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      In November 2024, the annual report of the Financial Intelligence Unit (FIU) caused a stir as, unlike in previous years, the number of suspicious activity reports submitted fell for the first time. A total of 322,590 suspected cases of money laundering and terrorist financing were registered for 2023 - a decrease of 4.33 per cent compared to the previous year. However, the number of reports on potential terrorist financing and other state security-related crime rose from around 4,100 in 2022 to around 5,500 cases in 2023 and now accounts for 2 per cent of the total number of reports.

      Unlike many money laundering-related reports, these cases are always and immediately transferred to in-depth analysis due to their risk profile. Applying the risk-based approach, these cases have an increased relevance per se, which is reflected in short-term processing and the initiation of measures.

      Bedrohung der inneren Sicherheit und der Integrität des Wirtschaftssystems

      There are good reasons for this. "The general threat posed by terrorist organisations in Germany remains high. Terrorist groups, extremist networks and individuals who sympathise with them are active in Germany" - this is the conclusion of the sectoral risk analysis published by the Federal Ministry of the Interior in 2020. According to this analysis, terrorist activities in Germany are carried out both by extremist groups and by individual terrorists acting alone.

      These actors pose a threat to internal security in Germany as well as a threat to the integrity of Germany as a financial centre and the reputation of the companies operating here. Consequently, the German government already gave "top priority" to combating international terrorism and its financing in the report on the first national risk analysis, which was published in 2019.

      Use and abuse of NGOs for terrorist activities

      Terrorist organisations obtain their financial resources from both illegal and legal sources. In this context, non-profit or non-governmental organisations (NPOs / NGOs) can pose a potential threat. These organisations, such as registered associations, foundations and non-profit limited liability companies, can be misused by criminals for the purpose of financing terrorism or can be founded and used specifically for this purpose:

      • NGOs can be infiltrated by extremist-minded individuals who embezzle funds and make them available specifically to terrorist organisations.
      • NGOs can unwittingly finance terrorism by paying money to unrecognised terrorist organisations in an effort to support aid projects in areas controlled by these organisations.
      • NGOs can also be deliberately set up and used to raise funds for terrorist organisations and conceal the activities of these organisations.
      • In addition, NGOs can be used specifically to collect donations of money and goods and to organise events in pursuit of terrorist objectives. The fact that these organisations are legally classified as non-profit organisations increases the trust placed in them.

      Concealing the true intentions of such "charitable" organisations, which in reality serve terrorist purposes, has enabled criminals in the past to enter war and crisis zones under the guise of aid convoys, for example. In this regard, the sectoral risk analysis of the Federal Ministry of the Interior states that "a humanitarian project in the target area of a terrorist organisation can legitimise the journey of a money courier with the financial resources he is carrying or so-called aid convoys for the transport of material goods".

      The risk of an NGO being unwittingly misused for terrorist financing depends heavily on various factors. Within the large NGO sector, vulnerability is mainly concentrated in organisations with certain types of activities in specific environments. For example, NGOs that provide financial support or direct humanitarian aid, particularly in areas with high levels of terrorist group activity, are significantly more vulnerable than those that primarily engage in lobbying and campaigning. However, if cases become public in which, for example, donations have been misappropriated to finance terrorism, the damage goes far beyond the NGO involved.

      For companies that work with NGOs as part of their ESG activities, for example, there is a risk that the funds provided could fall into the wrong hands for the reasons described above. This not only harbours the risk of terrorist financing. There may also be implications with regard to sanctions and embargoes if funds or resources in kind flow to sanctioned persons or organisations.

      Legal requirements for the prevention of terrorist financing

      To combat terrorist financing, German lawmakers are focussing on prevention measures and criminal prosecution.

      The measures to prevent terrorist financing go hand in hand with the mandatory measures to combat money laundering and future compliance with sanctions. Depending on the status of the obliged entity, different requirements for the prevention of money laundering and terrorist financing must be met. These include the reporting of identified suspected cases. In order to fulfil the requirements of the German Money Laundering Act (GwG) and the new EU legislation in this area, responsibilities must be defined and employees must be trained and appropriate processes for identifying and reporting suspected cases must be set up.

      In principle, NGOs are not subject to the obligations under money laundering law, which is why it cannot be assumed on the part of the donors that the respective NGO has implemented sufficient preventive measures in this regard. Nevertheless, there is a risk for NGO managers and employees of being prosecuted for money laundering (Section 261 StGB), terrorist financing (Section 89c StGB) or other criminal offences if they are actually involved in criminal activities.

      Business partners, but also recipients of donations or other support services, should therefore be continuously analysed and evaluated for risks of money laundering and terrorist financing.

      Irrespective of the obligations arising from the AMLA, companies are also obliged to comply with financial sanctions and embargo measures. This aspect is of great importance in the fight against terrorist financing, as many terrorist organisations and individuals associated with them are subject to sanctions in order to make their financing more difficult. NGOs should therefore also regularly and continuously monitor their transactions and business relationships in this regard.

      Our service

      KPMG's Forensic division supports you in fulfilling your obligations to prevent money laundering and terrorist financing and to comply with sanctions. This includes carrying out a corresponding risk analysis, setting up effective processes and measures and conducting internal investigations.

      We also offer you a forensic data analysis of your transactions and business relationships in order to identify anomalies and potential sanctions and embargo violations.

      If you already work with NGOs or are planning to do so, we will support you with comprehensive open source research and analyse your existing and planned business relationships in order to identify the associated risks of terrorist financing and money laundering.

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