NGO Regulation Network

International and regional influences

With the dramatic increase in international aid in recent years, NGOs raise, remit and disburse funds in a wider range of countries then ever before and raise more and more money. This brings with it increased demands for accountability and transparency from a variety of sources; at the same time, the international human rights agenda ensures that freedom of association remains important. At the same time, globalisation brings transnational regulatory demands – as well as opportunities to share ideas across borders. The benefits of greater collaboration between those interested in NGO regulation and the development of international good practice standards for NGO regulators and NGOs are widely recognised. NGOs’ funds will be used more efficiently and effectively right across the world and the risk of funds being diverted for fraudulent or inappropriate purposes will be minimised. Ultimately this will enhance donor confidence in the work of NGOs and help the sector continue to flourish globally.

Counter-terrorism:

A large influence on NGO regulation in recent years has been the international concern that NGOs can be misused for terrorist financing purposes. Despite this attention, there is international understanding of the valuable work of NGOs globally and of the fact a healthy NGO sector has an important role in any comprehensive counter-terrorism strategy, helping to address conditions conducive to exploitation by terrorism.

The UN has underlined the importance for counter-terrorism of dealing with issues like "poor governance, lack of civil and human rights abuse", "religious and ethnic discrimination, political exclusion and socio-economic marginalisation" (Uniting against terrorism: recommendations for a global counter-terrorism strategy, A/60/825, para 20ff). In a similar way, democractic ideas of community-building, avoiding alienation and creating freedoms of association and speech underpin the US National Strategy for Combating Terrorism and the State Department's Guidelines.

It is important that the risk of NGOs being misused for terrorist purposes is considered in the context of fully understanding the value of the sector for counter-terrorism and wide development objectives and with due regard for the fact that internationally there have only been a small number of NGO terrorist financing cases to date.

Development goals:

NGOs are a genuine ‘third sector’, with distinct advantages in some areas over their governmental and commercial counterparts. With the enormous challenges posed by international statements like the United Nations’ Millennium Development Goals, countries will need to act cooperatively and creatively. It is hard to envisage the MDGs being achieved in their entirety without the direct and indirect influence of civil society, of which NGOs are an important part.

International accounting standards:

Most international human rights treatsies refer to freedoms of association and expression; the same is true of many regional and national human rights standards. There are also moves within global civil society to create a UN Charter on Civil Society Rights although this is at a very preliminary stage.

International accounting standards: There has been a movement towards international standards for commercial organisations, although an underlying limitation has been the different philosophies behind varying national standards. NGOs have been largely ignored, although globalised NGOs and the impact of counter-terrorism described above may well change this. The UK’s accounting standards for NGOs have formed the basis of accounting standards in several other countries.

Further information on how counter-terrorism initiatives concern NGOs

Created in 1989, the OECD’s Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. Since 9/11, concern about the possibility that NGOs are vulnerable to misuse by terrorists - particularly as a mechanism for terrorist financing - has been the catalyst for the development of international standards for NGO regulation. While there is no evidence to suggest that misuse of NGOs for terrorist purposes is by any means widespread, the international community is concerned that gaps in the regulation of NGOs across the world exposes the sector as a whole to risk of misuse.

FATF’s Special Recommendation VIII specifies that:

Countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism. Non-profit organisations are particularly vulnerable, and countries should ensure that they cannot be misused:

• By terrorist organisations posing as legitimate entities;
• To exploit legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset freezing measures; and
• To conceal or obscure the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.
  

FATF has agreed an Interpratative Note to explain Special Recommendation VIII

FATF’s 2002 International Best Practices paper on combating abuse of the NGO sector remains relevant by emphasising transparency and accountability as ways in which terrorist misuse can be minimised. It suggests best practices for financial transparency, programmatic verification, administration and oversight bodies (regulators). In the latter part, the paper points out that there is no single correct approach to regulation and that different organisations use different methods, but suggests roles for regulation, law enforcement, the NGO sector etc.

FATF-style regional bodies (for example the Asia Pacific Group) and multilateral organisations like the World Bank and the International Monetary Fund promote these recommendations across the world.

The United Nations is also involved in counter-terrorism, with United Nations Security Council Resolution 1373 dealing with threats to international peace and security caused by terrorist acts. United Nations Security Council Resolution 1456 includes a declaration that: “States must ensure that any measure taken to combat terrorism comply with all their obligations under international law, in particular international human rights, refugee and humanitarian law”.

Meanwhile, the Commonwealth Secretariat has produced Model Legislative Provisions on Measures to Combat Terrorism. Part IX of these suggest some provisions for dealing with charities linked to terrorist groups.

The European Commission is also consulting on draft recommendations to members states regarding a code of conduct for non-profit organisations to promote transparency and accountability best practices

At a national level, In the UK, the Charity Commission has a clear policy on NGOs’ alleged links to terrorism, as well as detailed operational guidance.

The US Administration has introduced a number of measures dealing with the possibility that NGOs can be misused for terrorist financing purposes. The Handbook on Counter terrorism is a good introduction.

Unsurprisingly, these measures have sparked debate between the sector and the government at national, regional and international levels.