A recent Financial Intelligence Center (FIC) risk assessment on terrorism financing in the non-profit organization (NPO) sector has detailed more than a dozen instances where South African NPOs have played a role in financing terrorism. The report, which was compiled with the support of the European Union Anti-Money Laundering (AML)/Counter Terrorist Financing Global Facility (CFT), and with financial support from the European Union and Germany, highlighted that despite the existence of ‘inherent vulnerabilities’ which put the NPO sector ‘at risk’ of terrorist financing abuse, no arrests of individuals identified as potentially involved in terrorist financing have been made.
What You Need to Know:
The report defines NPOs as “legal entities primarily engaged in raising or disbursing funds for charitable, religious, cultural, educational, social, or fraternal purposes, or for carrying out other types of ‘good works.’ However, this definition excludes certain entities like informal groups, political parties, trade unions, or organizations primarily engaged in economic activities for personal or financial benefits.”
The report identified a medium risk of terrorist financing abuse in South Africa’s NPO sector, with 10 ‘pointers’ identified on the nature of terrorist financing threats to NPOs. However, a survey of NPOs rated their own risk to terrorist financing as ‘mostly no risk at all.’
The nature of terrorist financing in the NPO sector was identified as follows:
- NPOs raising funds or other support for foreign terrorist groups
- Establishing an NPO to support domestic terrorist activity
- NPOs facilitating foreign travel for terrorist causes
- NPOs used as a conduit to channel foreign funds to terrorist groups in Africa
- NPOs using the Internet and online media for fundraising, recruitment, and propaganda
- NPOs supporting terrorist causes through cash
- NPOs supporting terrorist causes through remittance services
- NPOs using multiple bank accounts
- Diversion of funds by a beneficiary/partner
- Payment of ransoms to terrorist groups by NPOs.
The dominant groups covered in the report are the Islamic State (IS) and its affiliates in Africa, Al-Shabaab and its affiliates in Africa, including Al Sunnah Wa Jama’ah, Nigerian terrorist groups, including Boko Haram and the Movement for the Emancipation of the Niger Delta (MEND), domestic right-wing extremists, and Al-Qaeda (including al-Qaeda in the Arabian Peninsula (AQAP) and al-Qaeda in the Islamic Maghreb).
The Details:
In February 2023, South Africa was placed on the ‘gray-list’ of the Financial Action Task Force (FATF), a Paris-based international anti-money laundering organization, as the result of a report which identified 60 points in which South Africa’s financial system was unable to prevent money-laundering activity used to support Islamic State (IS) affiliates across Africa.
The report states, “there have been some confirmed cases of the flow of funds to facilitate foreign terrorism. These cases are limited but involve the IS and al-Shabaab terrorist groups. There has been a growing concern, both locally and internationally, that South Africa is not only used as a conduit but also a source of funding for these terrorist groups (IS and al-Shabaab).” Adding, “South Africa has reportedly facilitated the training of foreign terrorist fighters (FTF). There has been support for foreign terrorist organizations (FTOs) by South African nationals who travel to and from conflict zones, as well as foreign suspected terrorists transiting through or staying in the country.”
The report then lists 13 ‘sanitized’ case studies, due to some still being under investigation, as examples of how the NPO sector was ‘possibly’ abused to finance terror.
Case study 1:
“An alleged member of an IS cell located in South Africa registered a community development NPO with DSD. Several bank accounts with different banks were opened in the name of the NPO. The accounts were credited via donations, cash deposits, and EFTs. The funds were used in support of IS activities and personal expenses (misrepresentation).”
Case Study 6:
“After relocating to South Africa, a foreign national registered an NPO to be active within the social and community development. Funds obtained through this NPO were used by the foreign national to sustain himself while in South Africa. The foreign national later traveled from South Africa to a foreign jurisdiction to provide material support for the Islamic State (IS).
Case Study 11:
“Organization B was registered as an NPO in South Africa by individuals with an extremist agenda to solicit funds in the country to recruit Muslim students in South Africa and to send them to study at a religious institution in Syria. The institution in Syria previously came under attention for its radical approach and having links to FT (foreign terror) groups such as Al-Qaeda. It was believed at the time that these students would be sent to this religious institution to be radicalized, hoping that upon their return to South Africa they would present similar training or tuition to like-minded individuals. No electronic payments were made by Organization B to this foreign institution. Instead, students were given cash (amounting to R100 000 per person) to take with them in their suitcases and on their person and told to pay the religious institution upon their arrival. A contact of Organization B at OR Tambo International Airport in Johannesburg, and part of an organized human trafficking syndicate, facilitated their departure by ensuring that they were not checked by airport security. Upon their arrival in Syria, some of the cash paid by these students to the religious institution was, without the knowledge of the students, deliberately siphoned off by individuals known to Organization B and channeled to an FT group in Indonesia. Not only did the students exceed the threshold for the amount of cash they could take out of the country for perceived legitimate religious training abroad but, they were also unwittingly exploited as conduits or mules to carry large amounts of funds to another country, unwittingly supporting the activities of an FT group.”
Case Study 12:
“Organization D is a registered NPO which obtained funds from local communities in South Africa to provide humanitarian relief to disadvantaged local and émigré communities in the country. However, Organization D was infiltrated by a member of the Somali émigré community in South Africa sympathetic to the cause of al-Shabaab, and who was intricately involved in the collection of donations from within South Africa. Some of the donations received by this individual were not declared to the leadership of Organization D and channeled via the hawala system to like-minded individuals in Somalia and Kenya.” Despite the mention of these case studies, the report states, “there is limited direct evidence of NPOs being abused for terrorism financing in South Africa.” Continuing, “most (91 percent) NPOs had no foreign links, meaning that they had not sent funds abroad, received funds from abroad, or run projects abroad. It also means that these NPOs have not worked with foreign partners, obtained work permits for foreigners, or have not been established or managed by foreigners. Those that had foreign links mainly received foreign funds.”
So, What Now?:
While the information expressed in the FIC’s report seems somewhat contradictory, the report highlights that while there is some evidence that NPOs have been abused to finance terror, the evidence appears minimal when assessed across the NPO sector as a whole. Despite this, the report concludes that the average risk of terrorism financing to the NPO is ‘medium.’ This is likely due to the complexity of the issue, with the tracing of finances potentially used for terrorism extremely difficult, particularly in under-funded/under-resourced nations.
