The Australian Charities and Not-for-profits Commission (ACNC) has released key findings from work to better understand how charities manage the risks of funds being misused, including for terrorism financing.
The work focused on small charities that operate overseas to examine how they protect funds and assets, in line with obligations set out in External Conduct Standard 1. Charities that participated in this work completed a self-audit and took part in meetings.
ACNC Commissioner Sue Woodward AM said it is pleasing that most charities had some governance measures in place to manage risks of terrorism financing.
‘The majority understood the seriousness of the issue and demonstrated a willingness to comply with Australian and international laws. Importantly, they supported their board and staff to develop strong financial literacy skills, and had strong risk management procedures in place,’ Ms Woodward said.
Charities with strong governance in this area achieved this by:
- having a specific counter terrorism policy or embedding counter terrorism measures within a financial management policy
- checking all partners and personnel against the listed terrorist organisations under the criminal code, and the Department of Foreign Affairs and Trade's consolidated list of all individuals and entities subject to Australian sanctions, including targeted financial sanctions and travel bans
- conducting due diligence before working with overseas partners
- having documented agreements in place with overseas partners and monitoring service delivery against agreed expectations
- identifying risks related to their activities and the countries they operate in
- maintaining a risk register and undertaking periodic risk assessments of all projects
- having a skilled board and employees or volunteers with financial expertise
- transferring funds from the charity account via bank-to-bank transfers or using established remittance service providers
- keeping records, including project reports to acquit the use of transferred funds
- being aware of relevant legal obligations.
Charities with less effective governance were generally familiar with the risks of terrorism financing, but assumed these risks were low or negligible in the overseas locations where they operated.
Other governance issues identified included charities:
- lacking key documents, such as:
- formal financial management or counter terrorism policies
- formal agreements with overseas partners
- an incident response plan
- not understanding relevant laws, particularly those related to terrorism financing, money laundering, and other criminal activities
- having processes which are based on trust and personal relationships with overseas partners, rather than formal vetting or documentation
- transferring funds via personal bank accounts or conducting transactions using cash.
Read the summary of findings from our work on managing terrorism financing risk.
For more information, see our guidance on protecting your charity from terrorism financing risks, and our general guidance for charities operating overseas.