Terrorism financing describes the provision of money and other assets to terrorists and terrorist organisations, or to fund a terrorist act.
Terrorism financing can be viewed in a similar way to money laundering, in that both criminals and terrorists use similar methods to raise, store, and move funds.
All charities are vulnerable to the risk of having their funds and other assets misused for the purpose of terrorism financing. However, charities that operate overseas, or that send money overseas, are particularly vulnerable to terrorism financing risks.
Ensuring your charity has appropriate governance, oversight and record-keeping measures in place can help protect it from having its assets misused.
These governance and oversight measures are vital to ensuring your charity meets their obligations – including the ACNC Governance Standards and, if operating overseas, the ACNC External Conduct Standards.
Both terrorism financing and money laundering are criminal offences under Australian law.
Australia takes a strong stance against the financing of terrorism, with the Australian Government working to ensure Australian funds are not diverted or used to support terrorism.
Australia is a member of the Financial Action Task Force, an intergovernmental body that has developed recommendations for countries to implement to combat the financing of terrorism.
The ACNC is committed to supporting this work through its regulatory oversight of the charity sector. More information on the ACNC’s regulatory focus areas is available on our website.
How charity assets can be misused to finance terrorism
There are several ways terrorists can use charity funds and other assets to finance or support their activities – and do so without a charity’s knowledge.
They include:
- charity funding – for example, a charity working with a partner organisation overseas has some or all the funds it provides to that organisation misused to fund acts of terrorism
- non-monetary charity assets – for example, charity vehicles or premises being misused to transport or store weapons
- the charity’s name and status – for example, a terrorist organisation conducting fundraising in the name of the charity but without the charity’s knowledge or consent
- fraud or fraud related issues within a charity – for example, members of a terrorist group infiltrating a charity and posing as employees before skimming charity money to fund terrorist activities.
Some of the characteristics that help charities achieve outcomes and earn the public’s trust and confidence can also leave them vulnerable to being misused to fund terrorism.
These include:
Operating locations
- Charities may have a global presence that provides a framework for national and international operations and financial transactions.
- Charities may work in or near areas most exposed to terrorist activity.
- Charities may operate in emergencies or provide humanitarian responses in locations where there are no banks or little financial infrastructure, meaning they may have to deal in cash or use alternative remittance systems.
Financial operations
- Charities often have complex financial operations that encompass:
- multiple donors and investments, often involving a variety of currencies
- a high volume of small transactions
- informal money transfers.
- Charities may also have unpredictable and unusual income and expenditure streams.
These factors mean that suspicious transactions are harder to identify.
Organisational structure and programs
- Charities may be run by one or two key individuals – often in unsupervised roles – making it easier to quickly move money and assets around.
- When operating or sending money overseas, charities may work with third parties to deliver programs.
- Charities may also send funds or other assets through intermediaries as part of their overseas service delivery.
High level of public trust
- Charity activities may be less consistently scrutinised compared to the activities of other sectors.
There may be serious consequences – including criminal penalties – for charities and their Responsible People if they are misused for terrorism financing. Those penalties may apply even if the charity is unaware of the misuse.
Links between a charity and terrorism – be they direct or indirect – are unacceptable and reduce trust and confidence in charities.
Protecting your charity
Charities should be diligent and take reasonable steps to ensure their charitable assets are protected from misuse and are exclusively used towards their charitable purpose.
Our experience has shown that charities are less likely to have their assets misused for terrorism financing if they have strong governance arrangements appropriate for any specific risks they might face, based on their operating location, activities and people.
These governance arrangements include:
- financial controls and financial management systems and tools
- risk management policies and procedures
- delegations of decision-making powers
- record management systems
- other relevant policies and procedures
- other suitable due diligence.
Complying with Australian laws while operating in Australia, and when operating overseas, can help charities maintain strong governance and operating arrangements. Charities must also follow the laws of the countries in which they operate.
Charities should regularly review and strengthen any internal controls they have established, and must ensure appropriate records are kept.
There are several steps your charity can take to mitigate the risk its funds or other assets could be inadvertently directed towards terrorism.
Your charity should take reasonable steps to ensure:
- that any person or organisation connected with it is legitimately acting on its behalf
- that it understands the risks associated with each country it sends assets to, has assets in, or conducts activities in. These risks might include:
- occupational health and safety for staff or volunteers working in warzones
- knowledge of any terrorist groups or known corruption in charity areas of operation. You can check which organisations are classed as listed terrorist organisations on the Australian National Security website.
Remember: a charity may also be committing a criminal offence if it is connected to, or supports, a listed terrorist organisation.
What constitutes reasonable due diligence for your charity will depend on its individual circumstances, including the countries in which it operates, its activities, and how much money is involved. The greater the risk, the more you need to do.
It is a good idea to record the steps your charity takes as part of its due diligence. This can include:
- retaining copies of any relevant searches your charity completes as part of its due diligence, such as checking sanctions and terrorist organisation lists
- maintaining a risk register to identify and monitor risks
- establishing, maintaining and regularly reviewing reporting and risk management policies and procedures.
Your charity should take reasonable steps to ensure its funds and other assets are being used in line with its charitable purpose and character as a not-for-profit.
Where your charity works with third parties, it can consider steps such as:
- establishing and completing appropriate due diligence checks on the third party, such as:
- confirming their legal structure and registration
- requiring the overseas partner to disclose any civil, criminal, and regulatory matters
- running checks to see if the partner organisation or its associated individuals are subject to sanctions or are associated with organised crime or terrorist groups
- searching for any adverse media (including online and social media) relating to the overseas partner
- obtaining copies of Working with Children Checks, police checks, or other similar checks
- having written agreements that set out each party’s roles and responsibilities
- monitoring activities – by obtaining written reports and receipts, for example – to ensure funds and other assets are being used as expected
- only providing funds on a periodic basis and withholding future transfers if necessary.
You can read our guidance on working with partner organisations for more information.
The steps that are reasonable for your charity will depend on its circumstances, including where it operates, the type of work it does, and the risks being managed.
All charities should keep and maintain records that explain their work.
Charities registered with the ACNC have record-keeping obligations, which require charities to retain relevant financial and operational records.
Adequate record-keeping also plays a vital role in supporting a charity’s governance and decision-making.
The type of records your charity keeps will depend on your assessment of the risks it faces, but at a general level, examples of useful records to maintain could include:
- financial records of income, expenses and financial transactions – including for third parties working on the charity’s behalf
- detailed budgets for each project
- regular progress reports for each project
- adequate records of meetings and forums where decisions are being made, such as meeting agendas and minutes.
More specifically, you should retain any sanction checks or risk assessments your charity has completed to understand and address the risk that its assets might be misused for terrorism financing.
The records you retain should have enough detail to allow your charity to prepare a summary of its activities outside Australia on a country-by-country basis for each year of overseas operations. This will help your charity demonstrate it is meeting External Conduct Standard 2.
Depending on their work or structure, charities may also have record-keeping obligations to other regulators. It is important that charity Responsible People are familiar with these additional obligations.
Australia enforces sanctions that are:
- imposed by the United Nations Security Council
- imposed and implemented by the Australian government as a matter of Australian foreign policy.
Designated people or entities – or specific countries or regions – could be subject to sanctions.
Your charity must comply with laws about sanctions while operating in Australia and overseas.
Steps that you can take in this area include:
- ensuring you are familiar with the applicable Australian sanctions law
- conducting due diligence checks on any third parties your charity works with to understand how goods and services being purchased by, or provided to, the third party will be used
- checking DFAT’s Consolidated List to check whether your charity would be directly or indirectly dealing with a designated person or entity.
Visit the Department of Foreign Affairs and Trade’s website for more information on sanctions.
To ensure your charity’s funds are used in accordance with its purpose and not-for-profit character, appropriate financial controls should be in place. These can include:
- strong financial measures and audit trails to protect your charity’s funds and other assets, and to show how when, and why they were used
- mechanisms to identify financial anomalies, and that allow for further scrutiny
- appropriate delegations and separations of authority for cash collection, handling and deposits, as well as for the issuing of receipts.
What constitutes appropriate financial controls for your charity will depend on its size, as well as other factors.
Large cash-based transactions can pose risks for charities. If your charity does receive such a donation, there should be a clear understanding of the donor’s motivations.
When making a payment, we recommend charities use formal banking facilities where they exist and are available, as they provide the safest means of transferring charitable funds.
However, if large payments are made in cash, your charity should be able to demonstrate why using cash was chosen over safer options, and how it is in line with its obligations to the ACNC.
In these circumstances you should also ensure detailed records are kept, that the payee is legitimate, and that the funds will be used in accordance with your charity’s purpose.
Your charity should also be able to demonstrate how it manages any risks associated with carrying significant amounts of cash.
If your charity uses a remittance service provider for funds transfers, we recommend checking it is registered with AUSTRAC.
Report suspicious activity
If you have information about suspected terrorism financing activities, contact the National Security Hotline by:
- calling 1800 123 400
- emailing hotline@nationalsecurity.gov.au, or
- texting 0498 562 549.
If you suspect suspicious activity, contact the Australian Federal Police.
You must also report any significant breaches of the Governance Standards or the External Conduct Standards to the ACNC via our raise a concern form.
Your charity may also wish to seek professional advice, such as from an anti-money laundering or counter terrorism financing expert or consultant.
Next steps
Complete our checklist to understand if your charity is taking the necessary steps to protect its funds and other assets from the risk of terrorism financing.
This checklist can help you identify if your charity meets the ACNC Governance Standards and External Conduct Standards that reduce its risk of being misused for terrorism financing.
The steps outlined in this checklist are suggestions only. The exact actions your charity take to meeting the ACNC Governance Standards and External Conduct Standards will depend on its individual circumstances.
Sending money
Our charity sends money overseas.
The methods we use to send money overseas include:
Electronic bank transfers
Remittance
Crypto assets
Hawala
Cash
Charities should avoid making payments in cash. When using any of the other methods listed above, make sure your remittance provider is registered with AUSTRAC.
Understanding and managing your risks
Our charity has conducted a risk assessment of the countries in which it is operating or sending funds to.
Your charity should assess the risks associated with each country in which it operates or sends funds to. For further information, see our guidance on External Conduct Standard 1.
Our charity has conducted due diligence on its overseas partners, employees and volunteers.
Our charity's due diligence included the following:
Confirming the partner organisation’s legal structure and registration
Checking who the owners (if any) and managers of the partner organisation are
Disclosure of any civil, criminal, and regulatory matters relating to the partner organisation
Running checks to see if the partner organisation or its associated individuals are subject to sanctions or are associated with organised crime or terrorist groups
Searching for any adverse media coverage
Obtaining Working With Children or equivalent checks for your charity’s overseas employees and volunteers
Obtaining police checks or equivalent for your charity’s overseas employees and volunteers
This is not a comprehensive list of actions you can take as part of your due diligence. What constitutes a reasonable level of due diligence will depend on your assessment of all the risks your charity may face, as well as its resources.
Our charity operates in a country that is subject to sanctions.
You can find more information regarding sanctions on the Department of Foreign Affairs and Trade website.
If the country in which our charity operates is subject to sanctions, we take reasonable precautions and exercise due diligence to avoid contravening Australian sanctions laws.
Our charity’s Responsible People, staff and volunteers are aware of the list of terrorist organisations, and understand the legal impact of listings.
It is an offence to support terrorist organisations listed under the Criminal Code Act 1995 (Cth). Listed terrorist organisations can be viewed at the Australian Government’s National Security website.
Our charity’s Responsible People, staff and volunteers are aware of the Consolidated List and understand the legal impact of listings.
The Department of Foreign Affairs and Trade maintains a list of all persons and entities subject to targeted financial sanctions or travel bans under Australian sanctions laws (Consolidated List). Listings for targeted financial sanctions are distinct from listings under the Criminal Code and impose separate legal obligations.
Internal controls
The financial controls our charity has in place to monitor and control our money include:
Separations of authority over collection, handling and depositing of cash, and issuing of receipts
The ability to audit the way funds have been spent
Methods to transfer funds through remittance service providers registered with AUSTRAC
Processes for recording and reviewing transactions
This is not a comprehensive list of financial controls you can consider implementing. What constitutes a reasonable level of financial control will depend on your charity’s size, number of staff, complexity, and other characteristics.
Our charity knows who uses its facilities and for what purposes. These facilities include our office, bank account and credit cards, computer system, telephone or other communication devices.
Our charity has procedures to check if any beneficiaries, partners, stakeholders, staff or other people associated with it are already listed – or may get listed – for targeted financial sanctions.
Our charity has procedures to check whether any beneficiaries, partners, stakeholders, staff or other people associated with it are already listed – or may get listed – as a terrorist organisation.
Our charity knows, or would know, if anyone else might be using its name.
Our charity understands the background and affiliations of its board members, employees, fundraisers, volunteers and partners.
Our charity knows if its Responsible People have other reasons why they want to be involved with our organisation.
Partners
Our charity has clear written agreements with agents, contractors or other partners – both in Australia and overseas – covering the activities to be undertaken and how they will be monitored and accounted for.
We recommend documenting your arrangements with your overseas partners. It is a good idea to write down what each party will do, how you will check that the other party is doing what they say they will do, and what happens if they don’t. Our website has more guidance on working with partner organisations.
Our charity reviews the capacity and capability of partners to manage, deliver and track funds and resources.
Our charity monitors the progress of its overseas partners.
Our charity has a plan for what to do if progress doesn’t meet expectations.
Reporting
Our charity has a policy on what to do if it notices any suspicious activity.
If you suspect suspicious activity, contact the Australian Federal Police.
You must also report any breaches of the Governance Standards or the External Conduct Standards to the ACNC via our website.
- Guidance from the federal Attorney-General’s Department on preventing terrorism financing
- Department of Foreign Affairs and Trade (DFAT) information about Australian sanctions
- The Australian Transaction Reports and Analysis Centre’s (AUSTRAC): Remittance Sector Register
- Australian Council for International Development’s (ACFID) list of member agencies. ACFID members are all signatories to the ACFID Code of Conduct, which includes mandatory annual report and financial management requirements
- The Federal Government’s listed terrorist organisations