Political Science

Money laundering can be defined as an act or a process of changing a significant amount of money which has been pooled from crimes such as sex tourism, child slavery or drug trafficking into instigation from a lawful source. Despite that observation, due to the raising standards in financial sectors, money laundering has been expanded to include other crimes such as tax evasion, false auditing as well as any abuse of what the state may define as economic good (Farah,2004). Looking at all aspects of global economy financial crimes have evolved to be more complex, hence financial intelligence has been developed and employed to combat global financial crimes as well as terrorism. More than often, money laundering is commonly anchored within economic, political, legal and NPOs perimeters. Therefore, money laundering is illegal the channels of generating the money are in themselves criminal activities, it should be understood that money laundering is highly linked to underground economies. It is on that note I desired to explore the aspects of money laundering within the broad context of NPOs.

Typically, grants are commonly used as the central sources of money by NPOs, though there are several types of grants (Napoleoni, 2003). It has been established that, the federal laws regulating these grants are often compromised this is due to the fact that, the intended recipients rarely gets benefits from these grants (Napoleoni, 2003 Jordan, 1999 Farah, 2004). It is from such a scenario that a number of non-profit organizations involved in criminal activities have taken advantage of the weaklines within the governmental stipulations regarding the money transfers being carried out by these groups. It is instrumental to aver that, the government agency rarely scrutinizes their banking trends hence, they transact their business without any detection. From such view, it becomes paramount to understand that, grants become a significant avenue by which the non-profit organizations rake to realize their goals. Perhaps, it is due to the reason that, the federal government recognizes the importance of voluntary roles these organizations plays such as contributing to welfare, employment as well as economic growth. Hence, in regard to their services, the government provides them with tax motivations including their donors. However, despite such governmental moves to award non-profit organizations, some have evolved to be terrorist charity groups, under the banner of non-profit organizations, and this have aided them in overrunning the strict scrutiny of tax administration officials who have the statutory authority of making certain that all laid down rules are followed to the letter (Jordan, 1999). 

Established studies have indicated that terrorist groups have abused the concept of non-profit organizations through their illegal acts of smuggling small arms, drugs, immigrants as well as operating brothel in various parts of the world (Farah, 2004). The money collected is usually channeled through the legal system where it is perceived as if it constitutes a certain percentage of the grants or donors. Another aspect that these groups employ in relation to money laundering is to falsify their tax returns with the aim of defrauding the government. Such a process commonly employs the use of individuals as well as groups which poses as non-profit organizations, but the bottom line is often to channel the illegal money into the given organization accounts where their worth is often exaggerated. Changes in nonprofit-related public policy over a number of years have not been constant, reflecting a pulling and tugging between government and nonprofits broadly speaking, as well as among diverse constituencies associated with the sector, including philanthropy, nonprofit service and advocacy groups, government regulators, business, and the academic community.

By attempting to conceptualize the evolution of public policy toward nonprofits in the U.S. as a series of games characterizing various stages over which policy has evolved, targeting the non-profit organization involvement in money laundering. Private philanthropic interests and government tax reformers are center stage in the first game with the former attempting to resist changes that would redress issues of fairness, tax abuse, and government revenue generation associated with the regulation of private foundations.  In a 2nd game, the sector-wide coalition again engages with the government, to address broader issues of public accountability across the sector as a whole. However, the greatest challenges have been identified within the manner by which these non-profit organizations manage themselves. It is on that note I desire to explore the broad concept of money laundering within the NPOs among other non-governmental organizations.

For example, it is widely known that, when James Madison put down the initial 10 amendments to the US constitution, he kicked off by writing Congress shall make no law respecting the establishment of religion, or leaving out the free exercise thereof... the US government since then has held this principle to its very base. This has resulted in a tremendous growth of religious and non-religious organizations operating as non-profit organization. This development can be attributed to the fact that, the government lack of concrete involvement in religious organizations, which are radically, granted special privileges by both federal and local laws. Though the government is said to be playing its role as the chief guardian of the basic individual freedoms, its interaction with non-profit organization with religious attachments are being exploited by these organizations abusively, through dubious financial engagement and lack of transparency in their operations (Farah, 2004). It should be noted that, terrorist groups operates under the umbrella of charity or non-profit organizations, therefore in an environment like this where the government has relaxed its rules, and they employ all available tactics of money laundering.

Terrorism
Recent disquiet have been raised in the US about non-profit organizations being instituted or usurped by persons or supporters of terrorist groups and organizations who utilizes the non-profit organization to seek resources for certain or specific groups or for their own gain. Though such cases are typically rare, it is imperative to understand that, money laundering involves concealing of illegally acquired resources as legitimate within a given financial system. Therefore, the cardinal aspect that terrorist financiers abuse in regard to non-profit organizations involves establishing organizations which are compactly designed to cater for purposes enshrined in their registration.

The latest money laundering accusation of former U.S. legislator Mark D. Siljander, 56, together with officials from Islamic American Relief Agency indicates that, on-profit organizations are some of the potential fronts behind terrorist based actions. It should be noted that, this organization was accused of channeling money to Iraqi, but the principal issue is they abused their tax-exempt status to solicit funds from the community by portraying that donors funds were tax deductible. Thus, the probable use of non-profit organizations to give cover for other organization whose nature is not related to charity or non-profit organization have become a matter of concern in the US today. This is linked to the fact that, these other entities being concealed by the non-profit organizations has been identified as the principal vehicles employed to solicit money either legally or illegally hence transacting this money to the intended recipients who perhaps end up being a terrorist linked outfit. This behavior is considerably linked to religious organizations, and the main weakness in this is that, the federal government does not restrict any transactions involved in their operations, hence, unscrupulous individuals and other fraudulent organizations have exploited this opening to run illegal business while concealing them under the banner of a non-profit organization. For instance, some of the NPOs are collecting funds in the name of building schools,mosque,churches and health centres in war torn countries like Iraqi,Darfur,afghanistant and Somalia,however,as Ali (2003) noted these funds are diverted towards arming the insurgencies in their respective locations.

Money laundering and terrorism
Money laundering generates the resources needed to fuel such acts as drug trafficking, arms smuggling and terrorist activities among other criminal activities. It is pivotal to recognize that, money laundering and terrorism in the current global setting are being viewed in an almost similar perspective. But what is terrorism Loosely defined, terrorism depicts act(s) designed to instill fear to the public. Acts of terrorism are commonly linked to religious convictions and are commonly employed to invoke fear (Farah, 2004). Hence, it is on such concerns that, diverse religious groups tend to be registered as non-profit organizations however, the government agencies have established that, some of these groups have direct links with criminal and terrorist groups.

This was established after several non-profit organizations were investigated and it was found that a significant number of them were involved in money laundering (Napoleoni, 2003). Therefore, some of the non-profit organizations are employed by terrorist groups such as Hamas, al shaabab, and al Qaeda to solicit money for the support of these terrorist groups. According to the U.S. government, it is apparent that these organizations acquire their funds from both legal and illegal sources. Therefore, pertinent financial policies are being enacted to contain money laundering with the scope of controlling non-profit organizations. And it is on these grounds that, the federal government is requesting operating non-profit organizations to be vigilant this is due to the fact that, some of the non-profit organizations have been indicted in money laundering activities.

Though this may seem difficult to deal with for the activity being utilized to facilitate money laundering may be the listed business which can be said to be lawful and legitimate. However, under certain circumstances, the contributions may appear suspicious and the government have put in place the mechanism of handling such issues, particularly if they are incapable to convince themselves about the qualifications of the people concerned, or the aptness of the donation or loan. Also there are some other aspects which are highly linked to money laundering and terrorism aspects and may include donations which have specific attachment on who to use or receive them, as well as funds given in cash but for specific period, though the principal is to given back to the donor at the end of the stated period. Despite the issue of receiving funds the non-profit organizations are also required to consider as risks which can result in money laundering and terrorism financing includes
Entering joint venture engagements with establishment that are suspicious
Use of an unconventional banking arrangement (Hawala) to shift funds to regions of operation (Ali, 2003).
Use of dispatch rider to transfer cash or valuables the zones of operation
Compensation for facilitation charges in a locale of business where these quantity to a concealed profit rather than a legitimate tax or duty. Also running business subsidiaries without sufficient control can be employed to receive funds and loans in order to confuse the audit trail (Krueger, 2007).

However, diverse studies have indicated that, terrorists are employing certain methods in using non-profit organizations in to fund their activities and this may include
Using money collected by charities to support terrorist establishments
Using non-profit organizations to smuggle individuals into countries unlawfully
Using suburban schools as armed forces conscription and training zones
Using aid organization set up for offering facilities for youthful individuals for organisation and enrolment
Using non-profit organizations for money laundering intentions (Farah, 2004 Krueger, 2007).

Fighting money laundering and terrorism
The government purpose of reflecting on the activities of non-profit organizations is to protect them from terrorist abuse this policy is significantly crucial in the manner the federal government is planning to fight or acts of terrorism and money laundering across the country. It should be recognized that, on-profit organizations provides the much needed services and hope to individuals and communities with diverse needs across the globe today. However, terrorists have taken advantages of privileges given to non-governmental organizations to exploit them through raising and transferring funds, providing logistical assistance, encouraging and recruiting terrorists, and also supporting operations and organizations of terrorist or organized crime cartels.

 Hence, such an issue is undermining the donor trust and confidence and more it is placing the integrity of the non-profit organizations whose services cannot be ignored. Thus for the government to be fully involved with the operations of NPOs it has established that, its agencies involved in handling matters pertaining to money laundering, terrorism as well as smuggling have identified specific measures which can be employed to control the incidences of financing terrorism as well as money laundering. 

Therefore, the federal government has realized the importance of NPOs, in the manner they contribute to the national economy and social schemes.

Their efforts help in harmonizing the government and business arms offering indispensable services, comfort and hope to those in need. In regard to that observation,NPOs are highly vulnerable to terrorist due to a number of reasons, for instance,NPOs enjoys uncompromised trust from the public, they have unlimited access to considerable sources of finance, and are habitually cash-intensive (Ehrenfeld,2000).

Also, some NPOs enjoys global acceptance and this gives them a framework for their domestic and international operations including financial interactions, and especially within or almost near to the regions where terrorist activities are rampant. Consequently, NPOs are rarely subjected to government oversight, that is, financial recording, financial monitoring as well as registration (Bentham, 1998).

Hence, Terrorist organizations have taken advantage of this distinctiveness of NPOs to penetrate the sector and abuse NPO funds and functions to wrap for or support revolutionary activity.
However, the government has put in place legal procedures designed to deal with acts of money laundering, as well as financing terrorist activities. This procedures includes the instigation of PATRIOT ACT,-2001, this act criminalized the funding of illegal groups more strengthen the client identification process. More so, through this law the government declared it illegal for any NPO to be involved in any transaction with any given foreign shell bank. In order to halt money laundering the government also introduced money Laundering Control Act (1986), the purpose of this law was to help in erecting money laundering as a crime against state, and it, it carried a clause that introduced civil and criminal forfeiture where violated, though these clauses in principle are typically applied in banking sector, they equally apply to NPOs due to the bulk of their financial transactions either domestically or internationally.

The government has a duty to protect its financial stability this is due to the fact that, money laundering is unhealthy to any given economy. Therefore, NPOs should be subjected to accountable in regard to the nature of financial transactions they handle including having regular auditing. Though the government have enacted money laundering policies, NPOs continues to be abused by terrorist oriented individuals in order to facilitate their operation effectively. It should be recognized that such cell groups as al Qaeda and Islamic American Relief Agency indicted for being money laundering cells which also facilitated and funded terrorist activities (Ali, 2003). Thus, the governmental through it agencies which includes the banking sector, internal security as well foreign affairs have paramount duty to help stop any incidence of terrorist financing. It should be understood that, without any elaborate procedures, the privileges that the NPOs are enjoying today could end up being disastrous due to infiltration of terrorist operatives within the realm of NPOs (Beare, 2003). Therefore, to stop such a move, it would be prudence for the federal government to initiated diverse procedures which would be employed to audit NPOs as well as verify their legitimacy and equally monitor their operations.

Therefore, by employing the use of Patriot Act to address the initial aspects of money laundering, it is apparent that this entails both jurisdictional and institutional foundation. This asserts that, the cooperation of law enforcement with intelligence services would be crucial in intercepting in incidences of money laundering and financing terrorism within the state. Also, the use of RICO law would be instrumental in bringing into book all individuals and organizations involved in criminal activities which includes money laundering, acquiring properties as a result of money laundering and equally financing any criminal activities such as smuggling of aliens, prostitution and drug and arms trafficking. It is important to understand that, the government cannot allow, criminals to tarnish its integrity through illegal activities which can be easily channeled through the NPOs sector.

Conclusion
Whilst there is diminutive evidence to put forward that NPOs have been unwittingly caught up in revolutionary and money laundering conducts or have been employed for such intentions by terrorists or criminals, illustrations of alleged or verified money laundering, as defined by federal financial statues, have taken place and been examined by the federal agencies. Instances have been recognized of funds being misplaced to trustee rule overseas or of inadequate checks being made on the absolute submission for those funds, both of which offer logical cause for apprehension that resources may have been channelled to criminal activities (Krueger, 2007).

It is imperative that NPOs trustees, aid organization employees and their consultants build into their hazard administration and internal controls a rational deliberation of the probable risk and aggressively and instantaneously follow up any doubtful transactions in a forceful and transparent approach. When looking into an incident or taking into account making a report it is fundamental to act in agreement with any direction by NCIS pertaining to the managing of a Suspicious Activity Report in such a style as to evade committing a tipping off offence. Nevertheless, the NPOs have a duty to self-regulate as well as provide the services they are mandated to, any deviation from that is considered as act of terrorism or money laundering. Therefore, it would be pivotal for the government to regulate and coordinate diverse activities being carried out by NPOs, for it has been established that a significant ratio of funds being received by these organizations ends up financing criminal and terrorist organizations across the globe today.