Terrorism risk for charity funds downgraded by Treasury report from medium-high to low

This year’s National Risk Assessment of Money Laundering and Terrorist Financing says little use of charity funds to finance terrorist activity has happened

The risk of charities being used to fund terrorism has been downgraded from medium-high to low, according to a risk assessment carried out by the Treasury and the Home Office.

The National Risk Assessment of Money Laundering and Terrorist Financing 2017, published yesterday afternoon, says comparatively little terrorist financing is known to have happened given the size of the charity sector. It praises the Charity Commission’s work in this area.

But it warns that some charities, particularly those working abroad, are still vulnerable to this kind of abuse, and says the problem could intensify if banks continue to withdraw services from charities that operate in high-risk areas.

The last National Risk Assessment was published in 2015 and estimated the risk of terrorist financing using charities to be medium-high.

But the latest report deems the risk to be low, saying: “While the risks in the sector are unchanged, government and law enforcement agencies have conducted significant work since 2015 to increase understanding of the sector and the risks that it faces around terrorist financing.

“In comparison to the overall size of the UK charity sector, the amount of known abuse for terrorist financing is very low.”

The document says it is unlikely any charities had been set up specifically to finance terrorism.

But it warns that the 13,000 to 16,000 UK charities that operate internationally face “significantly higher risks”, particularly those operating in areas such as Syria and Iraq.

The 30 per cent of these charities with annual incomes of less than £10,000 are especially vulnerable to abuse because they are less likely to be receiving professional advice and could make honest mistakes or adopt poor practices that put them at risk, the report says.

Where charities have been linked to financing terrorism, the report says, “a significant proportion” have been legitimate charities that have fallen victim to internal abuse by employees, volunteers or trustees, or they have been looted in the country in which they operate.

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A number of aid organisations have had their bank accounts frozen or closed by banks in recent years because of concerns about operating in high-risk areas.

The report acknowledges this and warns: “If this trend persists, de-risking may have the effect of pushing charities out of more intensely regulated areas of activity and into higher risk ways of working, such as transacting through physical cash or unregulated money service businesses, thereby increasing the risks in the sector.”

In the UK, the charities most likely to be at risk are those operating in London, the Midlands and north-west England, according to the report.

The report says the Charity Commission’s outreach programme focusing on charities identified as high-risk has been effective and, with the commission’s guidance and regulatory alerts, was likely to have contributed to reducing the risk of abuse from within charities.

Michelle Russell, director of investigations, monitoring and enforcement at the commission, welcomed the report.

In a statement, she said: “It is essential that those charities that are at greater risk take steps to protect themselves so that charitable funds are not abused.

“Any trace of terrorist financing within the sector corrodes public confidence in charities and cannot be tolerated. One case is one too many, which is why we continue to work proactively with the subsection of the sector that remains at high risk.”

She urged charities to review the compliance resources available in the commission’s website and to ensured they had strong financial, due-diligence and monitoring controls in place to prevent terrorist exploitation.

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Beware being used as ‘vehicles for terrorism’, regulator’s reports warn

The Charity Commission has published papers on two people convicted of using humanitarian aid convoys to fund terrorism in Syria

Charities could be used as “vehicles for terrorism”, according to two Charity Commission reports about cases in which humanitarian aid convoys were used to fund terrorism in Syria.

The reports are about, Syed Hoque and Mashoud Miah, who the regulator says were both convicted on 23 December 2016 of entering into funding arrangements contrary to section 17 of the Terrorism Act 2000.

This is believed to be only the second time the commission has published reports about individuals. They reiterate warnings about how humanitarian aid convoys can be abused for terrorist purposes.

According to one report, Hoque, was a volunteer for the east London community charity Shade. The report says that he used humanitarian aid convoys as cover for his support of another person involved in terrorist activities in Syria.

The charity had provided him with a letter of credential to support activities to help people affected by the Syrian civil war. The report confirms that the commission was in contact with the charity before Hoque’s conviction because the charity operated in a high-risk area.

The report says the charity did not conduct any due diligence on Hoque and failed to establish measures to control or monitor his activities on the charity’s behalf, which the commission considers to be misconduct and mismanagement on the behalf of the charity’s trustees.

The charity was issued with an action plan by the Charity Commission, which the charity has now implemented, the report says.

The other report says that Miah was a supporter of a company called Helping Humanity, which was raising charitable funds but was not a registered charity.

The regulator says in the report that the Helping Humanity it is referring to in the report, which is now defunct, should not be confused with a registered charity of the same name.

Miah also used humanitarian convoys as cover for his support of an individual in Syria, according to the report.

The company claimed to be awaiting charitable status, the report says, but never made an application to join the charity register.

The report says the company was later dissolved after contact with the commission.

The Charity Commission issued a regulatory alert in 2014 about the use of aid convoys in Syria, which warned that they could be abused by terrorists, and called on charities to ensure that all members of a convoy were properly vetted and travelled to and from the country as a group.

The commission has also emphasised that humanitarian aid convoys are an ineffective way of distributing aid, and has warned charities using them that they will be subject to additional regulatory scrutiny.

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