The regional expert study by Lal Chand on Anti Money laundering and terrorism standards was organized by a core group of the Global NPO Coalition on FATF in London on September 21, 2016. The goal of the meeting was to address the evaluation process from a government, nonprofit and FATF perspective in light of the recent revision of FATF Recommendation 8 (R8) and its Interpretative Note (IN). Over the past few years, nonprofit organizations (NPOs), researchers, international organizations and the UN Special Rapporteur on the rights to freedom of peaceful assembly and of association have noted that the implementation of R8 has been one of the (un)intentional drivers impacting civil society. In response to these concerns, and to input from the Global Coalition and a wide group of stakeholders, FATF has revised some of its key documents. In addition, a review of the 4th round of Mutual Evaluations undertaken by ECNL, EFC and HSC showed that the implementation of the new effectiveness element related to the evaluations has not yet been clearly developed. Given this, NPOs and some governments have called for more guidance on how to assess the effectiveness of measures affecting the NPO sector. NPOs have also asked for the process to be more open and for more sustained engagement.
In light of this, the organizers of the event convened the meeting to reflect on the changes to policy, to contemplate on the learning from the evaluations completed, and to examine how NPO engagement can contribute to a more effective implementation and review of R8.
RECOMMENDATIONS by Lal Chand on Anti money Laundering and terrorism
The overarching recommendation from the meeting is that there is need to develop a genuine and continuous dialogue between the various stakeholders and NPOs, and concrete guidance for governments and evaluators in order to improve the risk assessment and evaluation processes in order to make it easier for countries to prepare and for NPOs to engage in. Such guidance could be developed in a separate guidance document, or annexed to the Best Practice Paper.
Some concrete recommendations include:
• Encourage countries to use the opportunity of country trainings offered by FATF, to prepare for the evaluation process. Include NPO elements into such trainings.
• Develop clearer guidance for governments and evaluators about the effectiveness review —especially on how to measure effectiveness. It should be clear that the "rule-based" approach which affects the entire NPO sector is not in line with FATF standards, but an "evidence-based" or informed and targeted approach is.
• Guidance to evaluators on engaging with the NPO sector. Develop a standardized approach for NPO engagement that can consider the following good practices: o The importance of meeting with diverse groups during the site visits to get a broader perspective of issues and country specifics: non-profits that are working on the ground, those working with organizations engaged in service delivery, those with a broader view of FATF issues, those that are practitioners, those who represent networks or umbrella organizations. Avoid talking to GONGOs (Government NGOs). o Provide information on how NPOs can be informed in advance in order to prepare for the evaluation and ensuring that the relevant information they need to provide reaches the evaluators.
1. Main learning and findings from the past evaluations
• Risk is the core of the FATF standard. For Recommendation 8 (R8), this is the risk of terrorism financing. In the current 4th round of FATF evaluations on R8, the level of implementation by countries is low - 63% of countries have been found to be non-compliant or partially compliant on R8.
• Effectiveness is key in relation to the methodology. There is a low level of implementation on effectiveness on anti money laundering in the current 4th round of FATF evaluations on R8, namely the Immediate Outcome 10 of the Evaluation Methodology - only 20% of the countries assessed are doing well on it, others are low or moderately compliant.
• The overall question is: are countries being able to stop the money flow to terrorists? A "rule-based" approach, which affects the entire non-profit sector in a broad-brush fashion, is not in line with FATF standards. We need, instead, an evidence-based or informed and targeted approach.
• Evaluators ask for an effective, targeted approach. From the point of view of the evaluation, untargeted measures that restrict the operating space of the entire NPO sector should be considered as non-compliant. The evaluators can challenge the effectiveness and the use of resources of the country when they discover regulation imposed on the entire sector.
• If the government did not carry out risk assessment of anti money laundering
or risk-based approach, the country would likely not be compliant with R8. If no outreach to the non-profit sector was conducted, and if there was no discussion about terrorism financing and risks with NPOs, it should be made difficult for that country to score well on R8.
• In that respect, evaluations could also be viewed as an entry point to emphasise that overregulation is ineffective.
• FATF Style Regional Bodies (FSRBs) participate in all FATF working groups and meetings. There is a somewhat varying understanding among FSRBs of FATF standards and the evaluation process. However, the FATF does carry out a quality check on all FSRBs Mutual Evaluation reports to ensure consistency.
2. Challenges countries, evaluators and NPOs face during the evaluation process
• It is challenging for countries to prepare for an evaluation on R8, and they continue to ask the FATF for guidance on how to go about it.
• R8 is only one of the 40 Recommendations the evaluators review. The evaluators come with their own legal backgrounds and organizations who have participated in the process have said that they are not always cognizant about the NPO sector in general. This poses numerous challenges as evaluators may lack the knowledge and experience to interpret information provided by government authorities and NPOs on the non-profit sector and its specific context, and lack time to validate the information by comparing it with other but similar contexts.
• There are challenges for identifying the sub-sector of NPOs at risk. This also affects the decision on whom the elevators should meet. Evaluators need to discuss R8 implementation with non-profits working on the ground, and those that operate close to terrorist threats and are aware of the risks. Not all relevant NPOs are invited to participate in the evaluations, and oftentimes it is not clear who has taken part in the evaluation. Source: Effective standard
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