Charities could be gamed by terror groups

There is a high risk extremist groups could game Australian charities to finance terrorism.

And the federal government needs to do more to prevent it, starting with a comprehensive risk assessment of the not-for-profit sector.

That's one of the recommendations in a new report on counter-terrorism financing from the Australian Strategic Policy Institute.

Report authors Simon Norton and Paula Chadderton say charities can be deliberately misused.

"Sometimes funds ostensibly raised for legitimate causes are instead diverted to a terrorist group," the report says, blaming staff or foreign partners.

Another method is false representation whereby individuals claim to be associated with a charity and then send donations to a terrorist group, or establish a sham charity organisation as a front.

The report argues a risk assessment is needed to identify a subset of not-for profits that are vulnerable to terrorism financing.

Although there could be greater compliance costs for some charities, it would be balanced out by avoiding a potential drop in donations from reputational damage as a result of allegations of terrorism financing.

The report calls for the Australian Charities and Not-for-Profits Commission to be listed as a designated agency under anti-money laundering and counter-terrorism financing laws.

This will ensure there is better information sharing between the watchdog and the financial intelligence agency Australian Transaction Reports and Analysis Centre.

The report also recommends changes to privacy laws to protect companies and employees from prosecution if they report suspicions about potential terrorism financing to authorities in good faith.