Recognising the growing risk of charitable fundraising being used to provide cover for the financing of terrorism, the FATF has amended its Recommendation 8 to enhance the protection of NPOs from potential terrorist financing abuse without unduly disrupting or discouraging their legitimate activities.
The FATF’s Recommendation 8 sets out suggestions, guidance and examples:
- for countries to put in place an effective approach in identifying, preventing and combating the abuse of NPOs;
- for NPOs to understand the risks of their organisation being used for terrorist financing purposes and put in place adequate regulatory measures, internal control and good governance to combat these risks;
- for countries, financial institutions and NPOs to ensure the access of legitimate NPOs to financial services.
To that effect, financial institutions are encouraged to carry out a well-documented NPO-customer risk assessment (taking into account the result of the national terrorist-financing risk assessment as a factor to adopt potentially mitigating measures).
Financial institutions should thus take appropriate steps to identify and assess the risks of terrorist financing of their NPO customer (based on their countries or geographic areas, products, services, transactions or delivery channels) and to verify the regulatory and internal control measures that are applied internally by the NPO.
Financial institutions are also encouraged to:
- be more transparent as to their requirements regarding NPOs (e.g. in terms of NPO account management processes or in case of termination of a relationship);
- take advantage of digital information and documentation for their customer due diligence processes (under human control to prevent abuses or errors); and
- improve the traceability of financial transactions with NPOs
