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- Year: 2012
- Country: United States
- Language: English
- Document Type: Publication
- Topic: Aid Effectiveness,Counterterrorism and Money Laundering
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Counter -Terrorism, “Policy Launde ring,” and the FATF:
Legalizing Surveillance, Regulating Civil Society
Ben Hayes 1
Over the past decade, surveillance of the financial system and demands for increased regulation and
financial transparency of non -profit organizations (NPOs) have become central counter -terrorism
policies with the stated aim of reducing their vulnerability to abuse by terrorist organizations. This has
happened because intergovernmental organizations have adopted the hypothesis that terrorist
organizations use laundered money for their activities, and that charities and NPOs are a potential
conduit for terro rist organizations. Non -profit organizations have been placed under surveillance, while
charitable giving, development assistance, and remittances from Diaspora communities have been
intensively scrutinized by security agencies, particularly those organiza tions working with “suspect
communities” or in conflict zones. This shift to treating NPOs as objects of suspicion has been a
dramatic one since the early 1990s when civil society was widely praised “as partners in a shared
agenda of democratization, parti cipation and service delivery.” 2
In Europe and the USA, financial surveillance policies have been opposed by civil liberties and privacy
groups, and attempts to introduce binding rules on enhanced financial transparency of the non -profit
sector have been resisted by charities, development organizations, and other NPOs. But these policies
are now spreading to other parts of the world, places where “civil society” is much le ss able to make
its voices heard. While there is growing awareness of these policies among civil society organizations,
the international framework within which these policies have been developed, and the driving forces
behind the political agenda have bee n obscured from public scrutiny. This has undermined the
capacity of NPOs to engage with the actors demanding tighter regulation of their sector.
This article examines the intergovernmental organizations and standard -setting bodies behind the
emerging glob al regimes for financial surveillance and regulation of the non -profit sector, and the
implications of these regimes for non -profit and civil society organizations. It begins by suggesting a
critical lens through which these developments can be seen.
1.1 “Policy Laundering” and Intergovernmental Organizations
The concept of “policy laundering,” after money laundering, describes the use by governments of
intergovernmental forums as an indirect means of pushing international policies unlikely to win direct
approval through the regular domestic political process. 3 According to the 2005 Policy Laundering
Project (a joint initiative of the Privacy International, the American Civil Liberties Union, and
Statewatch), this technique had become a central means by which governments seek to overcome
civil liberties objection s to privacy -invasive policies pursued under the “war on terror.” 4 A critical
feature of policy laundering is “forum shifting,” which occurs when actors pursue roles in
intergovernmental organizations that suit their purposes and interests. Examples of controversial
policies that critics suggest have been “laundered” under the “war on terror” include measures relating
to the surveillance of telecommunications, the surveill ance of movement, and the introduction of
“biometric” identification systems (specifically fingerprinting).
The concept of policy laundering does not amount to a comprehensive theory of intergovernmental
decision -making. Rather, it is a useful tool for analyzing how and why certain governments have
shaped intergovernmental policy agendas to their own ends. What are crucial in this discussion are the
eschewing of a deliberative process, the sidestepping of parliamentary democracy, and the
marginalization of civil society. 5 This r eport engages the concept of policy laundering not to accuse the
Financial Action Task Force (FATF) of deliberately circumventing democracy, but to explain how a
wide -ranging set of global standards for countering -terrorism and surveillance of the financia l system
– many developed in the late 1990s – was rapidly adopted by a number of intergovernmental
decision -making fora in the wake of 9/11. Almost certainly drafted by the U.S. government and
subsequently adopted by the G7/8, United Nations, International Monetary Fund, and World Bank,
these standards then passed quickly down through regional bodies such as the Financial Action Task
Force (FATF) (and regional FATF groupings) and regional multilateral development banks, before being
transposed into binding regulations, laws, and practices in nation states. Despite their enduring
significance, this highly technocratic and largely unaccountable set of decisions has not received the
critical attention from civil society it warrants.
1.2 Global enforcement regi mes
Where “policy laundering” describes the techniques used by national governments to influence
intergovernmental organization (IGO) agendas, the concept of “global enforcement regimes” can help
explain the motives and outcomes, particularly in regard to law enforcement and counter -terrorism
cooperation. Underpinned by international laws and conventions, global enforcement regimes are
designed to criminalize certain behaviors at the international level and to facilitate the “free
movement” of investigation s and prosecutions across the world by placing substantive obligations vis –
à-vis criminal law and procedure upon the members of IGOs. 6 Examples of global enforcement
regim es include those enacted to suppress the production and trafficking of narcotic drugs (cf. the
three main UN Drugs Conventions); 7 to prevent and prosecute terrorist acts (cf. the dozen UN
terrorism -related Conventions); 8 to combat organized crime and “illegal” immigration (cf. the UN
Convention and three protocols on Transnational Organis ed Crime); 9 and to tackle “cybercrime” (cf.
the CoE Cybercrime Convention, which is open for worldwide signature). 10 These regimes function
through the obligations on signatory states to criminalize certain acts, to facilitate cross -border
investigations (by providing mutual legal assistance), and to assist in the prosecution of offenses (by
providing evidence and/or extraditing suspects).
While the Bush administration appeared to shun international law in favor of unilateral “war on terror,”
it continued to shape the agenda of various IGOs in order to embed and legitimize key elements of its
counter -terrorism strategy in international law and policy. The USA took the lead, for example, in
developing the international regimes governing the prevention of terrorist financing and terrorist
“blacklisting,” technical assistance for enhancing co unter -terrorism in less developed states, and
various international surveillance mechanisms, including for passenger and biometric data. The G7/8
and later the European Union (in particular the “Transatlantic Dialogue” on counter -terrorism issues)
became k ey partners in the “war on terror” not because they offered meaningful operational
assistance in tracking down the perpetrators of 9/11 – this was initially pursued bilaterally and
militarily through NATO – but due to the influence that these organizations could wield in terms of
global standard setting. Because the international community was much more likely to join counter –
terrorism initiatives within existing multilateral systems, these channels became crucial mechanisms
through which the USA and its al lies could set the agenda of a host of intergovernmental bodies. 11
Decisively, in the wake of 9/11, IGOs began to establish and bolster global enforcement regimes using
so -called “soft law” (resolutions, principles, guidelines, etc.), which could be agreed and ratified much
more quickly than traditional intergovernmental conventions, which often took several years or more
to agree (and even longer to ratify and enter into force). Academics have described this process as
“hard coercion through soft law,” 12 suggesting that such measures may be ultra vires , or beyond the
powers of the bodie s that adopted them. 13 This report examines the global enforcement regimes
established through FATF Recommendations on money laundering and counter -terrorism. Section 4
focuses specifically on the FATF’s Special Recommendation on the non -profit sector, showing how the
FATF’s int erpretation, guidance, and compliance mechanisms have substantially extended the scope
and impact of that Recommendation.
1.3 From NPO regulation to NPO repression?
Intergovernmental bodies are not the only forces shaping demands and outcomes in respect to
financial transparency and NPOs’ regulation. Other factors include the broader global transparency
movement, national policies, and the actions of the NPO sector itself. In this context, moves toward
greater NPO transparency can be seen as part of a “re -questioning by society of the rights, roles and
responsibilities of all institutions in the light of globalization.” 14Campaigns for openness, transparency,
and accounta bility have gained significant momentum over the past two decades. Freedom of
Information laws providing access to information held by governments and public bodies have been
adopted around the world (although standards in many countries are weak), transpa rency has become
a central part of the anti -corruption agenda, and “whistle blowing” about misconduct in various
institutions features frequently on the mainstream news. Industry lobbyists are now under increasing
pressure to declare their interests and ac tivities, and public accountability is seen as an increasingly
important aspect of “corporate social responsibility.”
This movement has already influenced the aid and philanthropic sectors, with governments and
donors increasingly expected to “publish what they fund.” 15 Aid transparency is now seen as crucial to
both anti -corruption and aid effectiveness (and is what led a former regional director of the World
Bank to fou nd the NGO Transparency International in the early 1990s). An International Aid
Transparency Initiative was launched in 2008 to “bring together donors, partner countries and civil
society to enhance aid effectiveness by improving transparency.” 16
Quite independently of the global transparency movement and counter -terrorist measures, many
countries have long had dedicated laws and regulatory frameworks governing the activit ies of non –
profit organizations. These regimes vary widely but share broadly the same objectives: to ensure that
NPOs do not abuse their charitable and/or tax -exempt statuses and provide mechanisms for Trustees
and Directors to be held liable for actions l ike fraud and damages to third parties. Some regimes also
include mechanisms to ensure that non -profit organizations stick to their mandates and/or charitable
purposes, particularly those governing the activities of international NGOs operating in foreign
territories. NPOs (together with non -governmental organizations (NGOs) and civil society
organizations (CSOs)) have augmented the legal obligations upon them with various internal
regulations, accountability mechanisms, and through dialogues with governmen ts and regulatory
It is in this self -regulatory context that NPOs have challenged attempts to impose top -down regimes
such as the World Bank’s 1997 “Draft Handbook on Good Practices for Laws Relating to NGOs.” After
consultation with the NPO sector and a concerted lobbying effort by a range of NGOs, the Bank
eventually decided that the Draft Handbook was not an appropriate tool for it to use or advocate.
However, as this report explains, in subsequently adopting and helping enforce the FATF
Recommen dations on money laundering and terrorist financing, the Bank was soon pressing for
minimum standards for NPO regulation in countries across the globe (see Sections 3 and 4, below).
Significant pressure to hold NGOs more accountable for their actions also came from right -wing
pressure groups and governments in the USA. 17 This culminated in 2004 with the launch of
NGOWatch, a joint initiative of the American Enterprise Ins titute for Public Policy and the Federalist
Society for Law and Public Policy Studies (two of the most influential and well -funded “think tanks”
then serving the Bush administration) that stemmed from an earlier conference on the “Growing
Power of an Unele cted Few.” 18 NGOWatch focusesoverwhelmingly on those organizations that
advocate “liberal” causes such as human rights, corporate accountability, and environmental
prote ction. 19
It is important to recognise that regulatory frameworks can have both positive and negative impacts
on the non -profit sector. On the one hand they may increase public and government confidence in
NPOs by enhancing transparency and accountability, but on the other they can also exert both
coercive and normative pressures that “constrain NGO behaviour by limiting their legal identities,
permitted activities, and ac cess to resources.” States can also use regulation to make NGOs “behave
in certain ways … by incentivising positive behaviors (from the point of view of the state) and making
illegal and punishing negative behaviors.” 20 Increased scrutiny and regulation around NGO activities in
conflict zones or NPO engagement with “suspect communities,” for example, can effectively introduce
policing systems that – while clearly serving state counter -terrorism agendas – may also adversely
constrain the “political space” in which these organizations work. Commentators have thus expressed
great concern that “weaknesses in NGO accountability are being used as cover for political attacks
agai nst voices that certain interests wish to silence.” 21
The discourse on NPO regulation thus strongly emphasizes the need to link frameworks for
transparency and accountab ility to guarantees regarding freedom of expression and association.
Experience suggests that states that fail to uphold human rights are much more likely to introduce or
apply regulatory frameworks in a coercive or repressive manner than states with a str ong human
rights culture. 22 According to a 2008 global study on the legal restrictions imposed on NPOs:
[M]any regimes still employ standard forms of repression, from ac tivists’ imprisonment and
organizational harassment to disappearances and executions. But in other states – principally, but not
exclusively authoritarian or hybrid regimes – these standard techniques are often complemented or
pre -empted by more sophistica ted measures, including legal or quasi -legal obstacles […] subtle
governmental efforts to restrict the space in which civil society organizations (“CSOs”) – especially
democracy assistance groups – operate. 23
As a result, civil society “groups around the world face unprecedented assaults from authoritarian
policies and governments on their autonomy, ability to operate, and right to receive international
assistance.” Another report on global NPO regulation, publ ished in 2010, found that civil society
operates in restrictive environments “due to harsh government legislation” in as many as 90
countries. 24 It is with this concern in mind that this report approaches the FATF’s approach to the non –
2 The Financial Action Task Force: structure, mandate, and
This section examines the history and origins of the G7/8’s Financial Action Task Force and its
subseque nt development into a global law enforcement, policy -making, and compliance body. It looks
at the structure, mandate, and powers of the FATF in respect to money laundering and terrorist
financing, and the mechanisms it uses to ensure compliance among its m embers. This analysis
highlights the lack of political and democratic accountability around the FATF and the failure to consult
non -profit organizations on recommendations that affect them.
2.1 Origins and development of the FATF
The decision to establis h the Financial Action Task Force (also known as Groupe d’Action
Financière (GAFI)) was taken at the Group of 7 Summit (G7) in Paris in 1989. 25 The G7 noted that the
dru g problem had “reached devastating proportions” and stressed “the urgent need for decisive
action, both on a national and an international basis.” The G7 Resolution included measures to
strengthen international cooperation in the War on Drugs, including ra tification and implementation of
the 1988 “Vienna Convention” on illicit traffic in narcotic drugs and psychotropic substances and the
creation of “a financial action task force from Summit participants and other countries interested in
these problems.” Th e mandate of the Task Force was “to assess the results of cooperation already
undertaken in order to prevent the utilization of the banking system and financial institutions for the
purpose of money laundering, and to consider additional preventive efforts in this field, including the
adaptation of the legal and regulatory systems so as to enhance multilateral judicial assistance.” 26
The G7 countries, together with the Eu ropean Commission (also represented on the G7/8) and
another eight EU member states, convened the FATF and instructed it to examine money laundering
techniques and trends, to review national and international counter measures, and to develop a
comprehensiv e framework to combat money laundering. This was delivered in April 1990, less than a
year after the FATF’s creation, via a set of 40 detailed recommendations. In 2001, following the 9/11
terrorist attacks, the development of standards in the fight against terrorist financing was added to
the FATF’s mandate. An additional eight “Special Recommendations” were produced shortly after, with
a ninth following in 2004.
During 1991 and 1992, the FATF expanded its membership from 16 to 28 members. Between 2000
and 2003 it grew to 33 members, and between 2007 and 2010 it expanded to its present membership
of 36. This includes 34 countries – the original “EU15” member states 27 plus Argentina, Australia,
Brazil, Canada, China (and Hong Kong), Iceland, India, Japan, Mexico, New Zealand, Norway, Russia,
Singapore, South Africa, South Korea, Switzerland, Turkey, and USA – together with two regional
bodies: the European Commission and th e Gulf Cooperation Council. 28 Some of these countries also
participate in regional FATF formations (see further below). Twenty -three further bodies have
“observer status ” at the FATF including the OECD, IMF, World Bank, regional development banks,
United Nations law enforcement bodies such as UNODC, UNCTC and 1267 [Terrorist Sanctions] Committee, INTERPOL and the World Customs Organisation, and international “umbrella
org anizations” dealing with the regulation of financial services. 29 No non -governmental organizations
have observer status at the FATF.
In addition to the 36 -member FATF, e ight further intergovernmental bodies replicate the work of FATF
and enforce its recommendations on a regional basis. These are:
APG – Asia/Pacific Group on Money Laundering
established: 1997 | HQ: Sydney, Australia | member countries: 40 30
CFATF – Caribbean Financial Action Task Force
established: 1996 | HQ: Port of Spain, Trinidad & Tobago | member countries: 29 31
EAG – Eurasian Group on money laundering and terrorist financing
established: 2004 | HQ: Moscow, Russia | member countries: 8 32
ESAAMLG – Eastern and Southern Africa Anti -Money Laundering Group
established: 1999 | HQ: Dar es Salaam, Tanzania | member countries: 14 33
GAFISUD – Financial Action Task Force on Money Laundering in South America
established: 2000 | HQ: Buenos Aires, Argentina | member countries: 12 34
GIABA – Inter Governmental Action Group against Money Laundering in West Africa
established: 1999 | HQ: Dakar, Senegal | member countries: 15 35
MENAFATF – Middle East and North Africa Financial Action Task Force
established: 2004 | HQ: Manama, Bahrain | member countries: 18 36
MONEYVAL – Council of Europe Committee of Experts on the Evaluation of Anti -Money
Laundering Measures and the Financing of Terrorism
established: 1997 | HQ: Strasbourg, France | member countries: 29 37
Taken together, the FATF and its regional bodies now cover more than 180 jurisdictions, all of which
have committed themselves at ministerial level to implementing FATF standards and having their
systems assessed through peer -review mechanisms.
2.2 The FATF Recommendations
The 40 FATF recommendations on money laundering and the nine FATF Special Recommendations on
Terrorist Financing provide for a comprehensive global enforcement regime. Like international
conventions, they are intended to be im plemented at the national level through legislation and other
legally binding measures while allowing states a degree of flexibility according to their particular
circumstances and constitutional frameworks. The 40 FATF recommendations of 1990 (as amended in
1996 and 2003) require states to, inter alia ,
implement international conventions on money laundering and organized crime;
criminalize money laundering and enable authorities to confiscate the proceeds of money
implement customer due diligen ce (e.g., identity verification), record -keeping, and
suspicious transaction reporting requirements for financial institutions and designated
non -financial businesses and professions;
establish data retention regimes of at least five years for all financia l transaction records
(both domestic and international) and “disclosure regimes” for “suspicious financial
establish a Financial Intelligence Unit to receive and disseminate suspicious transaction
cooperate internationally in invest igating and prosecuting money laundering.
The FATF issued eight Special Recommendations on Terrorist Financing in October 2001 and a ninth
Special Recommendation in October 2004, requiring states to, inter alia ,
implement international conventions and Secu rity Council resolutions on terrorist
criminalize terrorist financing and enable authorities to freeze and confiscate assets being
used for terrorist financing;
cooperate in international terrorism investigations and prosecutions;
extend disclos ure regimes and due diligence obligations to alternative remittance
systems, wire transfers, and individuals taking cash across borders;
review the adequacy of laws and regulations that relate to entities that can be abused for
the financing of terrorism, e.g., non -profit organizations.
The development and implementation of these rules is discussed in more detail in the following
sections of this report.
2.3 Structure, mandate, and powers
The FATF is based at but ostensibly independent of the Organisation for Economic Cooperation and
Development (OECD) in Paris, an intergovernmental body created in 1961 by 20 western nations with
“a commitment to democratic government and the market economy .”38 Unlike most
intergovernmental bodies, the FATF is not regulated by any international Treaty or Convention. In its
own words: “The FATF does not have a tightly defin ed constitution.” 39 Given the FATF now has a clear,
global policy -making role (and indeed describes itself as a “policy -making body”), this poses an
important challenge in terms of accountability. The FATF states that it is “accountable to the Ministers
of its membership” but in the absence of publicly agreed rules on, for example, decision -making,
openness and transparency, access to information, budgetary scrutiny, parl iamentary control, or
oversight mechanisms, the organization can only claim to be democratically accountable in the
narrowest sense. While the FATF has a fairly proactive publication policy, and much information about
its work can be found on its website, 40 there can be little doubt that, as Professor Peter Alldridge,
Head of the School of Law at University of London has argued, FATF decision -making structures are
“insufficiently transparent to warrant their own uncritical acceptance.” 41
In addition to the permanent secretariat in Paris, the work of the FATF is driven by a seven -member
Steering Group and a plenary. The plenary is chaired by a Presidency drawn from the FATF
membership, supported by a vice -president, both of which rotate on an annual basis. The Steering
Group, which is described as “an advisory body for the President,” includes the past, present, and
future presidencies. The other four members are unknown. Apar t from a commitment to take into
account the “geography and size of the FATF,” there are no evident rules governing the election,
mandate, or structure of the Steering Group. 42 The author of this report requested further information
about the composition and functioning of the Steering Group from the FATF Secretariat, but the
request was refused. In the absence of a formal framework governing the activities and transparen cy
of the FATF, there is no formal mechanism to challenge this kind of secrecy.
The current mandate for the FATF covers the period 2004 -2012. 43 Following a ministerial l evel mid –
term review in 2008, the FATF mandate was revised and expanded. 44 According to the 2004 mandate,
the FATF should, inter alia :
establish international standards for combating money laundering and terrorist financing;
ensure that members and non -members adopt relevant legislation against money
laundering and terrorism, including implementation of the 40+9 Recommendations
“in their entirety and in an effective manne r” (through both mutual evaluations/peer
reviews and self -assessment of compliance);
enhance the relationship between FATF and FATF -style regional bodies, the Offshore
Group of Banking Supervisors (OGBS), and non -member countries;
intensify the study of th e techniques and trends in money laundering and terrorist
further develop outreach mechanisms, including to parties affected by the FATF’s
standards, e.g., financial institutions and certain non -financial businesses and
The revised mandate, agreed in 2008, added the following competences:
intensify its surveillance of systemic criminal and terrorist financing risks to enhance its
ability to identify, prioritize, and act on these threats;
identify and respond to new threats, including “high -risk jurisdictions”;
limited expansions of its field of action where it has a particular additional contribution to
Crucially, the revised 2008 mandate removed the onus on the FATF to consult with those non -financial
businesses and professions affected by its standards. Instead, the FATF will simply “deepen its
engagement with the private sector.” This is particularly problematic in terms of the imposition of
standards by the FATF affecting the non -profit sector, discussed in Section 4 (below). If such
requirements are to be credible, effective, and proportionate, then the regular dialogue that takes
place between the FATF and the financial sector must be extended to NPOs and other stakeholders
from civil society.
The latest periodic review of t he FATF requirements was launched in October 2010, with requests for
submissions from interested parties. The review was based on 55 questions in a 521 -page document,
but there was no mention of Special Recommendation VIII on the non -profit sector. As a re sult, NPOs
were effectively excluded from the review process. 45 The review was completed in February 2012.
While the text and interpretation of SR VIII were not amended, the nine Special Recommendations on
terrorist financing were integrated into the 40 earlier Recommendations on money laundering, with
the result that Special Recommendation VIII becomes Recommendation 8. 46
2.4 Compliance mechanisms
The FATF is both a global policy -making and enforcement body; it sets global standards and uses
several compliance mechanisms to ensure that they are implemented. One mechanism is the “mutual
evaluation” process, under which countries are “peer -reviewed” and assessed for compliance with the
40 + 9 FATF Recommendations by teams of inspectors from IGOs and neighboring states. A second
mechanism is the list of “Non -Cooperative Countries or Territor ies” (NCCTs), a “blacklist” of failing
states in respect to the global fight against money laundering and terrorist financing. The FATF also
indirectly encourages compliance through the publication of best practices guidance on the
implementation of specif ic recommendations. 47
By 2001, 23 countries and territories had been designated as “non -cooperative” and placed on the
FATF blacklist. 48 The FATF hoped that other jurisdictions and financial sectors would take appropriate
action to protect themselves from the risks posed by these countries, and that “publicly pointing out
problems … fol lowed by a close engagement with affected jurisdictions [would] be highly effective in
further stimulating and accelerating national compliance with the standards.” 49 By 2006 this strategy
had been largely successful in FATF terms, and only Burma and Nigeria formally remained on the list,
until they too were removed. The FATF continued to issue public statements on “countries of concern”
and currently lists Iran and Nor th Korea as “high risk and non -cooperative jurisdictions.” 50
The FATF’s mutual evaluation/peer -review process is designed to “assess whether the necessary laws,
regulations or other measures required under the new standards are in force, that there has been a
full and proper implementation of all necessary measures and that the system in place is
effective.” 51 Self -assessment questionnaires are sent to the state being evaluated and then followed
up by inspection teams composed of F ATF, World Bank, and IMF officials together with experts from
national experts on money laundering and terrorist financing (typically ministry officials, law
enforcement specialists, and prosecutors from other states). 52 Participation in inspection teams may
also be extended, on a reciprocal basis, to experts from other observers that are conducting
assessments (observers from bodies like the UN Counter -Terrorism Executiv e Directorate may also be
considered “on an exceptional basis”). 53
The mutual evaluation process is crucial because it de facto extends the FATF recommendations by
impos ing extraordinarily detailed guidance – more than 250 criteria – on how states should comply
with those recommendations (see further the guidance on FATF SR VIII in Section 4, below). 54 On the
basis of their evaluation, the FATF inspection team makes detailed proposals on the measures the
evaluated state should implement in order to fully comply with the 40 + 9 FATF recommendations.
Under the current, third round of mutua l evaluations, countries are required to provide a progress
report 12 months after the adoption of their mutual evaluation report, based on a questionnaire
prepared by the FATF Secretariat. Such reports are subject to routine updates every two years
betwee n evaluation rounds, and FATF and national experts are available to advise states on
reforms. This continued cycle of review, assessment, and guidance emerges as a powerful force for
imposing new standards of “global governance.”
3 The FATF global enforce ment regime
This section examines the development and implementation of the FATF’s recommendations and the
way in which they have been tied in to the broader international counter -terrorism and global
governance agendas. It shows how a series of decisions adopted in the six weeks after 9/11 had
profound implications in terms of globalizing the FATF regime and extending its mandate to counter –
terrorism and regulations governing non -profit organizations. These decisions have in turn had a
significant effect o n the international development and “global governance” agendas.
3.1 Surveillance, data retention, and disclosure regimes
The FATF’s 40 recommendations on countering money laundering, adopted in 1990, address national
criminal justice systems and law enfo rcement powers, surveillance and regulation of the financial
services industry, and international cooperation. In respect to surveillance of the financial system –
which has significant implications for all who avail themselves of financial services – the key FATF
recommendations are those on data retention and disclosure regimes. Specifically, Recommendation 4
requires financial institutions and other businesses and professions to take pre -emptive action to
prevent money laundering (later extended to terro rist financing) and requires states to ensure that
“financial institution secrecy laws do not inhibit implementation of the FATF Recommendations”;
Recommendations 5 -12 impose “customer due diligence and record -keeping” obligations on financial
institutions , intermediaries and other designated non -financial businesses and professions, requiring
the keeping of accounts and transactional records for at least five years; and Recommendations 13 -16
require states to introduce legal obligations on financial instit utions to report “suspicious” financial
transactions to the appropriate authorities (while not disclosing such reports to those they concern). 55
The way in which the EU has incorporated the FATF Recommendations into its legal order is
demonstrative of their impact. The 1991 Directive (91/308/EC) assumes that any unexplained
transaction of €15,000 or more (or several transactions totalling this amount that seem to be linke d)
is “suspicious” and obliges member states to ensure that the employees of credit and financial
cooperate fully with the authorities… by informing [them], on their own initiative, of any fact which
might be an indication of money laundering [and] by furnishing those authorities, at their request,
with all necessary information. 56
While the Directive concerned “money laundering,” states were free to develop policies that would
allow “this information … [to] … be used for other purposes.” In applying the legislation, the UK went
as far as creating a criminal offense of failing to disclose a potentially suspicious transaction, which is
punishable by up to five years imprisonment. 57In accordance with the FATF’s recommendations, the
scope of the EU ’s anti -money laundering regime was later extended from financial institutions to
auditors, accountants, tax advisers, estate agents, lawyers and notaries, dealers in high -value goods,
and casinos (Directive 2001/97/EC), 58 then to all cash purchases over €15,000 (Directive
2005/60/EC), 59 then to persons entering or leaving the EU with cash amounts of €10,000 or more
(Regulation 1889/2005/EC), 60 and then to all wire transfers (Regulation 1781/2006/EC). 61 All are now
subject to suspicion, proactive disclosure, and post hoc surveillance.
Another important FATF Recommendation concerns the establishment of Financial Intelligence Units
(FIUs) to process Suspicious Transactiona l Reports (STRs, also known as Suspicious Activity Reports
(SARs)) and assist police investigations requiring financial information. Specifically, Recommendation
26 requires the establishment of dedicated police intelligence units for the purposes of:
rece iving (and, as permitted, requesting), analysis and dissemination of STR and other information
regarding potential money laundering or terrorist financing. The FIU should have access, directly or
indirectly, on a timely basis to the financial, administrati ve and law enforcement information that it
requires to properly undertake its functions, including the analysis of STRs. 62
The first FIUs were established in the early 1 990s. In 1995, on the initiative of the U.S. and Belgian
FIUs, the “Egmont Group of FIUs” was established as an “informal” organization for the “stimulation of
international cooperation,” including “information exchange, training and the sharing of
experti se.” 63 The Egmont Group now has 116 members and a dedicated International
Secretariat in Toronto, established in 2008. The EU also has its own dedicated rules on FIUs, a dopted
in 2000 (Decision 2000/642/JHA), which oblige member states to “ensure” that their FIUs “exchange,
spontaneously or on request … any information that may be relevant” to another state. 64 A dedicated
“EU Financial Intelligence Units Platform” was established by the European Commission in 2006 to
“facilitate cooperation among the FIUs,” again on an expressly “informal” footing. 65
Taken together, the overall effect of the 40 FATF recommendations has been to reverse the long –
established principle of secrecy in financial transactions and introduce a much broader framework for
the surve illance of financial systems. The lack of regulation of organizations like the Egmont Group
and the EU Platform of FIUs raises substantial concerns about data protection, accountability, and
democratic control. According to the Serious Organised Crime Agen cy, which houses the UK’s FIU,
more than 200,000 Suspicious Activity Reports (SARs) are received every year. 66 In 2009 the UK
House of Lords called on the Information Commissioner to “review and report on the operation and
use of the ELMER database [of SARs]” and “consider in particular whether the rules for the retention
of data are compatible with the jurispruden ce of the European Court of Human Rights.” 67
The question of what happens to the mountain of data generated by the FATF retention and disclosure
regimes is a crucial hu man rights matter. While the FATF has mandated an elaborate surveillance and
reporting system, it has not addressed issues such as privacy, data protection, and non -discrimination
at all. States should of course ensure that national laws and policies imple menting international
standards comply with relevant international human rights laws, but a lack of scrutiny and
understanding about financial surveillance coupled with an absence of guidance or best practice from
the FATF renders substantial violations of the right to privacy much more likely. International
jurisprudence requires all surveillance systems to be prescribed by law, to be proportionate to the
need they purport to address, and to be subject to adequate judicial control. 68 Data protection
convention further requires that personal data should only be collected and retained where strictly
necessary, that access to that data should be kept to a minimum, and that d ata should only be used
for the purpose for which it was initially collected. 69 Furthermore, individuals should be able to access
their data files (subject to limited ex ceptions) and have recourse to mechanisms that provide for the
correction or deletion of incorrect data and damages claims where data has been used unlawfully.
There should also be specific rules covering the onward exchange of data with external agencies and
The FATF has failed to issue guidance on any of these issues. This is problematic because even
countries with long traditions of data protection and relatively high levels of privacy protection have
failed to ensure that their post -9/11 s urveillance systems comply with international law. These
problems are only likely to be amplified in countries with much weaker levels of human rights
3.2 From money laundering to counter -terrorism
The atrocities of 9/11 galvanized a host of i ntergovernmental bodies into taking decisive action in the
field of counter -terrorism. Measures were rapidly adopted in quick succession across a host of
intergovernmental fora. These measures were, however, more than a knee -jerk reaction to 9/11; they
had long been on the agenda of powerful countries and IGOs.
The G7 began pursuing “measures aimed at depriving terrorists of their sources of finance” in 1995 in
response to events including the Tokyo subway attacks, the hostage crisis in Budennovsk, the
bomb ing campaigns in France (by GIA) and Spain (by ETA), the assassination of Yitzhak Rabin, and
the bombings at the U.S. military training center in Riyadh and the Egyptian Embassy in Islamabad. It
encouraged all states to “take action in cooperation with oth er States, to prevent terrorists from
raising funds that in any way support terrorist activities and explore the means of tracking and
freezing assets used by terrorist groups.” 70 The following year, the G7 asserted that NGOs were being
used for terrorist financing and called for action to:
counteract , through appropriate domestic measures, the financing of terrorists and terrorist
organizations, whether such financing is direct or indirect through organizations which also have, or
claim to have charitable, social or cultural goals, or which are also engaged in unlawful activities such
as illicit arms trafficking, drug dealing, and racketeering [emphasis added]. 71
A year later, in 1997, an identical provision appeared in a Resolution of the United Nations General
Assembly. 72 The “domestic measures” demanded by the G7 and now the UN included “monitoring and
control of cash transfers and bank disclosure procedures” and “regulatory measures in order to
prevent movements of funds suspected to be intended for terrorist organizations.” These resolutions
paved the way for the UN Convention on the Suppression of Terrorist Financing, proposed by France in
December 1998 and adopted a year later. States party to the Convention must criminalize the
financing of terro rist activities, freeze and seize funds intended for this purpose, and cooperate in
international terrorism investigations. 73 These provisions were de facto extended to transnational
organized crime in the UN Convention on that subject adopted in November 2000. 74
The USA was also pushing strongly for global standards. Its “N ational Money Laundering Strategy” of
1999 contained six Objectives and 27 Action Items to strengthen international cooperation, including
universal implementation of the FATF 40 recommendations; the development of FATF -style regional
bodies; putting count er-money laundering issues on the international financial agenda; expanding
membership of the Egmont Group of financial intelligence units; enhancing cross -border judicial
cooperation and the exchange of law enforcement information; urging the G7 nations t o harmonize
rules relating to wire transfers; and enhancing understanding of alternative remittance systems. 75
Where the UN Terrorist Financing Convention introduced sub stantive obligations on states to
cooperate with one another to prevent such activities, there was at that time no mechanism whereby
suspected terrorists and their alleged associates and financiers could be named, targeted, and
sanctioned by the internatio nal community as a whole. This framework was instead developed out of
the UN Sanctions framework. UNSCR 1267, adopted in October 1999, obliged UN states to freeze
assets belonging to designated members of the Taliban in the hope that this would force them to hand
over Osama bin Laden, who was by then wanted in connection with the 1998 attacks on the U.S.
embassies in Kenya and Tanzania. 76 In the aftermath of 9/11, the rea ch of this resolution was steadily
expanded to encompass a much wider circle of alleged terrorist groups, their members and
A G8 statement, issued on 19 Se ptember 2001 (eight days after the terrorist attacks in New York and
Washington), called for “expanded use of financial measures and sanctions to stop the flow of funds to
terrorists” and “the denial of all means of support to terrorism and the identificat ion and removal of
terrorist threat.” 78 The following week, G7 Finance Ministers announced that:
Since the attacks, we have all shared our national action plans to block the assets of terrorists and
their associates. We will integrate these action plans and pursue a comprehensive strategy to disrupt
terrorist funding around the world.… [We] call on all nations of the world to cooperate in this
endeavour … [by] more vigoro usly implementing UN sanctions on terrorist financing and we called on
the Financial Action Task Force to encompass terrorist financing into its activities. We will meet in the
United States in early October to review economic developments and ensure that no stone goes
unturned in our mutual efforts to wage a successful global campaign against the financing of
Five days later, on 24 September 2001, Executive Ord er 13224 was signed by President George W.
Bush, expanding the USA’s terrorist blacklisting regime, obliging financial institutions to freeze the
assets of any individual or organization designated by the Secretaries of State or Treasury, and
criminalizing the provision of any financial or “material support” to those so designated. 80 These
powers were consolidated two days later in the PATRIOT Act, which increased existin g criminal
penalties for knowingly or intentionally providing material support or resources for terrorism. 81 For
international donors and grant -makers, these criminal st atutes meant that they could now be found –
despite their best intentions – to have knowingly or intentionally provided material support or
resources for terrorism.
The substance of Executive Order 13224 was effectively replicated and outsourced to other
jurisdictions through the UN Security Council Resolution 1373, adopted on 28 September 2011 and
later described as “the most sweeping sanctioning measures ever adopted by the Security
Council.” 82 The resolution required states to implement the UN Terrorist Financing Convention (which
at that time had 46 signatures but only four ratifications, far too few for it to enter into force) by
making the obligations in the conventi on mandatory and binding on all UN members. Within a year
more than 130 countries had signed the convention and 45 countries had ratified it.
UN Security Council Resolution 1373 also set up a parallel blacklisting system to that of UNSCR 1267
(above), requ iring states to criminalize the support of terrorism by freezing the assets of suspected
terrorists. Whereas Resolution 1267 had targeted specific individuals, Resolution 1373 does not
specify the persons or entities that should be listed. Instead, it give s states the discretion to blacklist
all those deemed necessary to “prevent and suppress the financing of terrorist acts.” The
decentralized nature of this regime effectively enables states to interpret the resolution unilaterally
and identify terrorist su spects in light of their own national interests. 83 The result is more than 200
national and international terrorist blacklists across the world and widespread problems i n regard to
due process, human rights, and self -determination. 84
Lest there be any doubt about the intended effect of UNSCR 1373, the G7 Finance Ministers issued a
furth er statement from Washington on 6 October 2001, announcing an “integrated, comprehensive
Action Plan to block the assets of terrorists and their associates.” 85 This called on states to “freeze the
funds and financial assets not only of the terrorist Usama bin Laden and his associates, but terrorists
all over the world” and requested “Governments to consider additional measures and share lists of
terrorists as nec essary to ensure that the entire network of terrorist financing is addressed.”
The G7 Action Plan also instructed the FATF to “focus on specific measures to combat terrorist
issuing special FATF recommendations and revising the FATF 40 recommendations to
take into account the need to fight terrorist financing, including through increased
issuing special guidance for financial institutions on practices associated with the
financing of terrorism that warrant further action on the part of affected institutions;
developing a process to identify jurisdictions that facilitate terrorist financing, and
making recommendations for actions to achieve cooperation from such co untries.
On 16 October 2001 the U.S. Mission to the European Union conveyed a formal request for
cooperation in expanding the focus of the FATF and the Egmont Group of Financial Intelligence Units
to include financial flows to terrorists – one of more than 40 specific counter -terrorism demands. 86 An
extraordinary FATF plenary was convened in Washington at the end of October 2001, where the eight
FATF Special Recommendatio ns on terrorist financing were unveiled, requiring member states (and
those of regional FATF bodies) to ratify and implement all relevant UN measures; to criminalize the
financing of terrorism and associated money laundering; to enact measures to freeze an d confiscate
terrorist assets; to establish reporting mechanisms for suspicious financial transactions related to
terrorism; to enhance international cooperation; to establish disclosure regimes around alternative
remittance and “wire transfer” systems; an d to review the adequacy of laws and regulations that
relate to entities that can be abused for the financing of terrorism, especially non -profit
organizations. 87 A nint h Special Recommendation, on disclosure regimes for people carrying cash
across borders, was added in 2004.
So within just six weeks, UNSCR 1373 and the FATF Special Recommendations extended the financial
surveillance, data retention and disclosure regimes described above to terrorist financing, mandated
an elaborate global terrorist blacklisting system, and put the surveillance of the NPO sector firmly onto
the counter -terrorism agenda. While many observers view these measures as an understandable if
hasty reaction to 9/11, the Bush administration clearly had its own agenda. Former Treasury
Secretary Paul O’Neill, for example, described the rapid development of blacklisting and asset freezing
in the post -9/11 context as “setting up a new legal structure to freeze assets on the basis of evidence
that might not stand up in court.… Because the funds would be frozen, not seized, the threshold of
evidence could be lower and the net wider.” 88 As he acknowledged, “freeze” is “something of a “legal
misnomer – funds of Communist Cuba have been frozen in various U.S. banks for forty years.” The
USA also took a unilateral approach in its surveillance of data processed by the SWIFT in ternational
financial transaction system, failing to notify its international partners that it was routinely accessing
personal information about their citizens on a massive scale.
3.3 International law, international development, and global governance
Taken together the FATF’s 40+9 Recommendations and compliance mechanism amount to a
comprehensive set of anti -money laundering and counter -terrorist financing conventions. As noted
earlier, most international bodies in which a number of states participate h ave a formal structure and
constitution contained in a treaty, convention, or other agreement. This is not the case for the FATF,
which is instead seen as a “partnership between governments, accountable to the Ministers of its
member Governments, who give it its mandate.” 89 International lawyers contend that the FATF has
effectively “operated on an ad hoc and temporary basis for the last twenty years” and suggest that if it
is to be a standing body, it should “be properly constituted and established by an international
convention.” 90 This would be a welcome move in terms of addressing th e concerns about
accountability and human rights raised in this report.
The FATF and its 40+9 Recommendations have also had a significant impact on the international
development and global governance agendas. Among the first IGOs to adopt the FATF standard s were
the International Monetary Fund and the World Bank. The G7 states had initially asked the two
organizations to join their anti -money laundering efforts in July 2000, requesting them to prepare a
joint paper on their respective roles in combating mon ey laundering and financial crime. However, at
this time “there was also substantial resistance on the part of many member states, especially the
developing countries, to making AML activities a formal part of Fund and especially Bank
operations.” 91The developing countries did not want the Bank and Fund to generate additional funding
“conditionalities” and some states objected to a lack of expertise on the part of the Fun d and the
Bank, which was among the arguments levelled at the World Bank’s draft handbook on laws relating
to NGOs. After 9/11 this opposition melted away.
The IMF was first to announce the incorporation of the FATF standards into its Financial Sector
Asse ssment Program, and by August 2002 the Executive Boards of both the IMF and World Bank had
formally adopted the FATF recommendations. Together with the FATF, the two organizations also
launched a pilot project to develop “a comprehensive and unified method ology for assessing
implementation of AML/CFT standards,” resulting in the FATF “mutual evaluation” system described in
Section 2.4 (above). 92 With the establishment of effective domestic AML and CFT regimes now
explicitly part of the World Bank’s objectives, it also began to provide technical assistance (TA) to
borrower countries for this explicit purpose. Between 2002 and 2004 the World Bank, together with
the IMF, prov ided TA to 63 individual countries and 32 regional projects. 93 Technical assistance was
directed at the establishment of AML/CFT laws and regulations, capacity building for financial sector
supervisory and regulatory authorities, the establishment of Financial Intelligence Units, training
programs in the public and private sectors, and support for regional FATFs to conduct their own
compliance assessments. The original FA TF members also provided financial support to the newly
established regional FATF formations.
Almost all other bilateral aid development agencies followed the World Bank and IMF into AML/CFT
work, as did most of the other multilateral development banks (in cluding the European, Inter –
American, Asian, and African Development Banks). 94 The UN Counter -Terrorism Committee (CTC)
compiled a Directory of TA providers and the G8 e stablished a dedicated Counter -Terrorism Action
Group to support the CTC and increase donor coordination of TA. 95 In 2003, the FATF regime was also
tied in to the United Nations Convention Against Corruption, which de facto obliged ratifying states to
enact specific FATF recommendations to prevent money laundering. 96
These developments can be situated within three broader trends. The first is the increasing priority
attached to the integration of developing countries into the global economy via the opening of borders
and the harmoniz ation of domestic regulatory regimes. Almost a decade after 9/11, major aid donors
now support the global implementation of the FATF recommendations as a matter of course, through
both bilateral partnerships and multilateral technical assistance channels. The IMF now has a
dedicated AML/CFT “donor -supported trust fund” to finance technical assistance worth more than
$25.3 million, 97 while the “Financial Market Integrity” (AML/CFT) program is an “essential element of
the World Bank’s development mandate.” 98 The idea that poor countries must become trusted places
to do business has been fi rmly implanted on the development agenda; the threat of being branded
“non -compliant” ensures that governments in developing countries accept these requirements in their
attempt to ensure access to development funding and attract private investment.
The se cond trend is the increasing use of aid from countries in the global North to support their
national and international security agendas. 99 While little evidence has been presented to suggest that
these efforts actually benefit poor people in developing countries, Western security and counter –
terrorism demands have moved steadily up the international development agenda over the past
decade. In addition to the IMF and World Bank, the USA and EU have both provided generous financial
support to expand and implement the FATF regime across the world. Critics argue that “rather than
fulfilling their mandate as development agencies,” IGOs have “become instruments in the creation o f
regimes of governance that respond to perceived threats to western security.” 100
It may also be noted that the 40+9 FATF Recommendations have also spawned a growing f inancial
surveillance industry, with many private institutions now reliant on commercial service providers to
ensure that they do not fall afoul of their obligations under national and international
law. 101 International development and philanthropic organizations have been adversely affected by the
burden of compliance as we will examine in more detail later, 102 while companies that supply
sophisticated technologies for law enforcement agencies to identify and analyze suspicious financial
transactions and other datasets have seen their stock soar. 103 In August 2011 the U.S. security firm
Regulatory DataCorprevealed that it held more than one million individuals and organizations in its
“anti -terror” database. 104 The company markets this asset to government and private -sector clients
around the world as an AML/KYC “compliance protection” service. 105
4 FATF Special Recommendation VIII and regulation of the
non -profit sector
This section examines the development and implementation of the FATF’s Special Recommendation
VIII, which states that “Countries should review the adequacy of laws and regulations that relate to
entities that can be abused for the financing of terrorism e. g. Non -profit organizations.” The analysis
shows how SR VIII has been de facto extended by FATF interpretation, guidance, and compliance
mechanisms, significantly expanding the scope of the obligations on states to implement SR VIII and
moving beyond addre ssing possible vulnerabilities in the NPO sector to outright regulation of the
sector as a whole. These policies are potentially highly problematic in states where NPOs are already
viewed with suspicion or hostility by authorities, and where new regulation coincides with already
significant restrictions on the political and operational space of NPOs.
4.1 NPOs and the financing of terrorism
As noted above, the G7 first asserted that NPOs were involved in terrorist financing in 1996, calling for
measures to combat those organizations which falsely “claim to have charitable, social or cultural
goals” or which are also engaged in unlawful activities such as illicit arms trafficking, drug dealing, and
racketeering.” 106 Post -9/11, counter -terrorism policies have since accused some NPOs of supporting
terrorism in two ways: either as fronts for terrorist organizations that raise funds, transfer money, and
provide logistical suppo rt, or as legitimate enterprises that indirectly or directly support the aims of
terrorist organizations. According to the FATF’s 2008 Terrorist Financing “Typologies” Report:
Terror networks often use compromised or complicit charities and businesses to s upport their
objectives. For example, some groups have links to charity branches in high -risk areas and/or under –
developed parts of the world where the welfare provision available from the state is limited or non –
existent. In this context, groups that use terrorism as a primary means to pursue their objectives can
also utilise affiliated charities as a source of financing that may be diverted to fund terrorist attacks
and terrorist recruitment by providing a veil of legitimacy over an organization based on terrorism. 107
This thesis has been accepted and embraced by many national governments. For example, as Gordon
Brown (then UK Chancellor of the Exchequer) said in a spee ch at Chatham House in October 2006,
“We know that many charities and donors have been and are being exploited by terrorists.” 108
The actual extent of the problem is, h owever, strongly contested. A study commissioned by the
European Commission, published in 2008, found “limited abuse of foundations”; 109 the UK Charities
Commission has reported that “actual instances of abuse have proved very rare”; 110 and the U.S.
Treasury has acknowledged that the vast majority of the 1.8 million U.S. charities “fa ce little or no
terrorist financing risk.” 111 The FATF’s own “mutual evaluation” reports also often acknowledge that
terrorist financing in the NPO sector is an insigni ficant or nonexistent problem for the country
concerned, yet somewhat preposterously proceed to propose binding remedies that those states must
implement in order to comply with Special Recommendation VIII (see further below).
According to a recent study c ommissioned by the World Bank, “Despite the energy put into this effort
[combating terrorist financing], we are not aware of examples in which measures proposed by
individual countries in implementing SR VIII and the [Interpretative Note], or similar natio nal
legislation, have resulted in detecting or deterring cases of terrorism financing.” 112 In 2009, the
Working Group on Tackling the Financing of Terrorism of the United Nations Counter Terrorism
Implementation Task Force recommended that “States should avoid rhetoric that ties NPOs to
terrorism financing in general terms, because it overstates the threat and unduly damages the NPO
sector as a whole.” 113
4.2 SR VIII interpretation and guidance
SR VIII as adopted by the FATF plenary in October 2001 clearly li mits the scope of the obligations on
signatory states to “reviewing the adequacy” of their domestic frameworks for NPO regulation to
ensure that the sector cannot be exploited for their purposes of terrorist funding. The full text of SR
Countries should review the adequacy of laws and regulations that relate to entities that can be
abused for the financing of terrorism. Non -profit organizations are particularly vulnerable, and
countries should ensure that they cannot be misused:
(i) by terrorist organizations posing as legitimate entities;
(ii) to exploit legitimate entities as conduits for terrorist financing, including for the purpose of
escaping asset freezing measures; and
(iii) to conceal or obscure the clandestine diversion of funds intended for legitimate purposes to
As suggested above, it would appear logical to link any remedial action as regards NPO regulation to
the outcome of the actual reviews of the adequacy of existing laws and policies. Howe ver, the FATF’s
“Interpretative Note” on SR VIII expressly links the “adequacy” of measures relating to NPOs to a
broader requirement to regulate the sector as a whole in order to “preserve its integrity.” The note
sets out 15 specific measures that states should implement in this regard, including “clear policies to
promote transparency, integrity and public confidence in the administration and management of all
NPOs” and “steps to promote effective supervision or monitoring of their NPO sector.” In practi ce, this
means that all “countries should be able to demonstrate that the following standards apply”:
(i) NPOs should maintain information on:
(1) the purpose and objectives of their stated activities; and
(2) the identity of the person(s) who own, control or direct their activities, including senior officers,
board members and trustees. This information should be publicly available either directly from the
NPO or through appropriate authorities.
(ii) NPOs should issue annual financial statements that provi de detailed breakdowns of incomes and
(iii) NPOs should be licensed or registered. This information should be available to competent
(iv) NPOs should have appropriate controls in place to ensure that all funds are fully accounted for and
are spent in a manner that is consistent with the purpose and objectives of the NPO’s stated activities.
(v) NPOs should follow a “know your beneficiaries and associate NPOs” rule, which means that the
NPO should make best efforts to confirm the i dentity, credentials and good standing of their
beneficiaries and associate NPOs. NPOs should also undertake best efforts to document the identity of
their significant donors and to respect donor confidentiality.
(vi) NPOs should maintain, for a period of at least five years, and make available to appropriate
authorities, records of domestic and international transactions that are sufficiently detailed to verify
that funds have been spent in a manner consistent with the purpose and objectives of the
organiz ation. This also applies to information mentioned in paragraphs (i) and (ii) above.
(vii) Appropriate authorities should monitor the compliance of NPOs with applicable rules and
regulations. Appropriate authorities should be able to properly sanction relev ant violations by NPOs or
persons acting on behalf of these NPOs.
According to the principles of the FATF’s Interpretative Note, these measures should be “flexible” and
“proportionate” so as not to “disrupt or discourage legitimate charitable activities,” but sufficient to:
promote transparency and engender greater confidence in the sector, across the donor community
and with the general public that charitable funds and services reach intended legitimate beneficiaries.
Systems that promote achieving a high degree of transparency, integrity and public confidence in the
management and functioning of all NPOs are integral to ensuring the sector cannot be misused for
Further guidance on the interpretation of SR VIII from the FATF is provided in an “International Best
Practices” document on “Combating the Abuse of Non -Profit Organisations,” first issued in October
2002, which suggests additional measures that states should introduce in order to ensure financial
transparency and oversight. The best practices include detailed guidance on financial accounting,
programmatic verification, and administration by NPOs, as well as the following “oversight”
Law enforcement and security officials should continue to play a key role in the comba t
against the abuse of non -profit organisations by terrorist groups, including by continuing
their ongoing activities with regard to non -profit organisations;
[T]errorist financing experts should work with non -profit organisation oversight
authorities to r aise awareness of the problem, and they should alert these authorities to
the specific characteristics of terrorist financing;
Jurisdictions which collect financial information on charities for the purposes of tax
deductions should encourage the sharing of such information with government bodies
involved in the combating of terrorism (including FIUs) to the maximum extent possible;
[P]rivate sector watchdog[s] or accreditation organisations are a unique resource that
should be a focal point of international efforts to combat the abuse of non -profit
organisations by terrorists. Not only do they contain observers knowledgeable of
fundraising organisations, they are also very directly interested in preserving the
legitimacy and reputation of the non -profit orga nisations. More than any other class of
participants, they have long been engaged in the development and promulgation of “best
A final set of guidance on SR VIII is provided in the Handbook for FATF assessors for the purposes of
mutual evaluati on. Whereas the Interpretative Note and Best Practices suggested a “flexible, effective,
and proportional” approach to NPO regulation, the Handbook simply sets out a dozen criteria with
which states are expected to comply in order to adhere with the Specia l Recommendation. These
concern oversight mechanisms (including the licensing or registration of NPOs and five -year data
retention regimes for NPO accounts), investigative measures (including law enforcement access to this
data), and measures to facilitate cooperation with international police investigations concerning NPOs.
The FATF’s guidance is crucial, because it effectively dictates how states will be evaluated by assessors
and in turn the nature of the recommendations to which non -compliant countries will be subject.
As noted in the introduction, the imposition of extensive regulatory requirements in already repressive
environments carries a significant risk that the freedom of expression and association of NPOs could
be restricted. Licensing and regis tration requirements have already been widely used to prevent the
formation or restrict the activities of critical NGOs. In other cases, it may be counter -productive to
encourage governments to impose such detailed financial transparency requirements and t he routine
monitoring of NPO activities. As lawyer and human rights analyst Patricia Armstrong has explained:
“The development of regulatory systems for NGOs is a complicated process made more so when
approaches are intended to be appropriate in diverse na tional, legal, cultural, political and social
situations. There are no quick or easy solutions. The meaningful involvement of local NGOs is essential
not only to the development of appropriate approaches, but also for the growth and development of
the capa cities of those groups.” 114
The Center on Global Counterterrorism Cooperation (an organization that has worked extensively to
prevent abuse of the non -profit sector for the purposes of terrorist financing) suggests that it is now
“widely accepted that there can be no ‘one -size -fits -all’ approach to regulating non -profit
organizations,” 115 yet this is in essence what the FATF is promoting. In calling for “clear policies to
promote transparency, integrity and public confidence in the administration and management of all
NPOs,” the FATF may have unintentionally given repressive government s a broad mandate to monitor,
disrupt, and coerce charities and NGOs.
4.3 Assessing compliance with SR VIII
In order to better understand the impact of SR VIII, our research examined the mutual evaluation
reports of 159 countries and territories in order to assess compliance ratings and recommended
national actions in respect to SR VIII. 116 The research found that just five countries out of 159
evaluations have been ass essed as “Compliant” – Belgium, Egypt, Italy, Tunisia, and the USA –
meaning that the “Recommendation is fully observed with respect to all essential criteria.” A further
17 countries were found to be “Largely complaint,” meaning “only minor shortcomings, with a large
majority of the essential criteria being fully met.” This included nine FATF member countries (Canada,
China (including Hong Kong and Taipei, which were assessed separately), Denmark, France, Germany,
Netherlands, Spain, Switzerland, and the U K) and eight members of regional FATF bodies (Barbados,
Israel, Oman, Qatar, Saudi Arabia, Singapore, St. Vincent, and the United Arab Emirates). The vast
majority of the 159 mutual evaluation reports that were examined – 85% – designated countries as
only “partially complaint” or “non -compliant.” “Partially compliant” (66 of 159 countries, or 42%)
signifies that the “country has taken some substantive action and complies with some of the essential
criteria”; “non -compliant” (69 of 159 countries, or 43%) me ans “major shortcomings, with a large
majority of the essential criteria not being met.” (It should be noted here that the FATF is currently
nearing the end of its third round of mutual evaluations and many states have now been assessed
twice for complianc e with SR VIII).
Whereas six out of seven of the G7 members are rated as complaint or largely compliant, in South
America, all 21 Financial Action Task Force of South America (GAFISUD) countries were found to be
non -compliant or only partially compliant. I t was the same for 26 out of 28 Caribbean (CFATF)
countries; eight of 10 West African (GIABA) countries; eight of 11 Eastern and Southern Africa Anti –
Money Laundering Group (ESAAMLG) countries; seven out of eight of the Eurasian FATF Group (EAG)
countries; and 24 out of 27 Asia/Pacific FATF Group (APG). 117 The evaluation reports directed the
overwhelming majority of assessed states to introduce stricter regulation of the ir non -profit sectors.
As the following case studies show, however unintentionally, these recommendations can have a
tremendously negative impact in countries where civil society already operates in a politically
restrictive or authoritarian climate.
4.4 Country case studies
The case studies compare the findings of the FATF evaluators with the country assessments of the
International Center for Non -Profit law (ICNL) and other independent observers. 118 Some show a
direct link between FATF country evaluation reports and new national NPO regulations seen to
adversely affect civil society. Others show how the FATF regime is endorsing repressive NPO
regulations and even propo sing new laws and practices where civil society already faces severe
4.4.1 USA: model NPO regulation?
The USA has played a central role in setting the international FATF standards and is one of the few
countries of the world to have been designated “compliant” by that organization in respect to SR
VIII. 119 It also has some of the strictest counter -terrorism -related NPO regulations in the world on its
statute books, and has controversially prosecuted charities for “material support.” In doing so, it has
effectively outlaw ed the provision of any kind of assistance that could be construed as “material
support” to “terrorist” organizations, be it humanitarian assistance for social projects connected to
proscribed organizations, or human rights advice to non -state actors engag ed in armed conflict. Under
U.S. Treasury “Anti -Terrorism Financing Guidelines: Voluntary Best Practices for U.S. Based Charities,”
first issued in 2002, NPOs should also introduce new due diligence practices, including the checking of
all staff against th e national and international terrorist blacklists. 120 The guidelines also recommend
that NPOs certify that they will not “employ or deal with” anyone on these lists by placing conditions
on the funds they provide.
The subsequent adoption of these guidelines by donor organizations led, for example, the American
Civil Liberties Union (ACLU) to return a million -dollar grant to the Ford Foundation. 121 The U.S. Council
on Foundations, together with more than 70 foundations, charities, advocacy organizations, non -profit
associations, and legal advisers, has strongly opposed these measures an d recently withdrew from
any further negotiation with the U.S. Treasury, calling the guidelines “counterproductive” insofar as
“they impose excessively burdensome and impractical barriers to global relationships and
grantmaking.” 122 The Council contends that the “guidelines create confusion about legal requirements
and make wrong assumptions about charitable activity by targeting particular regions or religious
groups.” Research by the ACLU has also found that U.S. terrorism financing policies have undermined
American Muslims’ protected constitutional liberties, violating their rights to freedom of religion,
freedom of association, and freedom from discrimination. The ACL U suggests the policies have
produced a “climate of fear” that chills American Muslims’ “free and full exercise of their religion
through charitable giving, or Zakat, one of the ‘five pillars’ of Islam and a religious obligation for all
observant Muslims.” 123
4.4.2 Burma/Myanmar: FATF evaluation provides cover for clampdown on new social
In July 2008 the Asia -Pacific formation of the FATF (APG) found that Bur ma/Myanmar was only
“partially compliant” with FATF SR VIII. It called upon the Burmese authorities to “Introduce explicit
obligations requiring NPOs to maintain [their] records, for a period of at least five years,” “grant
relevant authorities access to N PO books and accounts,” and “introduce administrative penalties in
respect of non -compliance with reporting obligations or providing misleading information.” 124
In Janu ary 2011, the Burmese Junta announced that it was to increase scrutiny of NGOs’ finances in
an operation led by the national police force’s Department Against Transnational Crime. “The
authorities will check NGOs to see if any of their expenses violate the existing Money Laundering
Control Law. If a group can’t present proper records of their expenditures, it could be dissolved,” said
an interior ministry official. Observers suggest that the operation was aimed at new social
organizations that emerged in Bu rma after Cyclone Nargis struck the country in May 2008, many of
which had yet to officially register as NGOs and are still operating as community -based organizations
with funding from international aid agencies, Western embassies, or donations from overse as
Burmese. 125 As with other evaluation reports, the APG/FATF recommendations to the Burmese
government make no reference to the protection of freedom of association, d espite the country being
well -known for repression and restriction of this fundamental right.
4.4.3 Egypt: “most restrictive NPO regime in world” compliant with SR VIII
Egypt is one of only five out of 159 countries to be designated compliant in respect to SR VIII,
following an inspection by the World Bank in May 2009. 126 Its NGO law has also been described as
“one of the most restrictive in the world.” 127 According to the International Journal of Not -for -Profit
Law , “the provisions dealing with supervision of NGOs and enforcement of the law are vague,
arbitrary, and unnecessarily severe. MOSA [Ministry of Insurance and Social Affairs] has the authority
to dissolve any NGO at any time if finds that the organization i s “threatening national unity” or
“violating public order or morals.” And although any MOSA dissolution order can be appealed in the
administrative courts, an appeal can take several years in Egypt’s backlogged court system. As an
example, the Egyptian Org anization for Human Rights fought MOSA in court for more than ten years.
Although it ultimately prevailed, the well -respected human rights group wasted enormous amounts of
time and money in its decade -long fight for legal recognition.
More worrisome, fro m the standpoint of encouraging civil society, Law 84/2002 imposes
severe individual penalties for non -compliance with the law. These penalties include up to one year in
prison and a fine of up to 10,000 Egyptian pounds for establishing an association that threatens
“national unity” or violates “public order or morals”; up to six months in prison and a fine of up to £E
2,000 for conducting NGO activity “without following the provisions prescribed” by the law, conducting
activity despite a court ruling disso lving or suspending an association, or collecting or sending funds
abroad without MOSA permission; and up to three months in prison and a fine of up to £E 1,000 for
conducting NGO activity without a license from MOSA, affiliating with a foreign NGO network or
association without MOSA permission, or merging with another association without MOSA approval. 128
Following the Revolution in Egypt in 2011, decades of repression and restrictions on civil society have
been cited as a major inhibiting factor for new social movements to achieve adequate representation
in subsequent legal and political processes.
4.4.4 Tunisia: “Highly restrictive regime” endorsed by regional FATF
Tu nisia was another one of the five countries to be rated “compliant” in a 2007 evaluation by
MENAFATF, which noted that regulation of the NPO sector was “very strict and highly restrictive.” 129 In
much the same way as Egypt had, “Tunisia outlaws unlicensed associations, and individuals who
operate or participate in an unlicensed association can be imprisoned or fined. Yet it is impossible for
many CSOs to register and obt ain the required license. Only certain categories of CSOs are permitted
to register, and these do not include human rights or democracy groups. The government also creates
procedural barriers to prevent registration. In particular, the government routinely fails to issue
required receipts to organizations seeking to register, in effect blocking many independent CSOs from
Following the ousting of Ben Ali in the Tunisian Revolution, ICNL warned donors responding to the
humanitarian crisis on Tunisia’s border with Libya that “Staff of Tunisian CSOs who have contact with
foreign governments or organizations could later be prosecuted and face imprisonment if the Tunisian
authorities determine that these contacts have ‘incited prejudice’ against Tunisia’s vital interests,
economic security, or diplomatic relations – broad terms that give the government wide discretion to
target disfavored groups.” 131 Tunisian CSOs have called for a new NPO framework law that respects
the rights to association and assembly and eliminates these and other barriers to philanthropy.
4.4.5 India: FATF d emands tighter regulations; restrictive new Act adopted
In July 2010, a joint FATF/APG inspection found that India was “non -compliant” in respect to FATF SR
VIII. The FATF report called on the Indian authorities to “implement measures to ensure that all NP Os
are licensed and/or registered as such and make this new information available to the competent
authorities”; “ensure that NPOs maintain information on the identity of the persons who own, control
or direct their activities, including senior officers, b oard members and trustees”; “demonstrate that
appropriate measures are in place to sanction violations of oversight measures or rules by NPOs or
persons acting on [their] behalf”; and “undertake comprehensive outreach to the NPO sector with a
view to prote cting the sector from abuse for terrorist financing as well as wider outreach in relation to
good governance and accountability.” 132
The Indian government drew up new r egulations in advance of the publication of the FATF report and
adopted the Foreign Contributions Regulations Act (FCRA) in mid -2010. The FCRA was condemned by
CIVICUS, a global civil society alliance, for allowing broad executive discretion to designate
organizations as being of “political nature” and prevent them from receiving foreign funds. 133 This is
particularly problematic for organizations concerned with issues l ike human rights that rely more
heavily on foreign grants to fund their activities. FCRA also places an arbitrary cap of 50% on the
administrative expenses of an organization receiving foreign funding, while those organizations that
are given permission to receive funding from abroad must reapply for permission from the
government every five years.
4.4.6 Indonesia: New FATF -promoted laws opposed by NGOs
In July 2008 an APG inspection of Indonesia found that country to be “non -compliant” in respect to
FATF SR VIII. While foreign NPOs are subject to special regulations and procedures and required to
register with the Ministry of Home Affairs, the Law on Societal Organisations adopted by the Suharto
government in 1985 as a means of controlling civil society or ganizations had not been applied since
the regime fell in 1998.
In order to comply with FATF SR VIII, the APG called on Indonesia to “institute a process to improve
regulation and oversight of charities as a priority”; conduct a coordinated review of the d omestic NPO
sector; include religious NPOs in effective controls to “improve good governance and ensure AML/CFT
measures are effective in the sector”; “conduct outreach and implement measures to improve
transparency and good governance within the NPO secto r”; “implement measures, including existing
laws relating to Foundations, to ensure that all relevant NPOs operate within the terms of their
registration and make publicly available information on their activities, their office holders and
financial activi ties”; “remove barriers to information sharing between the DG Tax and other NPO
regulators, POLRI, PPATK and other relevant CFT agencies”; and “support improved mechanisms for
information exchange with foreign counterparts.” 134
In 2010 the Indonesian government announced several proposals, including a new law on civil society
organizations (to replace the 1985 Societal Organizations law) and a Bill on the Management of
Islamic Charity (Zakat). At a public hearing on the draft CSO law in June 2011, the Indonesian Centre
for Law & Policy Studies submitted a joint statement from a coalition of NGOs calling on the
government to scrap the bill and simply repeal the defunct Soc ietal Organizations law in order to
guarantee continued freedom of association. 135
4.4.7 Cambodia: Draft NPO law threatens unauthorized groups and organizations
Cambodia was rated partially compliant with FATF SR VIII by the World Bank and APG in July
2007. 136 The evaluation report called on the Cambodian government to adopt a “comprehensive legal
framework to govern the activities of NPOs.”
A draft NPO law was released in August 2010. Following widespread criticism from NGOs and civil
society organizations, a revised draft was produced in March 2011. ICNLreports that reaction t o the
new draft “has been largely critical, as many of the problematic provisions remain … and new concerns
have arisen.” In particular, the draft law limits eligible founding members of both associations and
NGOs to Cambodian nationals, thus excluding ref ugees, stateless persons, and others in Cambodia
from forming associations or domestic NGOs. The draft law also prohibits any activity conducted by
unregistered associations and NGOs; registration is mandatory and unregistered groups are banned.
According to ICNL, “this means that every group of individuals who gather together with a differing
level of frequency and perform the broadest variety of imaginable activities, from trekking and football
fans, to chess and silk weaving groups, will be acting in vio lation of law.” The draft law also “provides
inadequate standards to guide the government’s determination of suspension or termination of an
association or NGO”; there is no requirement for the governmental authorities to provide notice and
an opportunity to rectify problems prior to the suspension or termination. There is no mention of a
right to appeal after suspension or termination. Cambodia’s draft NPO law also “places constraints on
associations and NGOs through notification and reporting requirements ” and “erects barriers to the
registration and activity of foreign NGOs” in “a heavily bureaucratic, multi -staged registration process,
which lacks procedural safeguards.” 137
4.4.8 Russia: NPO regulations “dangerously increase” coercive powers of state
Draft legislation imposing heightened surveillance and re -registration procedures affecting the
450,000 Russian NGOs operating in Russia was passed by the Duma in Novembe r 2005. Many
interpreted the initiative as a reaction to the revolutions in Georgia and Ukraine where NGOs played
an important role. The Council of Europe, the EU Civil Society Contact Group, European politicians and
media commentators, and Russia´s own Pu blic Chamber all expressed concern about the law prior to
its second reading in the Duma. The United States House of Representatives even passed a Resolution
in December 2005, calling for Russia to withdraw the NGO legislation drafts. The EU Civil Society
Contact Group argued that the proposed law would “dangerously increase” the intrusive power of the
state by allowing unprecedented control over independent NGOs; create an overly complicated
registration procedure for NGOs and permit government officials t o deny registration arbitrarily;
subject NGOs to inspections and audits at any time and without limitation; liquidate NGOs unable to
obtain registration; outlaw foreign representative offices; and diminish the necessary checks and
balances intrinsic to a d emocratic society. 138
Despite promises by President Vladimir Putin to change the bill, the legislation was passed in January
2006. Critics argue that the law is uncons titutional and in violation of domestic and international
law. 139 A gay rights organization has been denied registration on the grounds that its work
“undermines the so vereignty and territorial integrity of the Russian Federation in view of the reduction
of the population.” 140
Despite criticism from around the world that the law is overtly repressive and restrictive, a joint
evaluation by FATF, EAG, and MONEYVAL in 2008 found that Russia was only “partially compliant” with
FATF SR VIII and called upon the authorities to set up a more “formalised and efficient
system.” 141 According to ICNL, the existing legislation already “authorizes the government to request
any financial, operational, or int ernal document at any time without any limitation, and to send
government representatives to an organization’s events and meetings (including internal business or
strategy meetings).” 142
4.4.9 Colombia: Regulation needed to ensure compliance with SR VIII
In 2007, a GAFISUD inspection of Colombia found that country “non -compliant” with FATF SR VIII. It
noted the failure to adequately review the sector to assess its vulne rability to terrorist financing and
introduce a uniform regulatory framework for NPOs. 143 According to ICNL, Colombia is “one of the
most dangerous countries in the wor ld in which to be a human rights defender, with dozens of labor
rights activists, lawyers, indigenous activists and community and religious leaders being murdered
every year. In recent years, civil society organizations, mainly human rights NGOs, and their members
have been frequent victims of reprisals and undue restrictions as a result of their work of promoting
and protecting the victims of the armed conflict. On several occasions, the Inter -American Commission
of Human Rights has voiced its concern abou t threats against human rights defenders and members of
civil society organizations. Other forms of violations include: illegal surveillance, smear campaigns and
criminal prosecutions, and violations of the home and other arbitrary or abusive entry to the offices of
human rights organizations, and interference in correspondence and phone and electronic
communication.” 144 While “there are no express legal barriers to operational activities, the subjective
application of regulations by government institutions often produces a disparity between the original
intent of the laws and their present enforcement.” The GAFISUD evalu ation failed to take this political
climate into account or qualify its demands for new NPO regulation with the need for stringent
safeguards guaranteeing freedom of association and expression.
4.4.10 Paraguay: Anti -terrorism law “criminalizes protest”
Pa raguay was rated non -compliant with SRVIII by a GAFISUD inspection in December 2005 on the
grounds that it lacked an adequate framework for combating terrorist financing and regulating
NGOs. 145 In 2007 the government introduced a draft Anti -Terrorist Law and modifications to the penal
code. The proposed anti -terrorist law did not clearly define what constitutes terrorism and included
acts such as “dangerous interventions or obstacles on public roadways,” “noise pollution,” and other
actions which “intimidate Paraguayan citizens.” Under the law, financing terrorist activities is a crime
punishable by five to 15 years in prison, as is any kind of association with terrorist organizations. The
law was seen as a clear attempt to criminalize forms of social protest and clampdown on
NGOs. 146 Despite widespread opposition, the law was passed in 2010. 147 A second law on the
Prevention of Money -Laundering, which extends the range of financial institutions that can be placed
under surveillance and provides the t ools to investigate institutions suspected of financing terrorism,
was also passed, leading to a lifting of sanctions against Panama by the Egmont Group of Financial
Intelligence Units. 148
4.4.11 Uzbekistan: Could do better?
In June 2010, EAG (Eurasian Group on money laundering and terrorist financing) found Uzbekistan
“partially compliant” with SR VIII, noting that the government had established “a comprehensive
integrate d system of monitoring and oversight over the NPO sector” and “that this system can be used
for, inter alia, protection of the sector from FT or ML risks.” EAG nevertheless recommended that
Uzbekistan should “review effectiveness of the established system of control and monitoring of the
NPO sector” for AML/CFT purposes. 149
The Uzbek NPO regulation system is seen by ICNL to have resulted in most foreign and international
NGOs being “closed and expelled from the country” and “a process of re -registration, which led to a
significant reduction in the number of non -governmental organizations” in Uzbekistan. 150 Under the
Administrative Liability Code it is illegal to participate in the activity of an unregistered
organization. 151 One of the last internati onal organizations in Uzbekistan – the representative office of
the Institution of New Democracies in Uzbekistan – was closed by the courts in the spring of 2010.”
Human Rights Watch’s representative office in Uzbekistan was closed down by a court decision the
4.4.12 Saudi Arabia: NPO regulation “outclasses” other jurisdiction
A joint FATF/MENAFATF evaluation of Saudi Arabia in 2010 rated the Kingdom as “largely compliant”
with FATF SR VIII and observed that “the NPO sector appears to be en capsulated in a comprehensive
regulatory and supervisory system that outclasses many other systems of other jurisdictions and that
appears to be rather effective.” 152 What the evaluators fail to stress is that in Saudi Arabia, only
organizations established by royal decree are allowed.
According to ICNL, Saudi regulations impose “multiple barriers to the formation and existence of civil
society organizations”; strictly c onfines civil society organizations to a narrowly construed range of
permissible activities; subject the activities of NGOs to strict monitoring by the Ministry of Social
Affairs and intelligence authorities (if an NGO engages in unapproved activities, the n government
authorities compel the founders of the organization to sign pledges to discontinue these activities);
and require CSOs to obtain prior approval from the Ministry before communicating with regional and
international peer groups. Saudi laws also allow the state to intervene directly in the internal affairs of
non -governmental organizations. 153
4.4.13 Sierra Leone: World Bank demands new NPO regulations
In June 2007, an FATF mutual evaluation conducted by the World Bank found Sierra Leone to be non –
compliant with SR VIII and called upon the government to introduce a “legal framework for the
regulation of NPOs” and “dissuasive and proportionate” sanctions for organizations that fail to comply
with the regulations. 154 The Government of Sierra Leone duly enacted the Revised NGO Policy
Regulations in 2009, subjecting civil society organizations to increased interference from Government
and other state agencies.
According to ICNL, NGOs in Sierra Leone are defined as having the primary objective of “enhancing
the social, environmental, cultural and economic well being of comm unities.” They are therefore
restricted from engaging in political and human rights advocacy. NGOs must also sign an Agreement
with the Government of Sierra Leone before they can commence operations; this is interpreted to
mean that every project implement ed in Sierra Leone by NGOs must be approved by the sectoral
ministry concerned and by the Ministry of Finance and Economic Development. No project shall be
implemented by an NGO in the country without prior state approval. NGOs are subject to stringent
rep orting and supervisory requirements and must submit annual reports for all projects implemented
and details of “all funds committed by donors for project implementation.” NGOs are subject to site
visits without prior notice. The NGO Policy also states that all assets purchased or acquired with donor
funds should be the property of the people of Sierra Leone who are the beneficiaries – rather than of
the NGO itself. Finally, NGOs are subject to sanctions (which could include cancellation of duty -free
concess ions and/or suspension or cancellation of certificate of registration) for failing to comply with
the provisions of the NGO Policy, for acting in contravention of its stated objectives, and where the
“NGO shows by its nature, composition and operations ove r the years that it is not
developing/promoting the capacity of Sierra Leoneans in the management of its operations.” 155
4.4.14 European Union: Attempt to introduce bi nding NPO regulations rebuffed
In 2005 the European Commission proposed a draft Code of Conduct for Non -Profit Organisations to
prevent the sector from being abused by terrorist organizations and comply with FATF SR
VIII. 156 Member State governments meeting in the Council of the EU endorsed the draft Code without
A public c onsultation was also launched and a coalition of European NGO platforms called on
governments to reject the draft code on the grounds that the European sector “already has inherent
mechanisms of transparency and accountability and is already subject to nat ional legislation and
control.” It added that “Unless evidence is advanced to the contrary, strong doubts are justified as to
whether this initiative is proportionate to the actual threat … while aiming at tackling what has not
been demonstrated to be more than a marginal phenomenon, it could end up raising suspicion on the
broader NPO sector and have very serious counter -productive effects.” 158
Following further critici sm, the Code appeared to have been withdrawn and the European Commission
decided instead to fund two studies: one examining the extent of criminal abuse of NPOs, 159 the other
examining self -regulatory initiatives. 160 The studies confirmed what the coalition of NGO platforms had
suggested: the problem of terrorist abuse of NPOs in Euro pe was extremely rare and existing
standards of transparency and accountability were largely sufficient.
Nonetheless, in 2009, a demand for “legal standards for charitable organisations to increase their
transparency and responsibility so as to ensure com patibility with Special Recommendation (SR) VIII
of the Financial Action Task Force (FATF)” appeared in the draft legislative programme of the EU for
2010 -14. 161 More c oncerted advocacy from European civil society organizations followed and the
proposal was restricted to “promot[ing] increased transparency and responsibility for charitable
organisations with a view to ensuring compatibility with [SRVIII].” 162
In 2010 the European Commission issued “voluntary guidelines” for European NPOs; 163 these too
were strongly criticized by civil society organizations which described them as wholly
unnecessary. 164 All 27 EU member states have been subject to the mutual evaluation process with
regards to FATF SR VIII. Only two countries are deemed “compliant,” six are “largely compliant,” 12
are “partially compliant” and seven are “non -compliant.”
5 Conclusions and Recommendations
5.1 A contradictory approach
The positiv e roles that many civil society groups across the world play in protecting and providing
services to marginalized communities, combating racism and discrimination, promoting human rights
and social justice, holding governments, corporations and IGOs to acc ount, demanding democracy and
transparency, challenging inequality, and educating the public, are widely recognized and lauded.
Outside the framework of the War on Terror, the U.S. State Department has called on other states to
allow NGOs to function in an environment free from harassment, intimidation, and discrimination; to
receive financial support from domestic, foreign, and international entities; and called for laws
regulating NGOs to be applied apolitically and equitably. 165 Last year the United Nations created the
first ever Special Rapporteur on Freedom of Assembly and Association to defend civil society.
Welcoming the initiative, the U.S. government announced th at it “will continue our leading effort to
expand respect for this fundamental freedom for civil society members and other individuals all over
the world.” 166
The top -down and over -broad approach to the regulation of civil society in the name of countering
terrorism, strongly promoted by U.S. governments and the Financial Action Task Force, clearly
contradicts these values and principles. The FATF is not, of course, resp onsible for the outright
repression of civil society in the countries discussed above (the governments and agencies of those
countries are). But what the research demonstrates is that, in its current form, FATF SR VIII is a
danger to civil society organiza tions in many parts of the world, because it incites governments to
introduce onerous rules and regulations, subject NPOs to excessive state surveillance, and interfere in
or restrict the activities of CSOs. While this was surely not the intention of the G roup of Seven justice
ministers who called for the establishment of the FATF, or the Group of Eight finance ministers who
called for measures to tackle terrorist financing in the immediate aftermath of 9/11, that is what the
FATF process has resulted in. A n innocuous sounding recommendation on reducing the vulnerability of
the NPO sector to exploitation by terrorist financiers from an obscure intergovernmental body has
been interpreted, expanded, and enforced in a way that threatens to impose a rigid global framework
for state regulation of NPOs.
A growing body of research has documented the way in which many less developed and less
democratic states already make it very difficult for NPOs to operate without undue restraint; many of
their governments now hav e the express endorsement of the FATF, World Bank, or IMF to introduce or
expand regulatory frameworks that facilitate their intrusions into activities of NGOs and civil society
organizations. The plethora of rules and regulations regarding due diligence a nd the proactive
disclosure of suspicions about terrorist links has also made it much more difficult for international
NGOs and donor organizations to work in conflict zones and with “suspect communities.” In a climate
in which European and North American development budgets already face the dual pressures of
budget cuts and securitization, the perceived dangers of doing development work in countries where
NPOs are vulnerable to terrorist abuse has already contributed to decisions by donors to pull out of
supposedly “high -risk” or “non -compliant” countries. This can only have negative consequences for
social justice and conflict resolution initiatives that had previously benefited from projects supporting
grass -roots and community organizations and engaging marginalized stakeholders.
5.2 Rethinking SR VIII
The legitimacy of the SR VIII regime rests on its proportionality: is the framework for NPO regulation
elaborated by the FATF commensurate to the actual threat of terrorist exploitation of non -profit
organ izations? The available evidence certainly does not support the proposition that terrorist
financing is a major problem across the world. The FATF has taken a sledgehammer to crack the
proverbial nut. Its approach appears both disproportionate and ultra vi res withSR VIII going beyond
its remit of reviewing the adequacy of laws to address potential vulnerabilities of NPO sectors to abuse
by terrorism, to requiring states to regulate their NPO sectors as a whole. A serious debate about the
purpose, impact, an d future of SR VIII is necessary in the light of the serious threats to civil society
described above. This debate should give careful consideration to the options open to FATF member
states, including repealing or reforming SR VIII.
Given the already substantive and onerous obligations on states and private entities to enact a whole
host of measures designed to prevent terrorist financing – many of which are set out in other FATF
Recommendations and UN Security Council Resolutions – there are strong arguments that FATF SR
VIII is not needed at all. Assuming that states meet their financial surveillance, criminal law, and
police cooperation obligations, they should have all the powers they need to investigate and prosecute
terrorist fin ancing regardless of the status of the perpetrator. As a 2010 report by the World Bank
suggested: “The rarity of instances of terrorism financing by NPOs, when contrasted against the
enormous scope of the sector, does raise the question of whether, in and of itself, government
regulation is the most appropriate response. To be clear, this is not to belittle the significance of the
issue; rather, it is to question the nature of the response.” 167 In this context the FATF might simply
restrict the scope of SR VIII to its apparently original purpose; in other words limiting the obligation
on states to the review of their own NPO sectors for vulnerability of terrorist financin g (see Section 4).
This would require wholesale changes to the FATF’s guidance and compliance regime. If terrorist
financing by NPOs is found to be a bona fide problem in specific countries, then advice on how to deal
with it may be provided the FATF and ot her expert organizations.
In imposing a package that amounts to wholesale NPO regulation in order to serve an international
law enforcement agenda, the FATF has also disregarded the great strides toward transparency and
accountability already taken by NPO sectors in many countries. State -centric approaches also ignore
the positive role that NPOs can play in both assessing measures to prevent terrorist financing and
ensuring that any new regulations does not adversely affect others in civil society. The FATF ’s
approach to the NPO sector contrasts with that taken toward the banking and financial services
sectors, which have long had observer status at the FATF and play a very active role in the
development and implementation of FATF recommendations. It is diff icult to understand why the
recommendation, guidance, and evaluation criteria for SR VIII have all been drawn up by the FATF
without any open consultation or structured input from concerned NPOs.
If SR VIII is to be maintained, substantial safeguards are urgently required to protect freedom of
expression and association and to prevent undue restrictions on the operational space of civil society
organizations and human rights defenders. Among the mo st alarming findings of this research was the
failure on the part of the FATF – an intergovernmental policy forum with global reach – to adequately
mainstream human rights concerns into any of its 40+9 Recommendations.
International human rights law requir es the FATF to ensure that all of its recommendations and
guidance pay due regard to the appropriate minimum standards of protection set out in international
conventions, protocols, and jurisprudence. Yet there is nothing in the FATF’s evaluation and
asses sment guidance to suggest that the rights to freedom of association and expression of NPOs
should be expressly guaranteed, or indeed any other enforceable safeguards against the kind of
excessive regulation described above. Moreover, it was also apparent f rom the evaluation reports that
the inspection teams lacked the mandate and expertise to address NPO regulation in a manner
consistent with international human rights law.
In response to growing concerns about human rights violations arising from the imple mentation of
Security Council resolutions on the prevention of terrorism, the United Nations Counter -Terrorism
Executive Directorate (CTED) is now obliged to “ensure that all human rights issues relevant to the
implementation of [Security Council] resoluti ons [on counter -terrorism] are addressed consistently
and even -handedly.” 168 Why not subject the FATF counter -terrorism mandate to the same standards?
Careful thought m ust be given to whether the FATF is an appropriate body to be promoting and
enforcing standards of NPO regulation throughout the world. If it is to continue in this vein, then it
must urgently introduce specific safeguards based on international laws prote cting the right of
individuals to form, join, and participate in civil society organizations. The World Movement for
Democracy and the International Center for Not -for -Profit Law “Defending Civil Society Project” have
developed six principles to protect ci vil society from excessive regulation and undue political and legal
interference. 169 The principles reflect the way in which international law protects the rights to fr eedom
of association, to operate free from unwarranted state interference, to free expression, to
communication and cooperation, to seek and secure resources, and places a duty on states to protect
the rights of civil society. Judged against these benchmar ks, it is SR VIII itself that appears “non –
compliant.” The newly appointed Special Rapporteur on Freedom of Assembly and Association could
surely provide guidance to the FATF on this matter.
5.3 The need for a broader debate about the FATF
The FATF emerge s as a powerful policy -making and enforcement body with global reach. This raises
important questions about the kind of regulation and democratic control to which the FATF’s activities
should be subject. The introduction to this report employed several del iberately provocative concepts
to highlight several specific problems. Whether one agrees or not with the concept of “policy
laundering,” the fact remains that the highly coercive and technocratic frameworks for financial
surveillance, combating money laun dering, and combating terrorist financing have been firmly
implanted on the international counter -terrorism and global governance agendas in the absence of any
real debate about their impact outside of the financial services sector. And whether or not one accepts
or rejects the premise of “global enforcement regimes,” a series of decisions adopted in the six weeks
after 9/11 have had far -reaching implications in terms of globalising the FATF and effectively imposing
a set of G7 standards upon the rest of th e world.
The FATF’s compliance framework, developed out of the World Bank and IMF financial sector
assessment programs, means that states’ obligations under the 40+9 Recommendations now exceed
the scope of those under comparable intergovernmental law enfor cement conventions. It matters that
the FATF is not regulated by any formal legal agreement, because crucial debates about its mandate,
powers, and activities have been avoided. It was the emergence of this kind of ad hoc alternative to
traditional forms o f so -called “liberal intergovernmentalism” that gave rise to the concept of policy
laundering in the first place. The absence of important debates about adequate democratic control of
the FATF and public accountability is reflected in a mandate that is con cerned almost solely with the
needs of law enforcement agencies above other values and principles, and a Secretariat that is
unwilling to even disclose the nationality of the seven governments which sit on the FATF’s Steering
In addition to the spec ific human rights concerns around SR VIII, the FATF has also failed to augment
its financial surveillance mechanisms with dedicated data protection regimes governing “suspicious”
transactions reports and the activities of Financial Intelligence Units. 170 Beyond the urgent need to re –
think SR VIII, there should be a much broader debate about the future regulation and control of the
FATF, its legal status, its enforcement regime, its compliance with international human rights
standards, and its mechanisms for enhanced accountability and transparency.
1. The FATF should recognise the crucial role of civil society in developing effective and
proportionate co unter -terrorism policies, as set out in United Nations Security Council
Resolutions, and begin an active dialogue on SR VIII with NPOs and human rights
experts as a matter of urgency.
2. This dialogue should assess the legitimacy, scope, and interpretation of FATF Special
Recommendation VIII with a view to substantial reform, including the introduction of
adequate protections for civil society.
3. The FATF should limit compliance assessments for SR VIII to countries where there is a
demonstrable problem of terror ist financing by NPOs.
4. In accordance with the Recommendations of the Working Group on Tackling the
Financing of Terrorism of the United Nations Counter Terrorism Implementation Task
Force, states and IGOs should avoid rhetoric that ties NPOs to terrorism f inancing in
general terms, because it overstates the threat and unduly damages the NPO sector as a
5. Experts should assess the compliance of all 40+9 Recommendations with international
human rights and data protection laws and conventions with a view to incorporating the
necessary protections into FATF guidance, best practices, and evaluations of member
6. Member countries should consider appropriate mechanisms to improve the democratic
control, public accountability, and legal regulation of the F ATF. At a minimum, this should
include a formal international agreement regulating the powers and activities of the
FATF, transparent rules and procedures around decision -making, and measures to
facilitate the public’s right of access to FATF information.
1 Ben Hayes is Project Director at Statewatch and a Fellow of the Transnational Institute. He also
works as a researcher or consultant to several international organizations, including Cordaid, the
European Center for Constitutional and Human Rights, and the European Commission.
The author wishes to thank Cordaid for supporting this research. In particular he would like to thank
Lia van Broekhoven, Fulco van Deventer, and Paul van den Berg for their inspiring approach to
protecting the political space of civil society organizations, their constructive critique of the global
counter -terrorism framework and their helpful comments on earlier drafts of this paper. He would also
like to thank colleagues at Statewatch for supporting earlier research into the imp act of counter –
terrorism laws on non -profits and Nick Buxton, Tom Blickman, and Fiona Dove of the Transnational
Institute for editing and comments on the paper. Finally, thanks to the Stephen Pittam of the Joseph
Rowntree Charitable Trust for encouraging S tatewatch to think critically about these issues in the first
This article is excerpted with permission from a study commissioned by Cordaid and published by the
Transnational Institute and Statewatch.
2 Howell, J. (2010) “ Civil Society, Aid, and Security Post -9/11 ” in International Journal of Not -for –
Profit Law , vol. 12 no. 4.
3 Hosein, I. (2003) “ On In ternational Policy Dynamics: Challenges for Civil Society ”
in Spreading the Word on the Internet . Vienna: Organisation for Security and Cooperation in Europe.
4 Policy Laundering Project (2005), The Problem of Policy Laundering .
5 Proponents of “liberal intergovernmentalism” broadly reject these arguments on the grounds that
national governments have an “equal stake” in IGO decision -making fora and that as such their
decisions are ac countable at the national level. However, as Kovach observes, “even this limited form
of accountability is extremely precarious when stretched to the global level. This is because, first, it
relies on the caveat that all member states of IGOs are democrati cally elected, which is plainly not the
case. Second, it ignores the differential degrees of power given to member nation states within the
internal governance structures of IGOs. Very few IGOs are based on the principle of one member, one
vote. Most privi lege a minority of nation states, giving them far greater decision -making power at the
expense of others. The result is that a small minority of citizens, by virtue of their national identity,
have far greater access to accountability than others. Finally, it ignores the need for citizens to have
access to information in order to exercise their accountability rights. Intergovernmental decision –
making is often opaque and private, preventing citizens from ever finding out what position their
governments have taken within a given IGO and hence holding them to account.” See Kovach, H
(2006) “Addressing Accountability at the Global Level: The Challenges Facing International NGOs” in
Jordan, L. & van Tuijl, P. (eds) NGO Accountability: Politics, Principles and Inn ovations . London:
Earthscan (pp. 195 -210). Research into IGOs based on “policy network theory” further suggests that
these structures routinely privilege certain interests in setting the policy agenda, limit participation in
the decision -making process, de fine the roles of specific actors (thereby shaping their behavior), and
effectively substitute public accountability for private government. See for example Rhodes, R. A. W.
(2002) Understanding Governance: Policy Networks, Governance, Reflexivity and Acco untability .
London: Open University Press.
6 Transnational Institute (2005) “ Global Enforcement Regimes Transnational Organised Crime,
International Terrorism and Money Laundering ,” TNI Crime and Gl obalisation seminar ,
Amsterdam, 28 -29 April 2005.
7 These are the Single Convention on Narcotic Drugs of 1961 (as amended by the 1972 Protocol), the
Convention on Psychotropic Substances of 1971 and the Convention against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances of 1988.
8 These are the Convention on Offences and Certain Other Acts Committed On Board Aircraft of 1963,
the Convention for the Suppression of Unlawful Seizure of Aircraft of 1970, the Convention for the
Suppression of Unlawf ul Acts against the Safety of Civil Aviation of 1971 (as amended by the 1988
Protocol), the Convention on the Prevention and Punishment of Crimes Against Internationally
Protected Persons of 1973, the International Convention against the Taking of Hostages of 1979, the
Convention on the Physical Protection of Nuclear Material of 1980, the Convention for the Suppression
of Unlawful Acts against the Safety of Maritime Navigation of 1988 (as amended by the 2005
Protocol), the Protocol for the Suppression of Un lawful Acts Against the Safety of Fixed Platforms
Located on the Continental Shelf of 1988 (as amended by the 2005 Protocol), the Convention on the
Marking of Plastic Explosives for the Purpose of Detection of 1991, the International Convention for
the Sup pression of Terrorist Bombings of 1977, the International Convention for the Suppression of
the Financing of Terrorism of 1999, and the International Convention for the Suppression of Acts of
Nuclear Terrorism of 2005.
9 That is the Convention against Transnational Organized Crime of 2001 and the Protocol to Prevent,
Suppress and Punish Trafficking in Persons, Especially Women and Children, the Protocol against the
Smuggling of Migrants by Land, Sea and Air, and the Protoc ol against the Illicit Manufacturing and
Trafficking in Firearms, Their Parts and Components and Ammunition.
10 Council of Europe Convention on Cybercrime, 2001.
11 See further Rees, W. (2006) Transatlantic Counter -terrorism Co -operation: The New Imperative .
12 Scheiber, C. (2006) “Hard Coercion through Soft Law? The Case of the International Anti -Money
Laundering Regime,” Paper presented at the annual meeting of the Internatio nal Studies Association ,
San Diego, 22 March 2006.
13 Martin Scheinin, former UN Special Rapporteur on Counter -terrorism and Human Rights, for
example, described UN Security Council Resolution 1373 (which placed substantive counter -terrorism
obligations on United Nations members after 9/11) in the following terms: “To put it bluntly, while
international terrorism remains a very serious threat and constitutes a category of atrocious crime, it
is not generally and on its own a permanent threat to the peace wi thin the meaning of Article 39 of
the Charter and does not justify exercise by the Security Council of supranational quasi -judicial
sanctioning powers over individuals or of supranational legislative powers over Member States.” See
“Rapporteur Says Neither of Existing Regimes Has Proper Legal Basis; Committee Also Hears Experts
on Freedom of Opinion; Human Rights and Corporations,” Minutes of the Sixty -fifth General Assembly,
Third Committee, 30th & 31st Meetings (AM & PM).
14 Kovach, H (2006) “Addressing A ccountability at the Global Level: The Challenges Facing
International NGOs” in Jordan, L. & van Tuijl, P. (eds) NGO Accountability: Politics, Principles and
Innovations . London: Earthscan (pp. 195 -210).
15 See for example “ Publish What You Fund ,” Global Campaign for Aid Transparency website.
16 International Aid Transparency Initiative website.
17 Charnovitz, S. (2006) “Accountability of Non -Governmental Organizations in Global Governance” in
Jordan, L. & van Tuijl, P. (eds) NGO Accountability: Politics, Principles and Innovations . London:
Earthscan (pp. 21 -42).
18 “NGOs —The Growing Power of an Unelected Few ,” undated American Enterprise Institute
19 See NGOWATCH website.
20 Bloodgood, E. A. and Tremblay -Boire, J. (2010), “ NGO Responses to Counterterrorism
Regulations After September 11th ” in International Journal of Not -for -Profit Law , vol. 12 no. 4.
21 Edwards M. (2 006) Foreword to Jordan, L. & van Tuijl, P. (eds) NGO Accountability: Politics,
Principles and Innovations . London: Earthscan (pp. vii -ix).
22 Jordan, L. & van Tuijl, P. (2006) “Rights and Responsibilities in the Political Landscape of NGO
Accountability: Introduction and Overview” in Jordan, L. & van Tuijl, P. (eds) NGO Accountability:
Politics, Principles and Innovations . London: Earthscan (pp. 3 -20). As the authors explain, “an NGO
will be in a much better position to address accountability demands in an environment that is free,
democratic and conducive to civic action, as opposed to a situation in which an authoritaria n regime is
repressing the basic freedoms of association, assembly and expression. Similarly, myriad issues arise
around an NGO’s responsibility when it operates in an environment where democratic institutions and
practices are not fully formed. NGO accoun tability thus inevitably leads to discussing issues of human
rights and democracy, not merely from a conceptual perspective, but as a basic human condition that
either allows or prohibits individuals from associating with each other to promote their legiti mate
interests” (page 5).
23 International Center for Not -for -Profit Law and World Movement for Democracy (2008) Defending
Civil Society .
24 Tiwana, M. and Be lay, N (2010), Civil Society: The Clampdown is Real – Global Trends 2009 –
2010 , CIVICUS World Alliance for Citizen Participat ion.
The G7 countries are Canada, France, Germany, Italy, Japan, UK, and USA. Following the inclusion of
Russia in 1994 the group met as the P8 until 1997, when Russia formally joined and the G7 became
“Summit Declaration ,” G7 meeting , 14 -16 July 1989, Paris. The “EU15” consisted of Belgium,
France, Germany, Italy, Luxembourg, Netherlands, Ireland, Denmark, UK, Greece, Portugal, Spain,
Austria, Sweden, and F inland.
The Gulf Cooperation Council members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United
25 The G7 countries are Canada, France, Germany, Italy, Japan, UK, and USA. Following the inclusion
of Russia in 1994 the group met as th e P8 until 1997, when Russia formally joined and the G7 became
26 “Summit Declaration ,” G7 meeting , 14 -16 July 1989, Paris.
27 The “EU15” consisted of Belg ium, France, Germany, Italy, Luxembourg, Netherlands, Ireland,
Denmark, UK, Greece, Portugal, Spain, Austria, Sweden, and Finland.
28 The Gulf Cooperation Council members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United
29 For a full list see “ Members and Observers ,” FATF -GAFI website.
30 See Asia/Pacific Group on Money La undering website.
31 See Caribbean Financial Action Task Force website.
32 See Eurasian Group on money laundering and terrorist financing webs ite.
33 See Eastern and Southern Africa Anti -Money Laundering Group website.
34 See Financial Action Task Force on Money Laundering in South America website.
35 See Inter Governmental Action Group against Money Laundering in West Africa website.
36 See Middle East and North Africa Financial Action Tas k Force website.
37 See Council of Europe Committee of Experts on the Evaluation of Anti -Money Laundering
Measures and the Financing of Terrorism website.
38 See Organisation for Economic Co -operation and Development website.
39 “About the FATF ,” FATF -GAFI website.
40 See FATF -GAFI website.
41 House of Lords European Union Committee (2009) Nineteenth Report, Session 2008 -09, Money
laundering and the financing of terrorism , (see paragraph 27).
42 “FATF Revised Mandate 2008 -2012 ,” Financial Action Task Force .
43 “Mandate for the Future of the FATF (September 2004 – December 2012) ,” Financial Action
Task Force .
44 “FATF Revised Mandate 2008 -2012 ,” Financial Action Task Force .
45 “Consultation on Proposed Changes to the FATF Standards: Compilation of Responses
from NGOs and Individuals ,” Financial Action Task Force .
46 For an explanation of the new numbering system, see pp. 4 -5, FATF (2012) International
Standards on Combating Money Laundering and the Financin g of Terrorism and
Proliferation: The FATF Recommendations .
47 “Publications & Documents : Best Practices ,” FATF -GAFI website.
48 The 23 countries were The Bahamas, Cayman Islands, Cook Islands, Dominica, Israel, Lebanon,
Liechtenstein, Marshall Islands, Nauru, Niue, Panama, Philippines, Russian Federation, Saint Kitts and
Nevis, Saint Vincent and the Grenadines, Egypt, Grenada, Guatemala, Hungary, Indonesia, Burma,
Nigeria, and Ukraine.
49 “Improving Compliance with the International Standards ,” FATF -GAFI website.
50 Since 20 09 the FATF has issued statements noting concerns and encouraging greater compliance by
Iran, Pakistan, Turkmenistan, Uzbekistan, North Korea, São Tomé, and Príncipe. Only Iran and North
Korea are currently listed as “High risk and non -cooperative jurisdic tions” in “ FATF Statement, 25
February 2011 ,” Financial Action Task Force .
51 “Mutual Evaluations Programme ,” FATF -GAFI website.
52 “AML/CFT Evaluatio ns and Assessments: Handbook for Countries and Assessors ,” Financial
Action Task Force Reference Document, April 2009.
53 “Third Round of AML/CFT Mutual Evaluations: Process a nd Procedures ,” Financial Action
Task Force Reference Document, October 2009 . See also “ Methodology for As sessing Compliance
with the FATF 40 Recommendations and the FATF 9 Special Recommendations ,” Financial
Action Task Force Reference Document , 27 February 2004 (Updated as of February 2009).
54 “AML/CFT Evaluations and Assessments: Handbook for Countries and Assessors ,” Financial
Action Task Force Reference Document, April 2009.
55 “FATF 40 Recommendations ,” Financial Action Task Force Reference Standards, October 2003
(incorporating all subsequent amendments until October 2004).
56 EU Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the
financial system for the purpose of money laundering Directive 91/308/EC
57 Actual knowledge or suspicion on the part of the “non -disclosee” is not required, nor apparently
need it be proved that actual money laundering took place. See Murphy, P. (2004) Blackstone’s
Criminal Practice . Oxford: Oxford University Press, page 835.
58 EU Directive 2001/97/EC of the European Parliament and of the Council of 4 December
2001 amending Council Directive 91/308/EEC on prevention of the use of the financial
system for the purpose of money laundering .
59 EU Directive 2005/60/EC of the European Parliament and of the Council of 26 October
2005 on the prevention of the use of the financial system for the purpose of m oney
laundering and terrorist financing .
60 Regulation 1889/2005/EC of the European Parliament and of the Council of 26 October
2005 on controls of cash e ntering or leaving the Community .
61 Regulation (EC) No 1781/2006 of the European Parliament and of the Council of 15
November 2006 on information on the payer accompanying transfers of funds .
62 “FATF Recommendation 26: Competent authorities, their powers and resources ,” FATF –
GAFI webs ite.
63 The Egmont Group took its name from the Egmont Arenberg Palace in Brussels, where the group
first met. For more information see Egmont Group of Financial Intelligence Units website and
International Monetary Fund and World Bank (2004) Financial Intelligence Units: An Overview .
64 EU Council Decision of 17 October 2000 concerning arrangements for cooperation
between financial intelligence units of the Member States in respect of exchangi ng
information (2000/642/JHA) .
65 “Financial Crime ,” European Commission website.
66 “The UK Financial Intelligence Unit ,” Serious Organised Crime Agency website
67 House of Lords European Union Committee (2009) Nineteenth Report, Session 2008 -09, Money
laundering and the financing of terrorism , (see paragraph 288).
68 Rapporteur on the promotion a nd protection of human rights and fundamental freedoms while
countering terrorism (2009) Report on the right to privacy (p. 2).
69 Council of Europe C ommissioner for Human Rights (2008) Protecting the right to privacy in the
fight against terrorism . CommDH/IssuePaper(2008)3 .
70 “Ottawa Ministerial Declaration on Countering Terrorism ,” G8 Ottawa Ministerial Meeting on
Terrorism, 12 December 1995.
71 “Agreement on 25 Measures ,” G8 Ministerial Conference on Terrorism , Paris, 30 July 1996.
72 “Measures to eliminate international terrorism ,” United Nations General Assembly
Resolu tion (A/RES/51/210), 88th plenary meeting, 17 December 1996.
73 International Convention for the Suppression of the Financing of Terrorism adopted by
the General Assembly of the United Natio ns in resolution 54/109 of 9 December 1999 .
74 Article 7 , United Nations Convention against Transnational Organized Crime adopted by
the General Assembly of the United Nations in resolution 55/25 of 15 December 2000 .
75 The National Money Laundering Strategy for 1999 , Departments of the Treasury and Justice of
76 Resolution 1267 adopted by the Security Council at its 4051st meeting on 15 October
1999 (S/RES/1267 ).
77 See Sullivan G. and Hayes, B. (2009) Blacklisted: Targeted sanctions, preemptive security
and fundamental r ights . Berlin: European Center for Constitutional and Human Rights.
78 Statement by the leaders of the G8 over last week’s terrorist attacks in New York and
Washington , 19 September 2001.
79 Statement of G7 Ministers of Finance , September 25, 2001.
80 “Executive Order 13224,” Office of the Coordinator for Counterterrorism, U.S. Department of
Stat e website.
81 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism ( USA PATRIOT ACT) Act of 2001 .
82 Eckes, C. (2009) EU Counter -Terrorist Policies and Fundamental Rights: The Case of Individual
Sanctions . Oxford: Oxford University Press, page 16.
83 Sullivan G. and Hayes, B. (2009) Blacklisted: Targeted sanctions, preemptive security and
fundamental rights. Berlin: European Center for Constitutional and Human Rights.
84 de Goede, M. (forthcoming 2011) “Blacklisting and the Ban: Con testing targeted sanctions in
Europe” in Security Dialogue 45 (5), December 2011.
85 Statement of the G7 Finance Ministers and Central Bank Governors , 6 October 2001,
86 “Text of US letter from Bush with demands for EU for cooperation ,” Statewatch News online ,
87 “9 Special Recommendations (SR) on Terrorist Financing (TF) ,” FATF -GAFI website.
88 Cited in Suskind, R. (2004) The Price of Loyalty . New York: Simon & Schuster, page 192. Almost a
decade after these measures were adopted, the asse ts belonging to hundreds of blacklisted individuals
remain frozen and their lawyers have still not been able to access the evidence against them.
89 House of Lords European Union Committee (2009) Nineteenth Report, Session 2008 -09, Money
laundering and the financing of terrorism (see paragraph 17).
90 Professor Peter Alldridge , Head of the School of Law at Queen Mary, University of London (see
91 Williams, D. (2008) “ Governance, Security and ‘Development’: the case of money
laundering ,” City University Working Papers on Transnational Politics , Working Paper CUTP/001,
February 2008, pages 10 -11.
92 “Combating the Financing of Ter rorism: First Year Report ,” G7 Press Release , 27 September
93 See Williams, D. (2008) in above citation, pages 11 -12.
94 See Williams, D. (2008) in above citation, pages 12 -13. See also, for example, “ Manual on
Countering Money Laundering and the Financing of Terrorism ,” Asian Development Bank ,
95 See “ Technical Assist ance ,” United Nations Security Council Counter -Terrorism
Committee website. See also Rosand, E. (2009) “ The G8’s Counterterrorism Action
Group ,” Center on Global Counterterrorism Cooperation , May 2009.
96 Article 14, United Nations Convention against Corruption adopted by the General Assembly
of the United Nations in Resolution 58/4 of 31 October 2003 . See furth er “ Legislative guide
for the implementation of the United Nations Convention against Corruption ,” United Nations
Office on Drugs and Crime Division for treaty Affairs , 2006.
97 Canada, France, Japan, Korea, Kuwait, Luxembourg, the Netherlands, Norway, Qatar, Saudi Arabia,
Switzerland, and the United Kingdom have committed $25.3 million over five years. See “ Factsheet:
The IMF and the Fight Against Money Laundering and the Financing of Terrorism ,” August 31,
2011, International Monetary Fund website.
98 Financial Market Integrity , World Bank website.
99 Cortright et al. (201 1) Friend Not Foe: Opening Spaces for Civil Society Engagement to
Prevent Violent Extremism . Report to Cordaid byFourth Freedom Forum and the Kroc Institute for
International Peace Studies.
100 On the contrary, it is argued that evidence suggests that the focus on establishing AML and CFT
regimes actually diverts funding away from development. See Williams, D. (2008) “ Governance,
Security and ‘Development’: the case of money laundering ,” City University Working Papers on
Tra nsnational Politics , Working Paper CUTP/001, February 2008.
101 In Europe, companies such as World -Check offer “risk intelligence” in order to reduce “customer
exposure to potential threats posed by the organisations and people they do business with.”
Thecompany claims to have a client base of “over 4,500 organisations , with a “renewal rate in excess
of 97%” (see Worldcheck website). Infosphere AB is another European “Commercial Intelligence and
Knowledge Strategy consultancy” providing similar services (see Infosphere website). Crucially these
companies do not just provide vetting services against those on official blacklists, they claim to collect
data on other individuals and entities deemed “worthy of enhanced scrutiny.” The potential dangers of
such private intelligence bodies are well known. In Britain in the 1980s, the Economic League drew up
its own blacklists and acted as a right -wing employment vetting agency. The League, which was
acknowledged to have cl ose links with the security services, had accumulated files on at least 30,000
people, files it shared with more than 2,000 company subscribers, in return for annual revenues of
over £1 million. The files it held contained details of political and trade un ion activists, Labour Party
MPs, and individuals who, for instance, had written to their local papers protesting at government
policy. The League always maintained that “innocent” people had nothing to fear as they only kept
files on “known members of extr eme organisations.” Critical investigative reporting coupled with a
campaign against the organization saw it disband in 1993 (though its directors reportedly set -up a
new company offering the same service on the basis of the same files the following year). An
enterprise considered illegitimate in the early 1990s has now been supplanted by an entire industry.
Hayes, B. (2010) “ Spying in a see -through World: the “Open Source” int elligence
industry ,” Statewatch Journal, vol. 20 no. 1.
102 See for example “ Charities End Dialogue with Treasury over Guidelines That Stifle Effective
Global Grantmaking ,” Counc il on Foundations Press Release , 22 November 2010.
103 In January 2011 the arms manufacturer BAE Systems announced that it was to pay £184 million
for Norkom, an Ireland -based counter -fraud and anti -money laundering solutions provider that
employs around 3 50 people. BAE already owns Detica, a company specializing in “collecting, managing
and exploiting information to reveal actionable [financial] intelligence.” See “ BAE systems to buy
Irish financial crime company ,” NeoConOpticon blog , January 2011.
104 See Regulatory DataCorp website. See also “ Firm holds 1 million on anti -terror
list ,” Spacewars , 3 August 2011.
105 KYC (Know Your Customer) obligations are placed on banks and other financ ial services.
106 “Agreement on 25 Measures ,” G8 Ministerial Conference on Terrorism , Paris, 30 July 1996.
107 Financial Action Task Force (2008) Terrorist Financing . FATF/GAFI website.
108 Howell, J. (2010) “ Civil Society, Aid, and Security Post -9/11 ” in Internation al Journal of Not –
for -Profit Law , vol. 12 no. 4.
109 Matrix Insight (2008) Study to Assess the Extent of Abuse of Non -Profit Organisations for
Financial Criminal Purposes at EU Level . European Commission Directorate -General Justice,
Freedom & Security.
110 “Charity Commission Counter -terrorism strategy ,” UK Charity Commission website.
111 “Charities End Dialogue With Treasury Ove r Guidelines That Stifle Effective Global
Grantmaking ,” Council on Foundations Press Release, 22 November 2010.
112 Van der Does de Willebois, E (2010) “ Nonprofit Organ izations and the Combating of
Terrorism Financing: A Proportionate Response ,” World Bank Working Paper no. 208 .
113 United Nations Counter Terrorism Implementation Task Force (2009) Final report of the
Working Group on Tackling the Financing of Terrorism .
114 Armstrong, P. (2006) “The Limits and Risks of Regulation: The Case of the World Bank -Supported
Draft Handbook on Good Practices for Laws Relating to NGOs” in Jordan, L. & van Tuijl, P. (eds) NGO
Accountability: Politics, Principles and Innovations . London: Earthscan (p. 78).
115 Center on Global Counterterrorism Cooperation (2011) Regional working group meeting on
preventing abuse of the non -profit sector for the purposes of terrorist financing: Bangkok,
Thailand, 22 -24 March 2011: Key Observations Of The Organizers .
116 The research took place between February and July 2011 and utilized all available reports from the
FATF and regional FATF group websites (see section 2.1, above). These evaluation reports were
produced b y inspection teams comprised of FATF/regional FATF, World Bank, and IMF officials with the
support of national experts.
117 Figure excludes APG member countries that are also members of the FATF.
118 The Int ernational Center for Not -for -Profit Law publishes the “NGO Law Monitor” and
the International Journal of Not -for -Profit Law . For more information about ICNL see .
119 Financial Action Task Force (2006) Third Mutual Evaluation Report on Anti -Money Laundering
and Combating the Financing of Terrorism .
120 U.S. Department of the Treasury (undated document) Anti -Terrorist Financing Guidelines:
Voluntary Best Practices for U.S. -Based Charities .
121 Sidel, M. (2008) “ Counter -Terrorism and the Enabling Legal and Political Environment for
Civil Society: A Comparative Analysis of ‘War on Terror’ States ” in International Journal of Not –
for -Profit Law , Volume 10, Iss ue 3, June 2008.
122 “Charities End Dialogue with Treasury over Guidelines That Stifle Effective Global
Grantmaking ,” US Council on Foundations press release, 22 November 2010.
123 American Civil Liberties Union (2009) Blocking Faith, Freezing Charity: Chilling Muslim
Charitable Giving in the “War on Terrorism” Fina ncing .
124 Asia/Pacific Group on Money Laundering (2008) APG Mutual Evaluation Report on Myanmar
Against the FATF 40 Recommendations (2003) and 9 Special Recommendations as Adopted
by the APG Plenary on 10 July 2008 .
125 “Junta to Increase Scrutiny of NGOs’ Finances ,” Irrawaddy.org , 18 January 2011.
126 Middle East and North Africa Financial Action Task Force (2009) Mutual Evaluation Report Anti ‐
Money Laundering and Combating the Financing of Terrorism: EGYPT .
127 “The Impact of NGOs on the State & Non -State Relations in the Middle East,” Peter Gubser, Middle
East Policy , March. 2002, Volume 9, Issue 1, p. 141.
128 Elbayar, K (2005) “ NGO Laws in Selected Arab States ” in International Journal of Not -for -Profit
Law , Volume 7, Issue 4, September 2005.
129 Middle East & North Africa Financial Action Task Force (2007) Mutual Evaluation Report of the
Republic of Tunisia on Anti -Money Laundering a nd Combating Financing of Terrorism,
adopted by the MENAFATF Plenary on April 3rd 2007 .
131 “Developments in Tunisia ,” International Center for Not -for -Profit Law, News & Information , 3
132 Asia/Pacific Group on Money Laundering & Financial Action Task Force (2010) Mutual Evaluation
Report: Anti -Money Laundering and Combating the F inancing of Terrorism: India , 25 June
133 “CIVICUS World Assembl y Delegates Express Deep Disappointment at India’s New Curbs
on Civil Society ,”CIVICUS press release, 6 September 2010.
134 Asia/Pacific Group on Money Laundering (2008) APG 2nd Mutual Evaluation Report on
Indonesia Against the FATF 40 Recommendations (2003) and 9 Special Recommendations,
Adopted by the APG Plenary 9 July 2008 .
135 “NGO law monitor: Indonesia ,” International Center for Not -for -Profit Law .
136 World Bank (2008) “ Kingdom of Cambodia: Detailed Assessment Report Anti -Money
Laundering And Combating The Financing Of Terrorism As Adopted By The APG Plenary 25
July 2007 .
137 “Cambodian Government releases revised draft Law on Associations and NGOs ,”
International Center for Not -for -Profit Lawwebsite, 8 April 2011 .
138 “After European pressure, Putin announces softer NGO law ,” Euractiv.com , 9 December
139 Kamhi, A. (2006) “ The Russian NGO Law: Potential Conflicts with International, National,
and Foreign Legislation ” in International Journal of Not -for -Profit Law , Volume 9, Issue 1,
141 Financial Action Task Force (2008) Second Mutual Evaluation Report Anti -Money Laundering
And Combating the Financing of Terrorism: Russian Federation, 20 June 2008 .
142 International Center for Non -Profit Law and World Movement for Democracy (2008) Defending
Civil Society (p. 13).
143 Grupo de Acción Financiera de Sudamérica (2008) Tercera Ronda De Evaluaciones: República
De Colombia, Informe Plenario, 7 November 2008 .
144 “NGO law monitor: Colombia ,” International Center for Not -for -Profit Law website .
145 Grupo de Acción Financiera de Sudamérica (2005) Informe De Evaluación Mutua Sobre Lavado
de Activos y Financiamiento del Terrorismo: Paraguay, 9 December 2005 .
146 “Anti -Terrorism Law Criminalizes Protest in Paraguay ,” Upside Down World , 8 August 2007.
147 “A State of Emergency in Paraguay: The Risks of Militarization ,” Foreign Policy in Focus , 26
148 “Country Reports on Terrorism (Paraguay) ,” Embassy of the United States in Paraguay , press
release, 5 August 2010.
149 Eurasian Group on combating money laundering and financing of terrorism (2010) Mutual
Evaluation Report Anti -Money Laundering and Combating the Financing of Terrorism:
Republic of Uzbekistan , adopted EAG Plenary in June 2010.
150 “NGO law monitor: Uzbekistan ,” International Center for Not -for -Profit Law website.
151 International Centre for Non -Profit Law and World Movement for Democracy (2008) Defending
Civil Society (p. 10).
152 Financial Action Task Force (2011) Mutual Evaluation Report Anti -Money Laundering and
Combating the Financing of Terrorism: Kingdom of Saudi Arabia , 25 June 2011.
153 “NGO law monitor: Saudi Arabia ,” International Center for Not -for -Profit Law website.
154 Inter -Governmental Action Group Against Money Laundering in West Africa (2007) Mutual
Evaluation Report: Anti -Money Laundering and Combating the Financing of Terrorism:
Sierra Leone , 12 June 2007.
155 “NGO Law Monitor: Sierra Leone ,” International Center for Not -for -Profit Law website.
156 European Commission (2005) Commission Communication to the Council, the European
Parliament and the European Economic And Social Committee: The Prevention of and Fight
Against Terrorist Financing Through Enhanced National Level Coordination and Greater
Transparency of the Non -Profit Sector , COM(2005) 620 final, 29.11.2005.
157 “2696th C ouncil Meeting: Justice and Home Affairs ,” Council of the European Union press
release, 14 December 2005.
158 “CSCG position on Code of Conduct for Non Profit Organisati ons ,” EU Civil Society Contact
159 Matrix Insight (2008) Study to Assess the Exten t of Abuse of Non -Profit Organisations for
Financial Criminal Purposes at EU Level . European Commission Directorate -General Justice,
Freedom & Security.
160 European Commission (2009) Study on Recent Public and Self -Regulatory Initiatives
Improving Transparency and Accountability of Non -Profit Organisations in the European
Union Commissioned by the European Commission Directorate -General of Justice, Freedom
and Security, Submitted by the Europ ean Center for Not -for -Profit Law .
161 Statewatch (2010) Statewatch briefing on EU proposals to increase the financial
transparency of charities and n on -profit organisations , January 2010.
162 European Foundation Centre (2009) When cooperation works: Overcoming security concerns
about NPOs at EU level , EFC Briefing, 15 December 2009.
163 European Commission (2010) “ Voluntary Guidelines for EU based non -profit
organisations,” Discussion Paper for 3rd conference on “Enhancing Transparency and
Accountability of the Non -Profit Sector “, Brussels 2 July 2010.
164 The European Foundation Centre, Cordaid, and the Samenwerkende Brancheorganisaties
Filantropie (2010) Joint comments on t he discussion paper: “ Voluntary guidelines for EU based
non -profit organisations ,” 10 September 2010.
165 United States Department of State (2006) “ Guiding Principles on Non -Governmental
Organizations (NGOs) ” in International Journal of Not -for -Profit Law , Volume 9, Issue 1, December
2006. See also Civil Society: Supporting Democracy in the 21st Century , Remarks by Hillary
Rodham Clinton, Secretary of State, Krakow, Poland, 3 July 2010.
166 “UNHCR Creation of Special Rapporteur on Freedom of Assembly and Association ,” Press
Statement, Hillary Rodham Clinton, Secretary of State, 30 September 2010.
167 Van der Does de Willebois, E (2010) “ Nonprofit Organizations and the Combating of
Terrorism Financing: A Proportionate Response ,” World Bank Working Paper no. 208 .
168 The UN’s Coun ter -Terrorism Executive Directorate (CTED) is also guided by the principle that
“effective counter -terrorism measures and respect for human rights are complementary and mutually
reinforcing, and are an essential part of a successful counter -terrorism effor t” and CTED is obliged “to
further develop its activities in this area, to ensure that all human rights issues relevant to the
implementation of [Security Council] resolutions [on counter -terrorism] are addressed consistently
and even -handedly.” Resolution 1963 (2010) Adopted by the Security Council at its 6459th
meeting, on 20 December 2010 , S/RES/1963 (2010) .
169 International Center for Not -for -Profit Law and World Movement for Democracy (2008) Defending
Civil Society .
170 There is a single recommendation buried in the evaluation handbook that states:
“Countries should establish controls and safeguards to ensure that information received by competent
authorities is used only in an authorised manner. These controls and safegu ards should be consistent
with national provisions on privacy and data protection” (emphasis added).