Revision of FATF Recommendation 8 reflects asks of non-profit and philanthropy sector
During its plenary session on 25-27 October 2023, the Financial Action Task Force (FATF) approved a revision of its Recommendation 8 (R. 8) on Non-Profit Organisations (NPOs) and its Interpretive Note to address the misapplication and misinterpretation of R. 8, which had led countries to apply disproportionate measures on NPOs.
Philea submitted input into the relevant consultations on R.8, its interpretative note and the Best Practices paper together with the wider Global NPO Coalition on FATF over the past months and welcomes the fact that this input is to a large extent reflected in the revisions.
To help stakeholders implement the revised R.8, the FATF also updated its Best Practices Paper on Combatting the Terrorist Financing Abuse of NPOs. The Best Practices Paper is not binding, but contains concrete examples of good and bad practices that may assist countries, NPOs and financial institutions with the risk-based implementation of Recommendation 8.
The main changes to R.8 include:
- A clearer application of the risk-based approach and acknowledgment of sectoral self-regulation measures: R.8 requires countries to have in place focused, proportionate and risk-based measures to address Terrorism Financing (TF) risks. Many NPOs may already have adequate self-regulatory measures and related internal control measures to mitigate TF risks, such that national authorities do not need to take additional measures.
- The clarification that NPOs should not be considered as obliged entities: R.8 clarifies that countries should ensure oversight or monitoring of NPOs, but they need not designate and supervise NPOs as reporting entities or require them to conduct customer due diligence.
- The clarification that R.8 does not apply to the entire universe of organisations working in the not-for-profit realm, but only to those that fall within the FATF definition of NPOs: It is clearly stated that, among these, only a small portion may be facing a “high risk” of TF abuse.
Philea, together with the FATF NPO Coalition, will closely monitor the next round of FATF country evaluations to determine the impact of the changes made.
- Agreement to publish a key report on “Crowdfunding for TF” and to scope work on countries’ criminalisation of TF (Recommendation 5)
- Agreement to amend the FATF Recommendations, which will provide countries with a stronger toolbox of measures to deprive criminals of the proceeds of crime and the release of a report with recommendations to further improve global asset recovery efforts in cross-border cases
- Adoption of reports on Illicit “Financial Flows from Cyber-Enabled Fraud and the Misuse of Citizenship and Residency by Investment Programmes”
- The release for public consultation of the updated “FATF Risk-Based Guidance on Recommendation 25 on Beneficial Ownership and Transparency of Legal Arrangements”, to which Philea is providing input, also on behalf of WINGS, along with the wider FATF NPO Global Coalition.
- FATF Plenary approves revision of Recommendation 8 and Best Practices Paper | Global NPO Coalition on FATF
- Protecting non-profits from abuse for terrorist financing through the risk-based implementation of revised FATF Recommendation 8