AUSTRAC and ACNC Risk Assessment of charities and non-profit sector

AUSTRAC and the Australian Charities and Not-for-profits Commission (ACNC) have released a joint report which assesses money laundering and terrorism financing risks affecting Australian non-profit organisations (NPOs).

The report identified a ‘medium’ risk level with regards to money laundering and terrorism financing within the sector, after evaluating approximately 257,000 registered non-profit organisations in Australia.

Many of these charities operate in, or send funds to, conflict zones and other unstable regions.

The threat of money laundering, including criminal misuse, in Australia’s NPO sector is assessed as medium. This is primarily based on suspicious matter reporting, the number of investigations into predicate crimes involving NPOs, and anecdotal insights from sector representatives regarding levels of criminal exploitation.

The key threats facing the NPO sector are fraud and theft of resources, with a low level of money laundering and tax evasion also detected. Offences are being committed by NPO personnel and affiliates at all levels, and are largely opportunistic. While the value attached to most offending is small, misuse of funds can have a significant impact on an NPO depending on its size and the amount of money it handles.

The threat of terrorism financing in the NPO sector is assessed as medium. This is based on the volume of suspicious matter reporting to AUSTRAC, intelligence holdings and the number of NPOs identified during counter-terrorism investigations as linked to persons of interest.

This rating is lower than previous assessments and reflects shifting terrorism financing behaviour. While historically several NPOs were used to raise and send large amounts of funds to support large global terror organisations, the current terrorism financing threat environment is dominated by self-funding activity.

Factors that increase an NPO’s vulnerability to money laundering or terrorism financing include:
• poor understanding of the risks of money laundering and terrorism financing
• poor due diligence on key personnel, volunteers, partners and beneficiaries
• inexperienced staff
• lack of formalised training and ongoing professional development
• poor record keeping
• weak internal controls
• poor transparency and accountability of the end-to-end funding cycle
• beneficiaries or operations in countries with poor AML/CTF regimes
• beneficiaries or operations in conflict or post-conflict regions
• beneficiaries or operations in dispersed ethnic communities in Australia, with strong links to high-risk countries (specific to terrorism financing only).

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