NCJ Number
237772
Date Published
2011
Length
83 pages
Annotation
This report examines the risks to the Australian non-profit sector of money laundering and terrorism financing, and it describes the regulatory changes that could minimize these risks.
Abstract
Charities have the potential to be manipulated as financial conduits for terrorist activity because they are cash intensive, regularly transmit funds between jurisdictions (often to areas of social unrest), and have historically operated under less formal regulatory scrutiny than for-profit entities. Thus, non-profit organizations (NPOs) are ideal vehicles for laundering money or collecting and transmitting funds to finance terrorism activities. The prevailing trend in the available typologies is that NPO misuse has come in the form of criminal or terrorist groups posing as legitimate charities, although there have been cases in which abuse occurs without the knowledge of the trustees, senior management, or donors. Evidence for the misuse of Australian NPOs for money laundering and terrorism financing is limited. Of the two prosecuted cases in which a charity was known to have been misused, one involved the fabrication of a charity to launder business-generated cash, and the other case involved the collection and disbursement of funds to a group engaged in both humanitarian and militant activities. Australia's regulation of NPOs has received three official reviews or inquiries between 2001 and 2010. Many NPOs are required to report multiple times to different authorities over the course of the financial year. Self-regulation, most recently in the form of codes of conduct, has accompanied government regulation in order to ensure the NPO sector is adhering to basic operating and risk-management principles. Developing a response proportional to risk has been paramount in deliberations on how to best deal with the abuse of NPOs for money laundering and terrorism financing. 14 tables and 65 references