing in their non-profit sectors, or deem their existing laws to be adequate in terms of addressing any such risks, are not subject to new legislative requirements.

Finally, under its new “effectiveness-led” assessment methodology, the report recommends that all evaluators be trained on the importance of developing and maintaining an enabling environment for civil society and” given guidance on how to assess the negative impacts of NPO regulatory frameworks,” adding that NPOs and CSOs should be allowed to “engage constructively in R8 evaluation processes.”

Read the full report here. More information on FATF and Recommendation 8 can be found here.