This case study was originally posted in the OGP Global Report.
The fight against money laundering and terrorism has come into tension with freedom of association and assembly in a number of countries. A group of OGP countries (including Nigeria, Kenya, Malawi, Nigeria, and South Africa) are currently working on terrorism finance, which affects nonprofit organizations.
Using the OGP action plan process to discuss and identify a proportionate response to money laundering that does not also impede civic space could be of considerable value to these efforts.
The advocacy of a number of CSOs in Uganda and Nigeria are highlighted to show how civil society is working to increase dialogue and transparency to ensure that responses to terrorism finance are not disproportionate or wielded as a political tool to suppress legitimate nonprofit activity.
In Uganda, this work is carried out by a network of CSOs led by the Defenders Protection Initiative (DPI). In Nigeria, a group is led by Spaces for Change (S4C). Beyond these two countries, there is a regional network of civil society leaders working to prevent overregulation of the nonprofit sector through domestic awareness-raising, collaborating with government, and the use of regional and continental blocs. This is done in collaboration with the International Center for Non-profit Law (ICNL), the European Centre for Not-for-Profit Law (ECNL), and the Human Security Collective.
Financial Action Task Force (FATF) Recommendation 8
The Financial Action Task Force Recommendation 8 lays out an approach for proportionate response to countering money laundering in the nonprofit sector:
That the laws and regulations that govern non-profit organisations be reviewed so that these organisations cannot be abused for the financing of terrorism. The FATF has established best practices aimed at preventing misuse of NPOs for the financing of terrorism while, at the same time, respecting legitimate actions of NPOs…
(d) Focused measures adopted by countries to protect NPOs from terrorist financing abuse should not disrupt or discourage legitimate charitable activities. Rather, such measures should promote accountability and engender greater confidence among NPOs, across the donor community and with the general public that charitable funds and services reach intended legitimate beneficiaries…
(e) Countries are required to identify and take effective and proportionate action against NPOs that either are exploited by, or knowingly supporting, terrorists or terrorist organisations, taking into account the specifics of the case.
While many of the FATF recommendations are not legally binding, they can affect bond ratings and the ability to borrow. Mutual evaluations rate governments and score governments on FATF recommendation compliance, including Recommendation 8.
Threats and dialogue in Uganda
Uganda is not an OGP member, but the work of Ugandan CSOs to undertake dialogue with governments illustrates a dialogue-based approach to developing appropriate regulation.
In 2017, the Government of Uganda, nominally acting under the auspices of FATF Recommendation 8, raided three major CSOs in the country with search warrants claiming the organizations were involved in illicit financial transactions and “subversive activities to destabilize Uganda.” Following this event, the Defenders Protection Initiative, an umbrella organization for human rights activists, held a dialogue with Standard Charter Bank, the head of the Financial Intelligence Authority, and 40 activists from Ugandan CSOs. While the dialogue did not fully explore arbitrary search and seizure, the dialogue did discuss inconsistencies and further steps needed to improve the governance of the Ugandan nonprofit sector.
The dialogue surfaced issues that comported well with the 2016 mutual evaluation of Uganda on compliance with FATF standards:
The NPO sector in Uganda is still not supported by adequate legal framework to deal with issues of TF [terrorist financing]. The current requirements regulating the NPO sector do not deal with TF or the TF risks associated with the NPO sector. There is no TF risk assessment which has been done in the sector to determine which NPOs are vulnerable to TF risks and consistent with that, no guidance has been given to such NPOs on how to deal with the TF risks they are exposed to. NPOs are not obligated to submit financial statements breaking down the NPO’s income and expenditure. The NGO Board has not engaged the NPO sector to raise awareness with them on TF matters and the NGO Board itself is not exposed to the kind of TF risks which some of the NPOs could be vulnerable to. Currently, the NGO Board does not have the capacity to carry out most of its functions and there is no proper coordination and administration of TF information related to the NPO sector.
Weak institutional environments harm nonprofit organizations and weaken the control of terrorism financing. Unclear rules and processes hinder potential support of nonprofits, can physically endanger nonprofit organizations, and weakens the ability of the government to identify actual risks. Government efforts to strengthen the NGO board (the unit responsible for implementing the recommendations) must include proactive engagement with nonprofit representatives and identify a proportionate response.
Evidence-based advocacy in Nigeria
In 2016, as part of its FATF membership candidacy, Nigeria underwent a National Risk Assessment. The assessment aimed to identify threats and vulnerabilities across a number of sectors, including those to nonprofits. The assessment took place in the context of a defeated NGO bill which would have created onerous regulation of the nonprofit sector, especially those which received foreign funding.
With other Nigerian NGOS, Spaces for Change analyzed the results of the National Risk Assessment. The report found that the assessment did not adequately address its goals of (a) identifying the NPO geographies or activities which were vulnerable, (b) identifying the particular vulnerabilities of nonprofit actors for financing (e.g. cash vs. bank transfers), or (c) assessing the adequacy of the regulatory environment. As a result, the response and regulation could overreach without addressing the real vulnerabilities or potential threats within the country.
This type of analysis, as well as advocacy for a targeted approach to risk assessment, can help identify actual risks to ensure that regulation does not overreach and cannot be used arbitrarily to target advocacy or dissent.