Civil society organisations (CSOs) are increasingly affected by policies and security measures designed to combat money laundering and the financing of terrorism (AML/CFT), adopted by global bodies, governments and the private sector.
In May 2024, the Council of the EU and the European Parliament adopted a new Anti-Money Launder / Countering the Financing of Terrorism package that will significantly affect the non-profit sector. It will particularly impact crowdfunding platforms, cross-border transfers, donations through virtual currencies, and the obligation for non-profits to identify and register their beneficial owners. However, the sector's specific needs and nuances were not considered in the design of the package.
The report “Unpacking the EU AML/CFT Package: Impacts on the non-profit sector”, by ECNL and Philea, outlines the key challenges, including:
- Increased challenges with banks or payment service providers: Non-profits, especially smaller organisations or ones operating in high-risk third countries, will face greater difficulty in their relationships with financial institutions due to the extended regulatory framework.
- Higher compliance burden for crowdfunding platforms: Crowdfunding platforms will now be considered “obliged entities,” resulting in a significant compliance burden. These platforms may need to raise commission fees to cover the cost of compliance, which could deter donations or make donation-based crowdfunding less viable.
- Challenges using virtual currencies: It will become even more difficult - and likely impossible - for CSOs and activists operating in restrictive contexts to use virtual currencies as an alternative to regular transfers and banking services. This is because all crypto-asset service providers will be subject to the obligations for obliged entities, including customer due diligence measures. The threshold for applying customer due diligence measures for occasional transactions will be 1,000 instead of 10,000 EUR.
- Unclear definition of beneficial ownership : The current rules do not provide the desired clarity as to who the “beneficial owner” of a non-profit organisation is. This could lead to a heavy administrative burden and unnecessary listing of information of individuals who have no rights on assets or control over the organisation.
The report is a “living document” and will be updated as more information becomes available or as clarifications are made.
ECNL and Philea, together with Civil Society Europe and other organisations, work with representatives from the European Commission and the new EU AML Authority to ensure that the impacts on the non-profit sector are proportionate and aligned with international human rights law.
In the coming period, many technical standards and guidelines will be developed, which will offer opportunities to engage with institutions to minimise the impact of these standards on the nonprofit sector. An example is the public consultation by the European Banking Authority on four draft Regulatory Technical Standards. This consultation is open for input until 6 June 2025. Please reach out to us in case you are interested to engage in the dialogue on this topic.
This report is co-funded by the European Union. Views and opinions expressed are however those of ECNL and Philea only and do not necessarily reflect those of the European Union or the European Education and Culture Executive Agency. Neither the European Union nor the granting authority can be held responsible for them.