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Anti-terrorist finance rules exact toll on aid to conflict zones

By Stella Dawson
Friday, June 12, 2015

WASHINGTON (Thomson Reuters Foundation) - As Western governments tighten the noose on anti-terrorist financing, aid groups say the crackdown is exacting a toll on humanitarian programs in war-torn regions.

The international women's rights group Madre twice in the past year could not get funds transferred to Iraq for its gender-based violence program. It had to fly the Iraq director for to Istanbul to collect his paycheck, said Lisa Davis, Madre's human rights advocacy director.

Its transfer agent Western Union without explanation refused to handle funds it had routinely processed for an employee on their books since 2003, she said.

"Banks and wire companies are nervous about running into any sort of problems. It's just so crazy," Davis said.

She suspects the money agent matched the Madre employee to someone with a similar name on the U.S. sanctions list and blocked the transfer, even though she supplied a U.S. government letter verifying he was not a suspected terrorist.

Western Union did not comment on the Madre case but said it does have a procedure in place for pay transfers for non-governmental organizations (NGOs).

Oxfam America said it had to jump through hoops to transfer funds recently to one East African country, where it partners with local groups to deliver humanitarian assistance.

Oxfam's accounting department had to arrange fund transfers through multiple countries when its international bank cut off relations with a local bank as part of a broader withdrawal to lower its risk exposure to terrorist financing.

Scott Paul, Oxfam America's senior humanitarian policy adviser, said these problems have affected all international humanitarian groups in that country.

"In the past two months it has become so acute that it threatens our operations there," he said, declining to name the country to protect the safety of staff and partners.

U.S.-based humanitarian groups said problems with banks and money transfers are growing in conflict zones, from Syria and Iraq to Yemen, Sudan, South Sudan, Somalia, Pakistan and Afghanistan.

United Kingdom charities report similar difficulties, according to the UK think tank the Overseas Development Institute.

A recent survey by the UK Charities Finance Group found that nearly a third of 26 charities felt that banks had become "substantially more risk averse".


Development experts and leaders NGOs said they appreciate governments' work to prevent charities from being used as fronts for terrorist finance or transferring illicit funds.

But when banks withdraw from conflict regions as the finance industry lowers its overall risk in the wake of the financial crisis and in response to government anti-terrorism rules, NGOs get squeezed.

"We are in an era where the number of refugees is the highest since World War II. If there isn't space left for humanitarian aid, very large numbers of people are at risk," said Sam Worthington, chief executive for InterAction, a Washington-based coalition of 180 NGOs.

The problem first arose several years ago over remittances to Somalia. NGOs are in regular talks with the U.S. government over how to ensure aid keeps flowing. What's unclear is how widespread and damaging the banks' risk aversion has become, U.S. and international diplomats said.

The G20 group of rich and developing countries is surveying banks, money transmitters and governments to get hard numbers on the impact counter-terrorism and anti-money laundering rules are having on financial flows, trade and remittances.

The United States does provide an exemption for humanitarian aid to flow to sanctioned countries, and last November clarified for banks and money agents that they can do business in high-risk environments, if they have proper controls in place.

Jean Pesme, manager of financial market integrity at the World Bank who tracks stolen assets, called for more dialogue between NGOs and public authorities to better understand and manage the terrorist financing risk, while supporting NGOs' legitimate activities.


Despite these government efforts, NGOs said their problems have worsened the past year as the Islamic State took control of swathes of Syria and Iraq, and stirred violence across the Middle East and North Africa.

High-profile prosecutions of banks also have made the finance industry more risk averse, said Peter Reuter, an expert on money laundering at the University of Maryland who has studied the issue of aid money.

The United States fined BNP-Paribas a record $9 billion last year for helping clients dodge sanctions on Iran, Sudan and other countries, and HSBC paid $1.9 billion to settle charges in 2012 of laundering Mexican drug money.

Mercy Corps, a humanitarian group working in many of the most dangerous areas of the world, said failure to resolve this tension between counter-terrorism measures and humanitarian aid could undermine the fight against terrorism and worsen crises.

Mercy Corps calls it a matter of life or death.

"If these measures are preventing or deterring the responsible delivery of humanitarian aid into conflict zones, we will see civilian casualties greater than those from any military campaign," said Jeremiah Centrella, the NGO's deputy general counsel.

(Reporting by Stella Dawson, editing by Alisa Tang. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s rights, corruption and climate change. Visit www.trust.org)


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