By Brian Dooley
News that Saudi Arabia has been approved for observer status at the little-known but powerful Financial Action Task Force (FATF) is more than worrying. The decision, says Saudi press reports, “Is a prelude to obtaining full membership.”
The organization was set up in 1989 to counter money-laundering by international criminal gangs, to stop them transferring their cash around the world through banks, businesses and other ways. Much of the emphasis now is on preventing terrorist organizations from shifting their money around the world. FATF now has over 30 country members and more than 180 jurisdictions across the world are committed to implement its recommendations.
FATF sees its job as “to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.” FATF assessors visit countries to determine, in their view, how well that country is doing to protect its banking, business, and non-profit sectors from being exploited – wittingly or unwittingly – by terrorists and other organized crime looking to launder money.
A long-term problem with FATF has been that while it has expertise on financial and banking sectors, it hasn’t understood the world of non-profit organizations (NPOs in its parlance), often regarding the NPO sector as risky and easily vulnerable to abuse. In fact, NPOs across the world typically take great pains to ensure that their operations are transparent and accountable, and that they aren’t open to shady exploitation by terrorists.
Human Rights First, working with the International Council for Non-for-Profit Law (ICNL), the Charity and Security Network (CNS) and other U.S.-based civil society organizations made this case strongly to the U.S. Department of the Treasury, which leads the U.S. government’s FATF work. Working with other international civil society organizations we also explained to FATF how a key weapon in the fight against terrorism is a healthy civil society allowed to operate without undue restrictions and overregulation, and that FATF should welcome flourishing civil societies rather than view them with suspicion.
The Treasury Department reacted well, arguing to FATF that it should make greater efforts in understanding how civil societies work and the contribution they can make in fighting extremism. Positive updates to FATF’s Best Practices Paper on how NPOs should be viewed and regulated were adopted by FATF a few weeks ago, and FATF has also now announced that it will meet NPO representatives at least annually. A new, more open dialogue with civil societies now looks possible.
The proof will be in how future FATF assessments of various countries are conducted, and whether this new approach that exists on paper will translate into encouragement for countries not to overregulate or crack down on civil societies in the name of protection against terrorism or other organized crime. The change in attitude from FATF over the last year, the constructive role played by the Treasury Department, and a better text in the Best Practices Paper are all reasons to be a little more optimistic. But the influence of Saudi Arabia could set back progress. Its record of crushing its own civil society – increasingly in the name of countering terrorism – will not help improve FATF’s understanding and engagement with NPOs, and threatens to undermine much of the progress achieved this year.