The Financial Action Task Force (FATF), an inter-governmental body described as the most powerful organization most people will have never heard of, is increasingly protecting civil society as a part of its global counterterrorism (CT) financing efforts. The FATF’s Executive Secretary announced in early March that the FATF will form a new work stream on unintended consequences of poorly implemented anti-money laundering and counterterrorism financing (AML/CFT) measures – from financial exclusion to the abuse of counterterrorism measures that suppress civil society and hamper their crucial work. This is a potentially transformative move in putting civil society freedoms and financial inclusion at the heart of the fight against terrorism and money laundering.
The FATF is an inter-governmental decision-making body established in 1989 during the G7 Summit to develop policies first against money laundering, and after the 9/11 attacks also against terrorist financing. It is a standard-setting body which generates ‘recommendations’ on financial regulation and the disruption of money laundering and terrorist financing. FATF recommendations are the internationally endorsed global standards against money laundering and terrorist financing: their goal is to enable countries successfully tackle illicit use of their financial system.
As the seventh review of the Global Counter-Terrorism Strategy began in earnest with the publication of the Secretary General’s Report at the end of January, there is much that can be learned and followed by the rest of the global counterterrorism architecture.
FATF: The Openings and Transformation
Global counterterrorism is pursued through a dense and largely closed institutional infrastructure. This includes U.N. entities such as the Counter-Terrorism Committee (CTC) and its Counter-Terrorism Executive Directorate (CTED), and the Office of Counter-Terrorism (OCT), as well as entities that are not ‘international organizations’ per se, but which play critical roles in setting, enforcing, and revisiting standards (such as the Global Counter-Terrorism Forum – GCTF). In the field of countering terrorist finance, the FATF is without question the most influential of these entities.
As well as developing standards, the FATF works to generate the political will to bring about concrete national legislative and regulatory reforms in line with them. The FATF and its ‘FATF-style regional bodies‘ then assess the implementation of its recommendations through a robust country level peer review process and score each country based on mutually agreed strict methodology. The FATF’s “teeth” stem from real-life economic consequences of not adhering to its standards: it assesses countries’ adherence to its standards and those that are identified as under-performing face economic sanctions from the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB), experience difficulties in getting loans from international institutions, and tend to see a reduction in trade.
The FATF’s recommendations are also promoted and embedded through references in U.N. Security Council Resolutions and U.N.-issued guidance and best practices, and implemented via national legislation and financial institutions. However, as with much of global counterterrorism responses, the FATF’s approach to countering terrorist financing since 2001 has been continuously criticized as enabling governments to target civil society through overbearing and repressive financial regulation applied as a mode of shrinking civic space.
During 2020, the FATF was repeatedly alerted to government action that used its AML/CFT standards to inappropriately freeze civic activists’ and organizations’ accounts, initiate dubious investigations of human rights organizations, activists and politicians, or adopt new restrictive legislation that hampers legitimate civil society work. These moves to clamp down on civil society were not isolated cases, but rather part of a sustained series of consequences stemming from the global AML/CFT and CT frameworks. The Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism has reported that 140 governments have adopted counterterrorism legislation since 2001, much of which reflects the FATF’s recommendations but through which States also seek to disrupt and repress civil society work. This is so even though recent research has shown there is no evidence legal restrictions on civil society reduce the number of terrorist attacks within a country.
Perhaps conscious of the ways in which its recommendations were being impugned and misapplied, and unlike some other counterterrorism institutions inside and beyond the U.N., the FATF has increasingly demonstrated capacity and willingness to recognize and act to mitigate the unintended consequences of its recommendations for civil society. This includes institutional changes in engaging with civil society and clearly addressing misuse and misapplication of its standards.
The FATF’s willingness to listen, adjust, and react to the perspectives and experiences of civil society is to be welcomed, although it took some time to reach this point. For example, the Global Nonprofit Organizations (NPO) Coalition on the FATF found little sympathy for civil society grievances when it first reached out to the FATF several years ago, and almost no opening for civil society involvement or recognition of the emerging problem (full disclosure: coauthor Vanja Skoric is program director at the European Center for Not-for-Profit Law, which is a member of the Coalition). However, through the Coalition’s persistent, constructive and targeted global advocacy pointing to evidence-based research and potential solutions, the FATF changed its standards affecting civil society and provided engagement opportunities. Over years, the FATF realized that the negative impacts on civil society of misuse of its standards had also undermined its broader goals in combating terrorism. The FATF therefore created direct access for civil society to submit its expertise, concerns and evidence of misapplication of FATF standards to help the FATF in evaluating countries and in improving its work. The FATF still needs to strengthen consistent civil society engagement at regional and country level, and to facilitate implementation of the new standards, as civil society increases its capacity to engage. However, there is growing recognition by the FATF leadership that the efforts to fight money laundering and terrorism must go hand in hand with protecting rights and freedoms, and should not disrupt civil society work.
Applying the FATF Approach in the U.N. Bodies
The rest of the global counterterrorism architecture has much to learn from the FATF. There is a strange mismatch between, on the one hand, the rhetorical acknowledgement of civil society’s importance in, for example, the U.N.’s Global Counter-Terrorism Strategy (GCTS), and on the other, the difficulties civil society experiences from counterterrorism measures and in gaining access to counterterrorism institutions. In particular, there are limited opportunities for civil society to be welcomed as sources of legitimate critique, rather than operational ‘partners’ in enacting strategies and programs. This feeds into persistent concerns about accountability of the CT architecture and about the global assemblage’s willingness to revisit and revise its approaches to counterterrorism in the face of evidence of ineffectiveness or misuse.
The FATF’s relative openness is all the more striking when one recalls that, as a quintessential informal institution with voluntary soft law standards, its engagement with civil society is voluntarily enacted and indicative of the openness developed over years of engagement with civil society described above, and through engagement with the U.N. Special Rapporteur. Other informal institutions, and particularly the GCTF, have been less willing to revisit their understanding of how and why civil society is impacted by counterterrorism policies, and why it thus needs a seat at the table – in spite of a very clear sense that such a change in attitude from GCTF and other institutions is needed.
The seventh review of the U.N. GCTS presents an opportunity for States and the U.N. to both meaningfully revisit their relationship with civil society and strengthen standards to protect it. The fact that most counterterrorism institutions remain so closed to civil society underlines the need for the GCTS to develop its rhetorical acknowledgment of civil society into practical actions. At the U.N. level, these might include establishing a civil society liaison office to ensure a rights-based approach and create pathways for national civil society actors into relatively closed U.N. counterterrorism institutions. This should be accompanied by ensuring that key practices of U.N. bodies, including all country level assessments by CTED, are opened up to a diversity of civil society voices in a way that is both meaningful and sensitive, in particular ensuring protection against reprisals. To act upon the warning in the just-released U.N. Security General’s report, the GCTS review should put forward commitments to hold States to account and include stronger safeguards for the protection of an enabling environment for civil society and its financial inclusion.
Speaking of the need to protect civic space, the U.N. Secretary-General has adopted a clear position that “it is a prerequisite for civil society actors to be able to make vital contributions to strengthening social cohesion, building resilience and leaving no one behind in addressing…terrorism.” Almost twenty years on from Security Council Resolution 1373 on the prevention of financing of terrorism, this insight must be extended to the global counterterrorism architecture and the U.N.’s central role within it.