November 17, 2022

Terrorist financing laws are preventing basic humanitarian assistance and often abused for political gain. What must change?

Development organisations delivering humanitarian assistance in unstable and conflict-prone regions have long had fraught relationships with donors over terrorist financing. Understandably, donors don’t want the aid dollar unintentionally supporting terrorism and development organisations understandably want a sensible way to abide by the law whilst doing their work.

But sometimes things go awry – we ask the experts how to find a way through.

Dr Sylvia Laksmi
Research Associate, Centinel – Singapore

Terrorist financing laws are enacted not to prevent basic humanitarian assistance but to mitigate the risk of charities being abused for terrorism funding purposes. Using the narratives of humanitarian assistance as a cover, terrorist groups gather money from the public. The groups abuse charitable organisations by inviting the community to donate their funds, using bank accounts of non-profit organisations (NPOs) to accommodate the transfer and expenditure of resources, and infiltrating programs delivery through charities’ activities for the purpose of promoting their ideology.

The most critical component in terrorist financing laws is the strategy to implement the laws in a broader community robustly. The issue that emerged in applying the regulations to NPOs is the likelihood of undue targeting and distrust of charities, which would trigger discrimination against them. To counter this, establishing a robust risk mitigation policy that focuses on the supervision, monitoring and investigation of programs under NPOs is critical to promoting integrity, transparency, and public confidence in the management and administration of all NPOs. Authorities should have the capacity to undertake risk assessments to examine features and types of NPOs, which, by virtue of their activities or characteristics, are at risk of being misused for terrorist financing.

Another issue to highlight is where weak governmental policies in implementing the laws also overlap with controlling the political environment. The overlapping framework among monitoring and control strategies on charitable organisations creates gaps in mitigating political risk, rather than the risks of terrorist financing. As NPOs enjoy the public trust, have access to considerable sources of funds, and are often cash-intensive, these organisations could also be used as a vehicle for the expression of the personal or party-political views of any individual trustee or staff member to support their goals for political gain. This could often be abused to oppress political opposition groups to achieve populism in power. To counter this, it is important that charities do not to cross the line into having a disqualifying charitable purpose, and must be sure to maintain independence from party politics.

Sylvia is a new friend of the Lab, coming highly recommended as a renowned expert in anti-money laundering and countering terrorist financing. She recently submitted a PhD thesis examining Indonesian counterterrorist financing policies and their impact on terrorist operations in Southeast Asia and the Asia-Pacific. At the Lab, we love Sylvia’s deep expertise, fair handed regulatory analysis, speedy email replies and are excited to see where she goes in this complex field.

Jacob Kurtzer
Director & Senior Fellow with the Humanitarian Agenda, Center for Strategic & International Studies

Terrorist financing laws created in the aftermath of 9/11 delay and obstruct humanitarian action in areas with the presence of groups designated as terrorist by the United States, United Nations, and other donor governments. Ostensibly designed to limit the resources available to terrorist organisations, these laws create complex compliance regulations and generate considerable criminal and civil liabilities for non-profit organisations (NPOs).  

Financial transactions to regions with the presence of designated groups are complex; NPOs - who already account for security and ethical considerations - must now seek exemptions or licenses, along with associated administrative or incidental costs, for humanitarian action funded by the same governments that restrict its implementation. The consequences reflect the prioritisation of the ‘counterterrorism’ agenda above all, including the provision of humanitarian assistance.

Today, the humanitarian picture has changed and the nature of these groups has evolved – yet the legal frameworks remain stagnant. States claim that harsh laws are necessary to prevent funding from being exploited. However, they also impede genuine lifesaving assistance, creating additional harms for civilians already suffering at the hands of armed groups.  

So what should change? Essentially, donors need to ‘flip the script’.  

Humanitarian action should be considered exempt from terrorist financing restrictions unless there is a unique reason why a specific context requires a stricter governing framework. The onus should be on security officials to make the case for restricting finances, rather than on humanitarians to make the case for exemptions. This would allow more efficient use of resources in contexts where severe restrictions aren’t needed, and ensure donor states act consistently with their obligations under international humanitarian law, and with humanitarian principles that ensure the impartiality of humanisation aid.  

Starting with a humanitarian exemption will also help donors pivot away from a ‘terrorism-first’ approach to foreign assistance, towards one that places the needs of individuals and communities at its centre.

Jake works in a fascinating space – right at the intersection of humanitarianism and armed conflict, foreign policy, and national security. After seven years with ICRC, and previous work as a congressional advocate at Refugees International, he’s now living in Tanzania and working for the Center for Strategic International Studies in Washington DC. At the Lab, we love Jake for his open-hearted generosity, dry sense of humor and wicked intelligence.

Natasha Chabbra
Humanitarian Policy Advisor, Australian Council for International Development

It’s in everyone’s interest that Australian funds are not misappropriated to support terrorist acts. This is a risk that impacts government, NGO, contractor and multilateral entities alike.

But counterterrorism regulations can pose serious problems for humanitarian assistance.  

For one, these regulations can significantly impede humanitarian access to affected populations – particularly populations who live in areas under the territorial control of designated terrorist organisations (for example in parts of Syria or the Lake Chad Basin). To deliver aid in these areas, it can be difficult for humanitarian actors to avoid contact with designated organisations – in many cases contact may be essential to negotiate access to affected populations. Another problem is that the counterterrorism requirements of donors – including vetting of staff, partners and even beneficiaries – can put humanitarian work at risk through undermining the perception that humanitarian organisations are operating in accordance with the humanitarian principles. Adherence to humanitarian principles is essential for ensuring assistance reaches those who need it the most and contributes to the safety and security of personnel.  

There are several changes needed to balance counterterrorism regulations with effective assistance.  

First, by empowering accredited Australian NGOs and their local partners to assess risk according to local conditions. This allows them to design their own controls based upon the risks and opportunities that are specific to their programs, partners and geographic location. This would be consistent with the Financial Action Task Force’s call to apply focused and proportionate measures, in line with the risk-based approach.

Second, by bringing the regulations in line with international law. UN Security Council Resolution 2462 (2019) requires states to ensure that counterterrorism measures comply with international humanitarian law, and specifically urges states, when designing measures, to consider the potential impact on humanitarian activities. Impartial humanitarian actors must have the right to offer their services to parties to conflict, if informed by a robust risks and rewards analysis, and if they support greater local and national participation and leadership of humanitarian action.

Natasha is a perfect example of the young talent that the Australian development sector attracts. She spent her high school years in Jakarta and watched on as the Asian Ocean Tsunami caused devastation in the region. Since then, she has worked on domestic disaster risk reduction in Government before joining the ACFID last year as their humanitarian specialist. At the Lab, we know Natasha best for having a laugh and injecting evidence into hot humanitarian debates.

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