Authoritarian Abuses: The Weaponisation of Anti-Financial Crime

Plenary sessions of the Financial Action Task Force (FATF) are a fixture in the calendar of many an anti-financial crime professional, with the Friday evening press conference a hotly anticipated first look at everything decided behind closed doors. The most recent such event held on 21 October was no exception, with several surprises in store, not least of which was that Nicaragua would cease to be subject to the organisation’s increased monitoring process – though the FATF was sure to note it remained ‘strongly concerned by the potential misapplication of the FATF Standards resulting in the suppression of Nicaragua’s non-profit sector’. This is an understatement, given how the government there has used new legislation – supposedly aimed at preventing financial crime – to shut down scores of non-profit organisations (NPOs) focused on human rights, democracy and citizen participation. The regime certainly has a history of dressing up suppression as fighting terrorism financing. Back in 2018, an arrest warrant was issued for Felix Maradiaga, a leading opposition figure and director of a policy think tank, for suspected terrorism financing. When he became an official presidential candidate in 2021, he was arrested for ‘working with foreign financing to carry out “acts of terrorism and destabilization”’. But Nicaragua’s autocratic government isn’t the only regime to have stumbled upon the FATF standards as a useful tool for targeting its critics.

The Most Powerful Organisation You’ve Never Heard Of

The FATF is a curious creature. As the global standard-setter on anti-money laundering (AML), counterterrorist financing (CTF) and counterproliferation financing (CPF), it is difficult to overstate just how pivotal this membership organisation is in shaping our legislation, enforcement and regulatory approaches to the problems of dirty money and the financing of global security threats. Given that globalisation has ramped up the costs of being excluded from a financial system premised on access to the US dollar, countries are wary of suffering the very tangible economic consequences of being included on the FATF’s so-called ‘grey list’ of states found to be in insufficient compliance with its standards. Governments dedicate substantial resources to preparing for assessment visits from the FATF, often pulling cadres of top-notch civil servants away from their usual duties to focus solely on securing a good grade. It is for its unique ability to induce behaviour change on the part of states and its impacts on our everyday lives that the FATF is associated with the maxim of ‘the most powerful organisation you’ve never heard of’.

From relatively modest beginnings, it is undeniable that the chief steward of the global anti-financial crime regime has outgrown its role as a mere technical body. Because of its power and influence, the FATF is inherently political, its members making choices with truly global ramifications – all without any legal basis under international law. Nominally part of a global network, decision-making power is held by FATF members (which include all G7 countries and permanent members of the UN Security Council), while its less influential regional bodies are tasked with assessing the majority of the world’s compliance with rules set at the top.

It only adds to the mystique surrounding the organisation that its standards are officially voluntary and occasionally vague on how they ought to be operationalised by states. For example, through its Recommendation 8 (8.1, p. 39), countries are required to continuously identify NPOs that are at risk of exploitation for terrorism financing, and must impose mitigating measures to prevent the misdirection of funds or assets for terrorist purposes. But what exactly constitutes appropriate or proportionate mitigating measures has sparked debate and controversy. For years now, a global coalition of NPOs and other stakeholders have led engagement with the FATF on how this one standard has caused endless headaches for civil society organisations, whose access to banking services has been severely restricted over terrorism financing concerns. This might be considered an unintended consequence of the overapplication of the FATF recommendation on protecting NPOs from terrorism financing abuse, and through the efforts of a broad civil society coalition, steps have been taken by the FATF, including a re-write of Recommendation 8 in 2016. This work continues, as some governments have endeavoured to curtail their civil society sectors through restrictive legislation and other measures, under the pretence of pursuing a considered response to money laundering and terrorism financing.

However, witnessed with alarming frequency around the world is a novel secondary effect of the FATF system with perhaps even more insidious impacts. Devised by the rich countries of the world, the FATF standards emphasise robust legal and administrative responses to AML/CTF, which when applied to countries with weaker democratic institutions offer a convenient cover for nefarious activities, including the suppression of dissent and deliberate targeting of distinguished regime threats. This stands in contrast to the adverse sector-wide effects of either intentional misuse or well-meaning but misguided overapplication in pursuit of securing a good FATF grade.

For authoritarian regimes, the FATF’s standards have been co-opted to justify the suppression and discrediting of critics on dubious or unfounded grounds. Targets include watchdogs, investigative journalists, human rights lawyers, pro-democracy reformers and political opposition figures, and any other entities deemed to threaten the regime. But misuse is also seen in stable democracies like Canada, where AML/CTF measures have been deployed to manage issues of law and order that have nothing to do with preventing money laundering or terrorism financing. Within the Centre for Financial Crime and Security Studies at RUSI, we refer to these instances of intentional weaponisation as ‘Authoritarian Abuses’ of the FATF’s anti-financial crime standards.

Authoritarian Abuses of the FATF Standards

A decentralised protest movement against police brutality is not a terrorist organisation. The End SARS campaign, named after its chief demand – the disbandment of the Special Anti-Robbery Squad of the Nigerian Police – started on Twitter and grew into a mass demonstration that spread across many of Nigeria’s major cities in late 2020. Amid the action on the street – which grew largely because of financial support that had been crowdfunded by core organisers – the country’s central bank and regulator of the financial sector filed a request to temporarily freeze 20 bank accounts pending the outcome of a terrorism financing investigation initiated by the country’s financial intelligence unit. A federal court granted permission to block the accounts, leaving 19 individuals without access to finances, including accounts that had received and then dispensed donations used to pay for food, water, phone charging stations, and whatever else was needed to keep protestors on the streets. One public affairs company that had raised funds for independent journalists to report on the protests also found its accounts frozen. Human Rights Watch commented on what it saw as ‘coercive financial measures’ being taken against protesters, and urged authorities to ‘lift arbitrary restrictions, including unblocking bank accounts of protest supporters’. By the time the accounts were unfrozen in February 2021, supposedly in the ‘spirit of reconciliation’, the movement’s momentum had long since dissipated.

This is just one of numerous contemporary examples of the unfolding phenomenon of Authoritarian Abuses, whereby tools intended for defanging dangerous lawbreakers have been turned against particular individuals, organisations and collective expressions of civil discontent seen to threaten sitting governments and regimes. In the summer of 2020, the finance ministry of Serbia launched money laundering and terrorism financing investigations into 20 individuals and 37 NPOs all known for their anti-corruption work, vocal criticism of the government and advocacy for EU accession. Authorities claimed these to be standard procedures to check for high-risk donors, but it is difficult to reconcile this story with the distinctly adversarial profiles of all the targeted entities. Furthermore, from Belarus to Tunisia, core political opposition leaders have found themselves subjected to politically motivated money laundering and terrorism financing charges. Timed ahead of key elections and referenda, such cases have dealt near-fatal blows to their movements or have invalidated their own candidacies. Authoritarian Abuses can verge on the absurd: consider how just this summer, the government of the Philippines charged a group of Catholic nuns for supposedly financing communist terrorists in rural areas though humanitarian aid.

Building the Evidence Base

As part of its new project, the Centre for Financial Crime and Security Studies will be looking into the phenomenon of Authoritarian Abuses with a view to mapping systematic global trends and sketching out the playbook of common tactics used. We hope that by building this evidence base we can clarify the problem at hand, raise awareness in key policy circles, and contribute to building resilience and an environment of solidarity among the grassroots.

The FATF standards are there to help authorities go after criminals’ dirty money and to ultimately ensure a co-ordinated global response to organised crime, corruption and the threats posed by terrorism and proliferation. That they have been exploited to encumber the work of pro-democracy and pro-accountability advocates and reformers is therefore a direct affront to their purpose and requires urgent attention.

The author would like to thank Sarah Manney, a former intern with the CFCS, for her contributions to this article.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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