“The report found that smaller, local, community-based NPOs, especially informal ethnic and faith based charities, often fall outside regulatory scrutiny and could be especially vulnerable to money laundering and terrorism financing.”
“This is particularly the case for organisations that regularly use informal methods of funds transfer - such as alternative remittance services.”
“The report found that organisations that have overseas offices in less-regulated countries, their structure may make them more vulnerable than their size suggests.”
“The risk of an NPO falling victim to terrorist exploitation may be greater for groups that…are closely aligned to particular religious or cultural movements” pg. 14
“AUSTRAC (2010a: 8) lists ‘financial contributions through formal charitable donations’ as one of the three most common methods by which terrorism funds are raised in Australia.” pg. 19
“It was reported in the 2010 typology report from the Asia-Pacific Group on Money Laundering that the most ‘significant’ cases of non-profit abuse for terrorism financing detected in Australia involved the collection of donations, often following a visit by an overseas speaker that was organised by local leaders (APG 2010). In these cases, the funds raised were wire transferred to overseas accounts but usually over a period of time in amounts of less than $10,000. These funds were generally sent to third parties who were suspected of having a connection with a terrorist organisation.” pg. 19
“Those organisations identified as most susceptible are charities, and in particular faith-based charities, and smaller entities that do not necessarily have the resources (or the inclination) to commit to due diligence and similarly recommended procedures.” pg. 50
- “Related to this concern about the vulnerability of smaller NPOs, especially the less formal charities formed around ethnic and faith-based communities, was the preferred or common use of informal methods for the collection and transfer of funds. The identity of donors may not necessarily be pursued by the charity for cultural or other reasons and funds are known to be relayed to overseas locations using remittance services or similar methods of informal funds transfer.”…”Risk primarily lies with that subset of entities that collected and dispersed donations, used informal methods of funds transfer and/or were unregulated.” pg. 51
And although these are generally met with the response “but we have no proof though that Islamic charities are funding terror”, at least there is an acceptance that this may be because of the lack of oversight, transparency and regulation which the report is trying to address.
What to do about it?
The report suggests a number of mitigants and other regulatory responses – some of which are helpful, the rest deliberately miss the point. In particular, there is too much focus on self-regulation and too little attention given to ‘legitimate’ Islamic charities providing ‘legitimate’ Islamic charity (directly or indirectly) to terrorists. Mostly, the report assumes that Islamic charities will be victims of abuse rather than motivated to circumvent all the mitigation strategies. For example “NPO’s, however, should…continue to avoid engaging with any organisation they suspect of being a terrorist group.” pg. 44.
And when independent regulation is proposed there’s the extra burden on everyone else: “It has been suggested that rather than enhancing the ability of NPOs to mitigate the risks deemed to exist in relation to money laundering and terrorist financing, proposed measures to stem misuse not only place an undue burden on the sector ‘without effectively tackling the terrorist threat’ (Quigley & Pratten 2007: 11) but stigmatises and consequently disrupts non-profit activity (ACLU 2009; Cortright et al. 2008; Crimm 2008; Quigly & Pratten 2007).” pg. 46. So is it all too hard? Why not impose additional regulation on only those charities that you have identified as being high risk?
There certainly is none so blind as those that will not see. The Australian Government knows, through its own work, what the problem with Islamic charities is yet wont do anything constructive about it. That said, and despite the report’s inadequacies, there are many positives to take from it, not least that the report even “went there” and what the Government was prepared to admit.
The issue of Islamic charity terror funding becomes even more concerning with the Government’s encouragement of Islamic finance and its impending growth in this country. Islamic finance contributes heavily to Islamic charities through the payment of zakat by the Islamic finance institutions and through the finance contracts themselves.