NGOs Threshold Pain – Almost there?

The perfect analogy for the current situation is pain when it comes to  Anti Money Laundering regulations that are being enforced by banks and increase scrutiny from donors and governments. A few days ago, I read with great interest a LinkedIn Blog from David Blair “KCY is killing your customer

I would like to remain positive but where do I see things going (unless we do something). Here some trends from developing countries in the context of country ownership and from developed countries nudge NGOs to merge.

a) New NGO Law Threatens Civil Society Independence in Kazakhstan — UN

b) Charity Sector Split on Call to Merge

The only difference with NPOs and other sectors (i.e the private sector) is that the scrutiny requirements that they now have to meet in order to maintain international relationships (if the banks actually want to accept the transaction) is also being applied by other institutions. Most of the efforts by the NPO sector are focused around Recommendation #8 even though new laws being passed by governments is most likely related to the need to receive a good FATF evaluation. (see India’s reporting requirements “Foreign Funding for NGOs”

If government want to receive a good evaluation, you would think that they would want their agencies to implement such measures when they provide finance (i.e. USAID). For example Colombia has more than 45 laws around Money Laundering and remains one of the most impacted country (as per this InterAmerican Institute)

So if you want to obtain changes, should you focus all of your efforts on FATF? or banks, financial institution, governments, government agencies,

The blog is full of great links and information citing many of the frustration that “corporates” are expressing in the context of increasing AML regulations and scrutiny for banks to Know Your Customers Customers.

There is so much to say on this subject and this is without a doubt the “situation” that will most likely impact the new development agenda. As the focus of the Global Goals is on private financing the need to adjust the financial infrastructures to make this possible will need cooperation, collaboration, and willingness to change the way business was done.

One of the first question that comes to mind is …. would you know if you are directly or indirectly helping laundering money? or financing terrorism? (I will come back to this subject as part of another blog). Have you been guilty of such while being somewhat oblivious? I will give describe a few cases in Latin America and Africa … food for thoughts!! This is all to the points of Know Your Customers Customers (KYCC).

It looks like many sectors have reached somewhat of a “pain threshold point” but little has changed. Here are some interesting points to consider before continuing:

1) Bankers do not like the current state of KYC either. Compliance departments continuously up the ante with regard to KYC in their search for safe haven from billion dollar fines. It is a Sisyphean task because no one knows what next year’s regulators will consider sufficient effort.

An article published by American Bankers – “AML Rules Create Undue ‘Suspicion’ of Customers, B of A Exec SaysKristin Broughton writes “….Bankers are often quick to close down accounts if there is “uncertainty” about transactions, out of a growing fear about enforcement penalties, he said. Ramaswamy compared the current financial regulatory environment to air travel following the 9/11 terrorist attacks.

“It’s sort of like the worst days of the no-fly list,” said Ramaswamy, global AML risk management executive at B of A and an ex-federal prosecutor, though he acknowledged that some of the concern about risk is legitimate. “Suspicion is becoming the guiding principle as to whether people get access to an account.

The article is worth reading but here is another section that is worth mentioning when it comes to ”’so what …and what’s next for those affected. Kristin writes “…A fear of penalties “should not color the decision-making approach of banks that are carrying out good-faith efforts to abide by the law,” said Nathan Sheets, undersecretary for international affairs in a speech last week. Still, it is up to the industry to come up with a response, Sheets said. “Ultimately, it will require some investment on the sake of institutions.

2) While most would agree with Mr. Nates comment, I think that the solution should come from the sector itself. No one really enjoys added administrative burden ….and AML/CFT/KYCC is one major administrative burden (i.e. this article “KYC Compliance Tops the List of Concerns for NGO Treasurers“). If the banks come up with solutions …and there are added cost …you can imagine that the cost will be passed on to consumers. If sectors, such as the NPO/CSO/NGO sector doesn’t come up with their own “self-serving solution” we know that this is what they will be faced with (from the same article) — “What professionals are saying is, ‘The risk I can’t manage is [that of] being second-guessed about why I did what I did,'” said Richard Small, an attorney at Ernst & Young. Banks are now being encouraged to extensively document cases where they have cut ties with particular industries, Small said, describing that as a recent change. “My personal opinion is, if you don’t want to do business with somebody, don’t do business with somebody,” he said.

3) In her recent speech, Jennifer Shasky Calvery (Director Financial Crimes Enforcement Network) concludes with the following thoughts “...Achieving this balance, where we identify and close gaps without imposing undue burden, is an issue that resonates with each and every rulemaking we undertake. From my perspective, this is particularly true in our ongoing work with respect to the finalization of the Customer Due Diligence (CDD) rule. Based on the comments that we received following our proposal, we continue to work to get a better understanding of the costs associated with the rule. We are doing this so that when we issue the final rule, our balancing of costs and benefits will be well understood, notwithstanding some of the general difficulties associated with quantitative assessments when dealing with the fight against money laundering, terrorist financing, and other illicit activity ….”


1) We know no one seems to like this (even the banks)

2) It looks like state of compliance is the “new normal

3) It looks like the impact of FATF goes beyond banks (donors, countries)

The suggestion from Nathan Sheets is that this is the banks problem….to resolve this….and it looks like banks already made that decision. If we expect banks to go that deep in due-diligence someone will have to pay for it and it’s rarely the banks. If the banks do it …that still lives governments and donors to deal with when it comes to due diligence.


Copied from David Blair >>> We cannot expect governments, regulators, or banks to solve this problem for us. If we act together by agreeing common standards, we have a much greater probability of success in forcing banks to accept standard KYC documentation, thus saving ourselves from time-wasting frustration and also helping to keep society safe.

The only problem that needs to be resolved is “price” – contrary to the private sector, NPOs can’t pass the cost down to consumers. The one most affected will be the “social, economic, or environmental” cause that they are supporting…or even worst is that if the sector doesn’t work together for a solution “what we are advocating for” the cost might be even higher if they can’t continue operating. Due diligence is expensive and necessary … a discussion about the  standard, cost, technology, and opportunities to collaborate is necessary and should take place sooner than later.

I did this test yesterday (see image below) on the ACAMS website. As you can see, donations to NGOs is a method to finance terrorism. I don’t think any sector is safe from terrorism financing and we will all benefits from greater transparency and collaboration.

Increase transparency and collaboration (not that they are not transparent already) can only help connect funding to local organizations and effectively measure our collective impact.

FARC & Hezbollah – South-South Cooperation?

The following article was written By Colby Adams

A pair of civil complaints relying on a Colombian insurgent group’s ties to Hezbollah could prompt a rise in similar lawsuits and related subpoenas sent to banks, according to legal experts.

The plaintiffs in both cases argue that the Lebanese militant organization has been instrumental to the drug trafficking operations of the Revolutionary Armed Forces of Colombia, or FARC, and that the relationship of the two groups allows them to invoke an American law subjecting frozen terrorist funds to civil litigation.

Although the United States has deemed FARC a “foreign terrorist organization” since 1997, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has for the last six years imposed sanctions against the group under the Foreign Narcotics Kingpin Designation Act, a law targeting drug traffickers.

Kingpin Act designations, unlike those imposed under the International Emergency Economic Powers Act (IEEPA), are not explicitly subject to civil claims made under the Terrorism Risk Insurance Act, or TRIA, which permits claims on insured losses resulting from acts of terrorism.

The competing lawsuits, brought by former U.S. contractors and a Venezuelan citizen who were separately captured and tortured by FARC, claim that civil judgments against the Colombian group should be satisfied with frozen funds linked to Hezbollah, on the basis that the organizations have cooperated in distributing cocaine.

The complaints seek a combined $354 million of assets tied to the Middle Eastern group that are currently blocked by U.S. financial institutions.

Should either lawsuit succeed, other parties could adopt the same legal strategy to sue for funds tied to other blacklisted militant organizations associated with FARC, including the Basque-insurgent group ETA, said Gary Osen, a New York-based attorney representing Hamas victims in an anti-terror lawsuit against Jordan’s Arab Bank.

Such an approach “may become more common because business ties between groups with different ideologies and different goals isn’t uncommon. Of course, at the end of the day, it’s going to be up to the government to decide how far those links can be drawn,” said Osen.

‘Garnishee’ banks

The motions to compel dozens of banks in New York, Illinois and other states to turn over blocked assets linked to Hezbollah follow a string of administrative setbacks for the plaintiffs, and an unsuccessful attempt by U.S. lawmakers to advance their cause through legislation.

In 2010, a federal court in Florida awarded the first group of plaintiffs—Northrop Grumman employees who, at the time of their disappearance, were conducting an aerial surveillance mission over Colombia for the U.S. Department of Defense, a $318 million judgment against FARC.

Members of the insurgency captured and held the group hostage for over five years after an engine forced them to crash land their plane in FARC-controlled territory. Their American pilot and a Colombian officer were immediately led out of the plane by FARC and shot.

In 2011, the plaintiffs obtained a court order granting them roughly $2 million held in a blocked U.S. account controlled by Mercurio Infernacional, a Colombian casa de cambio designated in 2008 under the Kingpin Act for laundering FARC assets, but the 11th Circuit Court of Appeals overruled the decision two years later on the grounds that U.S. assets blocked under the Kingpin Act weren’t available for seizure under TRIA.

The individuals now intend to seek remuneration through blocked funds held by banks in New York and Illinois.

Court documents cite Bank of America, Capital Bank, Ocean Bank, Wells Fargo, Falcon International, UBS AG, HSBC, Credit Suisse, Banco Santander, JGB Bank and several other financial institutions as potential “garnishee” banks holding blocked Hezbollah assets.

The financial institutions have declined to identify accountholders and other data on the funds until they receive separate subpoenas and the issue undergoes “extensive proceedings,” according to a July 2014 court transcript.

A competing motion filed in New York this year by a Venezuelan citizen who was kidnapped, tortured and sold to FARC in 1997 also seeks to garnish frozen Hezbollah assets. The litigant, now a Florida resident identified only as “Dr. John Doe,” won a $36 million judgment against FARC and his kidnappers in 2012.

Administrative work

Subsequent civil actions predicated on links between terrorism and drug trafficking could end up competing with litigation initiated by victims directly suing terrorist organizations, according to Sam Cutler, a sanctions policy advisor with Ferrari & Associates in Washington, D.C.

“The problem is that, if multiple claims against the same assets are valid, the judge probably won’t rule on which of them is more valid. It’s possible they will be awarded on a first-come, first-serve basis,” said Cutler.

FARC’s ties to Hezbollah stem in part from the Colombian group’s purported near-monopoly on global cocaine production and distribution.

The South American organization now controls nearly 80 percent of the world’s cocaine supply, and is linked to Middle Eastern extremists through common money laundering networks and other facilitators, according to an affidavit attached to the complaint.

FARC’s growing international reach and ties to other groups could translate into more administrative work for financial institutions that have blocked related funds, according to Peter Kucik, a former senior sanctions policy advisor for OFAC.

Although sanctions designees named under IEEPA and the Kingpin technically retain control of the funds financial institutions block, banks in most cases cannot release the money without permission from OFAC, according to a former official with the agency.

OFAC officials said in a legal briefing filed ahead of the 11th Circuit Court’s ruling that TRIA claims “generally override” its licensing requirements.

Even if claimants are successful in such litigation, banks may still decide to delay releasing assets without first obtaining the agency’s approval, according to the former official, who asked not to be named.

“My bet is that Treasury still has an interest in this,” said the person.

The issue has not gone unnoticed by U.S. lawmakers, who have proposed additional legislation to streamline civil judgments awarded to victims of terrorism. The plans, which have drawn White House opposition, have stalled at the committee level.

“This could limit Treasury’s ability to use these blocked assets as leverage against dangerous groups such as the Sinaloa Cartel, Los Zetas, Los Cachiros, and Colombian criminal gangs involved in the drug trade,” U.S. Deputy Assistant Secretary Jennifer Fowler told lawmakers considering amending TRIA to open up frozen drug money to terror victims.

A Treasury Department spokesperson and an attorney for the plaintiffs did not respond to calls and e-mails seeking comment by press time.

Imperfect Peace!

Imperfect Peace is the word I heard last week during a radio interview with Alvaro Uribe (former President of Colombia) about the peace accord in Colombia. Alvoro Uribe doesn’t support the current “accord” and the interviewer said “we know it’s not a perfect peace accord but this is what we have”. Imperfect Peace kind of makes sense with the terrible strategy that has recently happened in France.

Little I knew before writing this blog that the concept of imperfect peace existed. Here is an interesting excerpt from one research I found online “Imperfect peace is more than just the sum of all these peaces: it is a practical and theoretical tool that enables us to recognize, promote, and interrelate them.

This approach also allows us to consider peace as a process, an unfinished road. That is how one can interpret Gandhi when he said “There is no road to peace, peace is the road.” It can be no other way: Social and environmental realities are continually “evolving,” as are the forms of conflict. Such peace is not a teleological objective, but rather a presupposition that is both recognized and built from day to day. Understanding of the procedural nature of peace, in itself important for the advancement of the pacifistic praxis, is also upheld by theoretical and epistemological approaches in regard to our understanding of the dynamics of nature and life.

On the other hand, it is important to accept the “imperfect” aspects of our species that live in continuous conflict between the diverse, individual, and social possibilities that are conceivable and available owing to cultural and biological conditions, history or the capacity to feel, imagine, desire, communicate, think, or act. Accepting these determinants and the limitations of our biological, individual, social. and cultural entity, imperfect would be equivalent to conflictive, while also revealing to us an enormous capacity for productive action, based on the recognition of our parameters of existence,.

This approach enables us to achieve various objectives. It affords us a global, not fractioned, understanding of peace; facilitates access to all its facets; opens up better and greater research possibilities; explains and gives them greater relevance; makes them more accessible; allows a greater promotion of ideas, values, attitudes, and conducts of peace; and serves as a guide on the practice of peace, its enhancement and the advancement of its power.”

Maybe some context so that I will not be called a “peace-cynic”. I am kind of curious when I get labelled something for expressing an opinion. First I did was to look for peace-cynic maybe I am not the only in this category and would help me understand. In this context let’s look at characterization of people based on their comments. In this case Google is a good place to start so this is what came up when searching for peace-cynic. “Inside every cynic, there is a disappointed idealist”

That did not help …because I have never been called yet an idealist. Continued on searching a little bit more and founds this other quote “The Cynic Spoke War, The Fool Spoke Peace, The Beloved Spoke Forgiveness” – I kind of like this one but people speaking “peace” would definitely not like to be called “fool” and being a cynic …I don’t think I was talking about war …even though when you think about it maybe my comment was confrontational. For those familiar with the Art of War (Sun Tzu) – this makes more sense and it better explains “war” or “conflict”.

If you really like to read and may have came across this book from George Orwell’s book “Nineteen Eighty-Four“.  In his book, Orwell frames the party’s slogan War is Peace, Freedom is Slavery, and Ignorance is Strength as good examples of double thinking. Though contradictory by definition, they are both accepted as correct, simultaneously, by the citizens of Oceania. This means that even though Oceania is in a constant state of war, the people are acting like there is peace as well, hence they can easily switch from one emotion to the other, in accordance to what The Party asks of them.

Do we actually understand the meaning of “peace”? or is Peace Just another Word – Eurythmics – Peace is just a word 

Maybe this is what we are talking about “Imperfect Peace”. Even though there is a slight development difference between Paris and Cali – are we living in a constant state of war? Do you really care ..and think about your daily activities? Am I paying a fair price? Should I invest in this fund? Should I purchase this product? Should I travel there?

Be it in Colombia or Paris … you can actually believe that you are living in Peace and at the same time others can feel that they are living in conflict – War is Peace!

So that bring us back to the Imperfect Peace and this quote “The Cynic Spoke War, The Fool Spoke Peace, The Beloved Spoke Forgiveness” – do we understand what peace means ..and I thought it was simple but living in Colombia gives you another sense of what it means or not. It means that to end this conflict, the government will

Give impunity to the terrorist that have made a fortune kidnapping people, rapping women, selling drug, and killing people

– that the terrorist can now participate in politics

– that their name will be removed from the terrorist list.

So when we look at the recent tragic terrorist attacks and when I hear the word “peace” … do we mean impunity, or that we will accept an “imperfect peace”? will we accept that the same people that have committed crimes …could take part in politics? At what price?

Is the concept of “Imperfect Peace” the root caused, that in 2015, there are more people displaced by conflict than during the second world war? That El Salvador is the most violent country in peace?

……the Beloved Spoke Forgiveness!

NGOs Laundering Money? – Recommendation #8

Over the past few years, the third sector (NGOs/CSOs) have long complained about the increase scrutiny being imposed on them in the context of the Financial Action Task Force (FATF) work. Recommendation #8 directly speaks to the not-for-profit sector as being highly vulnerable to money laundering and terrorism financing.

Let’s start with the good news … the FATF has open the door to a public (virtual) consultation. You can go directly to this link (Public Consultation on the Revision of the Interpretive Note to Recommendation 8 (Non-profit organisations)) and put forward ideas. I did not look at it yet but we will definitely comment. You have until November 27 to send your comments.

Banks, donors, and governments are now applying different “vetting process” on CSOs to make sure that they comply with existing regulations. This situation reminds me of my years working on a Community Reinvestment Act for banks in Canada. We thought from thr onset that Credit Unions and Cooperatives would be the first one to adopt a CRA like disclosure mechanism but, as you can imagine, the answer was “We are good…let’s leave it at this”.

One of the organization that has done tremendous work on this is the Charity & Security Network. Many other have touched on the issues such as Human Rights Watch, Carnegie Institute, ICNL and ECNL; to name a few. Just a few weeks ago, UNDOC in Colombia launched a Guide for Civil Society Organizations to socialize the need to implement Anti Money Laundering (AML) processes. So even if one NGO does think that it’s important to do so …what ability do they have to actually implement such mechanism? Would that make the bank or financial institution more interested in accepting the transaction or would they actually think that this is too risky?

Take a look a this blog “Keep the Ball Rolling”  from John Byrne Executive Vice-President of the Association of Certified Anti-Money Laundering Specialists. At the end of the day it’s all about “risk” – and risk (real or perceived) will be decided by the bank itself ” This comment from the FATF  kind of summarize where the world of banking is — “The drivers of de-risking are complex and include: profitability; reputational risk; lower risk appetites of banks; and regulatory burdens related to the implementation of anti-money laundering and counter-terrorist financing (AML/CFT) requirements, the increasing number of sanctions regimes, and regulatory requirements in financial sector.

That brings us to a chicken or egg dilemma – what came first? I even think that this could lead us to a good case of Münchhausen trilemma!! Is the action of the banks justified? or could it be that the sector itself caused this increase scrutiny. I think that this recent article out of the UK makes that case “Do more to improve the charity brand, Andrew Hind urges foundations“. We have had several discussions with networks of NGOs and to-date you can’t find one serious mapping of CSOs in any countries. There are some research about Private Development Assistance but it’s still a mystery …as to how much and to whom?

The recent fight between INGO and local NGOs has done little to create a space for collaboration. I am not sure why we are so concerned with “collaboration” – it’s not like we will run out of “needs”.  The spirit of the latest “Humanitarian Relief Sector” meeting leaves little hope about collaboration between INGO and smaller/local NGOs. As I am writing this blog ..another email of hope? came from another blog from ALNAP – If it ain’t broke..

So much excitement a few weeks ago …SDGs, Global Goals, Post-2015 Agenda ….a sense of Euphoria but with this in mind?? Is this all going in the wrong direction? I love this piece from Charles Kenny at CGDEV – Are the Global Goals Famous Yet?

Not sure if you are familiar with Google Trends (try it) … I used it with my name but as you will see in the article – searches for Pizza Rat were much higher than Global Goals – Quoted from Charles’ blog – What was the result of this effort?  Figure Two compares search intensity for Malala, “pizza rat” (a recent viral video of a rat dragging a slice of pizza down the steps to a New York subway) “global goals” and “sustainable development goals” since July.  The results suggest there was a rise in search interest around the SDG signings in late September, but it did not reach ‘minor viral’ status.  So far, the Global Goals/SDGs/Sustainable Development Goals have not peaked at a small fraction of the search interest that Make Poverty History sustained for months.  Figure Two also suggests a rapid decline in interest since the UN meetings, and some evidence of the road still to go on the Global Goals rebranding exercise (in that ‘Sustainable Development Goals’ is back as the more common search term).

All of this to say that this is probably the best opportunity we have to collaborate – we should think less about the Ego System and move towards and Eco-System.

Four questions (from the Presencing Institute) inspired our work on the concept of “From Ego-to-Eco-system Economies”:

  1. In the face of disruption, what emerging future is already possible to discern?
  2. How do we lead from the emerging future?
  3. What evolutionary economic framework can guide us forward?
  4. How can we create practical strategies that help us to operate from the 
future that we want to create?

We do need to implement an inclusive “Ego to Eco framework”.

There are only two avenues in front of us 1) Status Quo  2) a Proposal for transparency

Both have cost attached to our decision …but the one most at need will far more be impacted by the Status Quo.

Changing World of Development