FATF February Plenary outcomes: Why philanthropy should care about the FATF Forum in May
The Financial Action Task Force (FATF) Plenary in Paris at the end of February 2023 under the Presidency of T. Raja Kumar of Singapore brought together delegates from over 200 jurisdictions. FATF agreed, among other things, on revisions to Recommendation 25 on transparency and beneficial ownership of legal arrangements and on new guidance on the revised Recommendation 24 on transparency and beneficial ownership of legal persons which also apply to the philanthropy sector. Delegates made further progress on FATF standards relating to virtual assets (also termed crypto assets) and agreed on the publication of the report on money laundering and terrorism financing in the art and antiquities market. New projects are envisaged on money laundering and terrorism financing related to cyber-enabled fraud and on the use of crowdfunding for terrorism financing.
Beneficial Ownership (BO) of legal persons and legal arrangements – guidance and best practice must clarify application to the NPO sector
The revised FATF BO standards 24 and 25 do not deliver for NPOs including philanthropy since they do not clarify how the BO concept is to be applied to the NPO sector. This must now be clarified either in the guidance and best practice or the Glossary to ensure that in the case of public-benefit organisations that follow a non-distribution constraint and do not benefit private interests, it is the one directing the organisation that should be listed as BO. The revised Recommendation 24 requires countries to ensure that BO information is held by a public authority or body functioning as a BO registry, or an alternative mechanism they will use to enable efficient access. The FATF Plenary has now finalised a guidance document on Recommendation 24 and also agreed on amendments to Recommendation 25 on legal arrangements. FATF sought input from relevant stakeholders, including through a White Paper consultation and a public consultation on proposed changes. FATF will start working on a guidance document on Recommendation 25.
The FATF NPO Coalition, of which Philea is part of, had submitted comments in different rounds of consultation around the revision of Recommendation 24 and 25. These asks for clarification and amendment on how this concept of Beneficial Ownership applies to NPOs were however not reflected in the revision of the standards in R24 and R25 and we now have to ensure that this will be clarified in the guidance to Recommendation 25 and respective Best Practices Papers of both standards. Apart from clarifying the application to the NPO sector in guidance or best practices paper, it is our suggestion that FATF could also consider amending the definition of beneficial ownership in the glossary, to provide more clarity regarding legal arrangements.
Watch out: best practices work and work on R8 itself foreseen
A revision of the Best Practices Paper on Recommendation 8 on NPOs is underway and will likely be ready for the June Plenary, after which it will be out for public consultation. FATF and the Global NPO coalition is still welcoming input on:
- Specificities of good governance examples in order to prevent TF abuse
- Measures that NPOs can take to facilitate financial access
The Unintended Consequences workstream will continue and will likely also include a focused review of R8 with a view to ensure clear application and avoidance of misinterpretation to avoid unintended consequences.
Have your say – FATF PSCF on May 8/9th in Vienna
The Private Sector Consultative Forum will be held in person after two years of online meetings on Monday, May 8 and Tuesday, May 9 2023 in Vienna and Philea will again be attending on behalf of the wider philanthropy sector (WINGs). There will be one panel on de-risking/financial access of NPOs, which includes the GlobalNPO Coalition on FATF as a panellist. The NPO coalition will also organise a side event, which can be attended by a large constituency of NPOs including foundations. Please contact Hanna Surmatz for more information: firstname.lastname@example.org
About the NPO coalition on FATF
The Global NPO Coalition on FATF is a loose network of diverse non-profit organisations (NPOs). The aim is to mitigate the unintended consequences of countering the financing of terrorism (CFT) policies on civil society in order that legitimate charitable activity is not disrupted. Since 2014, four organisations have developed strategies, and facilitated and coordinated the Coalition. They are supported by a core group of NPOs representing a wide range of interests across countries and regions. Four organisations lead the Coalition: Charity & Security Network; European Center for Not-for-Profit Law; Philea also on behalf of WINGS and Human Security Collective.