Saturday, July 28, 2012

Research on Possible Misuse of NPOs

Very often, the establishment of Non-Profit Organizations (NPOs) are premised on some very pure and "holy" intentions.  For example, they may be formed to garner financial support for cancer-related research; or they exist to provide material assisstance to some war-torn regions.  Nevertheless, along the way, some individuals who either run or provide support for NPOs may misuse such establishments for personal benefits.  Based on such possible eventualities, the Financial Action Task Force (FATF) has included the assessment of NPO governance as one of its 40 recommendations against money laundering and terrorism financing.  In its recent report on "Money Laundering and Terrorism Financing Risks to Australian Non-Profit Organizations", the Australian Institute of Criminology (AIC) has listed possible multiple ways in which non-profit entities may be misused:
  • Misuse of Funding - this may include soliciting funds in the name of legitimate NPOs but disbursed for other than "altruistic means".  Or NPOs may be used in money laundering activity such as tax evasion.
  • Misuse of Assets - this is where NPO's assets such as transport and property may be used to transport or house operative, some illegal activities
  • Misuse of Name and Status - an NPO may raise funds for a particular cause but have those funds dispensed for some fraudulant activities.
  • Misuse of the Notion of the Charitable Status - Here, criminal or terrorist entities may elect to establish a sham NPO, but one which is registered and engages in requisite regulatory requirements.