Special Report: Terrorist Financing: Over 78% NPOs in Nigeria aware of donors

Key findings of Terrorist Financing Risk Assessment (TFRA) of Non-Profit Organizations in Nigeria conducted by Special Control Unit Against Money Laundering (SCUML) . The TFRA rated the overall terrorist financing risk to NPO operations in Nigeria as medium high. In her presentation of the findings, Executive Director, Spaces For Change (S4C), Ms. Victoria Ibezim Ohaeri, gives’ highlights on the research and outcome.

Why conduct a terrorist financing risk assessment of NPOs in Nigeria?

Recommendation 8 (R8) of Financial Action Task Force (FATF) requires countries to identify the subset of Non-Profit Organisations (NPOs) vulnerable to terrorist financing risk, and to take target and proportionate measures to protect such organisations from abuse by criminal elements. Nigeria is a member of Intergovernmental Action Group Against Money Laundering in West Africa (GIABA), the FATF style regional body for West Africa. GIABA last published a Mutual Evaluation Report (MER) of Nigeria’s compliance with the FATF standards in 2021. The MER rated Nigeria’s performance on R8 as Non-Compliant and effectiveness under immediate outcome 10 as low effectiveness. Top on the list of reasons for the low rating was because Nigeria had not identified at risk NPOs , and the nature of threats posed by terrorist entities, as well as how terrorist actors abuse those NPOs.

Nigeria conducted a National Risk Assessment (NRA) in 2016 which fell short of the requirements of R8. To correct some of the shortfalls noted in the previous exercise, the Special Control Unit Against Money Laundering (SCUML) conducted a stand alone terrorist financing risk assessment of NPOs between 2021 to 2022. This risk assessment represents the country’s commitment to adopt a risk based approach and to take steps to promote effective supervision of at risk NPOs.

What does terrorist financing mean?

The definition of terrorist financing is very broad , and transcend financial support as the name implies . Section 21 of the Terrorism (Prevention and Prohibition) Act 2022 prohibits persons and entities from providing any form of support to terrorist groups which includes providing, soliciting, acquiring, collecting, receiving, possessing , or making available property, funds or other services with the intention or knowledge that it will be used , in full or in part , to finance a terrorist or terrorist group. Entities is this context includes NPOs .

Terrorist financing also encompasses involvement in any arrangement that enables terrorists and terrorist organisations to acquire, retain, transfer, conceal or control funds, or remove funds out of jurisdiction. Violating this legal provision attracts heavy punishment such as life imprisonment in the case of a natural person, or a fine of at least N2 billion in the case of a body corporate and the imprisonment of their principal officer for a term at least 20 years and up to a maximum of life imprisonment. Other penalties applicable to body corporate include winding up, prohibition from reconstitution or incorporation under any form or guise.

What does it mean to be at-risk of terrorism financing abuse?

The TFRA defines ” at risk NPOs’, which by virtue of their activities or characteristics, are likely to be at risk of terrorist financing abuse ‘. Within the context of this assessment, it means those NPOs which are inherently vulnerable to terrorist financing abuse. As further clarified in FATFbest practice paper to combat the abuse of NPOs, terrorists and terrorist organisations may seek to exploit NPOs, particularly those in conflict regions to raise and move funds, to provide logistical support (including provision of goods and services), to recruit new members, or otherwise support terrorist organisations and operations. They often employ tactics of deception to mask their activities or to secure a veil of legitimacy for their criminal activities. Against this backdrop of well planned deceptions, oversight by appropriate authorities with sufficient capabilities is a necessary element of preventing and detecting terrorist threats to the NPO sector.

An example is where legit organisations doing important work may find themselves exposed to the deception tactics of terrorists or other potential terrorism financing risks. So, extra care must be taken to support these organisations and reduce their terrorist financing vulnerabilities so that they can continue their important work in a way that is safe and secure. What the TFRA has done is to use all relevant sources of information to identify the features and types of NPOs, which by virtue of their activities or characteristics, are likely to be at risk of terrorist financing abuse.

What methodology was used to conduct the TFRA?

Although FATF standards “do not prescribe a particular method or format for assessing risk of terrorist financing in NPOs , Nigeria’s TFRA of the NPO sector was designed to meet the requirements of FATF R8. 1 (a -c) which are, identify which subset of organizations fall within the FATF definition of NPO, identify the features and types of NPOs that, by virtue of their activities or characteristics, are likely to be at risk of terrorist financing abuse, identify the nature of threats posed by terrorist entities to the NPOs which are at risk as well as how terrorist actors abuse those NPOs.

The risk assessment was completed using a methodology provided by a United Kingdom based firm, Greenacre Associates, and implementated by a local assessment team comprising representatives from public and private institutions, including the civil society such as, Economic and Finance Crime Commission (EFCC), Special Control Unit Against Money Laundering (SCUML), Nigerian Financial Intelligence Unit (NFIU), office of the National Security Adviser (ONSA), Nigerian Army (NA), Department of State Services (DSS), Federal Ministry of Justice (FMOJ), Federal Ministry of Budget and National Planning, Financial Reporting Council of Nigeria (FRCN), National Intelligence Agency , Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development, Borno State Government, Christian Association of Nigeria, Nigerian Supreme Council for Islamic Affairs (NSCIA), Corporate Affairs Commission (CAC), Central Bank of Nigeria (CBN), Spaces for Change (S4C) and the international NGO (INGO) forum.

Despite the lack of quantitative data on terrorist financing risk in the NPO sector in Nigeria, the assessment utilized primary and secondary sources to gather extensive data to determine a reasonable income band for NPOs in Nigeria, with specific emphasis on their funding sources, knowledge of donor(s), mode of fund transfers, the proportion of local to foreign funding , the share of government funding, grant making operations by donors in Nigeria, nature and scope of charitable activities, and the quantum of cash donations. The TFRA also assessed the regulatory environment for NPOs in Nigeria and the regulatory responsibilities fragmented across agencies like the CAC, Federal Ministry of Budget and National Planning (FMBNP), taxation agencies (state and federal), Financial Reporting Council of Nigeria (FRCN), state regulators, Special Control Unit Against Money Laundering (SCUML) and the Nigeria Financial Intelligence Unit (NFIU).

Written request for data on terrorist financing in the NPO sector, case studies, focus group discussions, and surveyed perceptions of terrorist financing risks, threats and vulnerabilities were obtained from representatives of the agencies listed in the preceding paragraph, including 14 financial institutions (commercial banks). Questionnaires were administered and interviews further conducted with representatives of over 530 civil society organisations and the above -listed agencies across the six geopolitical regions of Nigeria. The preliminary assessment report was widely shared with government and non- governmental stakeholders, followed by a validation meeting attended by all members of the core working group.

What are the sources of funding for NPOs in Nigeria?

NPOs operating in Nigeria have a variety of source of funding ranging from donations (cash and electronic transfers), consultancy , corporate sector financing, government funding, domestic philanthropy, grants and foreign funding. Survey responses reveal that the source and nature of funds received by NPOs depend on their activities and legal types. Donations may be made in cash or electronic transfers. On whether those receiving cash donations know the sources of donations, 78% indicated that they are always aware of the donor while the remaining 22% reported that they are to some degree aware of the donor but not always. No NPOs reported that they are never aware of their cash donors.

What is the nature of threats posed by terrorist entities to NPOs in Nigeria?

Nigeria’s Mutual Evaluation Report (2021) notes that Nigeria faces some of the deadliest and destructive terrorist threats in the world in Boko Haram and it’s offshoot, Islamic State West Africa Province (ISWAP). NIRA 2022 assessed the terrorist financing risk in Nigeria and rated overall risk as high. In relation to specific threats, the 2022 NIRA identified four main threats, with the assessments as follows, Yan Bindiga /Yan Taadda (North West /North Central), threat level is high, Boko Haram ( Jama’atu Ahl as -Sunnah li-Da’awati wal-Jihad ) North East and the threat level is high. Indigenous People of Biafra (IPOB), South East and South South, threat level is medium. Islamic Movement of Nigeria in North West and threat level is low.