Abuse of charities and non-profits

As of October 2026: Standards and risk ratings are stated as of October 2026: FATF's revised Recommendation 8 dates from November 2023 and the UK risk assessment from July 2025. The October 2026 Hamas fundraising case is an indictment; all defendants are presumed innocent until proven guilty. The appeal history of the Holy Land Foundation case is not covered on this page. Jurisdictions differ widely in how they apply Recommendation 8.

Also called: NPO abuse · charity abuse · sham charities · non-profit organisation abuse.

What is non-profit abuse?

Charities and other non-profit organisations (NPOs) do work that most people would want to see more of: feeding families in disaster zones, running clinics, funding schools. They also handle large sums of other people’s money, cross borders often, and rely on public trust. Those same traits are why a small number of criminals and terrorist groups try to exploit them.

Two ideas need to be held at once. First, abuse is real and has led to serious prosecutions. Second, it is rare. The FATF, the global standard-setter, says on its non-profit topic page that bad actors have at times taken advantage of charitable fundraising to provide cover for terrorist financing, and in the same breath that its measures should not disrupt or discourage legitimate non-profit work. The UK’s 2025 national risk assessment rates the whole non-profit sector as low risk for both money laundering and terrorist financing. The rule of thumb for investigators is to find the few high-risk cases without treating the sector as a suspect.

This page describes the patterns that authorities have documented. It is about what compliance teams, regulators and police look for, not how to hide anything.

How does the abuse work?

FATF’s 2014 typologies report examined where in a non-profit’s operations abuse can happen. It looked at the collection, transfer and spending of resources and the delivery of programmes. Combining that framework with later UK and US enforcement records gives four recurring patterns.

1. Sham or look-alike appeals. Someone raises money in the name of a cause with no real charity behind it, or copies a trusted name. The UK’s 2025 assessment describes a case in which a woman who solicited donations for a group called Sikh Youth UK, which never completed charity registration, diverted them into personal accounts, used more than 50 personal bank accounts to obscure the trail, and was sentenced in January 2025 to two years and eight months for money laundering and theft totalling £50,000.
2. Diversion from a genuine charity. Money raised for a real purpose is siphoned off by insiders or by a partner organisation. FATF’s 2014 report describes risk at every level, starting with the misappropriation of street-level fundraising.
3. Abuse of programmes and affiliation. A terrorist group infiltrates a charity’s programme delivery, for example to promote its ideology, as FATF’s 2014 report describes. The UK assessment says charities working in or near conflict zones, where terrorist groups control territory, face significantly greater exposure than the rest of the sector.
4. Charity structures as laundering vehicles. The UK assessment says the money laundering risk is low but identifies weaknesses: cash loans from community members repaid by bank transfer, close links between charities and connected companies, anonymous donations, online giving platforms that make donations more detached, and independent schools that are registered charities and can receive criminal funds through tuition fees.

Why does it work?

FATF’s 2014 report points to three features that make the sector attractive. Globalisation draws non-profits into areas where terrorist networks also operate. Staff and volunteers are often not given thorough background checks, and the sector has trouble keeping people with compliance expertise. And the level of public trust in charities is high, so their activities are generally not scrutinised as consistently as other sectors. Abusers piggyback on a legitimate organisation or mimic one.

Normal charitable activity also looks a lot like the thing investigators worry about. Cash donations are routine, and cross-border payments to local partners are the daily work of aid groups. A payment chain that hops through several intermediaries can therefore be hard to tell from a real delivery chain, unless someone checks where the money ends up.

Finally, regulation can be uneven. The UK assessment notes that the level of understanding of money laundering risk varies across the sector, and that charities working abroad depend on partners and banks whose own controls differ.

Why most non-profits are low risk, and why that matters

The most important finding in this field is also the least dramatic. FATF’s November 2023 revision of Recommendation 8 came about because countries had misapplied the earlier text. FATF said that had led them to apply disproportionate measures that hindered legitimate non-profits from operating, getting resources, and in some cases continuing at all. The revised standard says it applies only to organisations within the FATF definition, that only a small portion may face a high risk of terrorist financing abuse, and that many have adequate internal controls. It also says countries need not make non-profits reporting entities or require them to carry out customer due diligence. In 2025 FATF added a procedure that lets countries, the IMF and the World Bank raise concerns when a country’s misapplication of the standards disrupts legitimate non-profit activity.

De-risking is the sharp edge of the problem. The UK assessment warns that when banks pull back, and where formal banking is thin, non-profits can be pushed toward cash, less-regulated money service businesses and informal transfer systems. These channels are riskier and harder to monitor, so a blunt reaction to a small risk can create a larger one. A balanced reading is that the sector deserves proportionate oversight and also protection from over-reach.

Real cases: from the Holy Land Foundation to 2026

Holy Land Foundation. On November 24, 2008 a federal jury in Dallas convicted the Holy Land Foundation for Relief and Development and five of its leaders on charges that included conspiracy to provide material support to Hamas and conspiracy to commit money laundering. Before Treasury designated it and shut it down in December 2001, DOJ said, it was the largest US Muslim charity. Prosecutors showed that from 1995 the charity sent about $12.4 million to Hamas-controlled zakat committees (religious alms-giving organisations) and other affiliated bodies, while presenting itself as a humanitarian group. Sentences ranged from 15 to 65 years in prison when handed down on May 27, 2009.

Hamas fundraising network, October 2026. DOJ announced on October 2, 2026 an indictment of a Hamas media official and the arrests of three people in the United States and three in France. Prosecutors allege that since at least January 2020 the network ran purported charitable campaigns promising humanitarian aid and sent more than $1.7 million to Hamas using wire transfers and intermediaries, and that defendants used cryptocurrency to try to hide their activity. These are allegations. The defendants are presumed innocent until proven guilty.

Both cases show the same investigative target: a gap between the stated charitable purpose and the real destination of the money.

How does it get caught?

• Tracing the destination. Prosecutors in the Holy Land case followed funds to named committees and showed the stated purpose was not the real one. This is the core method: compare what the appeal says with where the money lands.
• Regulator inquiries. In the Sikh Youth UK case, concerns raised by police led the Charity Commission for England and Wales to open a statutory inquiry into the funds, and its evidence helped secure convictions.
• Bank and intelligence reports. Suspicious activity reports and financial intelligence units flag payment chains that do not match a charity’s stated work, such as personal-account collections or repeat transfers to unconnected intermediaries.
• Sanctions and designation. Authorities can designate a sham or captured charity and freeze its assets, as Treasury did to the Holy Land Foundation in 2001.
• Social media and platform monitoring. The UK assessment says digitally enabled donation crowdfunding is increasingly exploited for terrorist financing, with more police investigations involving online platforms.
• Self-regulation. The UK assessment notes that many charities delivering aid overseas have strong financial controls, due diligence on partners and beneficiaries, and screening, and that the sector can identify and mitigate its own risks.

For how this fits into the wider detection picture, see the detection overview. For the cash and informal channels that non-profits can be pushed toward, see hawala and informal value transfer.

First published October 4, 2026 · Last updated October 4, 2026 · Legal statuses current as of October 2026