Non-profit organizations are vulnerable to terrorism financing abuse. With federal regulations designed to uncover financing of terrorism and stop money laundering, banks find it easier to close accounts than to work with some charities. Also, in some cases, banks have severed ties without warning or giving a chance to charities to appeal. Thus, charities helping refugees from the Middle East and Syria are facing hard times finding banks that are ready to work with them.
Presently, non-profits find it too prohibitive to operate, which makes it a matter of concern. Some organizations have already had their accounts at multiple banks closed. Whereas, others have started anticipating blockages or delays, if funds are going to or have any mention of Syria. These delays have significant impact on ground operations abroad. Bank interventions are preventing non-profits from fulfilling their missions, undermining the good name in the regions they seek to serve.
Restrictions placed on banks have created unexpected insecurity. Different states have implemented Countering the Financing of Terrorism (CFT) controls, which limit any risk that non-profits carry. However, the actual level of risk this sector poses, or how effectively the existing controls can mitigate it, remains unclear. Raising risk awareness among financial authorities, institutions, and non-profits is the key tool to protect the non-profit sector from abuse.
The factors that are at play here include:
- If a bank is found to help or fund a terrorist group by transferring money from the U.S., it faces stiff financial penalties, and possibly criminal charges.
- Differentiating between a non-profit and financier of a terrorist group is hard. Though a bank can perform rigorous analysis of international non-profits, but it is probably cheaper for the bank to just look at the behavior and decide to cut ties with the non-profit.
- Defending itself against accusations of aiding terrorist groups, even if innocent, is costly for a non-profit.
- It is not possible for the banks to tell the non-profits what triggered the termination of their account. If they did, it could provide opportunities to the wrong people to work around their catches. The banks can also not directly ask the non-profit, “Are you a terrorist?”
However, it is not fair to blame banks for their reticence. Until it either becomes less costly to fund terrorist groups and money launderers, banks will not see the need to change their operations. It means that the costs of anti-criminal measures fall on charities. Non-profits will need to transfer money in ways that do not set off alarms. As long as the restrictions remain, non-profits will either have to create work-around solutions or will have to face further delays and account closures.
Many non-profits provide funds to communities outside of the United States with their charitable missions. American non-profits operating abroad must understand (1) the laws the country they operate in; (2) complying with such laws; (3) risks of non-compliance; and (4) how to best protect their volunteers on the ground.
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