Wolfsberg Group Response to FATF Consultation relating to Non-Profit Organisations

The Wolfsberg Group, in response to the FATF’s public consultations, has expressed its feedback on the revisions to R.8/INR.8 and the BPP concerning NPOs and their vulnerability to terrorist financing abuse.
The Group welcomes the revisions aimed at implementing a risk-based approach, recognizing the diversity in the risk profiles of NPOs. Concerning the placement of example measures in INR.8, they argue that their removal may have unintended consequences and propose moving them to a footnote.
The Group suggests enhancing NPOs‘ risk awareness by requiring them to adopt a risk-based approach to identify and mitigate their own risks. They emphasize the importance of understanding the source and destination of funds, especially for NPOs handling significant amounts of funding or operating in higher-risk contexts.
Regarding FIs, the Group believes they should perform controls on NPOs but should not extend their preventive measures like customer due diligence to NPOs‘ donors or beneficiaries. They propose several amendments to the BPP, focusing on risk identification, monitoring, auditor expertise, internal controls, and collaboration among NPOs.
The Group stresses the need for NPOs to explain their activities, risk assessment processes, and control frameworks to FIs, emphasizing that FIs should assess relationships on a case-by-case basis. They advise against restricting refusal to provide services to vulnerable groups only and urge clarity and transparency in communication between FIs and NPOs.
Data-driven evaluations are recommended to assess NPO risk effectively and avoid bias. The Group suggests that FATF address other financial crime risks such as corruption, fraud, and tax evasion that may involve NPOs.
Finally, the Wolfsberg Group proposes various edits to the BPP, including a title change to reflect the focus on terrorist financing, clarifications in the definition of NPOs, expansion of references to financial transactions, inclusion of VASPs, and the establishment of the legitimacy of funds handled by NPOs.