Non-profit organisations (NPOs) play an important role in helping to address social needs in communities, but many face risks of being abused for terrorist financing and money laundering due to the nature of their structure, income generation and beneficiary payment methods.
The Financial Action Task Force (FATF) has identified the NPO sector as being vulnerable to abuse by criminals for terrorist financing and money laundering. FATF sets global standards for measures to combat money laundering and terrorist financing. As a member of the FATF, South Africa is committed to meeting these standards.
To reduce their vulnerability, NPOs must understand the terrorist financing and money laundering risks they face, and take measures proportionate to the risks they face or apply controls to mitigate these risks.
In 2024, South African government role players and private sector partners published a terrorist financing risk assessment for the NPO sector. The report identified five main terrorist financing threats which had the potential to exploit NPOs to raise or move funds possibly in support or for the use of terrorist organisations or activities.
Inherent vulnerabilities that may potentially put an NPO ‘at risk’ of terrorist financing abuse are, NPOs:
- Established or operated by individuals with known terrorist sympathies.
- Active in high-risk foreign jurisdictions.
- With links to communities with individuals sympathetic to terrorist causes (including far-right causes).
- Receiving funds from and transferring funds to high-risk countries.
- Using unverifiable methods for raising or transferring funds.
NPOs using the internet and online social media for fundraising are cautioned on the emerging risk of using this practice. NPOs are warned to apply caution where there is a crypto wallet address on the social media page, as crypto payments are difficult to trace. Refer to FATF guidance for more on the topic: Crowdfunding for Terrorism Financing.
A common concern highlighted in the 2024 report, was that South Africa may be used as a source of funding for foreign terrorist groups. The main methods abused for this were identified as:
- Establishing an NPO to raise funds.
- Infiltrating an already established NPO.
- Establishing an NPO to provide logistical or other non-financial support to terrorist groups.
Most NPOs solicit donations from the public and government institutions. Many of these donations are made directly to the NPOs or their members. Without proper bookkeeping significant amounts of cash may flow freely through NPOs, creating levels of anonymity, as cash cannot be traced and there is no audit trail.
For NPOs that work beyond the country’s borders, where donations are collected within South Africa and intended for lawful beneficiaries in other countries, there is the risk of funds being stolen through corrupt activities and then distributed to terrorist groups. This may also occur locally.
Non-profits that operate in high-risk jurisdictions should ensure that they are not misused by organisations to collect terrorist funding which may have been solicited as being earmarked for charitable purposes.
NPOs can be used, wittingly or unknowingly, as a conduit for foreign funds to terrorist groups in the rest of the continent. Refer to the National Risk assessment for terrorist financing.
Reporting Suspicious Activities
When an NPO becomes aware or suspects that they are being abused for terrorist financing and/or money laundering, they are encouraged to notify the FIC by submitting a voluntary disclosure report (VDR).
Filing a VDR is not mandatory and is done voluntarily. A person who knows or suspects a VDR has been submitted to the FIC should not disclose the contents of that report to any other person. To register as a voluntary reporter, visit the FIC website to register or report.
No person, including NPOs, should continue with transactions in instances where the NPO is aware that the transaction is linked to terrorist financing. Filing a VDR is not a defence against prosecution for criminal activity.
Targeted Financial Sanctions
Section 26B of the Financial Intelligence Centre Act (FIC Act), which applies to NPOs, sets out prohibitions relating to designated persons and entities identified by the resolutions of the United Nation Security Council (UNSC). The UNSC publishes a targeted financial sanctions list of persons and entities involved in terrorist activity, proliferation activity, war crimes and crimes against humanity.
NPOs are prohibited from accepting, providing or making available economic or any financial or other services or support to persons or entities on the UNSC targeted financial sanctions list. This means that if the funds were coming from or going to a person or entity listed by the UNSC, the NPO would not be able to enter into the transaction. The FIC publishes and updates the targeted financial sanctions list on the FIC website which can be found here.
The FIC urges NPOs to report any suspicion or knowledge of the financing of persons or entities designated as such on the targeted financial sanctions list by submitting a VDR. Please consult public compliance communication 44A (PCC 44A) for more information regarding targeted financial sanctions and the Targeted Financial Sanctions user guide for a step-by-step explanation how to search for designated persons. PCC 44A is geared towards accountable institutions, but NPOs should find benefit in consulting the document.
Recommendations for NPOs
It is recommended that all NPOs register with the Department of Social Development, and either the Master of the High Court or the Companies and Intellectual Property Commission. Registering with regulatory authorities will help ensure that the NPO is not abused for money laundering or terrorist financing purposes.
NPOs should remain aware and vigilant about their vulnerability to being abused for terrorist financing and money laundering, and have a good understanding of the risks and implement measures or controls to manage these risks.
NPOs are advised to document the control structures, indicating all founders and members in their organogram and policies and procedures.
NPOs may face risks of terrorist financing and money laundering when dealing with either donors or beneficiaries. They are therefore advised to obtain and review major donor information to understand whether the donors are lawful and making use of the donations in a lawful manner.
An NPO’s founder(s), trustees, members, employees and authorised representatives who suspect or know that the organisation is being misused for terrorist financing and money laundering should report their suspicions to the FIC within a reasonable period.
When an NPO submits a report on suspicious and unusual activity, this report is referred to as a VDR. Refer to public compliance communication 41.
NPOs are also encouraged to use the anonymous whistleblowing platform provided by the Department of Social Development to report their suspicions. All linked documents are available on the FIC website.
For regulatory assessment purposes, NPOs should keep records of all information received from their donors and beneficiaries, as well as transaction records.
NPOs should conduct inspections on beneficiaries to assess whether funding has been used for the intended purposes.
The FIC remains committed to assisting the NPO sector in the fight against financial crime. Should NPOs require further information or assistance, they are urged to contact the FIC.
For more compliance information and guidance offered to institutions, refer to the FIC website (www.fic.gov.za.) The FIC’s compliance contact centre can be reached on +27 12 641 6000 or log an online compliance query by clicking on: https://www.fic.gov.za/compliance-queries/