Changes to global standard mean charities no longer assumed to be high risk

30 Jun 2016 News

A policy which required banks to assume that international charities were at high risk of being used to finance terrorism has been revised to clarify that that is not the case.

The Financial Action Task Force on Money Laundering (FATF) is the international body that combats terrorist financial abuse around the world.
The Charity Finance Group and Charities Aid Foundation, as well as other UK charities, campaigned to revise FATF recommendations which set a global approach for how countries should protect non-profit organisations, including charities, from financing abuse by terrorists.

The organisations had called for reform of Recommendation 8 (R8) and the Interpretative Note (IN) which had been delivering a negative signal to banks about the risks of working with charities. It has been announced that these have been reformed.

The CFG has said that the changes will “reduce perceived risks in providing financial services for charities, particularly those that work in conflict zones”.

It said it welcomes the changes which clarified that NGOs are not “particularly vulnerable”. This had been identified as one of a number of factors which had made banks more risk-adverse when providing financial services to charities working in high risk zones.
The changes include the removal of references to charities being particularly vulnerable to terrorist abuse and recognises and applauds the work of charities working in high conflict areas.

It also recognises the efforts that charities have made in order to counter terrorism, and that that measures need to be proportionate to the risks that have been identified.

Andrew O’Brien, head of policy and engagement at CFG, said: “We welcome FATF’s recognition that charities are not particularly vulnerable to terrorist financing abuse. Research conducted on behalf of the Financial Conduct Authority identified signals sent by global standards setters such as FATF as factors being charities losing access to financial services.

“Hopefully, this will send a positive signal to banks that they should provide financial services to charities that work in high risk environments and take proportionate measures. UK charities have played an important role in this process and shows the value of UK charities working internationally for change.”

“The Charity Commission should also be congratulated on its leadership as part of the group that has drafted this new version of Recommendation 8 and Interpretative Note and the positive influence that it has had. Without their leadership, this change wouldn’t have happened.”

“The new Recommendation 8 and Interpretative Note are not perfect, but they far more accurately reflect the risks to the sector and call for a more measured response when protecting charities.”

Adam Pickering, international policy manager at CAF, has written in more detail on the “momentous announcement for charities” here.


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