Non-profit organisations in Kenya are intentionally or unintentionally diverting their funds to terrorist actors, according to a new report jointly prepared by government agencies and civil society groups.
The report, released last week, also found that some non-profit organisations are sometimes misused to conceal the movement or distribution of terrorist funds, with terrorist groups sometimes developing operational relationships with them or individuals within them.
The report, Terrorism Financing Risk Assessment for Non-Profit Organisations in Kenya, was prepared by several institutions including the Public Benefit Organisations Regulatory Authority (PBORA), the Financial Reporting Centre (FRC), as well as Muslims for Human Rights and the Kenya National Civil Society Centre from the non-profit sector.
Currently, the al-Shabaab terrorist group poses the greatest terrorist threat to Kenya, with an elevated threat level in the border regions between Kenya and Somalia.
The report identifies four ways in which terrorist groups could misuse non-profit organisations (NPOs).
These are "misuse of NPOs to raise funds to support terrorist groups and operations, and to conceal the movement or distribution of terrorist funds".
"Diversion of legitimate NPO resources to terrorist actors, either intentionally, unintentionally or under duress," the report says.
It also cites the "development of an operational relationship with an NPO or individuals within an NPO" as another way terrorists can exploit these organisations.
"Competent authorities should develop mechanisms to identify the specific NPOs that have been identified as potentially at risk of terrorist financing," the report recommends.
Internal Security and National Administration Principal Secretary Raymond Omollo has now warned non-profit organisations against diverting donor funds to support illegal activities including terrorism in the country.
The PS said the government has stepped up financial monitoring of these organisations and revealed that the non-disclosure of funds received by some of them poses a challenge to their monitoring.
In addition, the failure to verify the sources of donations transferred to non-profit organisations and the lack of financial control in some organisations, which not only fail to disclose their funds but also fail to file tax returns, aggravate the situation.
“We have serious vulnerabilities posed by Faith-based organisations, which remain one of the weakest links as a source of funds being wired to illegal activities. We are fostering inter-agency cooperation and capacity building of PBORA staff,” Dr Omollo said.
To deal with such cases, the PS for Internal Security said Kenya has operationalised the Public Benefits Organisation (PBO) Act, which brings in better regulations to be enforced by the regulatory authority in its oversight of non-profit organisations.
Dr Omollo urged non-profit organisations to promote accountability that will in turn build confidence in the donor community, financial institutions and the general public that funds and services are reaching the intended legitimate beneficiaries.
“Our overriding objective is ensuring that non-profit organisations are not abused by terrorists or their organisations. PBORA is under firm instructions to ensure there are no sham organisations disguising as legitimate non-profit organisations that become conduits for terrorist funding,” the PS said.
Only by enforcing compliance in this sector, he said, will Kenya be able to get off the grey list it was placed on in February 2023 by the Financial Action Task Force (FATF) for its failure to prosecute money laundering and terrorist financing crimes.
In its assessment, the task force cited Kenya's lack of regulation of cryptocurrencies and non-profit organisations, weak regulation and oversight of the real estate sector, and inadequate oversight of the Bank Fraud Investigation Unit at Jomo Kenyatta International Airport.
“We failed in a number of respects resulting in our grey listing, especially in the areas of anti-money laundering and countering financing of terrorism. We have an obligation to conform and address the gaps and challenges identified by FATF,” PS Omollo said.
On his part, Mr Lindon Nicholas, the acting CEO of the Public Benefit Organisations Regulatory Authority, called for full compliance by all non-profit organisations, warning that they risk deregistration as part of the government's efforts to clean up the sector in line with set regulations.
According to Mr Nicholas, the authority will ensure that Kenya complies with task force’s Recommendation 8, which places a spotlight on non-profit organisations with the aim of preventing the sector from being exploited by elements of money laundering and terrorist financing.
“The findings of the assessment revealed risks that expose the sector to misuse., They include misallocation of charitable funds, inadequate internal controls and a lack of comprehensive training on anti-money laundering and countering financing of terrorism measures,” he said.
The PBORA chief said it was imperative to protect the reputation of non-profit organisations, which are instrumental in providing services to the vulnerable in society, as this was the only way to gain public trust in their motives.
To protect non-profits, Victor Kipkoech, a programme officer at the Global Centre on Cooperative Security and one of the advisors on the report, said PBORA and business registration services should ensure that their monitoring of these organisations is targeted, proportionate, risk-based and non-disruptive.
“This includes introducing systems where organisations classified as potentially at risk of terrorism financing abuse are subjected to routine desk-based reviews, inspections and or audits,” he said.
He also warned of the potential for PBORA to disrupt and discourage the activities of not-for-profit organisations if it is overzealous in targeting them without sound information about their activities.
The report commended the drafting of the Religious Organisations Bill, which, when enacted, will establish a Religious Affairs Commission as the competent authority for religious organisations.
“It is recommended that the risks, vulnerabilities and deficiencies identified in this assessment related to certain faith-based organisations are communicated to the Religious Affairs Commission once it is established,” reads the report.
