Arbeitsgemeinschaft für Entwicklung und Humanitäre Hilfe
Kommentar der Anderen | Outside View (EN)
For over two decades, nonprofit organizations have faced growing restrictions under the banner of fighting terrorism financing. But why would a humanitarian group, a human rights organization, or a local charity be treated as a potential security threat? And what are the real consequences of these measures?
Outside view by Thalia Malmberg and Vera Selig
The global fight against terrorism financing intensified after the 9/11 attacks, leading to significant changes in financial regulations. The Financial Action Task Force (FATF), originally established by the G7 in 1989 to combat money laundering, expanded its mandate to include countering the financing of terrorism. In doing so, FATF singled out nonprofit organizations (NPOs) as being ‘particularly vulnerable’ to terrorism financing abuse. The assumption was that charities could be used—knowingly or unknowingly—to funnel money to terrorist groups. This labelling was not based on empirical evidence of widespread abuse but still led to strict regulations on NPOs worldwide, making it harder for them to operate, especially in crisis zones where their work is most needed.
Over the past two decades, governments have adopted FATF’s guidance into national laws aiming to prevent financial crime. But instead of focusing on actual risk, many applied broad, blanket restrictions to the entire nonprofit sector. This has resulted in overregulation of the sector, including burdensome registration processes, excessive reporting obligations, restrictions on accessing foreign funding, and barriers to information access, among others. See figure on the left for more examples of overregulation.
This trend of overregulation has led to a myriad of consequences, including the shutdown of NPOs, redirection of resources to comply with burdensome requirements, and reputational damage. See more examples of consequences in the figure on the left.
While the intention was to protect security, the reality is that these measures have severely disrupted legitimate humanitarian, development, and human rights work.
Recognizing the damage caused, FATF revised its stance in 2016, clarifying that only a subset of nonprofits may be at risk and urging governments to adopt a risk-based approach rather than blanket restrictions. Although these reforms were welcomed, by that time, laws were already in place, and misapplications of the standard persisted. It also became increasingly clear that many governments were deliberately using the guise of countering terrorism financing in order to justify cracking down on critical nonprofit organizations. From the red-tagging and legal harassment of NPOs and activists in the Philippines and targeted investigations against journalists and human rights groups in Serbia to sweeping restrictions on civil society organizations in Turkey and the mass shutdown of over 3,000 nonprofits in Nicaragua.
At the same time, banks and other financial institutions, under pressure to mitigate risk, have increasingly denied services to NPOs, a practice known as ‚de-risking‘. A clear example is the de-risking of UK Muslim charities, whose accounts were suddenly closed without explanation or right to appeal. This arbitrary practice happening across the globe has left civil society struggling to access essential financial services, forcing them to resort to alternative, less transparent means to continue their vital work, increasing operational challenges and unintended risks.
While the changes to its influential recommendation on NPO regulation represent positive steps forward, much more work remains to be done. The efforts of the Global NPO Coalition on FATF have been crucial in raising awareness of the unintended consequences of countering the financing of terrorism measures on civil society. However, these efforts alone will not fully resolve the systemic challenges that nonprofits face.
Going forward, there is a need for changes in the FATF methodology to better identify disproportionate regulations, suppression of NPOs and de-risking practices. Stronger collaboration between governments, financial institutions, and civil society is necessary to mitigate the damage caused by the misapplication of the standard.
Restrictions on civil society have not proven effective in reducing terrorist attacks. On the contrary, having a vibrant civic space is vital in preventing violent extremism, particularly in conflict areas where they often serve as the primary providers of essential services such as food, water, shelter, and medical care. The question is: Can we afford to continue down this path? Or is it time to rethink the way we define risk, security, and the crucial role of civil society in promoting peace and stability?
Human Security Collective (Nov 2023): The Future of FATF Recommendation 8. A foresight piece
Thalia Malmberg is a Program Manager at Human Security Collective, working on issues related to de-risking and the effects of countering terrorism financing measures on civil society and human rights. As part of her work, she conducts research and capacity building, and engages in multi-stakeholder processes such as the Global NPO Coalition on the FATF and the Dutch Roundtable on Financial Access for NPO’s.
Vera Selig is Communications Officer at Human Security Collective, where she supports the team in strengthening the organization’s messaging and outreach. She also provides communication support for the Global NPO Coalition on the FATF, focusing on raising awareness about the impacts of de-risking and counter-terrorism financing measures on civil society and human rights.
In the section Outside view, Global Responsibility gives experts the opportunity to comment and share their views on current and relevant development issues. The aim is to facilitate development policy debates, promote democratic discourse and highlight the importance of implementing the 2030 Agenda. The authors are solely responsible for the content of their articles. Global Responsibility does not necessarily share the views expressed.
