Protecting your charity against the risk of terrorism financing
Why charities need to protect themselves
Charities can be potential channels for raising and distributing funds for terrorism financing. Because of this charities must take all reasonable precautions and exercise due diligence (research and action to reduce the risk, particularly when working with other people and organisations) to ensure that funds are not inadvertently directed towards terrorism. This includes putting in appropriate governance structures.
There may be serious consequences for charities if they are used for terrorism financing (even if the charity does not know), including criminal penalties.
How terrorists can abuse charities for terrorism financing
Some of the ways terrorists can misuse charities to raise funds to finance or support their activities (with or without the charity’s knowledge) include:
- Using charity funding
For example, a local organisation that has a relationship with the charity to conduct project activities overseas, a ‘partner organisation,’ uses all or part of the charity’s money to fund acts of terrorism.
- Using charity assets
For example, the charity’s vehicles or premises are used to transport or store weapons.
- Using the charity’s name and status
For example, fundraising is conducted in the name of the charity by a terrorist organisation, without the charity’s knowledge or consent.
- Committing financial abuse within a charity
For example, members of a terrorist group may infiltrate the charity and pose as employees, who then skim off money from fundraising to fund terrorist purposes.
- Setting up a charity for illegal or improper purposes
For example, a terrorist group registers a charity but the charity does not work towards their charitable purpose. The group uses all of the charity’s funds for terrorism financing.
Attention - Important information!Do not assume it will never happen to your charity!
Why charities are at risk
The factors that allow charities to achieve outcomes and earn respect from the public also make them vulnerable to being misused to fund terrorism.
- Charities may have a global presence that provides a framework for national and international operations and financial transactions.
- Many charities work within or near those areas that are most exposed to terrorist activity.
- Charities may operate in emergencies or provide humanitarian responses in locations where there are no banks or infrastructure, and they may have to deal in cash or use alternative remittance systems.
- Charities often have complex financial operations which are not always accounted for in detail, including:
- multiple donors, investments and currencies
- a high volume of small transactions
- informal money transfers.
- There may be unpredictable and unusual income and expenditure streams, so suspicious transactions may be hard to identify.
Organisational structure and programs
- Charities may be run by one or two key individuals, often in unsupervised roles which makes it easy to quickly move money and assets around.
- Often there are complex programs of operation and charities pass funds through intermediary partner organisations to deliver their services.
The high level of public trust
- Charitable activities may not be scrutinised as consistently as other sectors.
Charities that only operate in Australia can be misused too
Some charities who only have activities and beneficiaries in Australia incorrectly think they are protected from the risk of terrorism financing. Funds for terrorism financing may pass through a number of Australian charities and organisations before they are transferred overseas. The funds may also be used for terrorism financing within Australia.
How to reduce my charity’s risk
Whatever your charity’s size, activities or areas of operation, strong governance arrangements can reduce the risk of your charity being used for terrorism financing. The ACNC has governance standards that require charities to remain charitable, operate lawfully, and be run in an accountable and responsible way. Recording information and reporting annually to the ACNC adds to the accountability and transparency of your charity. By using this ACNC checklist, you can assess how well your charity is meeting these governance standards and reduce the risk of being misused for financing terrorism.
Attention:You need to know! Complete the checklist: protecting your charity against terrorism financing