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Registered Charities

Terrorism and money laundering

Charities are at risk of being misused by individuals or other organisations to finance or support terrorist activity or assist money laundering. It is wise to be aware of the risks, and to take appropriate precautions.

The purpose of this guidance is to advise Charities that there is a risk of being misused by individuals or other organisations to finance or support terrorist activity or assist money laundering. This Guidance aims to:

The charitable sector is large and diverse, with as many as 25,000 operating in New Zealand. By comparison, the scale of known terrorist links to charities operating in New Zealand is assessed as being small. However, when considering risk, it is important to note that:

How do terrorists and money launderers use charities illegally?

Terrorist activity requires financial support, concealment or opportunities for recruitment, whereas money launderers aim to legitimise money sourced in illegal activities.

Common techniques

Some of the common techniques used include:

Less common techniques

Some of the less common techniques used include:

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What can we do to make sure we comply with New Zealand law?

Principles of good practice

As a starting point, a charity must comply with New Zealand law and the laws of any foreign countries in which they operate. Non-compliance (whether through ignorance or otherwise) may lead to a charity and its officials being liable to prosecution and criminal penalties.

New Zealand law, under Section 43 of the Terrorism Suppression Act, states that all entities must submit a Suspicious Property Report (SPR) to the New Zealand Police Financial Intelligence Unit if they deal with property that is suspected to be owned or controlled by a designated terrorist entity. Beyond that, recommended principles of good practice are that the charity should:

For more information, see the NZ Police information sheet on   Best Practice Guidelines for Financial Institutions (PDF).

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Why is this issue important to charities and what are the consequences?

The consequences of becoming involved in terrorist financing or money laundering are significant, and can include the loss of reputation, status, registration under the Charities Act and donor confidence.

Also, individuals or organisations, including charities, may face criminal charges if they facilitate the funding of, or provide financial support to a terrorist individual, organisation or act or if they engage in money laundering.

Section 13 (5) of the Charities Act 2005 states that an entity does not qualify for registration as a charitable entity if -

Section 32(1) (e) of the Charities Act 2005 states that the Commission may remove an entity from the register if the entity has engaged in serious wrongdoing or any person has engaged in serious wrongdoing in connection with the entity

Section 4(1) defines serious wrongdoing as including:

Section 8 of the Terrorism Suppression Act 2002 states that a person could face up to 14 years imprisonment if they provide funds to an entity known to carry out terrorist acts.

Section. 243 of the Crimes Act 1961 states that a person could face up to 7 years imprisonment for engaging in a money laundering transaction.

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Why do terrorist organisations or money launderers target charities?

Terrorists or money launderers may target charities because they:

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How should we assess the risk to our organisation from criminal activity?

A risk-based approach

Charities should identify the specific risks to their organisation (for example, how a terrorist may be able to infiltrate a charity and/or fraudulently access funds) and, on that basis, form an opinion on the overall level of risk their organisation may be subject to (for example, high, medium or low). This assessment should inform a charity's decision on the level of compliance required with the principles of good practice. Charities face a higher risk if they:

It is important to note, however, that charities may still be misused even where aid or assistance is directed to beneficiaries within New Zealand. The risks will increase in situations where charities:

It is important that charities regularly review their risks, particularly when there are significant changes to the focus or scope of the activities of a charity.

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What are New Zealand's international obligations to counter-terrorisim?

As well as being strongly committed to international efforts to counter terrorism, New Zealand has obligations under international law to carry out United Nations resolutions against terrorism.

This includes taking steps to prevent terrorist financing, recruiting or other forms of support. New Zealand is required to apply these measures against specific entities listed by the United Nations Security Council.

Terrorist register

It also has an obligation to prevent terrorist activities more broadly. The Terrorism Suppression Act 2002 provides for a list of terrorist entities to be established and maintained in New Zealand. All terrorist entities listed by the United Nations are automatically listed by New Zealand, and our Prime Minister is able to designate entities beyond the United Nations list.

Action Task Force

New Zealand has also been a member of the Financial Action Task Force since 1991. This is an inter-governmental body that develops and promotes policies to combat money laundering and terrorism financing.

A special recommendation of the task force requires its members to 'combat the misuse of not-for-profit organisations for the purpose of terrorism financing'.

The task force has published useful material on   international best practice (PDF) (Financial Action Task Force on Money Laundering: Combating the abuse of non-profit organisations - 11 October 2002) to prevent money laundering and terrorist financing in the context of charities.

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