How Australia’s doomed charities regulator fights terrorism

By Stephen Easton

Friday January 9, 2015

There could be an unintended consequence of axing Australia’s charities regulator: it might hamper counter-terrorism efforts.

While the Abbott government tries to convince senators to support the abolition of the Australian Charities and Not-for-profits Commission, the Melbourne-based agency is quietly working to prevent charitable donations ending up in the hands of terrorists. This week, the commission reminded not-for-profit organisations of their particular vulnerability to “the risk of misuse for the purpose of terrorism financing”, as stated in recent reports from the Australian Transaction Reports and Analysis Centre and the international Financial Action Task Force.

In October, commissioner Susan Pascoe told The Mandarin the ACNC had developed a unique counter-terrorism role that would be missed if it was axed. “It’s hard to see who would have the [same] oversight of activity, if we didn’t have an independent regulator,” she said. “It’s not the kind of role that the [Australian Securities and Investments Commission] or the [Australian Tax Office] would logically inherit.”

Pascoe says the ACNC helped Australia fulfil its obligations as an FATF member to support the work of the inter-governmental organisation, which claims its policy recommendations “are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction”.

Pascoe also spoke of the commission’s work with intelligence gathering and law enforcement agencies at the October launch of the inaugural Australian Charities report, produced by Curtin University’s Not-for-profit Initiative from the data charities must supply the commission each year:

“In a recent speech, William Shawcross, the chair of the Charity Commission of England and Wales, said it is the role of a charity regulator to ensure that charities operating in high-risk regions are fully aware of their duties and responsibilities. He also said that protecting charities from terrorist penetration is a vital element of a charity commission’s role. The ACNC takes our oversight role as the national charity regulator extremely seriously.”

David Gilchrist
David Gilchrist

According to the lead author of Australian Charities, Professor David Gilchrist, the ACNC’s role is “very unique” because it is the only Commonwealth agency that has a full understanding of the many different types of not-for-profits, and a remit that intersects with all of their potential interactions with government.

“I think that the ACNC is in a very unique position to be able to understand better than any other federal department or agency what’s going on in the sector and to be able to develop policy in relation to some of those kinds of things,” Gilchrist told The Mandarin. And he agrees the ACNC plays an important role in combating terrorist financing and other shady financial activities.

“First and foremost it is a regulator, but regulation is only part of its role,” he explained. “The other parts of its role include maintaining and building up community trust in the sector, and also building capacity for the sector. And those two roles combined with the regulatory role mean that the ACNC is in a very unique position where it really does understand what is going on in the sector, it understands how the sector thinks and operates, and it understands how the sector uses its resources and responds to some of the things that the government has responsibility for, including those external responsibilities associated with various treaties.

“At the end of the day, in order to be successful in terms of prevention of money flying out of Australia through charitable organisations into the hands of people that we wouldn’t like to see money flowing into, there needs to be an organisation in Australia that really understands the full remit of the operations of [not-for-profit] organisations.”

The federal government wants to axe the Labor-instigated commission because it says it’s a red tape burden on charities. Its responsibilities would be folded back into the ATO; Pascoe argues the ATO has an inherent conflict in managing charities as it’s a revenue-raiser.

How the ACNC detects money laundering

In the FATF’s report on the risk of terrorists taking advantage of or being directly affiliated with not-for-profits, the taskforce found information collected by bodies like the ACNC helped detect such activity in 68% of case studies analysed. This compares with 63% that used intelligence on national security threats, and 58% that drew on information from law enforcement agencies. The report concluded that:

“Overall, the examination of how instances of abuse and risk were detected by relevant stakeholders supports the notion that mitigation of risk is achieved through the collaborative efforts of a number of different actors. While different actors offer, at times very different types of information, when put together, a complete picture of the risk environment is achieved.”

Gilchrist believes the Australian government would find it harder to identify and stop money flowing through the charitable sector to violent groups without the ACNC working with its crime fighting and security intelligence gathering arms. It would also be much harder to communicate directly with the sector.

The Australian Charities report, he explains, provides “the first substantial look at the charitable sector in Australia using actual data and using more than simply a sample of organisations” — and that newly collated data becomes even more powerful when combined with what else the government knows.

“What we were also able to do, through the auspices of the ACNC, was to combine that data with ATO data and also with [Australian Bureau of Statistics] data, so that we’re starting to get a much fuller picture of what’s going on in the sector,” Gilchrist said.

“… there’s never going to be a position where you’re not going to get these kinds of nefarious activities.”

“So it’s not just a matter of what data the ACNC collects but how that data is combined with other data, how it’s been evaluated in the context of the ACNC’s understanding of the sector and what’s happening in the sector, and then how the results of that are communicated throughout the sector, so that people can be on the lookout for those things. Because there’s never going to be a position where you’re not going to get these kinds of nefarious activities.”

While the incidence of such terrorist financing is rare, the risk is also persistent and threatens the public trust that is so vital to the charitable sector, which today employs nearly a million people, marshals some 2 million volunteers and turns over about $100 million a year before donations, representing about 8% of the economy — and that’s only the charity subset of the broader not-for-profit sector. Mining, for comparison, is a $217 billion-a-year industry, but employs less than 200,000 people.

“One of the things that we identified out of that data was the sector is an extremely important part of the Australian economy, so you do need to have a government agency that understands the sector because, regardless of the colour of the government, regardless of the politics and what it wants to do, it needs to understand the economics of the sector in order to make good policy,” said Gilchrist.

“Traditionally, it’s just sort of flown along and it hasn’t represented a great deal of money or a great deal of risk, but increasingly it’s become a significant part of the economy and when you, for instance, start talking about cutting funds to the sector, then you’re starting to talk about an economic impact at the national level, and this is not well understood by governments yet, because we haven’t had the kind of data and the kind of access to data that the ACNC’s provided until now.”

More at The Mandarin: Uncharitable cut? Aust’s not-for-profits regulator stands tough

About the author
1 Comment
Newest Most Voted
Inline Feedbacks
View all comments
Ted Sherwood
Ted Sherwood
7 years ago

I read this article but am still little wiser how the ACNC actually contributes to the identification of terrorist financing. And I note that such financing is ‘rare.

The Mandarin Premium

Insights & analysis that matter to you

Subscribe for only $5 a week

Get Premium Today