16 September 2019

Philanthropy sector and NPO coalition engage with Financial Action Task Force

The philanthropic sector, represented by Hanna Surmatz from the EFC on behalf of the wider philanthropic infrastructure (WINGS), engaged with the Financial Action Task Force (FATF) about the latest international money laundering and terrorism financing policy at its 2019 Private Sector Consultative Forum (PSCF) meeting, which took place in Vienna in May.

The PSCF meeting was chaired by the current President of the FATF, Marshall Billingslea from the United States, with over 300 private sector representatives, including from the financial sector; civil society,  including philanthropy; and FATF members and observers. The philanthropic sector holds one of the four seats on the PSCF allocated to the NPO coalition who were invited to attend the entire two days.

A number of additional Global NPO Coalition members from across the world attended a specific FATF NPO consultation session on a new Terrorist Financing (TF) Risk Assessment Guidance, which the FATF has in the meantime published, making strong and relevant contributions to the topic. The Global NPO Coalition submitted joint written comments to the FATF immediately after the PSCF on this Guidance, and these were taken into account in its preparation. Given that governments often do not know how to move ahead with a national risk assessment, and in particular the assessment of NPO related risks, the development of more detailed guidance was welcomed by the sector. Efforts to stress the need for outreach and participation and the need to take existing measures into account when assessing the risk are included in the now published guidance. The NPO coalition is now working on more in-depth comments on the published guidance.

The PSCF is the annual opportunity for the philanthropic sector and other private sector representatives to engage with the FATF and its members on policy around anti-money laundering and countering the financing of terrorism (AML/CFT). Over recent years the security agenda has been one of governments’ motivations to restrict the operating space of NPOs and philanthropy, and it is therefore important to engage with FATF as the key international policy setter. At the Forum meeting we were able to share NPO and philanthropy sector views and concerns.

In light of recent incidents related to money-laundering schemes, offshore or financial centre leaks, as well as terrorist attacks, FATF wants to further strengthen overall “effectiveness” in the context of the implementation of money laundering and terrorism financing measures. One session looked at how this policy potentially could combat corruption.

At the Forum, FATF reviewed its responses to new financial and technological developments. FATF amendments of the FATF Recommendations in October 2018 made clear that AML/CFT obligations apply to virtual asset activities and related providers, according to an interpretative Note to Recommendation 15 on new technologies and the Guidance paper published in June 2019. FATF is also developing guidance on the use of digital identity for the purposes of conducting customer due diligence.

Regarding the application of new technologies in the context of AML/CFT (machine learning, data mining, and artificial intelligence), participants exchanged views and concerns on how public authorities and the private sector use this new technology to manage financial crime risk. In all these three discussions concerns were raised by the NPO sector that the application of these new technologies must take privacy rights and wider human rights into account while also mentioning that virtual assets/block chain technology can potentially be a tool for safe cross-border philanthropy actions and investments.

Apart from a specific session on NPO risk assessment guidance, another parallel session looked at the Risk Based Approach on the Legal Profession, Accountants and Trust and Corporate Service Providers – Three separate but generally consistent Guidance documents are being produced and they will replace the 2008 Guidance for these professions.

Regarding best practices on beneficial ownership, which aims to ensure that legal persons are not being misused for ML/TF, FATF wants to promote best practice in this area and ensure that information on beneficial ownership is available to competent authorities. FATF wants to promote EU and EU Member States’ policy in this regard since it is more advanced compared to other countries. The NPO sector raised concerns around balancing the needs of information sharing, data protection and global interaction on information sharing, in regards to the issue of beneficial ownership.

The NPO coalition on FATF is the key actor for current and future NPO engagement with FATF and other policymakers. Over recent years NPO coalition members also worked on financial inclusion and bank-de-risking issues: Members of the Global NPO Coalition were in Tokyo for the Civil Society 20 (C20) Summit in April, carrying on advocacy efforts to flag the issue of financial access difficulties (de-risking) for non-profit organisations ahead of the G20 Summit in Osaka in June. Coalition members then organised an event on the sidelines of the G20 in Osaka in June, which took the form of a dialogue between the FATF, the World Bank, the banking sector, and Japanese and international NPOs on issues of financial access. For more on the event, including what the key FATF messages were for the Coalition, visit the NPO coalition website.

Another WINGs webinar on the issue is in the pipeline. Should you have any further questions, visit the FATF NPO coalition website or contact Hanna Surmatz.

The EFC currently holds the seat on behalf of the philanthropy sector at the FATF PSCF and is a member of the FATF NPO coalition core group. The EFC’s work around FATF is encompassed in the joint DAFNE-EFC Philanthropy Advocacy initiative.