Risk Register: Terrorist Financing in Charities

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Introduction

Charities are vulnerable to terrorist financing due to the nature of their activities, which often involve receiving and disbursing funds from various sources. A comprehensive risk register is essential for charities to identify, assess, and mitigate potential risks related to terrorist financing.

Risk 1: Inadequate Due Diligence on Donors

Description of Risk Indicator

• The charity accepts donations from donors without conducting thorough due diligence.
• This increases the risk of accepting funds from terrorists or individuals involved in terrorist activities.

Consequence

• If the charity fails to conduct adequate due diligence, it may inadvertently accept funds from terrorist organizations.
• This can damage its reputation and potentially lead to legal consequences.

Risk Owner

• The Charity’s Senior Management Team is responsible for ensuring that proper due diligence procedures are in place.

Likelihood and Impact

Rationale

While some charities may not prioritize due diligence on donors, most are aware of the risks and take steps to mitigate them. A breach in due diligence could lead to reputational damage, but it is unlikely to result in significant financial losses or operational disruptions.

Risk 2: Inadequate Monitoring of Beneficiaries

Description of Risk Indicator

• The charity fails to monitor its beneficiaries effectively.
• This makes it difficult to track the ultimate use of funds and increases the risk of diverting resources to terrorist organizations.

Consequence

• If the charity fails to monitor its beneficiaries, it may inadvertently support terrorist activities or divert resources to unintended recipients.

Risk Owner

• The Charity’s Program Management Team is responsible for ensuring that proper beneficiary monitoring procedures are in place.

Likelihood and Impact

Rationale

While charities often have systems in place to monitor beneficiaries, inadequate monitoring can occur due to resource constraints or lack of expertise. A breach in beneficiary monitoring could lead to reputational damage and potential financial losses.

Risk 3: Inadequate Record-Keeping

Description of Risk Indicator

• The charity fails to maintain accurate and complete records.
• This makes it difficult to track transactions, donors, or beneficiaries.

Consequence

• If the charity fails to maintain adequate records, it may struggle to demonstrate compliance with anti-money laundering regulations.
• This can potentially lead to legal consequences.

Risk Owner

• The Charity’s Financial Management Team is responsible for ensuring that proper record-keeping procedures are in place.

Likelihood and Impact

Rationale

Most charities understand the importance of maintaining accurate records and take steps to ensure compliance. A breach in record-keeping could lead to reputational damage, but it is unlikely to result in significant financial losses or operational disruptions.

Conclusion

This risk register highlights potential risks related to terrorist financing in charities. Charities should tailor their risk registers to their specific operations and context. By identifying and mitigating these risks, charities can minimize the likelihood of inadvertently supporting terrorist activities and maintain a strong reputation.