MOVING BEYOND THE TERRORIST-FINANCING RISK MATRIX IN THE NPO SECTOR

At Spaces for Change’s | S4C’s one-day capacity-building workshop held in Maiduguri, Borno State, leaders and executives of non-governmental organizations (NGOs) operating in north-east Nigeria deepened their understanding of the National Risk Assessment (NRA) of non-profit organizations (NPOs) in Nigeria. Whether or not NGOs are vulnerable to terrorism financing (TF) abuse has been a subject of much contention. For this reason, Recommendation 8 of the Financial Action Task Force (FATF) requires countries to identify the subset of NPOs vulnerable to TF risk and take targeted and proportionate measures to protect such organizations from abuse by criminal elements. In compliance with R8, the Nigerian government, through the Special Control Unit Against Money Laundering (SCUML), conducted the NRA in 2022. Among other things, the NRA finds that NPOs operating in the Northeast were vulnerable to TF risks.

The workshop was convened against the backdrop of the NRA’s finding that the most significant single factor in the level of risk faced by an NPO is geography, particularly operating in high-risk areas where insurgencies and terrorist activities are prevalent. Operating in such fragile contexts makes it imperative for NPOs to take steps to reduce their TF risk exposure and protect their organizations from terrorist abuse. Accordingly, the organizations operating in the North-east learned about the objectives and importance of the NRA, and what the findings portend for the non-profit sector in Nigeria.

Detailed presentations, factsheets, and podcasts from S4C facilitators and external experts clarified the concepts and importance of terrorism financing risk assessment, the methodology, and the outcomes of the latest round of assessments. The ultimate goal of the risk assessment is to identify NPOs susceptible to TF abuse and realign regulatory agencies’ supervisory measures to a risk-based approach. Beyond rating the overall inherent terrorist financing risk to NPOs in Nigeria Medium-High, the NRA identified 10 categories of NPOs identified to be at risk of terrorist financing. They include foreign NPOs active in the North-east; NPOs with links to high-risk foreign individuals or entities; NPOs operating in very high-risk areas, including the movement of goods; humanitarian NPOs operating in the Northeast; faith-based NPOs raising, moving, and disbursing cash; service provision NPOs operating in the Northeast; NPOs that engage vendors or third parties in high-risk areas; NPOs associated with unapproved financial or operational activities; NPOs associated with complex financial arrangements; and NPOs using higher risk methods for moving funds, including moving large sums and using cash transactions. As these findings demonstrate, the geography of the NPO is the most significant factor in determining the level of risk they face.

You would recall that the failure to conduct the NRA was among the reasons the FATF moved Nigeria to the grey list. Conducting a risk assessment of the NPO sector alone would not be enough to remove Nigeria from FATF’s grey list. To achieve that, Nigeria must meet the FATF’s priorities, which are, conducting a risk assessment, outreach programs, targeted risk-based supervision, and enhanced monitoring. As of now, Nigeria has met the criteria of conducting a risk assessment of TF in the NPO sector, and still needs to meet the other requirements to be removed from FATF’s grey list. The expected outcomes of the risk assessment may include increased monitoring of identified vulnerable NPOs, government outreach, changes in policies and regulations, and more collaboration between the government and NPOs, especially in the area of outreach to NPOs.

Participants also learned more about the recent delisting of NPOs as designated non-financial businesses and professions (DNFBPs) under the Money Laundering (Prevention & Prohibition) Act, 2022 (MLPA). S4C’s sustained advocacy preceded the delisting of NPOs under the MLPA, culminating in the removal of stringent reporting requirements NPOs were previously subjected to. Concerns were raised regarding the possible re-inclusion of NPOs as DNFBPs in the future due to the unrestricted power granted to the Minister responsible for trade to expand the list of DNFBPs under the MLPA. Elated participants requested for similar workshops to be organized in the future to reach more organizations operating in rural and urban settings, especially those identified as highly vulnerable to TF risk. The workshop was supported by the Global Center on Cooperative Security.