Report sheds light on terror funding

Growing international concern about SA’s role in the financing of terrorists and terrorist acts in the region contributed to the country being greylisted by the Financial Action Task Force (FATF) in February 2023.

One of the findings of a 2021 report by the FATF was that local authorities had a poor understanding of terrorist financing and that the risk of terrorist financing through SA was not being adequately addressed.

It was in response to this, as well as growing concern that SA was not only used as a conduit but also a source of funding for terrorist groups that the Financial Intelligence Centre (FIC), in partnership with the SA Revenue Service (Sars) and the department of social development, compiled a report that assesses the exposure of nonprofit organisations (NPOs) to terrorist financing risk.

This report, which was published on Thursday, forms part of SA’s follow-up action plan to address greylisting by the FATF.

“Understanding and regularly assessing the particular terrorist financing risks to which SA NPOs are exposed remains the best measure to effectively combat their abuse and exploitation,” said the acting director of the FIC, Pieter Smit.

The assessment would enhance authorities’ understanding of the risks of terrorist financing faced by NPOs. “The findings will help us formulate measures to prevent or mitigate the abuse of NPOs for terrorist financing purposes,” he said.

The assessment, which included a survey of 301 NPOs, identified five possible terrorist financing threats: Islamic State and its affiliates in Africa; al-Shabaab and its affiliates in Africa (including al-Sunnah Wa Jama’ah; Nigerian terrorist groups (including Boko Haram); domestic right-wing extremists; and al-Qaeda.

The financing of terrorist organisations could occur via NPOs raising funds for foreign terrorist groups, the establishment of organisations to support domestic terrorist activity, and using NPOs to facilitate foreign travel for terrorist causes and as a conduit to channel foreign funds to terror groups in Africa.

The report also provides an assessment of the vulnerabilities that could put an NPO at risk of terrorist financing abuse. These include being active in high-risk foreign jurisdictions or receiving and transferring funds from high-risk countries, and having links to communities sympathetic to terrorist causes.

Vulnerabilities could also arise when NPOs were established by individuals with known terrorist sympathies or if they used unverified methods of raising or transferring funds.

According to the report, almost half of NPOs received no income in the past 24 months, 35% received up to R250,000, about 15% received between R250,000 and R5m, and only about 2% received more than R5m in funding.

There have been some confirmed cases in SA of the flow of funds to facilitate foreign terrorism. However, none of the known cases involved NPOs. These cases are limited but involve Islamic State and al-Shabaab, the report said.

Given all the risks and vulnerabilities that were identified, the overall inherent risk of terrorist financing abuse of NPOs in SA was assessed as “medium”.

The report recommends that SA implement a more targeted approach to dealing with higherrisk NPOs.

The report set a new base to inform policy development in the NPO sector on a risk-based methodology, said Sars commissioner Edward Kieswetter.

“We hope that this sets the tone for future work in this sector — where Sars partners with the whole of government strategically to address vulnerabilities,” Kieswetter said.