Congress has responded to concerns about foreign influence in U.S. elections by introducing several bills to amend the Foreign Agent Registration Act (FARA), an obscure law requiring registration and disclosure by those acting “for or on behalf of” foreign governments and entities. (Background on FARA here.) On Jan. 17, 2018 the Judiciary Committee in the House of Representatives approved HR 4170 on a split vote, over-riding Democrats’ calls for a hearing and rejecting several amendments intended to address constitutional concerns. The International Center on Not for Profit Law (ICNL) has said that left unchanged, the current vague definition of a “foreign agent” in the law could lead to politically motivated enforcement and intrusive registration and reporting requirements.
The Latest News
The Charity and Security Network monitors U.S. and foreign government activities and a wide range of news sources to identify developments in national security policy that impact civil society and nonprofit organizations. We collect and disseminate relevant information on our website, via our Twitter and Facebook accounts, and through our biweekly email newsletter, which contains links to a variety of news articles. To read the most recent issues of our email newsletter or to subscribe, click here.
Our staff also creates news pieces on events and developments of particular interest to our members that are not covered in other news outlets. Those stories can be found below, in revese chronological order.
In a January 9 Senate Banking committee hearing, both legislators and witnesses touched on the importance of a risk-based approach (RBA) in the federal anti-money laundering and counter-terrorist financing regime.
While the hearing, Combating Money Laundering and Other Forms of Illicit Finance: Opportunities to Reform and Strengthen BSA Enforcement, mostly focused on information sharing and beneficial ownership, there was much discussion of getting regulators to support the RBA, particularly in regard to bank examinations. The Charity & Security Network has consistently promoted the need for a RBA in combating terror financing, and cited lack of adherence to it as a factor in the global bank derisking crisis that has adversely impacted nonprofit organizations (NPOs).
In a discussion of greater information sharing as a tool to enhance ALM/CFT programming, Heather Lowe, legal counsel and director of government affairs for Global Financial Integrity, noted that it "needs to be done with some appropriate safeguards, especially where it may result in somebody being delayed banking services." She argued that anyone in such a situation needs "an opportunity to disprove whatever information has been collected on them and give them access if they do have legitimate business." Reliance on misinformation in determining risk has also been cited as a factor in bank derisking of NPOs, and those impacted by this trend have asserted the need to correct any perceived problems or deficiencies.
Greg Baer, president of the Clearing House Association, introduced discussion of the RBA in his opening remarks: "An effective approach should be risk-based," he said. "Unfortunately, banks have been pushed away from risk-based approaches because their performance is graded not by law enforcement .... but by bank examiners, who do not track how the intelligence is actually used," Baer explained. He noted that this has lead to bank derisking, dropping clients perceived as high risk rather than managing the risks, which undermines development and financial inclusion goals.
Lowe noted that financial institutions are generally attempting to implement the RBA, but have been stymied by bank examiners who are "not open to the risk-based approach that financial institutions have put in place. They're checking the boxes." Dennis Lormel, president and CEO of DML Associates and the former chief of the FBI's financial crimes program, echoed this assertion when he said, "Regulators now put an emphasis on check boxes. Getting important information from banks to law enforcement has gotten contorted because of perceived concerns of regulators Targeted monitoring is better."
Lowe surmised that bank examiners are reluctant to endorse a RBA because it is more work "when you have a totally risk-based system and can't use one-size-fits-all," adding," That shift needs to happen, and it will be a big one."
Both the House of Representatives and Senate held hearings in late November on proposed legislation to update the 50-year-old Bank Secrecy Act (BSA), which is the primary law setting out anti-money laundering and counter terrorist financing (AML/CFT) rules for banks. While the bills in each house vary, statements in the hearings echoed the same theme: the world has changed substantially since the BSA was updated in 2001 and gaps and strains in the AML/CFT system need to be addressed. However, neither bill addresses the negative impacts of bank “derisking” (dropping accounts or limiting services) on nonprofit organizations (NPOs) or financial inclusion goals. The contradiction between the strict liability for violations in the current AML/CFT regime and the need for a proportionate, risk-based approach, cited by the Financial Action Task Force in 2016, was also not discussed. The move the update the BSA and related AML/CFT laws presents both opportunities and challenges for NPOs in 2018. The legislation and testimony is summarized below.
Just three days before International Human Rights Day, Charity & Security Network joined CIVICUS Alliance, the International Center for Not-For-Profit Law ICNL) and a defendant in the J20 criminal trial stemming from the Inauguration Day protests to present testimony on restrictions of the freedoms of association and peaceful assembly in the U.S. before the InterAmerican Commission on Human Rights.
Charity & Security Network’s Andrea Hall presented data from the February 2017 report, Financial Access for U.S. Nonprofits, on the financial access difficulties that nonprofits are having in accessing banking services. Her testimony outlined how this problem, which includes account closures and wire transfer delays, severely impedes the organizations’ ability to carry out their programs. Access to funds is integral to the right to freely associate.
Bobbie Traut of CIVICUS led the panel and gave an overview of the problems with freedom of association and assembly in the U.S. today, highlighting data available in the CIVICUS Monitor. Charity & Security Network is a research partner on the Monitor.
Nick Robinson of ICNL discussed the serious threats to freedom of peaceful assembly that have passed or are pending in various state legislatures. He also explained that the militarization of local police has created a hostile and dangerous environment for protestors that includes kettling and the use of chemical agents without proper warning. That information is contained in ICNL's protest law tracker.
Elizabeth Lagesse is a defendant in what is known as the J20 criminal trial. She is also a plaintiff in a civil lawsuit against the Washington, D.C. metropolitan police concerning the same events. Lagesse is facing multiple criminal charges associated with the protest, including felony rioting, inciting a riot and conspiracy to riot, even though prosecutors have admitted in court that they have no evidence that she harmed any people or property. More than 230 protesters, journalists and legal observers were arrested. As prosecutors have aggressively pursued these charges, they have depicted political organizing as a political conspiracy, she said, and described the prosecution’s disruption to the lives of her and her co-defendants, each of whom face up to several decades in prison. She also noted the chilling impact of these cases on other protesters.
The U.S. government was then given an opportunity to respond to the civil society panel’s presentation. They used this time to present a history lesson on freedom of speech in the United States. Following their remarks, the IACHR commissioners publicly scolded the U.S. government representatives for making “no reference to what is happening” in their remarks, and noting their serious concern with the problems outlined by civil society. The only way things can change is by admitting there has been a regression, … and that the regression is caused by the highest levels of power in the U.S. government,” said IAHCR chairwoman Margarette May Macaulay. She added that the situation with the J20 defendants is “unacceptable” and that she expected the U.S. government’s answer to focus on that. Finally, she noted that given the current state of civil liberties in the U.S., the country’s founders must be “turning in their graves.”
At its November 2017 plenary session the Financial Action Task Force (FATF) approved two documents relevant to nonprofit financial access concerns. First FATF adopted a customer due diligence supplement to its 2013 FATF Guidance Anti-Money Laundering and Terrorist Financing Measures and Financial Inclusion. These are combined in one document. While focused on individuals/natural persons rather than nonprofit organizations (NPOs), the new guidance is relevant in that it demonstrates FATF’s commitment to financial inclusion and provides some indication of how the risk-based approach (RBA) can be applied to increase access to the regulated financial system. At some point in the future, a similar document focused on NPOs would be useful for all stakeholders. Second, FATF published a short statement supporting technical innovation in financial services that is consistent with its standards.