North Macedonia is an example of positive collaboration between civil society and government on a national terrorist financing risk assessment.
In 2020 Konekt, a North Macedonian legal and human rights research organisation, contacted the government’s Financial Intelligence Office (FIO) and offered technical assistance in order to improve the existing national terrorist financing risk assessment (RA) before an upcoming Financial Action Task Force (FATF) evaluation. The old risk assessment rated all civil society organisations (CSOs) as a high terrorist financing (TF) risk. Konekt pointed out that a well-done RA would increase the likelihood of a positive FATF rating. The result was a commitment from the government to undertake a joint government-civil society terrorist financing risk assessment. This is the first step to implement the risk-based approach to counter the financing of terrorism (CFT), as set out by the FATF.
Konekt’s efforts led to a positive outcome for CSOs. Based on the updated risk assessment’s findings, the previous ranking of CSOs as high risk for terrorist financing was downgraded. The subset of 13% of CSOs found to be at risk were rated as low-medium risk, and the rest of the sector was ranked low risk.
The collaborative process opened dialogue between CSOs, government and banks about mitigation measures, including banks’ reports on suspicious transactions. The process of defining changes and providing supporting explanations produced a new, clear set of indicators of suspicious transactions for each sector. This should make banking services for CSOs operate more smoothly and efficiently. CSOs will continue their engagement with the government to implement the findings that came out of this cross-sector collaboration.
The final report was published on the FIO website in June 2021. As the President of North Macedonia relayed at an event highlighting the process and outcomes:
“...our main concern must be to not disturb the delicate balance between national security and freedoms as a supreme value."
The process
During the process technical support was provided by the UK-based Greenacre Group. CSOs participated in all stages of the process, which was guided by a methodology agreed upon, and carried out by, a working group.
The FIO, which coordinated the government agencies involved, worked with Konekt on the preparation phase of the project. A 14-member working group was established which was composed of 8 representatives from government and 6 from civil society. The government delegation included the agency with regulatory authority over CSOs as well as those with relevant roles in the field.
The collaboration began with an orientation period in which stakeholders were able to state their concerns, exchange background information and clear away some misperceptions. Then the stakeholders agreed on a methodology and began the analysis. The technical expert led the first few meetings and as the process moved forward meetings were co-chaired by government and civil society representatives.
As the assessment progressed, a small drafting group of a few government and civil society participants was formed and drafts were submitted to the entire group for feedback and oversight. Stakeholders had the opportunity to provide written comments and discuss drafts in meetings.
Konekt provided input to the FIO during the report drafting stage, with special attention paid to developing mitigation measures. CSOs provided feedback on the feasibility and effectiveness of proposed TF mitigation measures. Konekt then helped finalise the report, providing information, edits and explanations.
When the National Council for the Fight Against Money Laundering and Terrorist Financing met in November 2021 to review the draft, Konekt took part in the discussion, answering questions and explaining the reasoning behind the findings.
How CSOs organised collaboration
Konekt was supported by ECNL and was able to utilise their knowledge from being part of global collaborative work with other CSOs which is now facilitated on the Global CFT Expert Hub. They used their awareness of the impact of CFT measures on CSOs and the way in which TF risk assessments are at the core of problems CSOs experience, particularly with banking services. Because Konekt has wide contacts in both civil society and government they were well placed to provide coordination, serve a diplomatic role between stakeholders and help build trust.
Konekt recruited a diverse and balanced group of CSOs to participate in the process, drawing from the development, humanitarian, religious, educational and cultural sectors and members of its Financial Sustainability Network. Geography and ethnicity were also considered. The overall emphasis was on groups most vulnerable to terrorist financing, as they would be most impacted by the outcome. Many groups were already familiar with issues relating to the FATF process. Konekt provided the participants with information and resources to enable effective participation in the process.
The CSO representatives and their networks, coordinated by Konekt, provided resources to the process, including data, legal analyses and surveys. It helped facilitate communication between government agencies.
Key lessons
Civil society’s experience in North Macedonia points out several key lessons for CSOs in other countries:
- It is essential to have organisations directly affected by CFT rules be part of the RA process: An essential first step in the risk assessment process is to identify the portion of civil society that comes within FATF’s definition of a non-profit organisation (primarily service organisations) and the subset within that that faces terrorist financing risk. After the working group’s data analysis indicated that religious organisations were part of the subgroup of non-profit organisations facing risk, it reached out to the State Commission for Relations with Religious Communities and Groups to involve them in the process.
- Technical assistance can make this complex process easier and more productive: All stakeholders benefit from expert advice on risk assessment methodology and resources. For example, financial intelligence officials in other countries can be encouraged to contact their North Macedonian counterparts to get referrals to experts and hear about their experiences.
What Comes Next
Once the risk assessment was completed the process moved to the next steps in the risk-based approach: a review of current laws and measures and action to align them with the RA’s findings. In North Macedonia CSOs provided input to make the National Strategy for the Fight Against Money Laundering and Terrorist Financing (2021-23) consistent with the risk assessment’s findings.
The lower risk rating for CSOs in the final risk assessment opened the door for discussions with banks to address barriers to adequate banking services for CSOs. This outreach, based on the outcome of the RA, has set the discussion in the right direction, including a review of the government’s guidance to banks on serving CSOs.
As a result of the multi-stakeholder engagement in all three steps of the risk-based approach, North Macedonia now has measures to mitigate risk of terrorist financing that are preventative and proportionate. They will be implemented with cross-sector collaboration, increasing the odds that they will not disrupt or discourage the activities of legitimate CSOs.
