At a moment when the United States is withdrawing from many multilateral institutions, one important means of external influence remains in the form of a little known international organization: the Financial Action Task Force (FATF), of which the United States is still a member. FATF serves as the global standard-setter for anti-money laundering and countering the financing of terrorism (AML/CFT) regulatory policy.
Throughout March, FATF has been evaluating the United States on its compliance with AML/CFT regulations. Although many multilateral checks with any real leverage have been severely undermined by the Trump administration’s “ongoing assault on international cooperation,” this FATF Mutual Evaluation of the United States represents a critical opportunity for constructive engagement — and accountability — on the mis-application of AML/CFT measures to target and silence non-profit actors within the United States.
Under the second Trump administration, U.S. non-profit organizations face an increasingly hostile political and regulatory climate. Multilateral organizations that traditionally provide support to embattled civil society are in turn grappling with the fallout of slashed budgets, reduced political support, and open hostility from the Trump administration and its allies. Indeed, as one of its first actions in 2026, the Trump administration issued an executive order announcing the United States’ withdrawal from 66 international organizations the administration deemed to be inconsistent with U.S. national security interests. In an accompanying statement, Secretary of State Marco Rubio emphasized that the work of these organizations “is advanced by the same elite networks – the multilateral ‘NGO-plex’- that we have begun dismantling through the closure of USAID.”
In addition to escalating rhetoric portraying non-profits as foreign agents seeking to undermine domestic interests, the Trump administration has also issued threats to non-profit tax exempt status, slashed government funding, characterized broad swaths of the non-profit sector as potential “agents of domestic terrorism,” and directed law enforcement agencies to dedicate significant resources into investigating non-profit financing and linkages to foreign entities. At the same time, the Trump administration has significantly increased Foreign Terrorist Organization (FTO) and Specially Designated Global Terrorist (SDGT) designations against transnational criminal networks, vastly increasing legal exposure for non-profit organizations providing support to or operating in jurisdictions where these designations apply.
FATF needs to make clear in its Mutual Evaluation of the United States that the country is not upholding its commitments to FATF standards, namely Recommendation 8, which calls for preventing terrorist financing abuse in the non-profit sector, “without unduly disrupting or discouraging legitimate NPOs activities.”
To maintain its integrity, independence, and standing as a global body, FATF must hold the United States to the same standard to which it holds other governments. If not, FATF risks undermining its institutional credibility and global purpose. Governments who have engaged in similar misuse of counterterrorism measures to target non-profits have recently been rated as “partially compliant” on Recommendation 8, and the United States’ actions warrant this same rating.
Why FATF Matters for the United States in this Moment
Originally founded in 1989 to spur greater global cohesion and cooperation on fighting money laundering, FATF expanded its scope to include countering the financing of terrorism in 2001. Today, FATF comprises 37 countries and two regional organizations, with more than 200 jurisdictions committed to FATF standards.
The United States is both a founding FATF member and has maintained an outsized influence in the organization, which it would lose if it withdrew. The Trump administration cannot as easily rebuke or ignore its membership in FATF due to geopolitical concerns regarding de-dollarization, despite the dollars’ near ubiquitous utilization in global financial markets; a desire to advance the country’s economic nationalism; and the United States serving as a de facto clearinghouse for many international transactions.
A core part of FATF’s mission includes conducting periodic Mutual Evaluations, in which a five- to six-person assessment team, primarily selected from the pool of FATF member countries with the support of the FATF Secretariat, assesses a country’s technical compliance with and effectiveness of implementation of the 40 FATF recommendations and 11 immediate outcomes. The aim is to appraise how countries identify and mitigate AML/CFT risks and the status of their AML/CFT regulations.
At the onset of the Mutual Evaluation process, governments submit information to FATF assessment teams on steps they have taken to address previously identified AML/CFT risks and to provide current standing on AML/CFT regulations. Assessment teams then conduct in-country visits in which they meet with a wide array of actors to understand how the country’s implementation of these regulations and standards impact different sectors.
Assessors use information gathered before and during in-country visits to develop Mutual Evaluation Reports, which score countries against FATF standards and identify areas of vulnerability or misuse within their AML/CFT regulations, such as weaponization of FATF standards to target certain sectors or poor adherence to standards that jeopardize a country’s ability to prevent against illicit financial flows. Countries then report on their plans and progress toward addressing the identified gaps. These various inflection points create valuable — and rare — opportunities for constructive cross-sectoral engagement with financial institutions, ministries of finance, bank regulators, the private sector, and non-profit organizations on AML/CFT regulations and their impacts on civic space and broader society.
Countries that score poorly in their Mutual Evaluations may be placed on a list of “jurisdictions under increased monitoring” or a list of “high risk jurisdictions subject to a call for action,” known as the FATF grey and black lists, respectively. Criteria for placing countries on the grey list entails serious AML/CFT regulatory deficiencies but an active commitment to addressing these with FATF, while criteria for the black list entails a country being completely “non-cooperative” on their AML/CFT regulatory deficiencies and needing heightened due diligence measures. Countries on these lists are assessed to have poor coordination between regulatory authorities and limited or no enforcement action for AML/CFT violations.
Placement on these lists can trigger significant economic consequences, including reduced inward foreign investment, increased compliance and borrowing costs, delays in international financial transactions, declines in GDP, financial de-risking (when financial institutions exit customer relationships and services due to perceived risk), and reputational damage that undermines other areas of international cooperation. For example, in February 2020, Mauritius was placed on FATF’s grey list. The consequences included decreased access to financial services and funding internationally; increased challenges for entities based in Mauritius to conduct payment transactions; decreased foreign direct investment opportunities; the country being added to the European Union’s and United Kingdom’s “list of high-risk countries;” and damage to the country’s reputation, to investor comfort and confidence, and to professional and financial services industries, ultimately resulting in investment and capital flight.
The United States’ Mutual Evaluation (its third since the founding of FATF) is currently being undertaken, with a public report likely to be published in late 2026 or early 2027. Given the primacy of the dollar within the global financial system, and the risk of significant domestic and international financial consequences for non-compliance with FATF standards, it is in the United States’ interest to engage in its upcoming Mutual Evaluation process in good faith. This positions the ongoing Mutual Evaluation as among the year’s most important external accountability processes for the United States.
Recommendation 8 and the Non-profit Sector
The majority of FATF recommendations focus on traditional AML/CFT points of vulnerability. However, one FATF recommendation — Recommendation 8 — is related to the non-profit sector and it requires States to protect non-profits from abuse of terrorist financing while upholding application of the “risk based approach.” The risk-based approach requires measures to protect against money laundering and terrorist financing to be proportionate, meaning actors should focus targeted resources on where the risk is highest, as opposed to adopting blanket, “one-size-fits-all” tactics. Recommendation 8 requires that countries implement this risk-based approach to terrorist financing threats within the non-profit sector, with assessments that account for non-profits’ internal self-regulatory measures and controls, that countries ensure their AML/CFT measures do not unduly prohibit legitimate non-profit activity, and that countries conduct periodic assessments of non-profit terrorist financing risks.
Recommendation 8 was developed in October 2001, immediately following the 9/11 terrorist attacks. It initially characterized the non-profit sector writ-large as “particularly vulnerable” to terrorist financing, despite no accompanying evidence to support this claim. The characterization led to non-profits facing well-documented over-regulation via restrictive laws and practices, government misapplication of Recommendation 8 to target non-profits, and loss of access for non-profits to financial services and inclusion via bank de-risking. This led to an overall exceptionalization of non-profits, which were “singled out by the FATF” via the creation of a sector-specific recommendation.
In response, the non-profit sector conducted years of sustained advocacy to change Recommendation 8, leading to the removal of the “particularly vulnerable” label in 2016. In 2023, Recommendation 8 was revised again to ensure the risk-based approach is fairly applied to the non-profit sector, to take steps to address the “unintended consequences” of the FATF recommendations, and to ensure that non-profits’ self-regulatory measures are taken into account by governments. These updates expanded opportunities for constructive engagement between civil society, governments, and the international community regarding the importance of ensuring a healthy and robust operating environment for civil society within the context of CFT.
Indeed, in 2024, under the updated Recommendation 8, FATF rated the government of India as “partially compliant” on Recommendation 8. In its Mutual Evaluation Report for India, FATF raised concerns regarding burdensome registration and audit requirements for non-profits registered in India that impede legitimate civil society activity, lead to inadequate consultation between the government and non-profit sector on changes to regulations regarding access to foreign funding, and create lengthy periods of pre-trial detention for individuals facing charges under AML/CFT laws, including human rights defenders. FATF proposed several “Priority Actions” for the Indian government to take to improve how it treats the country’s non-profit sector, including addressing judicial backlogs and undertaking more targeted, compliance-focused outreach.
Likewise, in December, FATF rated the government of Belgium as “partially compliant” on Recommendation 8. In its Mutual Evaluation Report for Belgium, FATF stated that Belgium’s “lack of a targeted, risk-based approach to terrorist financing represents a significant shortcoming” in its application of Recommendation 8, emphasizing the country has not identified actual non-profit organizations deemed at high-risk for terrorist financing abuse versus the sector writ large.
These examples may be instructive for the FATF Mutual Evaluation of the United States, especially surrounding the U.S. government’s targeting of non-profit actors it deems as political opponents and its expansive use of “domestic terrorism” categorizations to harm the reputation, funding ability, and tax-exempt status of non-profits.
Implications for the American Non-Profit Sector
In the months leading up to the United States’ Mutual Evaluation, non-profit actors have shared concerns regarding ways in which the U.S. government has not fully upheld Recommendation 8 via associating certain organizations as being “high-risk” without proper, evidence-based assessments to support these claims, and, increasingly, escalating to imposing investigative actions against non-profits falling under intentionally broad definitions such as those holding “extreme viewpoints on immigration, radical gender ideology, and anti-American sentiment.” In December, the Charity & Security Network (C&SN), where one of the authors works, submitted a report to FATF highlighting how the U.S. government’s regulation of the non-profit sector is not proportional to actual terrorist financing risks faced by non-profit organizations. C&SN urged FATF assessors to prioritize meeting with as broad a range of civil society actors as possible during their site visit and recommended that FATF consider rating the United States as “partially compliant” with Recommendation 8.
The C&SN report also emphasized gaps in existing measures, including inconsistent and lack of detailed regulatory guidance to banks and financial institutions on non-profits; increased weaponization of countering the financing of terrorism and counterterrorism frameworks against non-profit organizations under the current administration; and continued legal exposure for non-profits under the “material support” statutes, which prohibit most engagement with foreign terrorist organizations. Given the proliferation of FTO designations coupled with the United States’ continued conflation of counterterrorism and organized crime, non-profits conducting legally supported activities in FTO-controlled areas are still at increased risk of criminal liability for terrorist financing.
Within the report, C&SN also shared findings from a December survey of 20 non-profit organizations and 11 philanthropic donors and financial institutions regarding their experiences of how U.S. AML/CFT regulations interact with their work. Although this is a relatively small sample size, participants represented a diverse cross-section of non-profit organizations, funders, and financial institutions working in varied regions and issue areas.
They reported a wide range of impacts to their work as a result of restrictions to financial access, including delays to cross-border grants or transfers, delays in delivery of emergency or humanitarian relief, increased spending on compliance with AML/CFT standards, and even closure of partner organizations. Several respondents expressed concern with the Trump administration’s posture toward regulation of the nonprofit sector, including concerns that the administration is deliberately targeting non-profits in an attempt to criminalize them; as well as reports of more fragmented, unclear, and restrictive communications from executive branch authorities on matters of non-profit financial regulation. Financial institutions and funder survey respondents also expressed concern regarding potential weaponization or politicization of U.S. bureaucratic policies, including IRS tax statutes and the Foreign Agents Registration Act. One respondent specifically noticed an “increasingly chilling effect created by growing politicization and weaponization of regulatory bodies and criminalization of dissent.”
C&SN concluded that the administration’s politicized targeting of non-profits on AML/CFT grounds risks adherence to Recommendation 8, while undermining hard-won progress on increasing cooperation between government, financial institutions, and non-profits. If current trends are not reversed, civic space and freedoms within the United States will continue to shrink to the detriment of productive cooperation on legitimate efforts to fight money laundering and terrorist financing.
Protecting Multilateral Norms and Standards Takes Political and Moral Courage
The Trump administration has demonstrated a willingness to retaliate against domestic and international critics and to de-fund, exit, and politically oppose international bodies, including those the United States helped establish. FATF’s core mandate, its global reach and membership, the consequences for failing to engage in the Mutual Evaluation process, and the significant economic impacts of being added to FATF’s grey or black list may help to protect the institution against similar treatment.
A technically sound and robust Mutual Evaluation process of the United States will help ensure that regulatory resources are directed toward actual money laundering and terrorist financing. It will also protect the non-profit sector from politicized targeting, allowing much-needed services to be delivered to communities that need them.
Crucially, a strong FATF Mutual Evaluation process and subsequent Mutual Evaluation Report for the United States will demonstrate that multilateralism in service of shared objectives around good governance, anti-corruption, and rule of law remains possible.
The FATF Mutual Evaluation of the United States serves as an opportunity to promote the preservation of multilateral norms and standards. To make this opportunity a reality, close attention and sustained engagement from domestic civil society and the international community must be mirrored by political and moral courage from FATF leadership and assessors.
FEATURED IMAGE: A picture taken on June 7, 2011 in Paris shows the Château de la Muette, OECD headquarters, which also houses the FATF Secretariat. (Photo credit should read JACQUES DEMARTHON/AFP via Getty Images)