A Critical Exploration of the Impact of the Counter-terrorist Finance Legal Framework on Domestic Charities

ABSTRACT A Critical Exploration of the Impact of the Counter-terrorist Finance Legal Framework on Domestic Charities The political response to the terrorist attacks of 11th September 2001 in the United States was swift and decisive, precipitating developments in the arena of counter-terrorist finance policy and legislation which were to have far-reaching consequences. International regulatory bodies, such as the Financial Action Task Force, recognised the potential for non-profit organisations to be exploited in order to raise, store and transfer funds for terrorist purposes, and were thus identified as a key area on which governments should focus their attention. Regulation intended to counter this perceived threat, overseen by the Charity Commission in the domestic jurisdiction (England and Wales), has resulted in responsibilities which may be burdensome for some charities. The regulatory spotlight has also increasingly focused on third party financial partners, such as banks and other financial institutions, on whom charities rely to effectively pursue their charitable objectives. The research evaluates some of the issues relating to the environment in which charities operate both domestically and overseas that may make them susceptible to abuse. Focusing particularly on the domestic charity sector, the research evaluates how the law is applied, and the impact it is having in practice. Furthermore, the research considers the extent to which the responsibilities imposed by the counter-terrorist finance legal framework may affect their capacity to operate. The research illuminates the points of interaction and potential friction points between the pivotal structures involved in this inquiry: charities, the regulation, the Regulator and financial institutions, as well as highlighting the positive elements of engagement. A socio-legal approach to the research was taken, to include both doctrinal analysis and qualitative inquiry. A contextual background of the global regulatory landscape is presented, which highlights the complex and often paradoxical inter-connectivity between the actors and forces which exist therein. It is within these complex relationships that regulators seek to address the threat of terrorist financing, potentially influencing the operations and regulatory governance of charities. The empirical data derived from analysis of 34 semi-structured interviews with charity participants and various commercial partners and has focused on three distinct relationships which have been challenging for organisations within the charity sector: engagement with the regulation, engagement with the financial services sector and engagement with the Charity Commission. The understanding created by the interview data analysis, together with the presentation of material from the doctrinal research makes an original contribution to the available knowledge. The research provides new perspectives in this regard, uniquely analysing the relationships between stakeholders in a number of dimensions, from the perspective of charities. This approach provides insights into the practical implications for domestic charities of implementing counter-terrorist finance regulation and considers the effectiveness of the regulation as it is implemented (the direct effects of the regulation).The implications for charities of other interconnected structures, in their implementation of the regulation (indirect effects) is also evaluated in this research. Both direct and indirect effects of the regulation may ultimately affect the operating capability of some charities and their ability to fulfil their charitable purpose