It follows requests prior to July’s general election for the new government to commit to establishing a civil society charter that supported charities and government to work effectively together.

The new Civil Society Covenant was announced by Prime Minister Keir Starmer, and Culture Secretary Lisa Nandy in October, along with a framework for that Covenant that was developed in consultation with sector bodies including NCVO and ACEVO.

Outlining how government and CSOs collaborate and cooperate, the Covenant Framework proposes four key principles:

1. Recognition: to ensure a strong and independent civil society.
2. Partnership: to ensure effective service delivery and policy making, and shared learning of best practices.
3. Participation: to ensure people and communities can be heard and make a difference.
4. Transparency: to ensure civil society and government have the information needed to best serve people and communities.

Stakeholders across both government and civil society have until 12 December to give feedback on the proposed framework, before a final version is published next year. CSOs are asked to provide input via NCVO.

UK Prime Minister Sir Keir Starmer praised the “dynamism, innovation and trusted reach” of CSO, and commented:

“To fix the foundations of our country we need a fundamental reset of the relationship between government and civil society. That is why we’re building a new partnership with the sector to tackle the complex social and economic challenges we face as a country.”

Neil Heslop, chief executive of the Charities Aid Foundation (CAF), comments:

“It is positive that the government appreciates the vital role charities undertake and are announcing the start of a partnership approach with civil society to address our most pressing issues. Charities have been through very tough times, and we look forward to working with the Government to build a more resilient and thriving civil society in the coming years.”

A joint statement from the CEOs of ACEVO and NCVO says:

“Civil society organisations have always been key to building stronger, more resilient communities. Now, under a new government committed to change, we have the opportunity to make that relationship more meaningful and collaborative.”

In addition to this, ACEVO CEO Jane Ide says:

“ACEVO welcomes the government’s commitment to work together to develop a Civil Society Covenant which aims to redefine our relationship for the benefit of the people, causes and communities we serve. Effective leadership relies on collaboration, trust, and mutual respect – values that underpin this Covenant. Civil society leaders are essential partners in realising this vision and ensuring its principles are upheld.”

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The European Commission’s Action Plan for a comprehensive Union policy on the prevention of money laundering and terrorism financing commits it to taking measures to strengthen EU rules in this area. The action plan is built on six pillars. Under Pillar 2, “Establishing a single EU-wide body of AML/CFT rules”, the Commission proposed the Anti-Money Laundering and Countering the Financing of Terrorism package of laws in July 2021.

Following its adoption by the Economic and Monetary Affairs Committee in March, members of the European Parliament adopted this new package of law on April 24.

This new body of law replaces Directive (EU) 2015/849 (as amended by Directive (EU) 2018/8431).

The Anti-Money Laundering and Countering the Financing of Terrorism package consists of:

• The EU single rulebook regulation – provides rules on customer due diligence, transparency of beneficial owners and the use of anonymous instruments, such as crypto-assets, and new entities such as participatory finance platforms
• The Sixth Anti-Money Laundering directive ­– contains national measures on monitoring and on Financial Intelligence Units, as well as on access by the competent authorities to the necessary information, such as registers of beneficial owners
• The Anti-Money Laundering Authority regulation

It aims to achieve the following main objectives:

– Harmonize and strengthen the rules to fight against money laundering and terrorist financing.

– Improve supervision and cooperation between Financial Intelligence Units.

– Strengthen the European framework for crypto-assets.

Improving access to information on beneficial owners

Article 12 of the Sixth Directive stipulates that people with a legitimate interest, including journalists and media professionals, civil society organisations, competent authorities and supervisory bodies, shall have immediate, unfiltered, direct and free access beneficial ownership information held in national registries and interconnected at EU level.

Strengthening the powers of Financial Intelligence Units

Each Member State must set up a Financial Intelligence Unit responsible for preventing, detecting and effectively combating money laundering and terrorist financing.

Article 18 of the Sixth Directive gives FIUs immediate and direct access to a range of information, including tax data, nonprofit registers and national registers of beneficial owners.

Article 20 of the Directive requires Member States to ensure that FIUs are empowered to suspend or refuse the execution of a transaction when it is suspected of being linked to money laundering or terrorist financing.

The creation of a new EU anti-money laundering authority

Regulation 2021/0240 (COD) establishes a new European authority to combat money laundering and terrorist financing. This new authority will be in Frankfurt and will be responsible for:

– Contributing to the implementation of harmonized rules.

– Directly supervising financial sector entities exposed to the highest risk of money laundering and terrorist financing.

– Facilitating cooperation between national Financial Intelligence Units.

– Monitoring and supporting the implementation of targeted financial sanctions.

Next steps

The texts must now be formally adopted by the Council before their official publication in the EU’s Official Journal.

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EFA has been in support of a proposal to facilitate cross-border activities of nonprofit associations in the EU. Now that an EU Commission initiative has in fact been tabled, the European Parliament, as well as the EU Council, will have to study the proposal and introduce amendments as they see fit. This round of decision-making provides an opportunity for non-institutional organizations, such as EFA, to offer input to the decision-makers as to which amendments would be needed to either protect or further strengthen the civil society sector. As such, EFA has joined a consortium of civil society organizations that align on specific matters, in order to strengthen the voice of its members in Brussels.

In the last edition of Fundraising Europe, I wrote that the European Commission adopted a proposal for a Directive on European cross-border associations, which aims to facilitate intra-EU cross border activities for NPOs, by removing some of the legislative and administrative burden. The Commission’s proposal introduces an additional legal form of a European cross-border association (ECBA) in Member States’ national legal systems, “which is specifically designed for cross-border purposes and will reduce legal and administrative burden when it comes to the recognition and establishment of nonprofit associations engaging in activities in another Member State”.

Points to address

Whilst the consortium supports the creation of an ECBA, it needs to be addressed that the ECBA proposal does not effectively cover foundations and does not provide for the creation of a European cross-border foundation. Therefore, in the future, a specific legislative initiative, similar to the ECBA, should also be proposed for foundations. The consortium also argues that guarantees against arbitrary restrictions based on ‘public interest’ should be strengthened.

Another problem has been identified in that the Directive seems to be exclusive towards non-Europeans. The consortium argues that for the ECBA Directive proposal to be effective, it must ensure that non-EU based people or associations (and other non-profit legal entities) can be members of an ECBA and hold leadership positions. The same exclusivity also seems to make it prohibitive for associations that include non-EU members to be converted to an ECBA.

Lastly, while taxation is not covered by the Directive proposal, the consortium expects that at the national tax law level, Member States could consider that foreign-based ECBAs will be considered comparable to local/resident ECBAs and hence donors giving to an ECBA registered abroad would receive the same tax incentive as if they were giving to a local ECBA.

EFA will continue to monitor the proposal as it makes its way through the stages of EU decision-making.

Patrick Gibbels, Gibbels Public Affairs

About Patrick Gibbels

Patrick is EFA’s public affairs columnist in Brussels.

He is the director of Gibbels Public Affairs.

Follow Patrick @GPA_Brussels.

Read more from Patrick in our View from Brussels column here.

Picture by Antoine Schibler on Unsplash

On 5 September 2023, the European Commission adopted a proposal for a Directive on European cross-border associations, which aims to facilitate intra-EU cross-border activities for NPOs by removing some of the legislative and administrative burden. EFA has been in support of the European Parliament’s legislative initiative procedure of a similar name, calling for legislative action by the European Commission in this regard. As such, EFA is pleased to see that the EU Commission has now tabled this proposal.

The history of the proposal

In 2020, led by Rapporteur MEP Sergey Lagodinsky, the European Affairs Committee tabled a report calling on the Commission to put forward a directive on common measures for NPOs and also a Regulation establishing a statute for European cross-border associations and nonprofit organisations. The proposal recognised that NPOs in particular faced multiple legal and administrative challenges when attempting to operate across borders. It argued that minimum EU standards and being able to acquire a legal personality would help NPOs overcome these barriers.

In February 2022, the European Parliament adopted this proposal with an overwhelming majority. On 5 September 2023, the Commission followed through with their proposal for a Directive. Currently, national legal provisions for NPOs are patchy, and insufficient to build a real pan-European civil society. NPOs do not receive uniform acknowledgment of their legal personality and capacity, and often need to register for a second time or even form a new legal entity in that Member State. An estimated 310,000 nonprofit associations are currently affected by those obstacles.

What’s proposed

The Commission’s proposal introduces an additional legal form of a European cross-border association (ECBA) in Member States’ national legal systems, “which is specifically designed for cross-border purposes and will reduce legal and administrative burden when it comes to the recognition and establishment of non-profit associations engaging in activities in another Member State”. Once established in one Member State, an ECBA will be recognised automatically and will be able to engage in activities in all Member States, including economic activities, thereby allowing non-profit associations to flourish across the EU with minimal barriers to their operations.

Whilst the European Parliament had asked for Regulation as well, which is arguably a better tool for harmonization, the Commission chose to propose a Directive instead, which offers more flexibility for implementation by the Member States. The likely reason for this will be the difficulty to harmonize what has been described as a patchwork of 24 legal systems.

What’s next

Since this proposal was born in the European Parliament, it is likely to receive continued support from this institution, which will ultimately enter into negotiations with the EU council. The question is which amendments to the Commission proposal the Parliament might table and whether these will be good for NPOs. It is important for civil society to monitor these developments closely, and to inform decision makers when and where necessary regarding the potential impact their proposals and amendments might have on NPOs’ operations, thereby shepherding the proposal to a positive outcome.

For more on this: read our news story here. 

Patrick Gibbels, Gibbels Public Affairs

About Patrick Gibbels

Patrick is EFA’s public affairs columnist in Brussels.

He is the director of Gibbels Public Affairs.

Follow Patrick @GPA_Brussels.

Read more from Patrick in our View from Brussels column here.

Picture by Jonas Horsch on Pexels

These proposals are the subject of a consultation by the country’s Department of Rural and Community Development, which runs until 30 June.

Once finalised, the policy will begin in 2023 and operate for an initial five years, with a group chaired by the Government publishing annual updates and data on its implementation.

Five goals

Among the policy’s five objectives are “increase awareness of the value of philanthropic giving”, including through a national communications campaign and annual awareness event; and “activate strategies for collection and utilisation of data and research to inform and guide decision making in philanthropy”.

The section on data notes that while there are already several sources of data and knowledge relating to philanthropy, “there is a lack of integration, coordination and trending analysis, leading to significant data gaps when seeking a full understanding of the philanthropic sector in Ireland”.

Another objective is to create an “enabling environment and culture for Irish philanthropy to thrive and maximise its potential to benefit society”. This could include tax incentives, as well as encouraging professionals such as tax advisers and accountants to discuss philanthropy as an option with their clients.

The final two objectives are improving collaboration between Government, nonprofits and other relevant stakeholders, and building capacity in the nonprofit sector. This final objective will ensure that philanthropists can have confidence that their donations will have a meaningful social impact.

EFA member Charities Institute Ireland has been part of a National Advisory Group created to develop the policy.

The institute’s chief operating officer Scott Kelley is urging charities to respond to the consultation, calling the new policy an “incredible opportunity”, and says:

“The development of this National Philanthropy Policy in collaboration with key stakeholders is a significant step towards fostering a more just Ireland and positively impacting the lives of many. It will provide a framework for philanthropy, government, and beneficiaries to work collaboratively and effectively, creating an environment where philanthropy can grow and thrive.

“This policy will set clear objectives and specific actions to enable philanthropy to flourish, supporting the knowledge and capacity development of the sector while identifying the necessary support systems for its maximum potential.”

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The recommendations came in a European Commission proposal for a Council Recommendation on developing social economy framework conditions.

The proposal recommends that Member States consider tax incentives for the sector including corporate tax exemptions and income tax incentives for donors. It also includes a focus on how to make public benefit cross-border donations easier.

Figures shared by the Commission show that the social economy provides more than 13 million paid jobs, accounting for 6.3% of EU employment, with 2.8 million social economy entities in Europe.

The aim is to advance access to the labour market and social inclusion by helping Member States to integrate the social economy into their policies and by creating supportive measures and a more favourable environment.

The proposal provides recommendations to Member States on:

• how public policies and legal frameworks can be tailored to support the actions of the social economy, particularly in areas where it is less developed
• how administrative and institutional structures can be adapted to support these entities and engage with stakeholders in the sector

It covers various topics including: skills, social innovation, access to funding, public procurement, taxation, social impact measurement and management, and more.

The proposal will now be discussed in the Council. If agreed on, Member States will adopt or update their national strategies for the social economy within 18 months, and the Commission will then monitor the implementation of the strategies through regular consultations with Member States via the Employment Committee and the Social Protection Committee.

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The fight against money laundering and financing of terrorism remains an important priority at international, EU and national level for both policymakers and civil society organisations. Despite this, international and EU legislation have produced a number of unintended consequences on the work of legitimate public benefit organisations, including public benefit foundations, limiting their ability to provide humanitarian assistance, social support, aid in the education and culture fields, and to contribute to the fight against climate change, but also to hold governments accountable and fight corruption.

For this reason, on 6 June 2023 Philea and Civil Society Europe hosted a webinar to discuss the impact of EU anti-money laundering and counter-terrorism financing policy on civil society with high-level policymakers and national representatives from the sector. The discussion came at a timely moment, as the final negotiations (trilogues between the European Commission, Parliament, and Council) on the new EU anti-money laundering and counter-terrorism financing policy legislative package (EU AML/CFT Package)[1] are unfolding, with the final legislation to be adopted in the coming months and to enter into force in 2027.

Legislation objective

As explained at the beginning of the webinar by Raluca Pruna, Head of Unit for Financial Crime at the Commission, the main objective of the new legislation is to achieve a harmonisation of the rules at EU level through a “single EU Rulebook” comprising a Regulation[2] – the first of its kind in this field – and a Directive, which will replace the previous one from 2018. Importantly, Raluca Pruna stressed the fact that harmonisation does not mean a one-size-fits-all approach, and that a risk-based approach should remain a guiding principle when applying the new policy.

To better understand the unintended consequences of EU AML/CFT policy, the discussion highlighted some concrete examples of unintended consequences happening at Member State level, mostly in the form of overregulation and bank de-risking.

Interpretations of the law by national governments

Thanks to insightful interventions by civil society and foundation representatives and nonprofit law experts, it was interesting to learn how certain national governments have adopted even stricter rules than what is currently required by EU legislation. This is the case, for example, in Spain, where associations and foundations are considered partial obliged entities, and in Bulgaria, where all civil society organisations are classified as obliged entities, meaning that they must keep records of all donors and beneficiaries – which can number in the thousands – and identify who is the beneficial owner, a difficult task, given that non-profit structures are set up to serve the general public and not private interests.

Unintended implications

Furthermore, some Member States require public benefit foundations to list as their “beneficial owners” – not only board members but also founders (who in most cases have no say in the running of the organisation or may have passed away), and in some countries such as Austria listing of all grant recipients (beneficiaries) as “beneficial owners” is required. Reporting on all grant recipients is not in line with the rationale of identifying the individuals who own or direct the organisation and implies significant administrative burdens for foundations, and also raises important privacy issues.

Other examples presented in the webinar concerned Belgium, where associations must report the same details on ownership structures in four different registers, and Finland, which has adopted a very strict act on fundraising. Participants also reported on banks delaying processes and even not providing services to the public benefit sector, often without giving an explanation: this issue of so-called bank de-risking is also considered as an unintended consequence of the AML/CFT policy.

These cases of unintended consequences or overregulation have a chilling effect on legitimate PBOs’ work.

All civil society representatives stressed the importance of dialogue with their respective governments, with examples of constructive, or very constructive engagement, reported in Spain, Belgium, the Netherlands and Finland.

Limiting the impact 

How can the new EU legislation potentially limit some of these unintended consequences as trilogue negotiations unfold? What good practices can be identified in the adoption and implementation of the legislation at Member State level? The panel discussion focused on these questions.

Lia van Broekhoven, executive director at Human Security Collective, presented the main asks of a civil society coalition around the EU AML/CFT package. To avoid unintended consequences that ultimately divert civil society from its role, it is necessary to clarify that public-benefit organisations associations or foundations are not obliged entities and that the beneficial owner for these entities is the one directing the organisation, and not also the beneficiaries or grant recipients. She then stressed the importance of allowing cross-references to company/foundation registers where the Beneficial Ownership information is stored, to avoid multiple reporting obligations. Lia also highlighted the need for civil society to apply political pressure and to engage in meaningful multi-stakeholder sector dialogues. This has been the case in the Netherlands, where risk-based standards have recently been developed as a result of this dialogue.

The importance of dialogue with civil society organisations was echoed by the policymakers who participated in the panel. Elina Rantakokko, ministerial advisor on these issues at the Finnish Ministry of Finance, shared some good practices put in place in the Finnish context, including a thorough analysis of the sector to determine the diverse areas of risk. Gwendoline Delbos-Corfield, from the Greens at the European Parliament and member of LIBE, one of the committees in charge of the EU AML/CFT Package, stressed the importance of monitoring the impact on fundamental rights and in particular civic space. She also reminded us of the need to remove obstacles for activities of associations as well as cross-border philanthropy across the internal market. Raluca Pruna from the European Commission also stressed the need to continue this dialogue once the legislation is adopted, to limit as much as possible erroneous application by Member States, as- she stated – was the case for beneficiaries considered as beneficial owners.

Carlotta Besozzi of Civil Society Europe and Hanna Surmatz representing Philea concluded the event by stressing that it is hoped that the momentum of the trilogue negotiations will still be used, in particular to clarify some definitions around Beneficial Ownership to ensure that in the case of public-benefit foundations and associations, the Beneficial Owner is the one directing the organisation. For the future, both considered that multi-stakeholder engagements and dialogues among banks, policymakers and the public-benefit sector should be deepened at national, EU and international levels to ensure a risk-based, proportionate and fit for purpose AML/CFT policy that does not unduly restrict the millions of legitimate associations, foundations and their beneficiaries.

[1] The Package comprises 4 Proposals: New Regulation on AML/CFT, 6th Directive on AML/CFT (AMLD 6) Regulation establishing EU AML Authority (AMLA), Revision of the 2015 Regulation on Transfers of Funds

[2] Type of EU Act which becomes immediately enforceable as law in all member states simultaneously when it enters into force

Picture by Alex Fotos on Pixabay

Among those present were representatives from member organisations in 13 countries, including Fundraisers Forum (Belgium) and France générosités, who have both joined in recent months.

The Members’ Meeting started with an introduction from president Charlotte Rydh before the floor was given to attendees to share the top current issues for their organisations and civil society in their countries. Commonly shared issues included shrinking civic space, changing legislation at national and EU level, and the recruitment and retention of fundraisers at all levels.

Attendees then heard board members share their strategic plans for EFA and present short reviews of current public affairs issues, partnership opportunities, communications, and the Certification programme.

Charlotte Rydh, EFA president commented:

“Meetings like these are an important way for us to keep up to date with the key issues our members are facing, and we will follow up on some of these at September’s Skillshare. They’re also a great opportunity for members to meet and widen their network, and of course for EFA to share our own strategic plans and priorities. It was wonderful to see so many attend.”

This year’s Skillshare and AGA will take place in Prague on 21-22 September, with more details to follow soon.

The European Ideas Lab (EIL) session, titled ‘Democracy Now! Civil society building for a stronger Europe’, took place in Warsaw on 3-4 March. EIL is an annual event hosted by The Greens/EFA parliamentary group to find creative solutions to problems.

While the trend in some European countries has been to shrink the civic space through actions including limiting access to public funds or preventing peaceful assemblies, moves are also afoot to transform and protect civic space.

However, the differing legislations that exist across Europe to regulate the NGO sector is a key issue that limits the development of a European civic space. As Francesca Fanucci from ECNL pointed out during the session: “Despite the growing number of NPOs operating across EU Member states, there is currently no harmonised pan-European legislative framework allowing them to operate and organise themselves properly at cross-border level.”

Therefore, implementing a European association statute and minimum standards for member states on how to treat associations and NPOs could help to protect and strengthen civil society organisations throughout the EU.

Member states’ differing understanding of civil society requires evaluation during the development process of a European association statute, with the panel unanimous that the definitions of public benefit organisations should be clear for all, and mutually recognised. Lack of harmonisation is critical in cases, for example, when an NGO wants to move from one EU country to another and finds out not only that its legal form does not exist in that country, but that it cannot even simply convert its current form into an equivalent one. This can result in having to shut down and create a new organisation with all the consequences that this entails in terms of administrative costs, restrictions on access to funding, etc.

NGOs are economic entities like companies, and ought to have same rights to decide their location and to work across borders, the panel agreed. Even though there would be some common basic rules, the state’s sovereignty to decide on rules and laws on areas such as taxation would not be questioned.

The panel also discussed the participation of NGOs in the regulation process. Where there have been consultations on a national level, they are often not public but inclusive only of selected parties. As a result, NGOs have felt that they are not improving anything but fighting against moves and proposals. This led to a question in the audience: Are NGOs perceived as government enemies?

Main photo by Iwona Castiello d’Antonio on Unsplash

The European Council is the EU institution that defines the general political direction and priorities of the European Union. The Council is led by its Presidency, which is held by one of the 27 EU membership on a 6-month rotating schedule. This way, every European Member State gets a chance to push their national priorities by setting the EU policy agenda. Therefore, knowing the work programme of the current (and future) Presidency is an important part in EFA’s own EU agenda setting. On 1 January Sweden took over the EU Presidency. These are the priorities relevant for EFA.

The fundraising sector has historically been an attractive target for money launderers. EFA is aware of this and has been actively involved in the EU developments regarding Anti Money Laundering and terrorist financing. The Swedish Presidency will seek to continue the fight against international crime by advancing the efforts to tackle money laundering and the financing of terrorism. This will involve advancing the negotiations on establishing a new EU body in this area and on the ‘rulebook’.

Similarly, EFA has been quite active on the upcoming ePrivacy Regulation, which is currently making its way through the EU decision-making procedure. As I have written before in Fundraising Europe, some of the proposed changes in the Regulation can have a substantial impact on the day-to-day business of fundraisers and other NPOs.  The Swedish Presidency will continue negotiations with the European Parliament on the ePrivacy Regulation.

The Swedish Presidency has also indicated that it will continue the work on the proposal for new VAT rules for the digital age. At the end of last year, the European Commission published a legislative proposal regarding VAT in the digital age – the “ViDA initiative – as part of its action plan for fair and simple taxation. This package aims to improve VAT efficiency and to minimise VAT fraud. This is done by modernising VAT reporting obligations and facilitating e-invoicing, extending the scope of the VAT rules for the platform economy and moving towards organizations having one single VAT registration in the EU. Given the cross-border nature of many fundraisers and NPOs, this is an initiative on EFA’s watch list.

Lastly, the EU has been moving forward on a proposal for a regulation on the transparency and targeting of political advertising. Because definitions in this proposal are considered to be a bit vague and “muddy” there is a risk that new rules might affect the work of NPOs as well. The Swedish Presidency has indicated that it will work to advance the EU’s work regarding the negotiations on the Regulation on the transparency and targeting of political advertising. EFA will monitor this file closely in order to signal any potential unintended consequences for fundraisers in their campaigning and outreach work.

EFA will keep you informed on any relevant developments regarding these files. On 1 July 2023, Spain will take over the EU Presidency from Sweden, at which time we will re-evaluate the police agenda.

About Patrick Gibbels

Patrick is EFA’s public affairs columnist in Brussels.

He is the director of Gibbels Public Affairs.

Follow Patrick @GPA_Brussels.

Read more from Patrick in our View from Brussels column here.