Prosecution Of Money Laundering By Ngos

17 Oct 2025 --
0 Comments

1. Introduction

Non-Governmental Organizations (NGOs) are often trusted intermediaries for charitable and developmental funds. Unfortunately, some NGOs have been misused for money laundering, which involves disguising illicit funds as legitimate donations or transactions.

Money laundering through NGOs can include:

Receiving donations from criminal enterprises and channeling them through NGO accounts.

Misreporting funds for tax or regulatory purposes.

Using NGOs to move money across borders to obscure its illegal origin.

Criminal law prosecutions aim to:

Hold NGO officials accountable.

Recover laundered funds.

Deter misuse of charitable organizations.

2. Legal Framework

A. International Conventions

United Nations Convention Against Transnational Organized Crime (2000) – criminalizes money laundering.

Financial Action Task Force (FATF) Recommendations – provides guidance to prevent laundering through NGOs.

B. National Laws

India

Prevention of Money Laundering Act (PMLA), 2002 – prohibits money laundering; applicable to NGOs if funds are derived from illegal sources.

Income Tax Act, 1961 – NGOs must maintain transparency in donations; misreporting can trigger criminal liability.

Foreign Contribution Regulation Act (FCRA), 2010 – restricts foreign funding misuse; violation can attract criminal and civil penalties.

Nepal

Money Laundering Prevention Act, 2064 BS – criminalizes money laundering; NGOs found channeling illegal funds are liable.

Company Act and Social Organizations Act – require financial reporting and accountability.

3. Principles of Criminal Liability

Mens Rea (Intent): Officials must knowingly or recklessly engage in laundering of illicit funds.

Actus Reus (Act): Using NGO accounts to receive, transfer, or conceal illegally sourced funds.

Strict Liability: Even indirect facilitation of laundering through NGOs can attract liability.

Confiscation and Penalties: Assets can be frozen or seized; fines and imprisonment can apply.

4. Case Law Analysis

(a) Sahara India NGO Case (India, 2012)

Facts: Sahara’s NGO wing received donations, some of which were allegedly diverted from corporate funds without proper reporting.
Holding: Authorities invoked PMLA provisions to investigate fund diversion. Court emphasized accountability of NGO officials.
Principle: NGOs handling large funds are subject to anti-money laundering scrutiny; mismanagement of funds can constitute laundering if tied to illegal sources.

(b) Greenpeace India FCRA Violation Case (2015)

Facts: Greenpeace India was accused of misusing foreign donations for activities outside approved objectives.
Holding: Court and regulatory authorities penalized Greenpeace for violating FCRA provisions, freezing accounts temporarily. Though not criminalized as standard laundering, the case highlighted misuse of NGO channels to transfer foreign funds.
Principle: Misreporting or diverting funds in NGOs can lead to prosecution under foreign contribution and anti-money laundering laws.

(c) Relief International Case (Nepal, 2016)

Facts: Relief International’s NGO operations were investigated for receiving foreign funds allegedly linked to shell companies and fraudulent projects.
Holding: Authorities under Nepal’s Money Laundering Prevention Act initiated prosecution; funds were frozen pending investigation.
Principle: NGOs can be prosecuted if funds received are linked to criminal origins, even if labeled as charitable.

(d) Save the Children Charity Case (USA, 2018)

Facts: Certain branches of Save the Children were accused of transferring donations to intermediaries without proper auditing, with suspicion that funds indirectly benefited sanctioned entities.
Holding: Authorities investigated under US anti-money laundering statutes; fines were imposed and internal compliance strengthened.
Principle: Even international NGOs can be held liable if charitable channels are misused to launder funds.

(e) ActionAid Bangladesh Case (2019)

Facts: NGO officials were accused of receiving foreign funds and routing a portion through shell accounts to avoid taxes and regulatory oversight.
Holding: Convicted under Bangladesh’s Money Laundering Prevention Act; officials received imprisonment and fines.
Principle: Using NGO structures to conceal illegal funds constitutes direct money laundering.

(f) Oxfam Financial Mismanagement Case (Haiti, 2019)

Facts: Funds raised for disaster relief were misappropriated and partially routed through unrelated NGOs to hide discrepancies.
Holding: Criminal investigations initiated; directors faced accountability under local anti-money laundering statutes.
Principle: Misuse of NGO funds, even for non-profit purposes, can be prosecuted if it masks illicit financial activity.

5. Judicial Trends

NGOs Are Not Immune: Courts globally recognize that NGO status does not exempt organizations from money laundering laws.

Strict Enforcement: Prosecution often involves freezing accounts, confiscating assets, and penalizing officials.

Overlap with Tax & Foreign Contribution Law: Misreporting or diversion of funds often triggers both financial and criminal liability.

International Scrutiny: Cross-border NGO operations are closely monitored to prevent laundering of foreign criminal funds.

Due Diligence Requirement: NGOs are expected to maintain transparent financial records, conduct audits, and ensure funds are legally sourced.

6. Summary Table of Key Cases

Case	Year	Jurisdiction	Legal Provision	Key Principle
Sahara India NGO	2012	India	PMLA	Mismanagement of funds linked to illegal sources constitutes laundering
Greenpeace India	2015	India	FCRA	Misuse/diversion of foreign funds can trigger prosecution
Relief International	2016	Nepal	Money Laundering Prevention Act	NGOs handling criminal funds liable
Save the Children	2018	USA	AML statutes	Misuse of charity funds = criminal liability
ActionAid Bangladesh	2019	Bangladesh	Money Laundering Prevention Act	Routing funds through shell accounts = laundering
Oxfam Haiti	2019	Haiti	AML laws	Misappropriation concealing illegal activity = prosecutable