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How FATF has been misused for political purposes around the world

The Financial Action Task Force (FATF), a global money-laundering monitor, has been misused by some governments to launch crackdown against rights activists and opponents, a Reuters investigation has found. 

The revelations come just weeks after India openly admitted that it has used its influence at the international forum to push Pakistan into a ‘grey list’ of countries that strict scrutiny. 

Paris-based FATF was created by the G7 group of advanced economies to ensure global financial systems, including banks, are not used by terror groups, money launders and criminal syndicates. 

Over the years FATF has pushed countries to introduce anti-money laundering laws and strengthen the systems that monitor how the money flows across the borders. 

But there have been some unintended consequences. 

READ MORE: Pakistanis see politics behind FATF decision

The Ugandan case

In late 2020, when Ugandan President Yoweri Museveni faced a fresh challenge to his 35-year rule, a new tool helped to silence his critics: anti-money laundering legislation promoted by the G7.

The FATF had written to Uganda’s government eight years earlier telling it to do more to combat money laundering and terrorism financing or risk being placed on a “grey list” of deficient countries, according to a top Ugandan official who described the private letter to Reuters.

Such a move could damage Uganda’s ties to foreign banks and investors, which closely follow the FATF’s updates.

Within a year, Uganda’s parliament passed a new law to criminalise both offences and established an intelligence unit to enforce it.

But Uganda didn’t deploy the law as the FATF intended.

Last December, as Museveni prepared for a January election, authorities used the law to temporarily freeze the bank accounts of three rights groups and arrest a prominent lawyer, 40-year-old Nicholas Opiyo, on money laundering charges related to the funding of an NGO he founded.

Opiyo, who was later released on bail, called the charges “spurious.” 

The government has denied using the law to target its critics. 

In January, amid accusations of voter fraud by Museveni’s main rival, the electoral commission declared Museveni had won re-election.

Uganda isn’t unique.

READ MORE: EU to set up anti-money laundering watchdog in wake of scandals

Reuters found that in at least four other countries – Serbia, India, Tanzania, and Nigeria – legislation passed to meet FATF standards was used by authorities to investigate journalists, NGO workers, and lawyers.

Based on interviews with people targeted, government officials and financial crime experts, the reporting by Reuters provides the first account of the unintended consequences arising from the task force’s mandate.

Through constant assessments of countries’ measures, the FATF plays a little-known but key role in shaping financial crime legislation and in dictating governments’ security priorities.

Across the globe, it has strengthened laws to crack down on money laundering and terrorist financing. 

But by pressuring nations with weak democratic frameworks to adopt and bolster such laws, the FATF has unwittingly handed a new legal instrument to authoritarian governments, according to a dozen researchers at think tanks and human rights groups.

“Its standards are increasingly not just being misunderstood, but are being purposefully abused,” said Tom Keatinge, director of the Centre for Financial Crime at the Royal United Services Institute in London.

In particular, a focus at the FATF from the early 2000s on tackling terrorist financing through non-profit organisations has allowed some governments to pursue legitimate civic groups under the cover of enforcing international standards, according to researchers.

“Non-profit organisations can get caught in those crosshairs,” said Tracey Durner, a director at the Global Center on Cooperative Security in New York.

The FATF said it was aware of reports its recommendations have been misused and was monitoring governments’ oversight of nonprofits. 

The FATF impact

Terrorist financing experts said the FATF has limited the funding of groups like al Qaeda by making banks more risk-averse and giving authorities more powers to investigate an entity’s finances.

The FATF has long nudged countries into compliance with Western security standards. 

Since the G7 established the task force in 1989, over 180 nations have committed to implementing its recommendations.

Countries deemed non-compliant with FATF standards are “grey-listed,” or blacklisted, a tag currently held just by North Korea and Iran. 

In the case of Uganda, even after passing the 2013 law, it spent three years on the grey list. 

A stint on the list keeps a country under close monitoring, potentially unnerving its foreign investors and complicating its overseas banking relationships.

Civil groups for years have complained the FATF unfairly stigmatises them as conduits for illegal funds. 

In the wake of the 9/11 attacks on the United States, the FATF issued a recommendation warning that non-profit groups were “particularly vulnerable” to terrorist financing, citing the possibility that terrorist organisations could exploit the sector to raise and move funds. 

This recommendation required states to review their laws to ensure such groups “cannot be misused.”

The recommendation complicated funding for various NGOs around the world as banks, nervous of falling foul of regulators, closed their accounts or blocked transfers. 

NGOs’ vulnerability to terrorist financing has been challenged in studies, including in a 2019 report by the United Nations’ Special Rapporteur on Human Rights and Counter-Terrorism. 

What happened in India

Last year, it was India’s turn to prepare for another FATF evaluation. 

The then-junior home affairs minister tweeted the government would “disrupt the terror-financing networks” to meet FATF standards.

In October, the national counter-terrorism agency raided the offices of 10 NGOs in New Delhi and India-administered Kashmir, where security forces are battling a decades-long insurgency.

It said in a statement the organisations were using foreign funds for “secessionist and terrorist activities” in Kashmir. 

No arrests were made.

Several of the NGOs, including Delhi-based relief organisation Charity Alliance, denied the agency’s claims. 

READ MORE: International pressure grows on India over arbitrary detentions

They said they were either providing humanitarian aid or researching alleged rights abuses committed by security forces deployed in Kashmir – work which was supported by several UN special rapporteurs. 

One of the Kashmir-based NGOs told Reuters that during the raid officers seized documents and hard drives with sensitive information on victims of torture.

They halted the research, fearing further reprisals.

Charity Alliance’s chairman, Zafarul-Islam Khan, told Reuters it was a “blatant lie” that his charity funded terrorism in Kashmir. 

The counter-terrorism agency has not provided evidence of any alleged crime, he said, accusing Prime Minister Narendra Modi’s government of trying “to throttle Muslim, Christian, leftist and human rights NGOs.”

India’s Ministry of Home Affairs declined to comment.

A damning Reuters investigation says governments including New Delhi have deployed anti-money laundering rules to go after opponents.

The Paris-based FATF works as a global money-laundering watchdog.
The Paris-based FATF works as a global money-laundering watchdog.
(Reuters)

The Financial Action Task Force (FATF), a global money-laundering monitor, has been misused by some governments to launch crackdown against rights activists and opponents, a Reuters investigation has found. 

The revelations come just weeks after India openly admitted that it has used its influence at the international forum to push Pakistan into a ‘grey list’ of countries that strict scrutiny. 

Paris-based FATF was created by the G7 group of advanced economies to ensure global financial systems, including banks, are not used by terror groups, money launders and criminal syndicates. 

Over the years FATF has pushed countries to introduce anti-money laundering laws and strengthen the systems that monitor how the money flows across the borders. 

But there have been some unintended consequences. 

READ MORE: Pakistanis see politics behind FATF decision

The Ugandan case

In late 2020, when Ugandan President Yoweri Museveni faced a fresh challenge to his 35-year rule, a new tool helped to silence his critics: anti-money laundering legislation promoted by the G7.

The FATF had written to Uganda’s government eight years earlier telling it to do more to combat money laundering and terrorism financing or risk being placed on a “grey list” of deficient countries, according to a top Ugandan official who described the private letter to Reuters.

Such a move could damage Uganda’s ties to foreign banks and investors, which closely follow the FATF’s updates.

Within a year, Uganda’s parliament passed a new law to criminalise both offences and established an intelligence unit to enforce it.

But Uganda didn’t deploy the law as the FATF intended.

The government Ugandan President Yoweri Museveni used anti-money laundering laws to go after political opponents.
The government Ugandan President Yoweri Museveni used anti-money laundering laws to go after political opponents.
(AP)

Last December, as Museveni prepared for a January election, authorities used the law to temporarily freeze the bank accounts of three rights groups and arrest a prominent lawyer, 40-year-old Nicholas Opiyo, on money laundering charges related to the funding of an NGO he founded.

Opiyo, who was later released on bail, called the charges “spurious.” 

The government has denied using the law to target its critics. 

In January, amid accusations of voter fraud by Museveni’s main rival, the electoral commission declared Museveni had won re-election.

Uganda isn’t unique.

READ MORE: EU to set up anti-money laundering watchdog in wake of scandals

Reuters found that in at least four other countries – Serbia, India, Tanzania, and Nigeria – legislation passed to meet FATF standards was used by authorities to investigate journalists, NGO workers, and lawyers.

Based on interviews with people targeted, government officials and financial crime experts, the reporting by Reuters provides the first account of the unintended consequences arising from the task force’s mandate.

Through constant assessments of countries’ measures, the FATF plays a little-known but key role in shaping financial crime legislation and in dictating governments’ security priorities.

Across the globe, it has strengthened laws to crack down on money laundering and terrorist financing. 

But by pressuring nations with weak democratic frameworks to adopt and bolster such laws, the FATF has unwittingly handed a new legal instrument to authoritarian governments, according to a dozen researchers at think tanks and human rights groups.

“Its standards are increasingly not just being misunderstood, but are being purposefully abused,” said Tom Keatinge, director of the Centre for Financial Crime at the Royal United Services Institute in London.

In particular, a focus at the FATF from the early 2000s on tackling terrorist financing through non-profit organisations has allowed some governments to pursue legitimate civic groups under the cover of enforcing international standards, according to researchers.

“Non-profit organisations can get caught in those crosshairs,” said Tracey Durner, a director at the Global Center on Cooperative Security in New York.

The FATF said it was aware of reports its recommendations have been misused and was monitoring governments’ oversight of nonprofits. 

The FATF impact

Terrorist financing experts said the FATF has limited the funding of groups like al Qaeda by making banks more risk-averse and giving authorities more powers to investigate an entity’s finances.

The FATF has long nudged countries into compliance with Western security standards. 

Since the G7 established the task force in 1989, over 180 nations have committed to implementing its recommendations.

Countries deemed non-compliant with FATF standards are “grey-listed,” or blacklisted, a tag currently held just by North Korea and Iran. 

In the case of Uganda, even after passing the 2013 law, it spent three years on the grey list. 

A stint on the list keeps a country under close monitoring, potentially unnerving its foreign investors and complicating its overseas banking relationships.

Civil groups for years have complained the FATF unfairly stigmatises them as conduits for illegal funds. 

In the wake of the 9/11 attacks on the United States, the FATF issued a recommendation warning that non-profit groups were “particularly vulnerable” to terrorist financing, citing the possibility that terrorist organisations could exploit the sector to raise and move funds. 

This recommendation required states to review their laws to ensure such groups “cannot be misused.”

The recommendation complicated funding for various NGOs around the world as banks, nervous of falling foul of regulators, closed their accounts or blocked transfers. 

NGOs’ vulnerability to terrorist financing has been challenged in studies, including in a 2019 report by the United Nations’ Special Rapporteur on Human Rights and Counter-Terrorism. 

What happened in India

Last year, it was India’s turn to prepare for another FATF evaluation. 

The then-junior home affairs minister tweeted the government would “disrupt the terror-financing networks” to meet FATF standards.

In October, the national counter-terrorism agency raided the offices of 10 NGOs in New Delhi and India-administered Kashmir, where security forces are battling a decades-long insurgency.

It said in a statement the organisations were using foreign funds for “secessionist and terrorist activities” in Kashmir. 

No arrests were made.

Several of the NGOs, including Delhi-based relief organisation Charity Alliance, denied the agency’s claims. 

READ MORE: International pressure grows on India over arbitrary detentions

They said they were either providing humanitarian aid or researching alleged rights abuses committed by security forces deployed in Kashmir – work which was supported by several UN special rapporteurs. 

One of the Kashmir-based NGOs told Reuters that during the raid officers seized documents and hard drives with sensitive information on victims of torture.

They halted the research, fearing further reprisals.

Charity Alliance’s chairman, Zafarul-Islam Khan, told Reuters it was a “blatant lie” that his charity funded terrorism in Kashmir. 

The counter-terrorism agency has not provided evidence of any alleged crime, he said, accusing Prime Minister Narendra Modi’s government of trying “to throttle Muslim, Christian, leftist and human rights NGOs.”

India’s Ministry of Home Affairs declined to comment.

Source: Reuters

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