Non-Profit Organisations (NPOs)

The non-profit sector in Luxembourg has experienced steady and sustained growth over many years. It facilitates and supports private initiatives across a wide range of fields, primarily in sports, social welfare, and culture. This sector encompasses non-profit associations (associations sans but lucratif, or asbl) and foundations.

The non-profit sector constitutes a vital social fabric deeply rooted at the local level, enabling a diverse array of projects. It is therefore essential to promote and safeguard this sector. Given the risk of misuse by terrorists—particularly the potential exploitation of funds and projects for terrorist financing purposes—raising awareness within the sector is of paramount importance.

Vulnerability to Terrorist Abuse

It is important to note that non-profit organisations and foundations face varying degrees of risk regarding exploitation for terrorist financing (TF), depending on their type, activities, or characteristics. The majority present a low risk.

To identify those particularly vulnerable to abuse by terrorists, the Financial Action Task Force (FATF) has developed the following functional definition:

Organisations such as trade unions, professional associations, or entities primarily engaged in research activities or advocacy for policy change are generally not covered by this FATF definition.

What Are the Risks for These Associations and Foundations?

While instances are extremely rare in Luxembourg, the non-profit sector may nevertheless face several risks at any given time, including:

• The misappropriation of funds collected by non-profit organisations (NPOs) to support terrorism (e.g., financing operational infrastructure, weapons, or ammunition);
• Operational affiliation between an NPO and a terrorist entity;
• The use of charitable activities as a front for fundraising by NPOs that promote causes or engage in activities linked to terrorism. NPOs with direct or indirect connections to conflict zones where terrorist groups operate must exercise heightened vigilance.

The 2022 vertical risk assessment of legal persons and legal arrangements, along with the vertical risk assessment on terrorist financing, provide a more detailed analysis of the risks faced by these associations (as defined by the FATF).

The Law of 7 August 2023 on non-profit associations and foundations reformed the legal framework governing their operations, with a focus on improving governance and financial accountability.