Charity Commission for England and Wales - PowerPoint Presentation

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Charity Commission for England and Wales Terrorist Financing: Perspectives on Informal Finance and Charities Preventing Terrorist Financing without damaging legitimate charitable activity3 October 2014

Peter Clarke – Board Member Michelle Russell – Director of Investigations, Monitoring and EnforcementSlide2

The Regulated Charity Sector in England and Wales164,000 + registered charitiesAnnual income c.£64 billionAssets of c.£186 billion80% income accounted for by 3% of charities78,000 charities with an income of less than £10,000 paOnly 1,976 charities with an annual income greater than £1 million13,000 operate internationally - annual income c.£10 billionSlide3

Vulnerability of Sector – Why is it at RiskHigh levels of public trust because of voluntary and altruistic natureRelatively easy to set upGlobal presence – money, goods and peopleOften depend upon one or two individuals who play a key and often unsupervised rolePowerful vehicles for bringing people together – ready made legitimate social networkDifferent and generally lower levels of regulation in other parts of the world Slide4

Financial & Logistical Support Financial & Logistical Support

Attack

Training UK & Overseas

Precursors & equipment

Food & Accommodation

Support for Families, Before During & after

Travel Fares, Visas, car hire

Communications & IT

Minor

Crime

Business

Charities

Donations

FraudSlide5

Aspects Of Terrorist FinancingSlide6

The International Response Financial Action Task Force (FATF) Recommendation 8 Countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism. Non-profit organisations are particularly vulnerable, and countries should ensure that they cannot be misused: (a) by terrorist organisations posing as legitimate entities;

(b) to exploit legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and (c) to conceal or obscure the clandestine diversion of funds intended for legitimate purposes to terrorist

organisations

.

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FATF Typology Report 2014: Risk of Terrorist Abuse in Non-Profit OrganisationsKey Findings include:The NPO sector has interconnected vulnerabilities, and terrorist entities seek to exploit more than one type of vulnerabilityThe NPOs most at risk appear to be those engaged in ‘service’ activities, and that operate in a close proximity to an active terrorist threatDisruption of abuse, or the mitigation of substantial risk, was dealt with through multiple means including, but not limited to, criminal prosecution. Administrative enforcement, financial penalties, and targeted financial sanctions play important roles in disruption of abuseSlide8

The Challenges:FATF Recommendation 8: Non-Profit Organisations:Implementation is not consistent – there are practical challenges for some countries, and it can be seen as low priority Challenges in reviewing and assessing the true risk of abuseWhat does risked based and proportionate mean in practice? Over regulating, restricting the operations of charities, freezing and seizing funds and closing down charities can create problems:

New organisations are set up and/or take overActivities go under ground into cash based systems or other unregulated sectors

Money intended for good causes can be frozen for years

Creates a gap for terrorists to provide aid and relief themselves

Criminals find other ways around obstaclesSlide9

Our role and the UK approachHMG: CONTEST strategy and the 4 “Ps”A three pronged policy approach:The legislative framework in the criminal law that deals specifically with terrorism – law enforcementThe Financial Sanctions Regime - HM TreasuryThe regulatory and legal framework that applies to all charities – the Charity CommissionClose down the charity v take out the problem?The Commission’s counter-terrorism strategy – 4 strands:Awareness, Cooperation, Oversight and InterventionSlide10

Using a Regulatory Framework to support criminal InvestigationsTerrorist activity is a criminal matter but;An organisation that is set up to and has purposes to support terrorism would not be recognised as a charity The use of a legitimate charity’s funds or other assets for support of terrorist activity is not a proper use of those assets The distinction between abuse of a charity by people outside it and instances of abuse for terrorist purposes from within a charitySlide11

Where are the risks and common difficulties?IN Money from donors – provenance of funds; reputational risks due to links associations conduct; undue influence over decisionsWITHIN Risks from – activities; links and associations (trustees, employees, volunteers, fundraisers…); when conduct in personal capacity impacts OUT use of partners (overseas); not just money – links, associations, control - reputational risks; beneficiary influence Slide12

Some Challenges for the Regulator and Partners in This AreaNPOs are part of civil society and it is likely that they and people involved with them will come up in investigationsIdentifying abuse from legitimate activity Funding that supports both legitimate and illegal activity Links between terrorism issues and other crimes Evidence thresholdsCash intensive environments International boundaries and information sharing – particularly across criminal/civil/taxTurning intelligence into evidence Limitations in PowersSlide13

Charity Commission ResponseStepping up our intervention work During 2013-14 cases featuring allegations or concerns relating to extremism/terrorism issues included 25 pre investigation assessment cases12 investigations55 monitoring casesTargeted monitoring and supervision use of proactive compliance visitsIncreased outreach and work with charities to prevent abuse and help make them more resilient Slide14

Case Study

Bookshop

Genuine charitable entity

Mohammed Siddique KHAN

Shezhad TANWEER

Deceased 7/7 bombers

Trustees

Premises used to view extremist material?

Premises used as meeting place for the bombers?

Premises used to radicalise the bombers?

£12.5k charitable funds held in bank account

Charitable funds not used to finance 7/7Slide15

The importance of Prevention and The Role of CharitiesEqually important is to prevent abuse happening in the first place and ensure that the sector do enough themselves to safeguard charities from this. This means: Strong financial controls and good governanceImplementing good general risk management policies and proceduresMeaningful and effective oversight of activities by trusteesDue diligence: Know Your Donor Know Your Beneficiaries

Know Your PartnerMonitoring and verifying the end use of fundsNot promoting extremist views inappropriate for charity Proportionality – not

a one-size fits all approachSlide16

Live Issues: Conflict Zones Charities working in conflict affected areas and where terrorist groups operate (e.g. Syria, Gaza)Aid convoys - may be abused for non-charitable purposes and facilitating travel for British foreign fighters Charitable appeals and fundraising issuesOther risksdiversion of funds and aid in countrysafety risks including kidnapping transmission of cash by charity representativesuse of local partners for deliveryeffective monitoring end use challengesSlide17

Live Issues: Charities awareness of duty to report offences under s19 TACT 2000Commission alerts: - the public on safer giving for Syria – ongoing campaign- charities on convoys, moving cash out of the UK, due diligence and monitoring, distributing aid, people travelling to SyriaOutreach work with the sector on these issues – our events for charities working internationallyPerception of bias and targetingSlide18

Impact of Financial Sanctions and De-risking by BanksSector concerns in the sector about banks withdrawing or curtailing services to charities - and delays in transfer of fundsAnderson report highlights “risk that necessary anti-terrorism laws will be given a bad name if they result in avoidable restrictions on the ability of NGOs to conduct vital humanitarian and peace building operations in parts of the world from which terrorism emanates”.Recommends dialogue between NGOs and policy makers including in UK If charity banking facilities are withdrawn, regulatory concern is ensuring that another provider is secured, the charity can still operate and funds are not at

riskOur public position - serious regulatory concerns if a charity were not able to operate because of a lack of banking servicesCommission involved in ongoing dialogue with sector, BBA and other Government departments Slide19

Final Thoughts Allowing legitimate humanitarian work to continue and donors’ money to be used as intended is vitalA multi-layered approach allows targeted effective action – criminal action is not the only optionA risk based approach is vitalClose working with agencies is vitalEnabling the sector to learn for the futureDisruption is a good result Slide20

Terrorist Financing: Perspectives on Informal Finance and charities3 October 2014Peter Clarke – Board Member Michelle Russell – Director of Investigations, Monitoring and Enforcement