Cash-hungry terrorist groups target charity and NFP sector

The sector's vulnerability to exploitation through terrorism financing was revealed in a recent online briefing tailored for charities and NFPs delivered by the nation’s financial intelligence and anti-money-laundering agency AUSTRAC.

AUSTRAC's manager of industry education and outreach, Emma Salik, said charities and NFPs were most at risk of exploitation when undertaking fundraising.

“Over the next three years religiously motivated violent extremism actors will likely continue to exploit registered charities and legitimate NPOs (non-profit organisations) to raise funds for overseas terrorist activities,” she said.

“NPOs [non-profit organisations] provide a seemingly legitimate avenue to attract funds from both witting and unwitting donors and it is challenging to successfully disrupt or prosecute their operations given the lack of visibility of pathways offshore,” said Salik.

While ideologically motivated extremists are unlikely to make charities and NFPs a key financing avenue given their successful use of other channels to raise funds, Salik said the risk to the sector was still real.

“Links between these actors and legitimate NPOs warrant monitoring by authorities.”

The warning follows recent confirmation by the Australian Charities and Not-for-profits Commission (ACNC) that it has been investigating several Australian charities over links to terrorist organisations and terrorist financing.

Salik said the security outlook for the charity and not-for-profit sector was constantly evolving.

“The intelligence picture regarding the misuse of registered charities and legitimate NPOs for terrorism financing by ideologically motivated violent extremism actors is developing,” she said.

“These NPOs do not appear to be funding violent activity but are likely a vehicle to spread propaganda and undertake recruitment activities.”

In 2017 AUSTRAC and the ACNC released the National Risk Assessment an evaluation of the money laundering and terrorism financing risks in the Australian charity and NFP sector.

In the years since, Salik said authorities have invested heavily to better understand, monitor and disrupt terrorism financing and the misuse of charities and NFPs in Australia and across southeast Asia.

This has resulted in multiple charities having their registrations revoked.

Indonesian authorities have also listed an Australian NFP and its main Australian facilitator for targeted financial sanctions.

Salik said the National Risk Assessment had identified several vulnerabilities for Australian charities and NFPs in regard to financial exploitation by terrorist organisations.

It had also found a wide variation in the level and sophistication of risk mitigation strategies employed by charities and NFPs.

The evaluation concluded that large international organisations better understood and were able to limit their terrorism financing risks because of their access to resources and governance expertise.

In some cases, this resilience was also strengthened by requirements by funding bodies for effective financial control and acquittal.

Salik said small and medium NFPs, in contrast, tended to rely on trust-based relationships with individuals or partner organisations to deliver projects overseas.

She said their lack of understanding of their terrorism financing risks meant “they may not have adequate mitigation strategies in place.”

The National Risk Assessment found NFPs that were more vulnerable to terrorism financing demonstrated one or more of the following characteristics:

• poor understanding of terrorism financing risks and limited strategies to manage the risks
  
  
• poor due diligence in relation to key personnel, volunteers, partners and beneficiaries
  
  
• inexperienced staff and lack of formalised training and professional development
  
  
• poor record keeping
  
  
• poor transparency and accountability in relation to the end-to-end funding cycle
  
  
• use of cash or informal money transfer services to move funds outside regulated channels
  
  
• operating in countries with poor anti-money-laundering and anti-terrorism financing regimes or in conflict or post-conflict zones.

Salik said charities and NFPs can be established with the genuine intent to undertake charitable activity yet become vulnerable to unintended illicit diversion happening downstream.

“What this looks like usually is that an NPO was acting in good faith, but it has limited control and ability to ensure funds are used for their intended purpose.”

More information

Regulator probes charities’ terrorism links

AUSTRAC guidance for NFPs