The funding of terrorism through charities

Charities have always been susceptible to political involvement. To some extent this is inevitable and legitimate: the activities of many charities involve the provision of humanitarian relief and charities are inevitably drawn into considering the causes of suffering and seeking ways in which those causes can be alleviated as part of their work. This may involve some political activity in so far as it can be justified by the purposes of the charity involved.

Apart from humanitarian needs resulting from natural disasters, in a growing number of areas in the world such needs arise out of civil disputes and unrest caused by political, cultural or religious differences. Charitable relief in those areas is essential and necessary. Often, however, it does involve close association between charities providing humanitarian relief and political organisations operating in those countries.

This presents particular challenges for those whose responsibility it is to administer and manage such charities, and for the Charity Commission as regulator to ensure charitable funds are only applied for the legitimate purposes of the charity.

Perhaps more easily recognisable (at least in theory) is the deliberate use of charities to launder money or to support activities of a political or terrorist nature abroad. This may arise in a variety of circumstances, including the direct funding of terrorist organisations, the provision of educational facilities that are used as means of recruitment and training, the organisation of terrorist activities or for propaganda purposes.

Although these issues were known to the Charity Commission and, where appropriate, action was taken in relevant cases, the events of 11 September 2001 threw into sharp relief the funding of terrorism worldwide and the need for the Commission, as the charity regulator for England and Wales, to have a clear and unambiguous approach to these matters.

The Charity Commission's approach

The Commission has developed and published a clear statement of the principles that it will apply in dealing with allegations or evidence suggesting the involvement of charities with terrorism.

The Charity Commission's approach rests on three key principles that are applied in its regulatory work. These are:

the Commission will not register an organisation as a charity that has the support of terrorism as either an express or implied purpose, or has activities directed towards that end;

the use of a charity's property or resources directly or in support of terrorist activity is not a proper use of that property or resources; and

any links or sustained allegation of links between a charity and terrorism are corrosive to the public confidence in the integrity of that charity.
The key to effective regulation by the Charity Commission is the proper governance of charities by those whose responsibility it is to administer and manage them. Accordingly, the Commission expects trustees to be vigilant to ensure that a charity's premises, its property, its volunteers and other facilities and resources cannot be used for activities which may directly or indirectly support - or appear to support or condone - terrorist activities.

The Commission would expect charity trustees immediately to take all necessary steps to dissociate their charity from any activity that may give or appear to give support for terrorist activity. Not only must trustees act within the law but they should also take all necessary steps to ensure that their activities cannot be misinterpreted. They are also strongly advised to take all necessary steps to ensure that their activities are transparent. Trustees are accountable for ensuring that procedures are put in place to ensure that terrorist organisations cannot take advantage of a charity's status reputation, facilities or other property.

The Charity Commission will act robustly where any allegations are made involving a charity and terrorist activity. This approach is reflected in the clear warnings set out in the Commission's website that conveys the essence of its policy in this area: "We will deal with allegations of links between a charity and terrorist activity as an immediate priority and will liaise closely with intelligence, security and law enforcement agencies to ensure the thorough investigation. Active collaboration between charities and terrorist organisations is a Police [sic] matter that may lead to serious criminal charges...Where a charity's activities may give or appear to give support to terrorist activities, we expect the charity trustees to take immediate steps to disassociate the charity from the activity. We expect trustees to ensure that the charity's premises, assets, volunteers and other resources cannot be used for activities that either support or appear to support terrorist activities..."

The international dimension

The Commission recognises that this is an international issue and one in which it has a vital role to play together with non-governmental organisation (NGO) regulators in other states and the law enforcement agencies of those states. UN Security Council Resolution (UNSCR) 1373, passed in the wake of the 11 September 2001 terrorist attacks, imposed for the first time an obligation on all states to take a broad range of measures to suppress terrorism and block terrorist finances.

Actions by states to effect this obligation are being monitored by the Counter Terrorism Committee of the Security Council. The Financial Action Task Force on Money Laundering (FATF), an intergovernmental body established by the 1989 G7 Paris summit, registered concerns that numerous instances had come to light where NGOs had either been constituted for the sole purpose of fundraising and laundering, or the abuse existed without the knowledge of the organisation's genuine members.

Special Recommendation 8 of the FATF requires that all members and non-members introduce a regulatory system for charities and not-for-profit organisations, with the aim of stopping the flow of terrorist funding from such organisations.

In fulfilling the UK's obligations, the Commission, where necessary, applies its regulatory powers to undertake investigations into charities within its jurisdiction to ensure funds are not being used improperly. The Commission also verifies that they are not financing unlawful political objectives, that they are not being used for criminal purposes and that they are not financing terrorism.

As part of the international effort, the Commission has delivered two international conferences - the South and South East Asian Conference in Colombo, Sri Lanka and the sub-Sahara and South African Conference in Botswana - to discuss the legislative framework necessary to establish an effective charity regulation mechanism to meet the international obligations of UNSCR 1373 and the FATF's Special Recommendations.

These conferences discussed, in the context of the regulatory systems of the various attending countries, the definition and scope of NGO regulation; the essential components in an effective regulatory system; the role of monitoring; the effective use of intelligence in investigations; and international co-operation and liaison in investigations.

A key issue for the future remains that of international regulation and greater international liaison between domestic regulators and law enforcement agencies to stop or disrupt the use of charities and NGOs for financing terrorism.

Regulatory Challenges

It is difficult to gauge the scale of the problem and the impact of effective regulation both domestically and internationally in dealing with terrorist funding through charities and NGOs.

The nature of terrorist activity suggests that it may be resilient and able to create new opportunities for itself where law enforcement and regulatory agencies intervene and block financing. Nevertheless, frustration and disruption of terrorist funding (as opposed to stopping it outright) is an achievement in itself.

The key is effective international co-operation and liaison, and the sharing of information and intelligence between regulators. Charities and NGOs provide an easy cover for the raising and transmission of funds. Terrorism is often an international enterprise and therefore states must co-operate in the investigation of activities and other measures to frustrate it.

Where charities and NGOs are suspected of being 'fronts' for fundraising or money transfer, it is important for NGO regulators in both the fundraising and recipient country to share information. This collaboration would also be helpful in the investigation of allegations of malpractice not involving terrorism.

Bilateral co-operation could take the following forms:

help requested by regulators in donor countries who wish to confirm that funds raised for legitimate need are being used exclusively for those purposes in overseas programmes either delivered by the same NGO, or by a grant aided NGO locally;

information requested by the regulator in a country where terrorist activities take place in order to progress their investigations about a donor charity or the headquarters of an NGO in that jurisdiction. This might also prompt an investigation and use of powers of intervention in the donor country; and

the sharing of intelligence which may not be specific to a particular NGO, that may at some later date trigger concerns to enable speedy progress to be made in an investigation.
There are difficulties in international co-operation. Different jurisdictions and law enforcement agencies have regulatory systems that arise out of their own social needs and obligations and jurisprudence that may not be compatible. Intelligence-sharing may require security clearance and does not always result in evidence which may be used as a basis for exercising regulatory powers and which may be subject to legal challenges, particularly from human rights activists or lawyers.

The Commission, in its investigations, has found that it is difficult to assemble clear evidence to suggest that funds are being used for terrorist purposes. There have been cases, however, where trustees have been unable to demonstrate, in terms of both their internal financial controls and their accounting records, that the funds of the charity have been devoted to exclusively charitable purposes.

Additional problems arise where charities are operating in those areas of the world where humanitarian relief is most acute, and in areas where conflict and terrorist activities are taking place.

This poses particular problems of financial control and supervision of funds and general regulation to ensure that funds are being applied for charitable as opposed to other purposes, particularly in geographical areas which may be said to be under terrorist influence.

In those areas the Commission is very alive to the fact that by blocking or freezing funds on allegations that they are being used to support terrorist activity, they will be depriving those who are most in need of charitable relief. In these cases, the Commission is determined to conduct a thorough but focused investigation to ensure that its intervention does not have adverse effects on the beneficiaries of charities.

The commission also looks to find (with the co-operation of trustees and local volunteers and the help of others charities and NGOs) ways in which the application of charitable funds to beneficiaries can be assured through audit or other mechanisms.

Much work is required in terms of developing awareness, international co-operation and perhaps the international 'benchmarking' of regulatory standards of NGO regulation - and the not-for-profit/ charitable sector must be included in this.

The challenge does not so much lie in the enormity of the task as much as the need to strike the right balance (which may be a fine one) between effective regulation and one which may stifle legitimate charitable activity.

The Charity Commission's 'Annual Report 02-03 Making a Difference' details the organisation's international outreach programme on counter-terrorism issues.

Kenneth Dibble is director of legal services at the Charity Commission

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