Whose risk? Bank de-risking and the politics of interpretation and vulnerability in the Middle East and North Africa

Abstract

Following the events of 11 September 2001, measures aimed at countering the financing of terrorism (CFT) were intensified by States. Many countries around the world adopted strict anti-money laundering and CFT regulations for the transfer of funds globally. This process increased the costs of complying with regulatory requirements and imposed high penalties on banks for non-compliance. As a result, preventive measures – often known as “de-risking” – were taken up by banks, including terminating the accounts of clients perceived as “high-risk” for money laundering or terrorist financing, and delaying transfers. These measures, however, have had negative consequences, reducing financial access for local civil society organizations in conflict-affected contexts that are deemed high-risk for terrorist activities. Drawing on five years of research to understand the impact of de-risking on conflict-affected contexts from a local perspective, this paper reflects on the local political economy of CFT, with a focus on the Middle East and North Africa. It explores two key areas of inquiry. The first of these is the politics of interpretation – how counterterrorism as a discourse and a set of practices, of which CFT is one, gets interpreted by local authorities and banks, and subsequently gets reinterpreted to the population. This also has implications for which local actors are better positioned to access funds than others, and why. The second area of inquiry is the politics of vulnerability – how the local political economy impact of CFT can increase the social and economic vulnerabilities of some groups more than others. This paper demonstrates that under the guise of “counterterrorism”, local authorities in conflict-affected contexts have used CFT to restrict the non-profit and philanthropic space and are using banking regulations to shape that space in ways that are bound to have negative medium- and long-term implications for it.

Counter‐terrorism and humanitarian action: UK INGO responses since 2015

“…Other studies have focused on how specific elements of counter‐terrorism measures, such as financial ‘de‐risking‘—where banks or other financial institutions refuse to make their services available due to commercial concerns or fear of breaching counter‐terrorism measures—have affected humanitarian governance (Gordon, 2020). While a considerable body of work has rigorously analysed the emerging impacts of counter‐terrorism measures and sanctions on INGOs, only a small number of studies have systematically explored how they have responded to these changes (Bloodgood and Tremblay‐Boire, 2010; O'Leary, 2018; El Taraboulsi‐McCarthy, 2018a, 2018b, 2018c). Our study builds on these findings by identifying additional mitigation measures that INGOs are employing.…”

“…Counter‐terrorism measures and sanctions compound some of these long‐standing issues, disincentivising more equitable partnerships by ‘intensifying financial scrutiny, legal constraints, and punitive repercussions for losses’ (Stoddard, Czwarno, and Hamsik, 2019, p. 4). A series of studies by ODI (El Taraboulsi‐McCarthy, 2018a, 2018b, 2018c) show that counter‐terrorism measures have had adverse implications for financial access by local NGOs, including in Somalia, the West Bank and Gaza, and Yemen. While it is unlikely that local organisations will be directly subject to UK sanctions or counter‐terrorism regulations (unless they have British staff, or directly manage programmes and channel funding from an officially registered entity in the UK), they are often still affected due to various chilling effects.…”

“…Mackintosh and Duplat (2013) highlight instances where agencies reduced funding and halted projects in Gaza, owing to concerns about violating counter‐terrorism regulations. Similarly, El Taraboulsi‐McCarthy (2018c) contends that challenges in transferring funds in and out of Gaza have led some organisations to modify their programmes. Metcalfe‐Hough, Keatinge, and Pantuliano (2015) discovered that counter‐terrorism legislation was having a direct impact on levels of humanitarian funding for British INGOs, especially Islamic organisations, which faced heightened scrutiny.…”

“…Furthermore, the increasing demands for documentation issued by banks put more pressure on INGO staff's time and resources. Others (El Taraboulsi‐McCarthy, 2018a, 2018b, 2018c) have found that in Somalia, the West Bank and Gaza, and Yemen, bank de‐risking practices have obstructed organisations from accessing crucial humanitarian and development funds and damaged their reputations. More recently, INGOs operating in Afghanistan have faced similar challenges in financing humanitarian operations, in large part due to bank de‐risking (Moret, 2022).…”