The legislative blitz that rocked the civil society community in 2017 created a host of opportunities and lessons for government, civil society and the public. Non-state actors in the country are pushing regulators and the National Assembly to fix existing laws guiding the work of nonprofits in the country.

While regulators have stepped up their game, working hard to improve compliance with existing regulatory frameworks by nonprofits, positive results and intended outcomes can only be achieved if both the regulator and the sector work together to review all regulations with a view to testing its continuing relevance. Every policy option must be carefully assessed, likely impact, costed and a range of viable alternatives considered in a transparent and accountable way against the default position of “noneregulation”, being clamoured for by the sector (civil society community or NGO).

For example, the National Risk Assessment conducted in 2016 in response to Recommendation 1 of the Financial Action Task Force’s 40 recommendations requires that all countries identify, assess and understand the money laundering and terrorist financing risk elements prevalent in their jurisdictions for the development of efficient measures to combat the crime and efficient allocation of scarce resources to do the same.

An outcome of this exercise revealed that the ML threat level for the Nigerian nonprofit sector is rated medium-high, owing to weak and ineffective monitoring measures for the regulation of nonprofit activities. The report noted that “It has become extremely difficult and elusive to track the activities of these organisations effectively; matching expenditure against their perceived income has been reported to be quite difficult. This subsector showed some significant exposure to cash transactions because, the use of electronic payments is not common in rural areas where the Nonprofits mostly offer services”.

The question is whether our organisational systems as a sector are set up today in a way that addresses the outcome of the assessment. The consequences of the findings from the NRA will be with the sector for months to come. The resulting effect could be measured, regulations targeted at the sector in ways that enable or disable the operations of nonprofits in the country. Whatever it is this, provides both an opportunity and a threat as it affords the sector an opportunity to improve confidence in its activities by showing regulators how its internal systems and structures are helping to address ML/TF risks.

The sector’s (civil society community or NGO) strength and ability to convince regulators that our systems can withstand threats around ML/TF will be measured by the cumulative evidence provided by different organisations and institutions that make up the sector — showing how as an organisation their structures and systems discourage nefarious activities. Nonprofit executives and Board must urgently review their governance systems with a view to putting in place (where they do not already exist) and strengthening appropriate measures that can disallow the use of their organisations as conduits for money laundering and terrorism financing.

In testing the relevance of regulatory measures that may arise from the NRA, nonprofit networks, associations and coalitions must ensure their members comply with relevant regulatory requirements as this way, evidence for improving the law will become readily available for policy advocacy and campaigns since actual changes and amendments to laws can only be made legislatively.

For now, at least the sector appears well-disposed to ML/TF issues as they overwhelmingly agree that the sector can be used for terrorist financing when asked in a recent survey if they agree that the nonprofit sector can be used for terrorist financing. An understanding of how this connects with their day-to-day activities is yet to be fully understood signalling an opportunity for regulators to further educate the sector on the implications of the ML/TF laws as they apply to the formation, operation and sustainability of Nigerian nonprofits.

Oyebisi B. Oluseyi, Executive Director, Nigeria Network of NGOs, Lagos, seyi@nnngo.org

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Risk assessment; a process of evaluating potential risks, is often tailored round a projected activity as a way to define an estimate of risk related to the known threat. Over the years, Nigeria, like many African countries, has become a significant center for financial crime. This is essentially due to lack of proper checks and balances within the socio-economic purview, weak laws, weaker implementations of the laws already on ground and general lack of attention being paid to the movement of money especially within the third sector; terrorist organizations and corrupt officials therefore take advantage of the situation to launder money through not-for profit organizations and for the most part, get away with it.

The requirement to perform a National Risk Assessment stemmed from the 40 Recommendations on International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation handed down by the Financial Action Task Force’s (FATF), issued in 2012 and subsequently revised in 2016. The FATF is an intergovernmental body established in 1989It is the global body that sets the standards for combating money laundering and terrorist financing as well as other related threats to the integrity of the international financial system.

The National Risk Assessment began in the wake of the revision of the FATF recommendations which was done in 2012, recommending that countries identify, assess and understand the level of risks their countries face in terms of money laundering and terrorist financing. It mandated the need for specific actions to be taken in order to assess and ultimately mitigate these risks in their locales. Before it was officially reviewed and amended in 2016, the FATF Recommendation characterized Non-Governmental Organizations (NGOs) as being particularly vulnerable to terrorists abuse and this impacted the operation of civil society organizations greatly as laws which restricted the free operations of NGOs were then implemented. The revision however helped in gauging the effectiveness of the stringent laws, bringing to light the areas where implementation could be enhanced to mitigate the high risk of terrorist abuse within the sector.

Since inception, assessments have been done via mutual evaluations that are conducted with the country and representatives of the FATF or regional standard setter. It is to ensure that measures which are intended to be put in place to combat and ultimately mitigate the of risks of money laundering and terrorist financing within a country, sector or an organization are proportionate with the level of risks identified; anywhere there is movement of money: Financially-Based Organizations (FBO) as well as Designated Non-Financial Institutions (DNFI) which received sponsorship from various sources; NPOs are a part of, there is a perceived threat and the aim is to prevent criminals from using the financial system to move ill-gotten funds.

The Nigerian Financial Intelligence Unit (NFIU) has established a unit responsible for conducting thematic strategic analysis with a view to identifying money laundering and terrorism financing trends and typologies prevalent in the country. In this capacity, the NFIU relies mainly on the intelligence generated by itself and has not systemically benefited from other information in particular cases investigated by law enforcement agencies which were not triggered by NFIU. To date the NFIU has published one typology report on terrorist financing.

Organizations would demonstrate that the issues which predispose them to risks or amplify their level of vulnerability are taken into consideration; adequate measures to strengthen their structures and mitigate these risks are thought through and implemented. It is important to note however that even in all of these, risk is a dynamic and amorphous concept as it is inherently difficult to describe or measure in quantifiable terms; areas which were not initially considered to be vulnerable could pop up as the weak link if the mitigated measures are not carried out to safeguard the organization or sector as a whole therefore a risk assessment will involve making judgments about these perceived issues to achieve it intended goal.