Terrorist Financing Risk Assessment Report for the NPO Sector in Jordan

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TERRORIST FINANCING
RISK ASSESSMENT
REPORT FOR THE NPO
SECTOR IN JORDAN
EXECUTIVE
SUMMARY
2022

3
I. BACKGROUND OF THE ASSESSMENT PROCESS 5
II. THE METHODOLOGY 8
III. KEY FINDINGS – PHASE I. ASSESSING THE INHERENT RISK 12
IV. KEY FINDINGS – PHASE II. ASSESSING THE RESIDUAL RISK 17
V. KEY RECOMMENDATIONS 20
Contents
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1. The Financial Action Task Force (FATF) is the international standard-setting body in
Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT). Two main
parts of the FATF standards refer directly to NPOs. These are Recommendation 8
and Immediate Outcome 10, both of which require member countries, as a first step,
to identify the subset of organizations that fall under FATF’s definition of NPOs,
and to use all relevant sources of information to identify the features and types of
NPOs, which under their activities or characteristics, are likely to be at risk of terrorist
financing (TF) abuse.
2. Jordan is a member of the FATF-style regional body for the Middle East and North
Africa Financial Action Task Force (MENA FATF). MENA FATF last published a
Mutual Evaluation Report (MER) of Jordan’s compliance with the FATF standards
in 2019. (1) The MER rated Jordan as non-compliant with Recommendation 8 and low
compliance with FATF Immediate Outcome 10. The report identified problems that
needed to be solved.
3. The Terrorist Financing Risk Assessment for the NPO Sector was completed with
technical support using a methodology developed by Greenacre Associates. Edmaaj
for Development & Training Consulting implemented the data collection, analysis and
produced the assessment report with funding from the International Center for Not-
for-Profit Law (ICNL) and the Anti-Money Laundering/Combating the Financing of
Terrorism funded by the European Union (EU AML/CFT).
(1) MENA FATF. Anti-money laundering and counter-terrorist financing measures The Hashemite Kingdome of Jordan
Mutual Evaluation Report. Available at: https://bit.ly /3gRSswO
I. BACKGROUND OF THE ASSESSMENT PROCESS
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4. All phases and results of the risk assessment were overseen and confirmed by a Local
Assessment Team (LAT) comprised of representatives from 15 government and non-
government entities. The following is a list of these entities:
• Central Bank of Jordan
• Companies Control Department
• Ministry of Awqaf Islamic Affairs and Islamic Affairs
• Ministry of Social Development
• Associations Registry
• Ministry of Interior
• General Intelligence Directorate
• Anti-Money Laundering and Counter-Terrorist Financing Unit (AMLU Jordan)
• General Federation of Associations (NPO)
• Al-Hayat Center-RASED (NPO)
• We Participate for Civil Society Development (NPO)
• Fawasel for Civil Society Development (NPO)
• We Rise Center for Sustainable Development (NPO)
• Jordan Hashemite Charity Organization (NPO)
• Tkiyet Um Ali (NPO)
5. The assessment aims to conduct a comprehensive review to understand the features
and types of NPOs at risk of TF abuse and the nature of the threat. In addition, to
“review the adequacy of measures, including laws and regulations, that relate to the subset of the
NPO sector that may be abused for terrorism financing support to be able to take proportionate and
effective actions to address the risks identified” consistent with Recommendation 8 of the
FATF methodology.
6. The risk assessment is based on FATF requirements and guidance, as according to
Paragraph 8.1 of the FATF Methodology, which states that countries should: (2)
• “without prejudice to the requirements of Recommendation 1, since not all NPOs are
inherently high risk (and some may represent little or no risk at all), identify which subset
(2) Paragraph 8.1, Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness
of AML/CFT Systems
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of organisations fall within the FATF definition of NPO, and use all relevant sources of
information, to identify the features and types of NPOs which by virtue of their activities or
characteristics, are likely to be at risk of terrorist financing abuse”;
• “identify the nature of threats posed by terrorist entities to the NPOs which are at risk, as
well as how terrorist actors abuse those NPOs”;
• “review the adequacy of measures, including laws and regulations, that relate to the subset
of the NPO sector that may be abused for terrorism financing support to be able to take
proportionate and effective actions to address the risks identified”;
• “periodically reassess the sector by reviewing new information on the sector’s potential
vulnerabilities to terrorist activities to ensure effective implementation of measures.”
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1. Qualitative and Quantitative data were used for the risk analysis, in line with FATF
guidance (3).
2. A risk assessment has been carried out through two main phases sequentially, as
shown below.
3. Before the assessment began for each phase, the LAT was trained on the methodology
and reporting of the assessment results. Phase I training was conducted during
January 2021 to introduce the assessment process and FATF guidance on the scope
of R8 Risk Assessments. Phase II was conducted during 27-28 July 2021 and 8-9
September 2021. The training aimed to engage the team in the data collection process
and prepare them to review the results and findings of the assessment once drafted.
(3) “While quantitative assessments (i.e., based mostly on statistics) may seem much more reliable and able to be replicated over
time, the lack of available quantitative data in the ML/TF field makes it difficult to rely exclusively on such information.
Moreover, information on all relevant factors may not be expressed or explained in numerical or quantitative form, and
there is a danger that risk assessments relying heavily on available quantitative information may be biased towards risks that
are easier to measure and discount those for which quantitative information is not readily available. For these reasons, it is
advisable to complement an ML/TF risk assessment with relevant qualitative information such as, as appropriate, intelligence
information, expert judgments, private sector input, case studies, thematic assessments, typologies studies and other (regional
or supranational) risk assessments in addition to any available quantitative data.” Paragraph 30-31, FATF 2013 Guidance:
National Money Laundering and Terrorist Financing Risk Assessment. Available at: https://bit.ly/3zWaB5o
II. THE METHODOLOGY
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Phase I. Assessing the Inherent Risk Phase II. Assessing the Residual Risk
I. Identifying FATF NPOs in
Jordan and, therefore which
NPOs should be included in the
risk assessment , through a face-to-
face workshop on 1-2 February 2021
for the LAT, which includes the
definition of the FATF guidance on
“FATF NPOs”, then working within
the team to identify which NPOs in
Jordan meet the FATF definition.
II. A questionnaire for government and
financial institutions (Banks), during
the period 7 March till 6 April 2021.
The questionnaire included questions
about (i) Convictions of NPOs or
their agents for TF or related offences;
(ii) Prosecutions of NPOs or their
agents for TF or related offences; (iii)
Regulatory interventions of NPOs or
their agents for TF or related offences;
(iv) Active or closed investigations of
NPOs or their agents for TF or related
offences; (v) STRs/SARs relating to
NPOs; (vi) Requests for Mutual Legal
Assistance relating to NPOs and (vii)
Case studies of terrorist financing
abuse of NPOs.
I. Data from competent authorities:
a. Interviews : Interviews
were conducted with
representatives from the
following agencies during
October 2021:
• The Associations Registry
• Companies Control Department
• AMLU
• Ministry of Awqaf and
Islamic Affairs
• Pastoral Services and Churches
• Five Competent Ministries that
oversee relevant associations.
b. The gap analysis
questionnaire : The process
included written requests
to fill the gap analysis
questionnaire by the NPOs’
regulatory bodies.
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III. A phone survey was conducted
with 689 NPOs on the perceptions
of TF risks and the effectiveness
of mitigating measures. The NPOs
were divided into two categories,
Local Associations (as they constitute
around 72% of the NPO sector) and
Other NPOs, which included six
types. These are Branches of Foreign
Associations, Non-profit Companies,
Islamic Centres, Reconstruction
Institutions affiliated with the
Municipalities, Pastoral Services
and Monasteries in Jordan, and the
Mosques Committees. The table
below provides information on the
sample selected.
The NPOs participating in the survey
represent a randomised sample. The
sample size was determined with
a 95% confidence level and a 5%
margin of error. (4) The respondents
within the same size were selected
based on random numbers using
Random Integer Set Generator. (5)
Results for these groups represent
the entire group from which they
were selected.
c. Data on financial inflows
and outflows to FATF
NPOs : The data documented
is in the Associations
Registry’s database, which is
related to the pre-approval of
foreign funding applications
for local associations and
non-profit companies’ local
projects. The Associations
Registry hosts the Foreign
Funds Approval Committee
and is in charge of receiving
and archiving the data of
such applications.
d. Verification sessions with
the LAT : Two sessions were
implemented over the course
of the assessment to verify
the information and discuss
the preliminary findings. The
first was during the period
26-28 October 2021, and
the second was during 28
November – 2 December
2021.
(4) The sample size was determined through the program on the link, www.calculator.net/sample-size-calculator.html
(5) The platform used to select a random sample, www.random.org/integer-sets
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IV. Review of relevant local legislations .
The following laws and regulations
were reviewed, including relevant
amendments, implementing regulations,
and notices. The review was
supplemented by requesting data and
a questionnaire filled out by officials
responsible for their implementation,
including amendments, regulations, and
notifications.
V. Desk review of reports on AML/
CFT in Jordan . The reports
included:
1. MENAFATF Mutual Evaluation
Report Jordan 2019. (6)
2. Jordan’s government ML/
TF NPO sectoral risk
assessment, 2020. (7)
VI. Additional secondary information
and data sources . Secondary
information and data were not given the
same weight as primary sources. Mostly
it was used to inform the methodological
approach, but it was also used selectively
and in context to inform assessments
where preliminary data was not available.
II. Desk review . The process included
a review of laws and regulations
related to the NPOs’ work. The
review was supplemented by
interviews with officials responsible
for their implementation.
(6) MENA FATF. Anti-money laundering and counter- terrorist financing measures The Hashemite Kingdome of Jordan
Mutual Evaluation Report. Available at: https://bit.ly/3gRSswO
(7) Summary of the National Risk Assessment on Money Laundering and Terrorism Financing, 2020. Available at: https://
amlu.gov.jo/EBV4.0/Root_Storage/EN/EB_Info_Page/SummaryNRA.pdf
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1. This phase aims to conduct a comprehensive review to understand the features and
types of NPOs at risk of TF abuse and the nature of the threat.
2. According to paragraph 8.1(a) of the FATF, methodology countries should “identify
which subset of organisations fall within the FATF definition of NPO,” which
identifies NPOs as “a legal person or arrangement or organisation that primarily
engages in raising or disbursing of funds for purposes such as charitable, religious,
cultural, educational, social or fraternal purposes, or for the carrying out of other
types of ‘good works.’”
3. The FATF definition excludes:
• Informal groups of people who do not meet the definition of the legal
arrangement.
• Legal persons or arrangements or organisations that are not established for
‘good works,’ such as political parties, trade unions, or cooperatives primarily
engaged in economic activities for the financial benefit of members.
• Legal persons or arrangements or organisations not engaged in the raising or
disbursing funds as their primary purpose. This might include sports clubs,
or religious groups that do not or only incidentally engage in the raising or
disbursing of funds.
4. Regarding this, the risk assessment identified the profile of seven FATF NPOs.
III. KEY FINDINGS – PHASE I. ASSESSING THE
INHERENT RISK
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Table 1: NPOs in Jordan meeting the FATF definition of NPOs (Source LAT)
No. Type Relevant Law Competent
Authority
Total
Number
1 Local
associations
Jordan’s Law on
Societies No. 51
of 2008 and its
amendments
Associations
Registry and the
14 Competent
Ministries
6605
2 Branches
of foreign
associations
Jordan’s Law on
Societies No. 51
of 2008 and its
amendments
Associations
Registry and
14 Competent
Ministries
222
3 Non-profit
companies
The Companies Law
No. 22 of 1997 and its
amendments
The Regulation
for Non-profit
Companies No. 73 for
2010 and its
amendments
Companies Control
Department
1380
4 Islamic
Centres Under
the Ministry
of Awqaf and
Islamic Affairs
Islamic Centres bylaw
No 107 of 2020
Ministry of Awqaf
and Islamic Affairs
1500
5 Reconstruction
Institutions
– affiliated
with the
Municipalities.
The Voluntary
Institutions for Urban
Reconstruction Law
No. 60 of 1985
Ministry of Local
Administration
12
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No. Type Relevant Law Competent
Authority
Total
Number
6 Churches Law No. 28 of 2014
(Christian Sects
Councils Law of 2014)
Christian Sects
Councils and
the Council of
Ministers appointed
by the presidents of
the councils.
33
7 Mosques Law of the Ministry of
Awqaf Islamic Affairs
and Holy Places No.
32 of 2001 and its
amendments
Mosques Committees
under the Ministry
of Awqaf Islamic
Affairs and Holy
Places
625
5. The assessment findings (quantitative and qualitative) suggest that NPOs face several
potential TF threats. All of which were assessed as low-level, as seen below.
Nature of the TF Threat to NPOs in Jordan
The primary terrorist financing threat to NPOs in Jordan are:
1. Geopolitical terrorist threats in Jordan.
2. Individuals inspired by radical ideologies.
The potential ways that terrorist actors abuse those NPOs are:
1. Recruitment of foreign terrorist fighters, particularly in relation to conflicts in the
region (neighbouring countries).
2. A person with links to terrorism who owns, controls, or manages an NPO.
3. A person with links to terrorism who is employed by an NPO.
4. The creation of sham non-profit organizations to support or as a front for a
terrorist group.
5. NPOs that transfer funds abroad to support terrorist groups through cash or
logistical support.
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6. The “Inherent Risk” assessment found little evidence suggesting that terrorist
financing is a significant problem for most NPOs in Jordan. There are only two
known cases linking NPOs with a potential terrorist financing incident.
7. However, the assessment identified eight potential risk factors, of which six are likely
to be associated with greater exposure to TF risks. The risks are weighted according
to their risk level and prevalence as seen in the table below.
8. A five-level scale is used to assess the Inherent Risk for this report. These are Low,
Low-Medium, Medium, Medium-High, and High.
Risk factor Risk Level Prevalence
1. Charity / humanitarian aid organisation Medium-high Medium
2. Outgoing foreign funds Medium-high Low
3. Incoming foreign Funds Medium-high Low
4. NPOs’ internal governance and capacity Medium-high High
5. Informal, undocumented, and/or cash transactions Medium Medium
6. Due diligence Medium High
7. High-risk areas/populations sympathetic to terrorism Low-Medium Low
8. Unregulated NPOs Low Low
9. By distributing the risk factors according to the assessed risk level and frequency over
the risk matrix below, two main groups were categorized:
• Those that are on or above the line have an increased level of TF risks. Six
factors, in particular, have been identified as likely to be associated with greater
exposure to terrorist financing risks, based on the single case and submissions
from local experts, assessed within the context of international and regional
studies on the nature of the TF risk to NPOs in general.
• Those below the line form no risk.
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LowMedium
Frequency
NPO Secttor Risk Matrix
High
High
Medium
Risk Level
Low
Incoming Foreign Funds Outgoing
foreign funds Charity / humanitarian
aid organisation
High-risk areas/populations sympathetic to terrorism
Unregulated NPOs INformal, undocumented
and/or cash transactions Due Diligence
NPOs? internal
governance & capacity
10. After a thorough review, the assessment team has found little evidence to suggest
that terrorist financing is a significant problem for most NPOs in Jordan, and there
are only two known cases linking NPOs with a potential terrorist financing incident.
However, the country faces some significant terrorist threats, and these potentially
impact NPOs as they do all parts of society.
11. In this context, the overall inherent risk of terrorist financing abuse of NPOs in
Jordan is assessed as Low-Medium.
Inherent TF Risk of NPOs in Jordan
Low-Medium
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1. This phase of assessment has assessed the effectiveness of mitigation measures to
potentially reduce the level of “Inherent Risk” for the main six risk factors identified
in the phase of the inherent risk. This process shall provide a final judgement on the
“Residual Risk.” The equation of this judgement is:
(Inherent Risk – Adequacy of Mitigating Measures) = Residual Risk
2. This report assesses mitigating measures related to the six factors identified in the
Inherent Risk Assessment that may place an NPO ‘at risk’ of terrorist financing. In
addition, conducting a review covers three main areas: (1) laws and regulations; (2)
policy measures and outreach and awareness-raising by the government entities; and
(3) self-regulatory and self-governance measures by NPOs.
3. The metrics used in this review are taken from R8 and other FATF documents. The
preliminary tests are that the measures are “risk-based” and “effective.”
• “Effective” – The Immediate Outcomes are an assessment of the “effectiveness”
of AML/CFT measures. The Interpretive Note (INR8) requires countries to
adopt “effective measures” to counter-terrorist financing. (8) Effective measures are
properly resourced (financial, human, and technical). (9)
• “Risk-Based and Targeted” – FATF states that a “Risk-Based Approach” is the
core principle for all FATF assessments. (10) In addition, the Interpretive Note
(INR8) “requires” countries to adopt “proportionate measures” (11) and adds that “a
(8) 4(c), Interpretive Note R8, p 59, available at https://bit.ly/3orm5tT
(9) “Countries should provide their appropriate authorities, which are responsible for supervision, monitoring and investigation of their NPO sector,
with adequate financial, human and technical resources.” 7, p. 63, Interpretive Note to R8, p. 59 available at https://bit.ly/3orm5tT.
Whilst the Interpretive Note refers to this in the context of authorities, by analogy it refers to any entity responsible for
implementing a mitigating measure.
(10) See FATF Recommendation 1, p.10, available at https://bit.ly/3orm5tT
(11) 4(c), Interpretive Note R8, p. 59, available at https://bit.ly/ 3orm5tT
IV. KEY FINDINGS – PHASE II. ASSESSING THE
RESIDUAL RISK
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risk-based approach applying focused measures in dealing with identified threats of terrorist
financing abuse to NPOs is essential.” (12) This principle is reiterated both in general
terms and in relation to specific activities through the FATF documentation. (13)
• “Non-disruptive” – Ensuring the measures do not disrupt legitimate NPO
activities, (14) that they are adapted to local circumstances, (15) and are consistent
with international human rights obligations. (16)
4. For the purpose of this report, a five level-scale is used to assess the Residual Risk.
These are Low, Low-Medium, Medium, Medium-High, and High.
5. After studying all the measures within the areas indicated above, the results were as follows:
No. Risk Factor Inherent Risk
(Phase I
assessment)
Adequacy of
Mitigation Measures
(Phase II assessment)
Residual
Risk
1 Charity / humanitarian
aid organisation
Medium Medium Medium
2 Outgoing foreign funds Medium-high High Low-medium
3 Incoming foreign funds Medium-high Medium Medium
4 NPOs’ internal
governance and capacity
Medium-high Low Medium-high
5 Informal, undocumented,
and/or cash transactions
Medium Medium-high Low-medium
6 Due diligence Medium Low Medium
(12) 4(a), Interpretive Note R8 p. 59, available at https://bit.ly/3orm5tT
(13) See also paragraphs 19, 21, 23, 24, 29, 32 and 35 (pages 15-19) of the Best Practices Paper, available at https://bit.ly/3oWebrr .
(14) “To what extent, without disrupting legitimate NPO activities, has the country implemented a targeted approach, conducted
outreach, and exercised oversight in dealing with NPOs that are at risk from the threat of terrorist abuse?” Immediate
Outcome 10, 10.2 (see Annex 1). See also INR8 paragraphs 4(a), 4(d) and 4(e), available at https://bit.ly/3orm5tT and Best
Practices Paper 32(a), available at https://bit.ly/ 3oWebrr .
(15) The Best Practices Paper repeatedly states that there is no ‘one size fits all’ approach to TF measures in the NPO Sector.
Paragraphs 23(c) states that a “one size fits all” approach is not an effective way to combat terrorist abuse of NPOs and is
more likely to disrupt or discourage legitimate charitable activities”, and this sentiment is repeated in paragraphs 7(b), 18,
29, 32(a) and 32(e), available at https://bit.ly/3oWebrr .
(16) Implementation of R8 must be “consistent with countries’ obligations to respect freedom of association, assembly,
expression, religion or belief, and international humanitarian law”. 6, Best Practices Paper available at https://bit.ly/3oWebrr .
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6. As summarised in the table above and elaborated below, the report notes a legal and
regulatory regime that is generally sufficient for most risk factors, with some areas
need to be focused, particularly in NPOs’ measures to mitigate risks related to NPOs’
internal governance and capacity.
7. The report identified some strong measures to ensure bad actors are not able to
control NPOs, and that their funding or activities will not be misused by TF groups.
However, there is a need to strengthen the reliance of these measures on identified
risks, and they need better coordination.
8. Overall, the outreach measures need to be further strengthened. Most measures
were often ad-hoc, unsustainable, and were not applied systematically by all the NPO
regulators. Mainly they were conducted by the Associations Registry (the regulatory
body of around 77% of the NPO sector).
9. As a result, the overall adequacy of the mitigating measures is assessed as medium.
Thus, there is no change to the overall assessment of the inherent risk (Low-Medium).
Inherent Risk
Low-Medium Adequacy of
Mitigating MeasuresMedium Residual Risk
Low-Medium
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The below recommendations are the most significant recommendation to work on for the
high-risk factors, and they are based on three main pillars, as follows:
Legal Review
• Introduce a formal written mechanism identifying and scoring TF risks (a risk
scoring matrix) . The mechanism should facilitate risk-based targeted supervision
and monitoring of NPOs likely to be ‘at risk’ of terrorist financing and to decide for
focused guidance and support for these NPOs.
• Introduce a set of TF preventive measures and relevant sanctions for NPOs
that fail to implement these measures and address significant TF-related deficiencies
identified through the monitoring process. This should also include (i) detailed
and tailored guidance for Due Diligence, and (ii) mechanisms for monitoring the
fundraising and disbursement of funds to ensure that they are risk-based, reflect best
practices, appropriate for addressing new and developing fundraising methods, and
are connected to relevant sanctions.
• Introduce new measures to enhance the transparency and governance of NPOs
and their regulations and inspections processes . It is noted that this activity is under
work by the regulatory bodies through Commitment 1 of Jordan’s Fifth National Action
Plan (NAP) 2021-2025 under the Open Government Partnership (OGP), (17) which aims
at “developing policies and procedures that adopt a risk-based approach in supervising
and overseeing the work and activities of CSOs to protect them from the risk of being
exposed to ML/TF, along with strengthening their governance.” The assessment team
recommends continuing the efforts of the OGP Fifth NAP.
(17) Ministry of Planning and International Cooperation, Jordan’s OGP Fifth NAP 2021-2025, available at https://bit.ly/3CsVthh .
V. KEY RECOMMENDATIONS
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Coordination and sharing of information
Coordination and information sharing mechanisms could be improved on two levels:
• Level 1 : Information sharing to influence policy areas and support the work of the
National Anti-Money Laundering and Terrorist Financing Committee. This includes
establishing an operational standing Liaison Technical Committee under the National
Anti-Money Laundering and Terrorist Financing Committee. The committee
includes various supervisory entities including the AMLU, law enforcement, and
NPO regulators. The purpose of this committee is to ensure effective cooperation
and information sharing among all relevant authorities that hold relevant information
on NPOs and to ensure that the information is promptly shared with competent
authorities, when needed to take preventive or investigative action.
• Level 2 : Information sharing to report TF-revealed cases by regulators to the AMLU.
This includes adding the NPO regulators to the existing GOAML system (18) that
AMLU runs to ensure information is shared with high confidentiality and those cases
are resolved with high efficiency.
Outreach and Capacity Building
The NPO regulators should significantly expand their outreach program . It is
noted that outreach activities to protect NPOs from the risk of being exploited in terrorist
financing actions is included under Commitment 1 in Jordan’s OGP Fifth NAP 2021-2025.
The assessment team recommends continuing the efforts of OGP. This will include: (19)
• “Design capacity-building programs, developing, improving, and adopting
governance concepts for CSOs, based on the standards agreed upon between
CSOs and the government. This will focus on appropriate governance structures,
adopting high professional and ethical standards for staff and management,
developing accountability mechanisms, and providing transparent reports for
donors, governmental bodies, and the communities they serve, provided that the
(18) The system is currently used by AMLU to share information with reporting entities and competent authorities.
(19) Ibid
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Governance Manual (20) that was developed under the Fourth OGP National Plan
(2018-2021) will be utilised.”
• “Implement a series of face-to-face and online training, awareness-raising sessions,
and media materials at the national level for all relevant governmental institutions.
These activities are about the adopted procedures and policies which aim to protect
CSOs from the risk of being exposed to ML/TF, and to strengthen governance within
their work.”
• “Implement a series of face-to-face and online training and awareness-raising sessions
for CSOs about the adopted procedures and policies which aim to protect CSOs from
the risk of ML/TF and to strengthen governance within their work.”
(20) Associations Registry – “Associations Governance Manual”, available at https://bit.ly/33rQFLG ; Companies Control
Department – “Nonprofit Companies’ Governance Manual”, available at; https://bit.ly/3HfqCpc .
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