Non-Profit Organisations: Who Stands to Gain?

Terror networks often use charities to front their own activities, using them both as a means to generate funds and to transfer them. In fact, say experts, the exploitation of non-profit organisations (NPOs) is gaining recognition as a "weak point in the global struggle to obstruct terrorist funding at the source."¹

The appeal of charities and other NPOs is obvious: they enjoy public trust, have access to considerable sources of funding and their activities are often cash-intensive. Some operate globally and therefore offer established international infrastructures, facilitating operation and financial transactions. Not only are they a convenient vehicle, they are often believed to transcend criminal activity and suggest a certain innocence. As far as safe-havens go, they're just about ideal.

In general, NPOs are subject to lighter regulatory requirements than other institutions because they play such an important role in national prosperity - and, indeed, the global economy. A study by the Johns Hopkins University Comparative Non-Profit Sector Project estimates that NPOs contribute USD 2.78 trillion to the global economy or around 5 percent of world GDP. This money funds programmes in health, education, social services, culture, and the environment.

In addition, NPOs address the challenges specific to the most disadvantaged sections of society and perform a role that government and the private sector cannot. For example, explains Lydia Trotter, APEC Branch, Department of Foreign Affairs and Trade, Australia, "NPOs provide relief to victims of natural disasters, health care in disadvantaged communities? If NPOs did not exist, the services they provide might not exist either."

Apart from reducing the effectiveness of development activities, abuse of charities by terrorist organisations threatens economic growth in general. The threat of terrorism results in decreased confidence, weakened investment and disrupted services - and ultimately impede economic growth.

Addressing the abuse of NPOs is therefore a concern among APEC members. While NPOs must be supported, more effective regulation of the sector, say governments, can reduce the risk of criminal exploitation.

The APEC Workshop on Improving Regulation of the Non-Profit Organisation Sector (Bangkok, 12 - 15 May 2009) brought together government regulators, intelligence and law enforcement agencies and members of the NPO sector, each offering unique perspectives.

Understandably, a major concern among NPOs was that regulation should be straightforward and not create unnecessary administrative burdens. After all, many operate with limited resources.

And for all participants, the number of agencies involved in regulation challenged efficacy. In almost any given economy, the process might involve Ministries of Interior, Social Welfare, Foreign Affairs, financial institutions and law enforcement agencies.

In fact, the group identified international cooperation as an essential tool in combating terrorist abuse of the NPO sector. A more coordinated approach, they believe is necessary to avoid duplication and to make regulations more clear to the public.

In some cases, this requires legislative reform or the designation of a focal point agency for NPO regulation. In other cases, this would demand greater consultation of the NPO sector and programmes to educate them as to their responsibilities. The workshop marked a significant step toward more efficient and aligned reforms. Participants from across the APEC economies have already begun sharing information about their regulatory regimes amongst themselves. Able to examine various models of regulation, governments are equipped to identify models most suitable to their economy?s legal, social and economic situation.

Following in-depth discussions of the role of intelligence, identifying "red flag indicators" and investigative techniques, several economies will undertake domestic reviews of NPO regulation of NPOs, which may result in legislative and regulatory changes.

Pooling knowledge and sharpening legislation will not entirely preclude NPO abuse. It will, however, render NPOs a less convenient way of laundering dirty money, transporting suspicious goods undetected and hiding the terrorist activities which threaten economies and the people who live in them.

¹ Financial Action Task Force Best Practices Paper on Special Recommendation VIII