Charities and Terrorist Financing: The Dark Side of Philanthropy

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New cases highlight the vulnerabilities in the financial system and the need for stricter regulations

NAMIBIA - A recent expose by the Financial Intelligence Centre (FIC) has revealed that several non-profit organizations (NPOs) have been involved in suspicious transactions, raising concerns about terrorist financing.

Cases of Suspicious Transactions

• One case involves a Zimbabwean national in Namibia who received funds from an unknown source and subsequently transferred NAD 104,000 to the Prophetic Healing and Deliverance Ministries in South Africa.
• Another case involves a residential child facility that was not registered as a company, but pretended to be running a charitable organization. The suspect, supposed owner of the facility, solicited NAD 80,000 from the American Embassy under false pretenses and deposited the funds into their personal account. The money was then spent personally, rather than for charitable purposes.
• A mosque’s account in Namibia is also suspected of being used to finance terrorism in the Middle East.

Need for Stricter Regulations

These cases highlight the vulnerabilities in the financial system and the need for stricter regulations to prevent terrorist financing. In response, the FIC has developed a risk rating system to categorize NPOs based on their level of transparency and accountability.

Risk Rating System

According to the FIC’s guidelines, NPOs are categorized into three levels:

• Low-risk NPOs:
  • Have explicit charitable purposes
  • Disclose how funds are used with specificity
  • Have written grant agreements that contain effective safeguards
• Medium-risk NPOs:
  • Have general charitable purposes but provide some disclosure about fund usage
  • May have some written documentation, but lacks specificity in fund usage disclosure
• High-risk NPOs:
  • Have no written grant agreements or do not disclose how funds are used

Best Practices for Charities and Donors

To prevent terrorist financing, charities and donors must take the following steps:

• Perform on-site or remote audits and reporting to verify the use of funds
• Provide documentation of fund usage
• Engage in regular communication with the charity
• Ensure that transactions are subject to the safeguards of regulated financial systems consistent with international standards

Conclusion

As the global fight against terrorism continues, it is essential that charities and NPOs take proactive steps to prevent their organizations from being exploited for nefarious purposes. The FIC’s risk rating system and guidelines provide a framework for charities to assess their vulnerabilities and mitigate risks associated with terrorist financing.