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Interpretative Note to
Special Recommendation VIII: Non-Profit Organisations

Introduction
1. Non-profit organisations (NPOs) play a vital role in the world economy and in many national
economies and social systems. Their efforts complement the activity of the governmental and
business sectors in providing essential services, comfort and hope to those in need around the world.
The ongoing international campaign against terrorist financing has unfortunately demonstrated
however that terrorists and terrorist organisations exploit the NPO sector to raise and move funds,
provide logistical support, encourage terrorist recruitment or otherwise support terrorist organisations
and operations. This misuse not only facilitates terrorist activity but also undermines donor
confidence and jeopardises the very integrity of NPOs. Therefore, protecting the NPO sector from
terrorist abuse is both a critical component of the global fight against terrorism and a necessary step to
preserve the integrity of NPOs.
2. NPOs may be vulnerable to abuse by terrorists for a variety of reasons. NPOs enjoy the public
trust, have access to considerable sources of funds, and are often cash-intensive. Furthermore, some
NPOs have a global presence that provides a framework for national and international operations and
financial transactions, often within or near those areas that are most exposed to terrorist activity.
Depending on the legal form of the NPO and the country, NPOs may often be subject to little or no
governmental oversight (for example, registration, record keeping, reporting and monitoring), or few
formalities may be required for their creation (for example, there may be no skills or starting capital
required, no background checks necessary for employees). Terrorist organisations have taken
advantage of these characteristics of NPOs to infiltrate the sector and misuse NPO funds and
operations to cover for or support terrorist activity.
Objectives and General Principles
3. The objective of Special Recommendation VIII (SR VIII) is to ensure that NPOs are not
misused by terrorist organisations: (i) to pose as legitimate entities; (ii) to exploit legitimate entities
as conduits for terrorist financing, including for the purpose of escaping asset freezing measures; or
(iii) to conceal or obscure the clandestine diversion of funds intended for legitimate purposes but
diverted for terrorist purposes. In this Interpretative Note, the approach taken to achieve this objective
is based on the following general principles:
a. Past and ongoing abuse of the NPO sector by terrorists and terrorist organisations requires
countries to adopt measures both: (i) to protect the sector against such abuse, and (ii) to
identify and take effective action against those NPOs that either are exploited by or actively
support terrorists or terrorist organizations.
b. Measures adopted by countries to protect the NPO sector from terrorist abuse should not disrupt
or discourage legitimate charitable activities. Rather, such measures should promote
transparency and engender greater confidence in the sector, across the donor community and
with the general public that charitable funds and services reach intended legitimate
beneficiaries. Systems that promote achieving a high degree of transparency, integrity and
public confidence in the management and functioning of all NPOs are integral to ensuring the
sector cannot be misused for terrorist financing.

c. Measures adopted by countries to identify and take effective action against NPOs that either are
exploited by or actively support terrorists or terrorist organisations should aim to prevent and
prosecute as appropriate terrorist financing and other forms of terrorist support. Where NPOs
suspected of or implicated in terrorist financing or other forms of terrorist support are identified,
the first priority of countries must be to investigate and halt such terrorist financing or support.
Actions taken for this purpose should to the extent reasonably possible avoid any negative
impact on innocent and legitimate beneficiaries of charitable activity. However, this interest
cannot excuse the need to undertake immediate and effective actions to advance the immediate
interest of halting terrorist financing or other forms of terrorist support provided by NPOs.
d. Developing co-operative relationships among the public, private and NPO sector is critical to
raising awareness and fostering capabilities to combat terrorist abuse within the sector.
Countries should encourage the development of academic research on and information sharing
in the NPO sector to address terrorist financing related issues.
e. A targeted approach in dealing with the terrorist threat to the NPO sector is essential given the
diversity within individual national sectors, the differing degrees to which parts of each sector
may be vulnerable to misuse by terrorists, the need to ensure that legitimate charitable activity
continues to flourish and the limited resources and authorities available to combat terrorist
financing in each jurisdiction.
f. Flexibility in developing a national response to terrorist financing in the NPO sector is also
essential in order to allow it to evolve over time as it faces the changing nature of the terrorist
financing threat.
Definitions
4. For the purposes of SR VIII and this interpretative note, the following definitions apply:
a. The term non-profit organisation or NPO refers to a legal entity or organisation that primarily
engages in raising or disbursing funds for purposes such as charitable, religious, cultural,
educational, social or fraternal purposes, or for the carrying out of other types of “good works”.
b. The terms FIU, legal arrangement and legal person are as defined by the FATF Forty
Recommendations (2003) (the FATF Recommendations).
c. The term funds is as defined by the Interpretative Note to FATF Special Recommendation II.
d. The terms freezing, terrorist and terrorist organisation are as defined by the Interpretative Note
to FATF Special Recommendation III.
e. The term appropriate authorities refers to competent authorities, self-regulatory bodies,
accrediting institutions and other administrative authorities.
f. The term beneficiaries refers to those natural persons, or groups of natural persons who receive
charitable, humanitarian or other types of assistance through the services of the NPO.
Measures
5. Countries should undertake domestic reviews of their NPO sector or have the capacity to
obtain timely information on its activities, size and other relevant features. In undertaking these
assessments, countries should use all available sources of information in order to identify features and
types of NPOs, which by virtue of their activities or characteristics, are at risk of being misused for

terrorist financing. 1 Countries should also periodically reassess the sector by reviewing new
information on the sector’s potential vulnerabilities to terrorist activities.
6. There is a diverse range of approaches in identifying, preventing and combating terrorist
misuse of NPOs. An effective approach, however, is one that involves all four of the following
elements: (a) Outreach to the sector, (b) Supervision or monitoring, (c) Effective investigation and
information gathering and (d) Effective mechanisms for international co-operation. The following
measures represent specific actions that countries should take with respect to each of these elements in
order to protect their NPO sector from terrorist financing abuse.
a. Outreach to the NPO sector concerning terrorist financing issues
(i) Countries should have clear policies to promote transparency, integrity and public confidence
in the administration and management of all NPOs.
(ii) Countries should encourage or undertake outreach programmes to raise awareness in the NPO
sector about the vulnerabilities of NPOs to terrorist abuse and terrorist financing risks, and the
measures that NPOs can take to protect themselves against such abuse.
(iii) Countries should work with the NPO sector to develop and refine best practices to address
terrorist financing risks and vulnerabilities and thus protect the sector from terrorist abuse.
2
(iv) Countries should encourage NPOs to conduct transactions via regulated financial channels,
wherever feasible, keeping in mind the varying capacities of financial sectors in different countries
and in different areas of urgent charitable and humanitarian concerns.
b. Supervision or monitoring of the NPO sector
Countries should take steps to promote effective supervision or monitoring of their NPO sector. In
practice, countries should be able to demonstrate that the following standards apply to NPOs which
account for (1) a significant portion of the financial resources under control of the sector; and (2) a
substantial share of the sector’s international activities.
(i) NPOs should maintain information on: (1) the purpose and objectives of their stated
activities; and (2) the identity of the person(s) who own, control or direct their activities, including
senior officers, board members and trustees. This information should be publicly available either
directly from the NPO or through appropriate authorities.
(ii) NPOs should issue annual financial statements that provide detailed breakdowns of incomes
and expenditures.
(iii) NPOs should be licensed or registered. This information should be available to competent
authorities.
3
1 For example, such information could be provided by regulators, tax authorities, FIUs, donor organisations or
law enforcement and intelligence authorities.
2 The FATF’s Combating the Abuse of Non-Profit Organisations: International Best Practices provides a useful
reference document for such exercises.
3 Specific licensing or registration requirements for counter terrorist financing purposes are not necessary. For
example, in some countries, NPOs are already registered with tax authorities and monitored in the context of
qualifying for favourable tax treatment (such as tax credits or tax exemptions).

(iv) NPOs should have appropriate controls in place to ensure that all funds are fully accounted
for and are spent in a manner that is consistent with the purpose and objectives of the NPO’s stated
activities.
(v) NPOs should follow a “know your beneficiaries and associate NPOs
4” rule, which means that
the NPO should make best efforts to confirm the identity, credentials and good standing of their
beneficiaries and associate NPOs. NPOs should also undertake best efforts to document the identity
of their significant donors and to respect donor confidentiality.
(vi) NPOs should maintain, for a period of at least five years, and make available to appropriate
authorities, records of domestic and international transactions that are sufficiently detailed to verify
that funds have been spent in a manner consistent with the purpose and objectives of the organisation.
This also applies to information mentioned in paragraphs (i) and (ii) above.
(vii) Appropriate authorities should monitor the compliance of NPOs with applicable rules and
regulations.
5 Appropriate authorities should be able to properly sanction relevant violations by NPOs
or persons acting on behalf of these NPOs. 6
c. Effective information gathering and investigation
(i) Countries should ensure effective co-operation, co-ordination and information sharing to the
extent possible among all levels of appropriate authorities or organisations that hold relevant
information on NPOs.
(ii) Countries should have investigative expertise and capability to examine those NPOs
suspected of either being exploited by or actively supporting terrorist activity or terrorist
organisations.
(iii) Countries should ensure that full access to information on the administration and management
of a particular NPO (including financial and programmatic information) may be obtained during the
course of an investigation.
(iv) Countries should establish appropriate mechanisms to ensure that when there is suspicion or
reasonable grounds to suspect that a particular NPO: (1) is a front for fundraising by a terrorist
organisation; (2) is being exploited as a conduit for terrorist financing, including for the purpose of
escaping asset freezing measures; or (3) is concealing or obscuring the clandestine diversion of funds
intended for legitimate purposes, but redirected for the benefit of terrorists or terrorist organisations,
this information is promptly shared with all relevant competent authorities in order to take
preventative or investigative action.
d. Effective capacity to respond to international requests for information about an NPO of
concern
Consistent with Special Recommendation V, countries should identify appropriate points of
contact and procedures to respond to international requests for information regarding particular NPOs
suspected of terrorist financing or other forms of terrorist support.
4 The term associate NPOs includes foreign branches of international NPOs.
5 In this context, rules and regulations may include rules and standards applied by self regulatory bodies and
accrediting institutions.
6 The range of such sanctions might include freezing of accounts, removal of trustees, fines, de-certification, de-
licensing and de-registration. This should not preclude parallel civil, administrative or criminal proceedings
with respect to NPOs or persons acting on their behalf where appropriate.