FATF Public Consultation on the Revision of the Interpretive Note to Recommendation 8 (NPO)
The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering and counter-terrorist financing standard.
The FATF recognises the vital importance of the non-profit organisation (NPO) community in providing charitable services around the world, as well as the difficulty of providing assistance to those in need, often in remote regions, and applauds the efforts of the NPO community to meet such needs. However, terrorists and terrorist organisations may also abuse some legitimate NPOs, often without the knowledge of their donors, management, or staff, or may create sham charities to funnel money to terrorists. The FATF Typologies Report on Risk of Terrorist Abuse in Non-Profit Organisations published in June 2014 identifies that service NPOs which operate in close proximity to an active terrorist threat present the most desirable targets for terrorist entities because of the types of resources involved in their operations, the geographic breadth of their operations, and their access to vulnerable populations. The Typologies Report has led to a comprehensive revision of theBest Practices Paper on Combating the Abuse of Non-Profit Organisations (Recommendation 8), which was completed in June 2015. The updated Best Practices Paper aims to bring the Typologies Report into line with the revised FATF Recommendations and highlight the importance of ensuring that the implementation of Recommendation 8 and its Interpretive Note does not disrupt or discourage legitimate charitable activities.
The FATF is now undertaking work to rationalise the FATF Standard on NPOs together with the results of the Typologies Report and the recently updated Best Practices Paper. The current FATF Recommendation 8 and its Interpretive Note require countries to review the activities, size and other relevant features of their NPO sector as well as the adequacy of applicable laws and regulations. Given the variety of legal forms that NPOs can have, depending on the country, from the outset the FATF adopted a functional definition of NPO. This definition is based on those activities and characteristics of an organisation which put it at risk of terrorist abuse, rather than on the simple fact that it is operating on a non-profit basis. Recommendation 8 only applies to those NPOs which fall within the following FATF definition of a non-profit organisation:
A legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of “good works”.
The NPO sector and the threat environment in which it operates have evolved, governments’ experiences in implementing Recommendation 8 have advanced, and self-regulatory mechanisms have also evolved. The FATF therefore sees the need to revise the Interpretive Note to Recommendation 8, as a matter of priority, to align with the results of the Typologies Report and the recently updated Best Practices Paper, specifically seeking to incorporate the focus on the subset of NPOs that are intended to be addressed by Recommendation 8, clarify how the risk-based approach relates to the Recommendation 8 requirements, and further refine the terminology to distinguish between non-profit organisations as that term is defined by FATF and the NPO sector as a whole. In particular, we wish to clarify that Recommendation 8 only applies to those NPOs which fall within the FATF functional definition of a non-profit organisation, and not a country’s entire universe of NPOs. We also wish to highlight the importance of understanding the domestic non-profit sector, the ability to identify which organisations meet the FATF definition, and using a targeted risk-based approach in implementing the measures called for in Recommendation 8. Please note that this exercise is intended to be a focused revision ofthe Interpretive Note to Recommendation 8 and the FATF currently has no plan to re-open the revision of the FATF Standard as a whole.
The FATF is committed to conducting this revision in an open and transparent manner, and is keen to involve the NPO sector in order to ensure that practical knowledge and experience, in particular from service NPOs, can be properly reflected in the Interpretive Note to Recommendation 8. The FATF wishes to receive your views and specific proposals to the text of the Interpretive Note to Recommendation 8, in English or French, to FATF.NPOconsultation@fatf-gafi.org no later than Friday 27 November 2015 at 18:00 CET.
You and/or your organisation are strongly advised to read the Typologies Report and Best Practices Paper beforehand. All the comments received will be shared with the FATF delegations. Please note that the fields indicating countries in which you or your organisation is based and primarily operates and the entities which you represent are mandatory as we are particularly interested in hearing the views of those NPOs which fall within the FATF definition.
To facilitate the analysis, input which is not submitted according to the instructions and following the template, and/or is submitted after the above deadline, will not be considered.
At its next meeting in February 2016, the FATF will discuss the input received through this consultation process and will determine the next steps towards finalising the Interpretive Note to Recommendation 8 later in 2016.