Risk of Terrorism Financing in Non-profit Organizations

Looking at an orphanage incites feelings of compassion and empathy. Nothing else. And that is exactly why such organizations make for the ideal disguise for terrorism financing. An NGO that helps in providing water to African children would appear harmless on paper. But that is exactly where you could see it. It would not exist in reality. Even if it did, the money from donations would not translate to drinking water. It would instead be used for something far more sinister, providing funds to terror outfits. This jeopardizes the integrity of charities and enables terrorist activities. The non-profit organizations (NPO) that appear most at risk are usually performing acts of service in proximity to active terror threats. The NPO sector in the global community is vibrant, providing aid to millions. There are five identified categories of abuse and risk towards NPOs as stated by the FATF (Financial Action Task Force). The diversion of funds is an important method which involved actors inside the NPO or foreign partners being responsible for the diversion.

The second category involves NPOs or directing officials maintaining an affiliation with a terrorist entity; either knowingly or unknowingly. Non-governmental Organizations (NGOs) have also been used as a front for recruitment for terror groups, making this the third category. The fourth classification includes abuse of programs wherein the resources were genuine but the programs which they were used for were illegal. Finally, some terrorist entities use false representation to dupe others. They present themselves as sham NPOs to deceive donors into giving their support. Countries in Africa have been shown to have higher instances of terrorism financing through NGOs. This can be attributed to the fact that there are a number of terror outfits present in the area like Al Qaeda and ISIL. The resilience of the Al Qaeda network is a result of its ability to distribute its communications and diversify its financial and recruitment networks. Similarly, the Liberation Tigers of Tamil Eelam (LTTE) ran its global logistics network through numerous subsidiary NPOs and charities. Ultimately, as dissimilar as their goals may be, terrorist networks and NPOs exist in the same global environment, with their focus on the same population.

Humanitarian NPOs often want access to populations that are in contact with local or foreign conflict in order to carry out good work while terrorist movements seek access to the population in order to aggravate the forces of conflict. Most of these instances of terrorist financing through NPOs are identified by information from the public whistle-blowers, audits of existing NPOs and NPO applicants, collection and analysis of obligatory NPO reporting, as well as scanning the web and terrorism watch lists. The disruption of these organizations involves denying registration to the NPOs, suspending their activities, levying financial penalties, freezing their accounts and prosecuting them. While low-impact cases are often disrupted by measures that are minimally intrusive to NPO operations, high-impact cases involving complicit NPO officials often warrant more intrusive methods of disruption. An example of this was the Povrel Jerusalem fund for the Afflicted and Needy (JFHS) established in 1992 and purported to carry out humanitarian activities through partner organizations in the Palestinian Territories.

In 1992, JFHS applied for charitable registration to the Canada Revenue Agency (CRA). However, CRA became concerned that JFHS’s purposes and activities were primarily political in nature, and therefore not charitable according to Canadian law. Information received from open-source research disclosed that some of JFHS’s international partners were part of a fundraising network run by Hamas, a listed terrorist entity in Canada. Such high profile incidents represent the risk posed by terror outfits under the masks of NGOs. It has been close to ten years since this was recognized globally as a terror threat. However it still exists and is growing. Now is the time to face this issue head on.