CASE STUDIES

ABUSE OF CHARITIES AND NPOS

NPOS OFTEN HAVE A GLOBAL PRESENCE AND MANY OPERATE IN CONFLICT ZONES AND OTHER REGIONS WHERE PEOPLE ARE IN NEED AND CAN BE VULNERABLE TO EXPLOITATION AND ABUSE IN ORDER TO PROVIDE FINANCIAL SUPPORT FOR TERRORISM.

MORE CASE STUDIES AVAILABLE ON KYC36O.COMTHE ESSENTIAL ALLIANCE OF GLOBAL AML AND CFT INTELLIGENCE

© KYC360 2016. All rights reserved. This KYC360 infographic is licensed for your personal use only. It may not be used for any commercial purpose without the prior written permission of KYC360.

OVERVIEWNon-profit organisations (‘NPOs’) that raise funds and conduct charitable activities provide vital support and services to communities around the world. The legitimate operational model for many NPOs will involve cash-intensive fundraising, with numerous small cash donations consolidated together before being deposited into a bank account, and financial transfers to high risk countries where funds can be deployed for humanitarian work. Unfortunately this provides ideal cover for the financing of terrorism.

In order to fund terrorists or terrorist activities a legitimate NPO can be exploited, either wittingly or unwittingly, or a sham NPO can be used. This exploitation can occur at three distinct points in the NPO operational model: the collection phase, the transfer phase, or at the point of delivery.

SCENARIOLet us consider a fictitious example where exploitation occurs at all three points of the process. Suppose “Help the Homeland” is an NPO that raises funds primarily from the Somalian diaspora in the US and the UK for the stated purpose of providing humanitarian relief and poverty reduction in Somalia. Funds are raised using a variety of methods including cash donations collected by volunteers on the streets.

1Two members of the Somali community in the US who have friends and relatives who are members of terrorist groups in Europe and Africa volunteer to collect funds on behalf of “Help the Homeland”. Instead of passing on all of the cash that they collect to the NPO, they use some of it to send money to their terrorist associates abroad using a local hawala broker.

2Unbeknownst to the majority of the board and senior management of the NPO a significant minority actively support a terrorist group, the “African Caliphate”. This minority includes an individual who has access to the bank accounts of the NPO. Funds collected by “Help the Homeland” in the US and the UK are consolidated in an account in Switzerland, where the NPO has an office, before being sent on to Somalia. When these various transfers are made, funds are diverted using international wire transfers to the accounts of sham businesses, supposedly for logistical services, and are ultimately used to support the “African Caliphate”.

3Finally, on the ground in Somalia, one of the people responsible for distributing funds is also a supporter of the “African Caliphate”. Some of the money this individual distributes is used to purchase food and other provisions, half of which is diverted and sent to a local sub-group of the “African Caliphate”. Other funds distributed by “Help the Homeland” are passed on to local charitable organizations, one of which is in fact a front operation for the terrorist group.

LOGISTICS

H A W A L A B R O K E R

CHARTIY

HQ

CASE STUDIES ABUSE OF CHARITIES AND NPOS

MORE CASE STUDIES AVAILABLE ON KYC36O.COMTHE ESSENTIAL ALLIANCE OF GLOBAL AML AND CFT INTELLIGENCE

© KYC360 2016. All rights reserved. This KYC360 infographic is licensed for your personal use only. It may not be used for any commercial purpose without the prior written permission of KYC360.

Terrorist Associate of Volunteer

Terrorist Group

Local Terrorist Cell

Volunteer Fund Raisers

Cash Donations

NPO in US

Logistic Support Company A

Logistic Support Company B

Local Charitable Organisation

NPO in Switzerland

NPO in Somalia

Food