Report: Impact of Banking Restrictions on UK NGOs

Date: 
August 24, 2017
Author: 

Like their American counterparts, British NGOs working in or near areas where non-state armed groups are active increasingly face restrictions on their access to the financial system, according to a 2017 report from Chatham House, Humanitarian Action and Non-state Armed Groups: The Impact of Banking Restrictions on UK NGOs. This may include delayed transfers, the freezing of funds, and closure of bank accounts. 

The report, like many before it, tie the perception of NGOs as high-risk to the Financial Action Task Force's Recommendation 8. In addition, the global financial crisis has made banks subject to tougher regulatory and enforcement regimes, decreasing their appetite for risk. It notes, "Humanitarian NGOs generally accept the need for regulation and due diligence, but the current weight of compliance demands by their banking partners is often seen as disproportionate, resulting in a need to spend donor money on additional staff and due diligence tools, increased administration costs, aid delivery and financial transfer delays, and in some circumstances the closure of programmes to which funding cannot be delivered." 

Report Examines FATF Recommendations as Vehicle for Closing Civil Society Space in Nigeria

Date: 
August 24, 2017
Author: 

Prior to its revision in 2016, the Financial Action Task Force's Recommendation 8 referred to nonprofit organizations as "particularly vulnerable" to terrorist abuse. As a result, many countries implemented laws and policies designed to curb this perceived risk. As a result, NPOs have faced increased scrutiny and legal constraints, shrinking the space for charitable work. 

A report from Spaces for Change in Nigeria, Closing Spaces for Civil Society and Democratic Engagement in Nigeria,  examines the impact of Recommendation 8 on civil society in that country. The first part, Beyond FATF: Trends, Risks and Restrictive Regulation of Non-profit Organisations in Nigeria, is the product of systematic review of that country's legal framework for combating money laundering and the financing of terrorism to understand the connection between Nigeria's implementation of Recommendation 8 and shrinking space for civil society there. The second part, Closing Spaces for Civic Engagement and Civil Society in Nigeria, assesses the effectiveness of these policies and created a database of closed spaces, highlighting 100 incidents of overbroad application of these laws. 

World Humanitarian Day 2017

August 19 is World Humanitarian Day, another reminder of the need to alleviate suffering. This year, more than ever, we look to four countries on the brink of famine - Nigeria, Somalia, Sudan and Yemen. Unfortunately, for a significant number of U.S. humanitarian aid and development organizations working abroad, the closure of their U.S. bank accounts and the inability to send wire transfers in a timely manner have a significant impact on their ability to fund critical programs in these and other countries in need. 

As described in our February 2017 report on Financial Access for U.S. Nonprofits, "the human costs of NPOs' financial access difficulties and continued inaction must be recognized. When programs are delayed or cancelled because of the inability to transfer funds, peace is not brokered, children are not schooled, staff is not paid, hospitals lose power, the needs of refugees are not met and in the worst cases, people die." 
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Sanctions Bill Includes Counter-Terrorism Financing, Financial Access Language

Date: 
August 10, 2017

An international sanctions bill primarily focused on Russia contains language devoted to countering the financing of terrorism (CFT) and supporting remittances to Somalia as well as wire transfers by legitimate entities. 

Countering America's Adversaries Through Sanctions Act (HR 3364), signed into law by President Trump on August 2, incorporates two bills that passed in the U.S. House of Representatives in late December, in the final hours of the 114th Congress, HR 5594 (National Strategy for Combating Terrorist, Underground, and Other Illicit Financing Act) and HR 5607 (Enhancing Treasury's Anti-Terror Tools Act), with some modifications, in Subtitle C of the bill.

De-risking and Nonprofits: What's Responsible?

The architects of the AML/CFT framework deny that de-risking problems are caused by their regulations, "asserting instead that the banks are misinterpreting and/or misapplying the requirements, all the while lamenting the disappearance of clean money into 'shadow banking' channels," write Ben Hayes, Lia Van Broekhoven and Vanja Skoric an Open Democracy article calling on the G20 to take decisive action. 

The article, De-risking and non-profits, how do you solve a problem that no-one wants to take responsibility for?describes several "elephants in the room" around the de-risking of nonprofits. These include the wider problems facing non-profit organizations and a "global system for countering terrorist financing that was quickly drawn-up by US officials in the wake of 9/11 and railroaded through the intergovernmental decision-making system in just six weeks." They also ponder questions "as to the ultimate effectiveness of a system whose 'negative externalities' are piling up, but whose impact in terms of actually stopping the flow of funds to terrorist groups and their supporters is at best disputed and at worst rejected outright." 

The article states that non-profits are forced to find workarounds rather than solutions, which further embeds financial institution's practices and argues that time should be taken to find real solutions that benefit all parties. 

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House Subcommittee Examines Remittances

Date: 
July 20, 2017
Author: 

The Terrorism and Illicit Finance subcommittee of the U.S. House of Representatives Committee on Financial Services held a hearing July 18 to examine the regulations surrounding money service businesses (MSBs), or remittances, and the important role they play in impoverished communities overseas, to learn about informal remittance systems and potential terror finance exploitation of remittance networks. 

Among those testifying at the hearing, "Managing Terrorism Financing Risk in Remittances and Money Transfers," was Scott Paul, senior humanitarian policy advisor at Oxfam America, who emphasized the important role that remittances play in sustaining at-risk communities. "Remittances give people agency over their own lives," Paul noted. Matthew Oppenheimer, president and CEO of Remitly, testified that a recent survey of their customers revealed that "nearly all are using our service to send money intended to pay for the basic needs of their family members - housing, food, water, electricity, medical care, and education - basic things we take for granted in the United States but can be unattainable for millions living abroad." 

The hearing also touched on the issue of de-risking, and whether it forces charities and remitters into less transparent, unregulated money transfer channels, thus making the anti-terror finance regime ineffective. The subcommittee will seek to find ways to streamline remittance regulations in a way that will keep legitimate funds in legitimate channels, subcommittee members said. 

In his written testimony, Paul said, "[A] strategy that aims to maximize remittances, keep them within the formal financial system, and curb illicit financial flows will achieve the twin aims of poverty alleviation and combating the financing of terrorism. To do this, remittance services must be accessible, affordable, and accountable - both to law enforcement authorities and to the families sending and receiving money." 

UK Study Addresses Conflict between Humanitarian, Counterterrorism Goals

A new study from Chatham House and the Royal United Services Institute in the UK finds that humanitarian objectives are often stymied by counterterrorism laws designed to prevent assistance or funds going to non-state armed groups. Humanitarian Action and Non-state Armed Groups: The UK Regulatory Environment asserts that to resolve this conflict, the UK government needs to adopt a clear, unified approach to reconciling its humanitarian and counterterrorism priorities. 

The report also addresses the global phenomenon of bank de-risking and its impact on humanitarian aid organizations. The report authors urge the UK government to move proactively to counter this trend and to engage in international dialogue aimed at finding solutions. 

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UK Study Seeks Reconciliation of Humanitarian, Counterterrorism Goals

Date: 
May 11, 2017

A new study from Chatham House and the Royal United Services Institute in the UK finds that humanitarian objectives are often stymied by counterterrorism laws designed to prevent assistance or funds going to non-state armed groups. Humanitarian Action and Non-state Armed Groups: The UK Regulatory Environment asserts that to resolve this conflict, the UK government needs to adopt a clear, unified approach to reconciling its humanitarian and counterterrorism priorities. 

The report finds that the licensing system under sanctions regimes is opaque and ineffective, recommending that the UK government seek humanitarian exemptions, as well as simplify and expedite its domestic licensing system. It also notes that although the government cites prosecutorial discretion in asserting that there is no need for additional guidance around potential criminal penalties for incidental payments to listed groups, "prosecutorial discretion is insufficient comfort for humanitarian actors anxious to avoid breaking the law and the wide offences have a 'chilling effect'." 

Two UK government has dismissed recommendations to explore the possibility of introducing exceptions to counterterrorism legislation for humanitarian activities. It argues that legislative change would create a loophole open to exploitation. The Chatham House study recommends that this option should be explored further, with consideration of foreign laws and international instruments. 

The report also addresses the global phenomenon of bank de-risking and its impact on humanitarian aid organizations. The report authors urge the UK government to move proactively to counter this trend and to engage in international dialogue aimed at finding solutions. 

Read the full report

Counterterror Rules Impact Gender Equality

Although they're not alone in shouldering the weight of the counter-terror financing legal environment, "the specific profile of women's rights organizing and organizations has meant that they experience these rules in a number of adverse and often gender-specific ways," according to a new report from Women Peacemakers Program and the International Human Rights Clinic at Duke University Law School, Tightening the Purse Strings: What Countering Terrorism Financing Costs Gender Equality and Security.

While 87% of the report's survey respondents said their work involved countering terrorism and/or violent extremism, 90% said that counterterrorism measures had an adverse impact on their work, and the report notes that counter-terror financing regimes have exacerbated this. Ultimately, these measures have dictated how, where and sometimes if women's rights organizations can undertake their core work. 

Read the full report here

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