Terror Financing: The Dark Side of Kenya’s Non-Profit Sector.
Non-profit organisations in Kenya are allegedly, either knowingly or inadvertently, redirecting their funds to terrorist actors, according to a report jointly prepared by government agencies and civil society groups. The study, released last week, uncovered that some non-profits are exploited to obscure the transfer of terrorist funds, with terrorist groups occasionally forming operational relationships with these organisations or individuals within them.
Key Findings of the Report
The report, titled Terrorism Financing Risk Assessment for Non-Profit Organisations in Kenya, was prepared by institutions such as the Public Benefit Organisations Regulatory Authority (PBORA), the Financial Reporting Centre (FRC), Muslims for Human Rights, and the Kenya National Civil Society Centre. It highlights four primary methods through which non-profits may be misused by terrorist groups:
- Raising funds to support terrorist operations.
- Concealing the movement or distribution of terrorist funds.
- Diverting legitimate non-profit resources to terrorist actors, whether intentionally, unintentionally, or under duress.
- Establishing operational relationships with non-profits or individuals within them.
The report advises that competent authorities develop mechanisms to identify and address at-risk organisations.
Government’s Response
Principal Secretary for Internal Security and National Administration, Raymond Omollo, warned non-profits against diverting donor funds to support terrorism. Dr. Omollo stated that the government has enhanced financial monitoring of these organisations, emphasizing that non-disclosure of funds and failure to verify donation sources make oversight challenging. Faith-based organisations were highlighted as a particular vulnerability due to their susceptibility to fund misuse.
Dr. Omollo noted that the Public Benefits Organisation (PBO) Act has been operationalised to improve regulations and oversight. He urged non-profits to ensure accountability to build confidence among donors, financial institutions, and the public, stressing that this would prevent abuse by terrorists and help Kenya address its grey listing by the Financial Action Task Force (FATF) in February 2023. Kenya’s placement on the grey list was attributed to lapses in prosecuting money laundering and terrorist financing crimes, as well as weak regulation of cryptocurrencies, real estate, and non-profits.
Compliance and Regulation Efforts
Acting CEO of PBORA, Mr. Lindon Nicholas, called for full compliance by non-profits, warning that organisations failing to meet regulations risk deregistration. He emphasized the importance of adhering to FATF’s Recommendation 8, which seeks to prevent the misuse of non-profits for money laundering and terrorism financing. Mr. Nicholas noted the need to address risks such as misallocation of funds, inadequate internal controls, and lack of training on anti-money laundering measures.
Safeguarding the Sector
Victor Kipkoech, a programme officer at the Global Centre on Cooperative Security, highlighted the importance of targeted, risk-based monitoring by PBORA and business registration services. He cautioned against overzealous targeting of non-profits, which could disrupt their legitimate activities. Kipkoech recommended routine desk-based reviews, inspections, and audits for organisations identified as potentially at risk.
Legislative Recommendations
The report also praised the drafting of the Religious Organisations Bill, which proposes the establishment of a Religious Affairs Commission as the regulatory authority for faith-based organisations. It recommends that risks and vulnerabilities identified in the assessment be communicated to the Commission once established.
The Way Forward
Dr. Omollo reiterated that enforcing compliance in the non-profit sector is crucial for Kenya to meet FATF standards and ensure that funds and services reach legitimate beneficiaries. He stressed the need to dismantle sham organisations acting as conduits for terrorist funding, thereby protecting the integrity of the sector and restoring public trust.
Terror Financing: The Dark Side of Kenya’s Non-Profit Sector
