There are no serious risk factors for NPOs to be used to finance terrorism according to the adopted Sectoral Risk Assessment

  

In May 2023 the Standing Inter-Agency Working Group (SIAWG) adopted the report on the Terrorist Financing (TF) Risk Assessment of the Non-Profit Sector^[1]. The TF Risk Assessment of the Not-for-Profit Sector was prepared in fulfillment of an obligation under the International Anti-Money Laundering, Countering the Financing of Terrorism and Proliferation Standards (the 40 Recommendations of the Financial Action Task Force on Money Laundering / FATF and more specifically Recommendation 8^[2]) and is intended to facilitate risk-appropriate measures to prevent terrorist financing in the sector. 

  

The Bulgarian Center for Not-for-Profit Law (BCNL) was a member and active participant of the Analytical Coordination Team^[3] to the SIAWG, chaired by a representative of the Financial Intelligence Directorate to the State Agency for National Security (FID SANS), which prepared the Assessment. 

  

The purpose of the Assessment is to be a tool to assist both the government authorities and the private sector in understanding the threats of TF and vulnerabilities to this phenomenon of the nonprofit sector in Bulgaria, and in implementing measures to combat them^[4]. 

  

Due to the presence of classified information in the Assessment, it will not be published in its entirety. Currently available on the SANS' website are – Summary of the Terrorist Financing Risk Assessment of the Non-Profit Sector^[5], Information on Non-Profit Organisations that do not fall under the FATF definition of NPOs^[6], and an Inherent Risk Factors Assessment Matrix^[7]. 

  

  

Highlights from the results of the Not-for-Profit Sector FT Risk Assessment 

 

The TF Risk Assessment of the Not-for-Profit Sector identified for the first time the categories of organisations in Bulgaria that fall within the FATF definition of NPOs^[8]: 

  

• associations registered under the Non-profit Legal Persons Act, including: 
  • sports organisations (sports clubs and sports federations)^[9]; 
  • trustees of kindergartens, schools or centers for personal development; 
• The Bulgarian Red Cross. 
• Foundations registered under the Non-profit Legal Persons Act; 
• branches of foreign non-profit organisations; 
• People's Chitalishtes (traditional community centers) registered under the Peoples Chitalishte Act; 
• religious institutions and religious communities; 
• private cultural organisations. 

This analysis shows that by including all non-profit legal entities as obliged enteties under the Measures Against Money Laundering Act^[10] (MAML), the Bulgarian legislator has gone beyond the international standard requirements which is an argument in favor of revising this legislative approach. 

  

According to the Risk Assessment, there are no confirmed cases of misuse of non-profit organisations in the Republic of Bulgaria for terrorist financing purposes. The analysis in the course of the Assessment has also identified no serious risk factors for the sector. In view of those facts, the risk of misuse of non-profit organisations for terrorist financing purposes in the Republic of Bulgaria is assessed as low to medium. 

  

Four likely threats from TF by the non-profit sector in the Republic of Bulgaria have been identified: 

– False representation and fictitious non-profit organisations; 

– Diversion of legal funds intended for humanitarian programs; 

– Misuse of programs to promote philosophies designed to promote religious hatred and spread the ideas of a terrorist organisation;   

– Links with terrorist entities 

  

The following activities and their characteristics have been identified that increase the risk of abuse by TF in the sector of non-profit organisations in the Republic of Bulgaria whose activities are social-humanitarian, cultural-educational and/or religious: 

  

1. Performing activities in regions at risk of terrorism or receiving/sending funds from/to such regions; 

  

2. Receiving/sending funds from/to regions where there is armed conflict or war, or from/to third countries where there are identified strategic weaknesses in their national AML/CFT framework; 

3. Failure of religious organisations to provide information on their activities and financial transactions in a way that can be verified by the relevant competent authority, or lack of obligation to do so, as is the case with religious communities. 

4. Raising funds through crowdfunding or the use of virtual assets. 

5. Carrying out activities that require contact with persons vulnerable to radicalisation or residing in regions with such activity. 

  

Identified threats, activities that increase the risk of abuse by TF, and the Generalised Inherent Risk Factor Assessment Matrix should be taken into account by entities under Article 4(28) of the MAML (non-profit entities) when fulfilling the obligation to periodically update their own risk assessment. 

  

You can read about the obligations of non-profit entities under the MAML here.