Non-profit organizations (NPOs) most at risk of abuse by terrorists appear to be those engaged in service activities and those that operate in close proximity to an active terrorist threat, according the Financial Action Task Force’s (FATF) 2014 report, Risk of Terrorist Abuse in Non-Profit Organisations. The goal of the typologies report, as it has come to be known, was to better understand the terrorist threat to the NPO sector as it relates to FATF Recommendation 8 (R8), which directs countries to ensure their laws are adequate to prevent abuse of NPOs by terrorists. NPOs provided extensive input for the report and much of it was incorporated. However, in a letterresponding to the report the NPOs also cautioned against extrapolating the case studies to the nonprofit sector globally. Overall, the evidence shows that the incidence of terrorist abuse of NPOs is low.
Proximity to an active terrorist threat can mean being present in a conflict area, or can refer to an NPO that operates domestically, but within a population that is actively targeted by a terrorist movement for support and cover, the report explains. The “key variable of risk is not geographic, but the proximity to an active threat…Ultimately, the principal considerations for determining which NPOs are at a higher risk of abuse are the value of their resources or activities to terrorist entities, and the proximity to an active terrorist threat that has the capability and intent to abuse NPOs.”
This misuse can manifest as terrorist organizations posing as legitimate entities; exploiting legitimate entities to funnel money and escape asset-freezing measures; or concealing the clandestine diversion of funds.
The typologies report was intended to be analytic and did not set out to evaluate current policy or address complex strategic issues such as the tension between humanitarian assistance and counterterrorism measures. Rather than recommend policy action, it examines and explains the threat to the NPO sector from terrorist groups, the drivers of this threat, the sector’s vulnerabilities, and complexities facing responses. The abuse of this sector raises some complex strategy issues, including the tension between humanitarian assistance and counterterrorism measures, the report states. By identifying these issues, FATF hope that the report will provide an analytic foundation for additional work in this area.
The typologies report emphasized that while abuse of NPOs is not widespread, it is nonetheless significant. “While the vast majority of NPOs work tirelessly to better the lives of people around the world, a small number of organisations and individuals have taken advantage of the NPO sector for the most contrary of reasons: to support those who engage in terrorism or support to terrorist organisations,” the report states.
The report conclusion that service NPOs (those providing housing, social services, education and health care) were most vulnerable to terrorist abuse was based the fact that it found no instances of abuse of expressive NPOs (those that engage in sports and recreation, arts and culture, interest representation and advocacy) in the case studies it examined. In addition to identifying vulnerable organization types, the report also identified several categories of abuse or risk: diversion of funds, affiliation with a terrorist entity (knowingly or unknowingly), support to recruitment efforts, abuse of programming and false representation.
In examining approximately 100 case studies, FATF found that these categories were not mutually exclusive—terrorist entities may exploit the NPO sector’s interconnected vulnerabilities in more than one way. The diversion of NPO funds is a common method, while several types of non-financial abuse, such as using programs or support for recruitment, also appeared. The report distinguishes between risk and vulnerability, recognizing that a vulnerability only becomes a risk when there is both intent and capacity to commit or support a terrorist act.
Indicators are used extensively in other sectors to prevent and mitigate risks, as well as to detect abuse. A decade after the abuse of NPOs by terrorist entities was formally recognized as a problem by FATF, the NPO sector has developed an array of standards and initiatives to help organizations tackle this problem. However, detecting abuse or significant risk can be difficult, according to FATF, and requires collating many types of information from varied sources. Terrorists often mask their activities, especially outside conflict areas, the report notes. Because the resources available to non-governmental actors are often limited, NPOs are usually unable to penetrate well-planned deceptions. Therefore, state-based oversight is necessary for detecting the most sophisticated threats, the report asserts.
In analyzing the case studies, the typology report’s authors identified elements that indicated existing abuse of an NPO, or substantial risk of abuse. Of these various elements, the study cites two types of indicators for identifying and determining the nature of NPO abuse. Risk indicators suggest compliance problems that may or may not be terrorism-related and could be explained by other forms of abuse. Terrorist abuse indicators show a much stronger correlation with terrorism and can serve as a warning to government officials or NPOs. The study notes that indicators are leads for further analysis and must be used in the context of each case.
Once a risk is identified, many tools can be employed in mitigating it or disrupting abuse, including criminal prosecution, administrative enforcement, financial penalties, and targeted financial sanctions. Throughout the report, FATF stresses the need for preventive action, and notes that certain measures can be employed even before a case warrants criminal prosecution. These include preventive education, NPO self-regulation, designation of individuals or groups that support terrorist entities, or law enforcement action.
The importance of the NPO sector to the global community “cannot be overstated,” the report notes, and the Interpretive Note (IN) to R8 states that measures taken to protect the NPO sector “should not disrupt or discourage legitimate charitable activities.” While it is difficult to quantify the disruptions caused by mitigation and regulatory measures, targeted intervention based on nuanced analysis lessens the overall impact on legitimate operations, the report asserts.
In letters submitted to FATF both before and after the report was finalized, the Transnational NPO Working Group on FATF (Working Group) stressed the importance of developing typologies “that are guided by the principles of proportionality and effectiveness.” Without this, the Working Group asserted, “preventive regulatory approaches could be used in a manner inconsistent with these goals and feed into an alarming trend of excessive restrictions on civil society space globally.”
The Working Group recommended that FATF distinguish between potential risk and actual abuse, typologies be based on analysis of evidence that classifies clusters of similar cases, a variety of strategies be utilized to address a variety of types of abuse, typologies recognize the diverse structures and functions of NPOs, avoid an overbroad definition of terrorist financing, recognize risk mitigation procedures undertaken by the NPO sector, and minimize impacts on the NPO sector.
Following the publication of the typologies report, the Working Group, in an August 2014 letter to FATF, stated that it was pleased that several of its recommendations were included in the report, including references to the positive role that civil society plays in increasing human security worldwide and the special protections given to the sector under international human rights law and international humanitarian law. At the same time, it expressed concerns. Despite the report’s insistence that it is not a policy document, its emphasis on a preventative approach and use of administrative sanctions could be used to impose excessive levels of regulation and government control of the NPO sector.
Regarding the report’s limited data, the Working Group cautioned FATF and others not to generalize from the report’s findings. It noted that “while case studies are helpful and indicate potential trends for further consideration, the data cannot be taken as fact or extrapolated to apply to the nonprofit sector globally.” Any measures designed to prevent terrorist abuse of NPOs must be based on evidence demonstrating the need for the intervention, the letter states.
Finally, the Working Group expressed concern that vulnerability and risk were lumped together in the discussion, which could easily lead to counterproductive over-regulation. “As far as we are aware, no evidence exists that the NPO sector as a whole faces systemic risk or abuse,” their letter states. The letter goes on to explain that regulatory programs aimed at preventing vulnerabilities from becoming risks or abuses “should not prevent NPOs from doing critical work that saves lives and provides an alternative to the terrorist narrative.”
While this report is a big step forward in understanding the terrorist threat to the NPO sector, FATF notes that there is still a need for continued research and analysis. In particular, national-level studies could increase our understanding of individual jurisdictions, particularly those at higher risk for terrorist activity, the report states. In addition, threats related to the source of NPO resources is still not well understood. Additional research should look at the relationship between risks and abuses associated with resource sources.
The full report is available at http://www.fatf-gafi.org/media/fatf/documents/reports/Risk-of-terrorist-abuse-in-non-profit-organisations.pdf.