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. 

Read the full article

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

Report: Uncharitable Behavior and Banks That Drop Nonprofit Customers

January 14, 2015

A new study by UK financial expert Tom Keatinge examines the problems UK charities are experiencing with access to financial services for their international operations. U.S. charities face the same kinds of barriers, and a similar study is needed on the problems they face. The Press Release from Demos, which published the study, said the report:

- Reveals challenges NGOs face in securing and transferring funds due to the counter-terrorism regulation fears of banks

- Calls on banks, charities, and government bodies to improve dialogue on resulting financial restrictions and impact on charitable activity

- Critical aid struggling to reach conflict zones such as Syria

The full text of the study can be found here.

Two-Thirds of U.S. Nonprofits Have Financial Access Difficulties

Date: 
February 1, 2017

View a PDF of this press release

 

Washington, February 7, 2017 –Two-thirds of U.S.-based nonprofit organizations (NPOs) working abroad are facing problems accessing financial services, according to a comprehensive report released today by the Charity & Security Network. 

The report, Financial Access for U.S. Nonprofits, is based on the first-ever empirical study of the global phenomenon known as “derisking,” as it relates to U.S.-based NPOs. Derisking refers to financial institutions terminating or restricting business relationships to avoid rather than manage risk. The report also reflects information from numerous focus group sessions and interviews with stakeholders over the last year. It outlines and analyzes the scope, frequency, and prevalence of various financial access problems, including delayed wire transfers, account refusals and closures, and unusual additional documentation requests. The report also provides recommendations to address these challenges. Author Sue E. Eckert of the Center for New American Security noted, “At a time of unprecedented need in regions of conflict, humanitarian crises, and natural disaster, American charities’ efforts to save lives and prevent the further erosion of democracy and human rights are being stymied unnecessarily. The data are clear: there is a serious and systemic problem that must be addressed.”

Webcast Available

 Financial Access
 for Nonprofits

 

Did you miss our February 7 report launch at CSIS? You can now view the webcast of both the panel discussion and the Q&A.
 
 
Speakers included:

Sue Eckert, Adjunct Senior Fellow, Center for a New American Security; and Adjunct Professor of Law, Case Western Reserve Law School

Emile van der does de Willebois, Global Lead, Financial Market Integrity & Asset Recovery, World Bank Group

Michael Pisa, Policy Fellow, Center for Global Development  

Scott Paul, Senior Humanitarian Policy Advisory, Oxfam America

Moderated by:

Shannon N. Green. Senior Fellow and Director, Human Rights Initiative, CSIS

Webcast available here

 

Two-Thirds of U.S. Nonprofits Have Financial Access Difficulties, New C&SN Report Finds

The scope and prevalence  of challenges that U.S.-based nonprofits face in accessing financial services are far more vast than previously understood, according to a comprehensive new report by the Charity & Security Netowrk, Financial Access for U.S. Nonprofits.

Two-thirds of U.S.-based nonprofits working abroad are facing problems accessing financial services, the report finds. These include delays in wire transfers, account closures and account refusals, requests for unusual additional documentation, and inccreased fees. 

The report is based on the first-ever empirical study of the global phenomenon known as "derisking," as it relates to U.S.-based NPOs. The report also reflects information from a number of focus group sessions and interviews with stakeholders over the last year. 

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