Bill Watch 09-2024 - PVO Bill and FATF Recommendations

BILL WATCH 9/2024

[16th March 2024]

The New PVO Amendment Bill and the FATF Recommendations on Combating Terrorist Financing

The new Private Voluntary Organisations Amendment Bill was published on the 1st March, and we analysed its provisions in Bill Watches 5/2024 [link] and 6/2024[link].  In this Bill Watch we shall deal with an aspect of the Bill we did not touch on in those bulletins, namely the Bill’s attempt to comply with recommendations of the Financial Action Taskforce [FATF] regarding the financing of terrorism through non-profit organisations.

The main purpose of the PVO Bill, according to its explanatory memorandum, is to comply with FATF recommendations made to Zimbabwe about the abuse of charities for the financing of criminal or terrorist activity.  A worthy purpose, no doubt, but as we shall show in this bulletin the Bill goes far beyond FATF’s recommendations.  Before going into that, though, we need to explain what FATF is and what its recommendations are.

FATF

FATF is an inter-governmental organisation which acts as a global watchdog against money laundering and terrorist financing.  It has set international standards, known as the FATF Recommendations or FATF Standards, to prevent these illegal activities.  The standards ensure a co-ordinated global response to prevent organised crime, corruption and terrorism, and to help authorities identify and recover the proceeds of cross-border crimes such as drug dealing and human trafficking.  The latest version of FAFT Standards can be accessed on the Veritas website [link].

A regional body called the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), set up to monitor compliance with the FATF recommendations, found that Zimbabwe was only partially compliant with them, in particular those relating to PVOs.

FATF Recommendations for PVOs

FATF’s recommendations in regard to PVOs (which it calls “non-profit organisations”) are contained in Recommendation 8, which was revised in November 2023 to read as follows:

“Countries should identify the organisations which fall within the FATF definition of non-profit organisations (NPOs) and assess their terrorist financing risks.  Countries should have in place focused, proportionate and risk-based measures, without unduly disrupting or discouraging legitimate NPO activities, in line with the risk-based approach. The purpose of these measures is to protect such NPOs from terrorist financing abuse, including: 

(a) by terrorist organisations posing as legitimate entities; 

(b) by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and 

(c) by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.”

The definition of NPOs is contained in FATF’s interpretive notes which accompany Recommendation 8.  It is as follows:

“a legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of ‘good works’”.

Clearly what FATF had in mind are charitable organisations in the broad sense, i.e. organisations that raise or disburse funds for benevolent purposes.  The interpretive notes insist that Recommendation 8 applies only to NPOs that fall within this definition and “does not apply to the entire universe of organisations working in the not-for-profit realm in a country”.

What the PVO Bill will do

The Bill, as we have said, will go far beyond what FATF had in mind:

·      It will allow measures to prevent terrorist financing to be taken against all PVOs, whereas FATF says that recommendation 8 applies only to those that fall within its definition, which we have quoted above – i.e. to charitable organisations.

·      Not only will the Bill allow terrorist financing measures to be taken against all PVOs, but it will permit the Minister to extend the measures to entities that are not covered by the very broad definition of PVO in section 2 of the Act.  FATF warns against this in its interpretive notes:

“It is not in line with Recommendation 8 to apply measures to organisations working in the not-for-profit realm to protect them from … abuse when they do not fall within the FATF’s functional definition of NPOs.”

Furthermore, as we pointed out in Bill Watch 5/2024 of the 6th March [link], the Bill is unconstitutional in this respect, because a Minister cannot be given power to extend the ambit of an Act of Parliament.

·      The Bill will allow the Minister to conduct intrusive assessments every five years or so in order to assess the risk of PVOs being misused for terrorism, etc.  FATF’s interpretive notes say the assessments must be done in collaboration with the PVOs concerned, and should not unduly disrupt or discourage their legitimate activities.  There is no suggestion in the Bill that the Minister should collaborate with PVOs.

·      The Minister will be empowered to take very drastic measures against PVOs he or she deems to be at risk of misuse for terrorism or serious crime.  FATF on the other hand, says that measures must be “focused, proportionate and risk-based” and must not unduly disrupt or discourage the legitimate activities of the organisations concerned.  The words “focused”, “proportionate” and “risk-based” are not mentioned or even suggested anywhere in the Bill, and nothing to say the Minister must not disrupt or discourage legitimate PVO activities.

Conclusion

It will be obvious from what we have said in this bulletin that the officials responsible for preparing the Bill paid scant regard to FATF’s recommendations on PVOs.  If the real reason for bringing this Bill to Parliament was to comply with FATF’s recommendations, as the Bill’s memorandum says it was, then the Minister should withdraw the Bill and produce a new one which takes full account of what FATF has actually recommended in regard to PVOs.

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