The War on Terrorism Financing and Its Consequences for Civil Society Interview with TNI Fellow Ben Hayes

You were among some of the first to write and research on how countering terrorism financing (CTF) has been affecting the right to association and financial access for NGOs, and the role of the FATF in this. What prompted you to begin this research?

This was a coming together of many years of work of many organizations. I was working at Statewatch[2] at the time, where we did a lot of work analyzing decision-making in the fields of security, policing and counterterrorism. We were especially interested in the way decisions were made intergovernmentally. 

We first found out about FATF’s Recommendation 8 or R8 (the FATF’s Recommendation pertaining specifically to nonprofit organizations) when the Joseph Rowntree Charitable Trust mentioned to us that some of their NGO partners were having problems because of R8. This recommendation, when first presented in 2001, described the nonprofit sector as being “particularly vulnerable” to terrorist financing abuse. Over the years, this classification and the resulting measures taken by governments around the world have contributed to a wide array of repressive measures towards civil society organizations. 

Around the same time that this came to our attention, I started working with Lia van Broekhoven and Fulco van Deventer (then working at Cordaid, now at the Human Security Collective), who were also interested in the impact of these international mechanisms on their partners and their work. We first produced a short research for Rowntree, and then conducted a larger study for Cordaid[3]. During this time, Tom Blickman at the Transnational Institute (TNI) was also working on “global enforcement regimes” (for example, the increasing of police powers under the auspices of anti money laundering). All of this work came together at that time. 

For civil society, it is not an easy dilemma: Should it focus on engaging with the organizations that have pushed for these reforms that are now harming civil society and try to influence its decision making spaces, or does this mean it becomes part of somehow legitimizing what they are doing? What would your advice be for civil society on how to best navigate that balance?

There is always a tension when you start negotiating with these kinds of bodies. In June 2016, after a lot of advocacy done by civil society, changes were made to the FATF’s Recommendation 8. Changes, which among others, included the removal of the characterization of non-profits as “particularly vulnerable” to terrorist abuse, changes to the Interpretative Note, which now emphasizes, “the need to ensure that legitimate charitable activity continues to flourish”. The advocacy work done around the FATF’s Recommendation 8 can certainly be seen as a success, considering that the FATF went back on their absolutist positions on NGO’s being “particularly vulnerable” to terrorism. The way civil society was able to open and enter the rather closed FATF space, put the problematic effects of R8 on the table, and was able to secure some concessions on the part of these decision makers is definitively a success.

Where the key challenge lies, is that a lot of the damage has already been done. The core assumption within R8 - that nonprofits are particularly vulnerable to terrorist abuse - might have been reviewed at the FATF level, but it has been diffused through financial practice and governmental orders into domestic regulations. The process of putting the toothpaste back into the tube is going to be a very difficult one.

About engaging with decision makers, the reality is that everyone is engaging with them: law enforcement, banks, nonprofits - all coming from a different angle. The FATF is the only show in town, so we had to engage. But there are a lot of questions about the legitimacy of the FATF, because there is no international convention underpinning it, it is opaque, and it has no semblance of democratic oversight or rules on access to decision-making procedures. 

Still, nonprofits have to try to get a seat at the decision-making table. This is part of a bigger struggle to try to render the War on Terror accountable and democratic. If you look at the civil rights struggles of past – say those in the USA and Europe of the 60’s to 80s - these focused on trying to hold the police accountable and instituting democratic control and human rights protection. And they led to some fundamentally important reforms as to how policing was done. Today, the War on Terror has led to more and more counterterrorism policy decisions being taken away from democratic fora, either at the international level by bodies like FATF, or nationally by the executive or the intelligence services. The struggle now is to render these structures accountable and under proper democratic control. It is a huge task and we have far to go. 

Many international institutions - such as the World Bank, for example - have now taken up the topic of financial inclusion for NGO’s. What is your analysis of this trend?

The issue of de-risking and banks’ role in the problem of financial exclusion/inclusion of NGOs is in some ways quantifiably different than R8, and certainly harder to deal with. What needed to be done about R8 was clear, because it was one recommendation of the FATF, which needed to be changed. The factors that are driving de-risking by the banks are harder to deal with, because it’s not just because of R8. Once you start digging its not just the FATF that is giving instructions to the banks, it’s also, for example, the Basel Committee on Banking Supervision and central banks giving directives to their national banks. There are also many more FATF-style opaque bodies that are influencing these processes. You have banks under instructions to create a risk profile of all customers and place their accounts under routine surveillance. Certain sectors and countries are no longer in banks’ “risk appetite” to do business with. The countering terrorism financing agenda has driven a lot of this, but there are many other elements to it, which make it harder to address.

What I see as problematic in this area, is some of the pragmatism when it comes to developing solutions. Yes, the World Bank has initiatives working with money laundering specialists on “how do we help banks understand NGOs”, and “how do we help NGOs give banks all the information they need”. Others are proposing solutions like the creation of humanitarian corridors, where banks come together with humanitarian organizations and work with governments to see how they can get money into Syria or Somalia.

At a first glance, these are pragmatic responses to an urgent problem, because these humanitarian organizations need to get the money there to assist people. The problem is that none of these responses are chipping away at the core problem, which is that we have turned banks into police stations, allowing them to stockpile data on their customers and preemptively punish people and organizations without having to provide any evidence of wrongdoing. It is having devastating effects across the board. Unless we deal with the core issues that are going on, the pragmatic responses that we are – understandably – developing to deal with the crisis we face, will still exclude a whole bunch of civil society groups (such as small ones, activist groups, women’s rights organizations, those working in terrorist controlled areas, etc.). No one is figuring out how to serve their needs. Others suggest that new technology can solve this (for example through the use of online nonprofit vetting systems). All of these proposed solutions, while they make sense to the particular stakeholders that are pushing them, they still leave some sectors of civil society exposed and excluded, potentially putting them at even greater risk.

What are current strategies that are promising?

Some of the things we are looking at now are how to ensure first and foremost that groups that are affected by problems of financial exclusion have meaningful redress. Right now, the banks say it is their prerogative if they want to deny someone their banking services, and they are not even required to provide a reason for withholding such services. This is at odds with the financial inclusion goal of the UN Sustainable Development Goals (SDGs)[4]. What does meaningful redress look like for people who are unjustly impacted by these anti-money laundering / terrorism financing measures? What do they look like in national public law frameworks?

It is also fair to say that not all banks are behaving in the same way. We need to understand what is going on in the “good” banks, the ones that do want to be good global citizens: what is the difference between them and other banks? What is going on within the guidance that is given to the banks? There are so many more institutions and factors that influence the behavior of banking. The FATF is one, but there are others. We need to secure core revisions across the board, which recognize the importance of the work that NGOs do.

A key question is: How do we get organizations that are committed to financial inclusion to recognize and address the financial exclusion of NGOs? How do we get the most powerful actors to take ownership of this problem? The creation of the FATF in 1989-1990 was a result of an initiative by the G7, and took place without prior public discourse. Post 9/11, all CTF rules were drafted within 6 weeks of the attacks, and all the measures, most drawn up by the US Treasury were implemented with no discussion as to the merits, legitimacy or impact of those decisions. How do we get them to take ownership of this problem, to recognize it and take meaningful actions to redress it?

So many of the current responses are tinkering around the edges and not addressing the fundamental problem with the whole counterterrorism framework. There is a growing body of evidence that points to the devastating effects of countering terrorism financing policies[5]. But the evidence that this is effective in terms of actually fighting terrorism financing is not there[6]. The War on Terrorism Financing is not working. Until we can be honest about that and get policy makers to say that, we won’t find the bigger picture solutions to this, which we so desperately need. We are also going to need different solutions in different places.

If we don’t address the core problems, we will be living with this for years. Together with the Human Security Collective, we are currently conducting further research. We are conducting a stakeholder analysis, looking at all the different organizations that have a stake in this: the World Trade Organization, G20, OECD, etc.  Because of the impact on correspondent banking[7] all of these organizations recognize that de-risking is a problem. Still, only a few talk about the problem for NGOs, and what they propose to do about it. We need a systematic review of all of the solutions that have been put forward to be able to solve the problem of de-risking. From there, we can come up with ideas on what we should be advocating for. Because right now, no one knows what kind of agenda we should be pushing.

You have been a reviewer for the Women Peacemakers Program/Duke research - was there anything in the research that surprised you, while reading it?

The only thing that still surprises me in this space is constantly how bad things are. I think if the people who are making these decisions were to sit down with the NGOs that are on the sharp end of what is happening and hear their stories of what it means to have your bank account shut down or visit from the police asking about bank transfers, they might understand. They are not in touch with the reality on the ground. What your report did was bring home how massively significant problem this is. As we travel around talking about nonprofits from all stripes, it is always the actual impacts that never cease to amaze me. 

The Transnational Institute recently published an excellent piece analyzing the phenomenon of shrinking space for civil society[8]. In the piece, the writers (of which you and WPP’s Executive Director Isabelle Geuskens are two) unpack some of the inherent problems in the concept. For example, the space is not shrinking equally for all of civil society - for some it is even growing. What do you think is the biggest misconception that people have about the “Shrinking Space” phenomenon?

The idea that this complex phenomena of shrinking space can be fixed by a new civic charter or renewing international commitment to freedom of association, etc. We’ve had these standards for many years. Holding such a charter in front of governments that are repressing NGOs alone is not capable of solving the problems that are happening. The repression of groups that are critical of their governments has been happening for ages. I am not saying that such charters do not have significance, but it is not the solution. Some of these problems are much more nuanced; it requires critical thinking about where the shrinking space is coming from and how to counter it. It is a lot more complex that the current narrative around this leads us to believe. Unless we start to figure out how to deal with the more complex phenomena, we’re really going to struggle with the basics. 

[1] The Financial Action Task Force (FATF) is an intergovernmental body established in Paris in 1989 by the Group of 7 (G7). It seeks to combat money laundering, terrorist financing and other threats to the international financial system. It is both a policy-making and enforcement body, whose recommendations are adopted by over 190 jurisdictions around the world.

[2] Statewatch Website: http://www.statewatch.org/

[3] Ben Hayes (2012). Counter-Terrorism ‘Policy Laundering’ And the FATF. Statewatch & TNI( http://www.statewatch.org/analyses/no-171-fafp-report.pdf

[4] UNSDGs Financial Inclusion: http://www.uncdf.org/financial-inclusion-and-the-sdgs

[5] Tightening the Purse Strings: What Countering Terrorism Financing Costs Gender Equality and Security, by Women Peacemakers Program & Duke International Human Rights Clinic https://www.womenpeacemakersprogram.org/assets/TTPS-DUKE-FINAL-PRINT-AP-WEB.pdf

Financial Access for US Nonprofits by the Charity & Security Network http://www.charityandsecurity.org/system/files/FinancialAccessFullReport_2.21%20%282%29.pdf   

[6] Foreign Affairs (2017) “Dont follow the money” by Peter Neumann https://www.foreignaffairs.com/articles/2017-06-13/dont-follow-money

[7] “Correspondent banking services are essential to enabling companies and individuals to transact internationally and make cross-border payments. Recently there have been indications that certain large international banks have started terminating or severely limiting their correspondent banking relationships with smaller local and regional banks from jurisdictions around the world.” World Bank. 2015. Withdraw from correspondent banking : where, why, and what to do about it. Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/113021467990964789/Withdraw-from-correspondent-banking-where-why-and-what-to-do-about-it

[8] Framing Paper On ‘Shrinking Space’ https://www.tni.org/files/publication-downloads/on_shrinking_space_2.pdf