SA publish first ever national terrorist financing risk assessment report on the NPO sector.
The South African government, together with private sector partners, released a report assessing the risk of terrorist financing within the non-profit organization (NPO) sector. This report is crucial as it lays the foundation for developing clear and practical strategies to reduce these risks. Essentially, it serves as a starting point for shaping future policies that will focus on specific risks identified in the NPO sector.
According to the media release issued by SARS, the main goal of this report is to create strategies that are specific, balanced, and based on the level of risk. These strategies are designed to reduce the risks identified and are in line with international standards set by the Financial Action Task Force (FATF). The FATF aims to fight money laundering and terrorist financing worldwide.
This report is also a response to South Africa's commitment to address the concerns that led to its grey-listing by the FATF in 2023. By improving how we understand and handle these risks, we aim to prevent the misuse of NPOs for financing terrorism and to encourage stronger cooperation between the government, the private sector, and NPOs to safeguard the sector.
The findings of the report pinpointed threats of terrorist financing within NPOs, which could potentially be exploited to gather or transfer funds for terrorist activities. Additionally, it identified weaknesses within NPOs that terrorists could target, each varying in importance and frequency.
To address these issues, the report suggests a more focused strategy on NPOs that are at a higher risk of being exploited for terrorist financing and working on the weaknesses identified. It highlights the importance of teamwork between the government, private sectors, and NPOs to put these strategies into action effectively.
A diverse technical committee was set up to prepare this assessment, including members from the Department of Social Development (DSD), Financial Intelligence Centre, National Treasury, and several NPOs with expertise in regulatory compliance and financial oversight. This team was chosen to ensure a thorough analysis and to bring together different perspectives on terrorist financing issues in NPOs.
For accountants working within the non-profit sector, the detailed assessment of terrorist financing risks, as outlined in the recent report, has significant implications. Accountants need to be aware of these risks and the vulnerabilities of their organizations to ensure that they are not unwittingly facilitating illegal activities, for example:
Key Threats and Accountant Actions:
Diversion of Funds: Accountants should conduct regular checks to ensure money is used for its intended purposes.
Fraudulent Fundraising: They need to verify the legitimacy of fundraising activities and keep a close eye on new projects.
Misuse of Program Delivery: Setting up clear tracking for how funds, goods, and services are used in projects is crucial.
Cash Smuggling: Implement strict rules for handling cash and keep detailed records of all cash transactions.
Informal Money Transfers: Ensure all money transfers go through official, traceable channels.
Addressing Vulnerabilities:
Lack of Awareness: Accountants should lead training sessions to educate staff on the risks of terrorist financing.
Weak Internal Controls: It's important to regularly review and strengthen financial policies to prevent misuse.
Complex Funding Arrangements: Strive for transparency in funding, making it clear where money comes from and where it goes.
High Cash Intensity: Reduce cash use where possible and keep meticulous records for cash transactions.
Geographic Risk Exposure: Extra caution is needed for projects in high-risk areas, possibly requiring more rigorous financial checks.