Overcompliance refers to the proclivity of governments, regulators and regulated entities to take measures that are over and beyond what is required by the Financial Action Task Force (FATF) to counteract anti-money laundering and countering financing of terrorism (AML/CFT) vulnerabilities within the non-profit organizations (NPO) sector. Within the AML/CFT context, it occurs when state actors exceed obligations espoused in international legal norms, citing transparency, accountability and more specifically, compliance with FATF Recommendations, as the excuse for enforcing measure that adversely affect the good works of non-profit or civil society organizations. This also encompassesmeasures that are outrightly contradictory or not even required at all, but countries implement them in furtherance of FATF Standards.
Overcompliance can be through legal, regulatory, administrative or market responses, that are not prescribed by FATF or that go beyond what FATF actually requires. It could be through the imposition of blanket rather than risk-based measures; or measures that are not backed by any law or regulation. It manifests in different ways, ranging from multiple layers of registrations, stringent licensing and registration procedures, onerous due diligence protocols and overdocumentation, excessive reporting requirements, financial exclusion, targeted surveillance, and outright obstruction of civil society operations. While rolling out measures to combat money laundering or counter terrorism financing are essential, overcompliance can generate so many challenges for the NPO sector and the domestic financial system in general. Overcompliance can be through legal, regulatory, administrative or market responses, that are not prescribed by FATF or that go beyond what FATF actually requires. It could be through the imposition of blanket rather than risk-based measures; or measures that are not backed by any law or regulation. It manifests in different ways, ranging from multiple layers of registrations, stringent licensing and registration procedures, onerous due diligence protocols and overdocumentation, excessive reporting requirements, financial exclusion, targeted surveillance, and outright obstruction of civil society operations. While rolling out measures to combat money laundering or counter terrorism financing are essential, overcompliance can generate so many challenges for the NPO sector and the domestic financial system in general.
Over the years, Spaces for Change | S4C has observed consistent patterns of overcompliance with FATF Recommendations in West Africa, notably Recommendation 8. At various multi-stakeholder convenings held across West Africa, a worrisome trend of overcompliance has been observed. Though primarily state-driven and varying by country, the ripple effects of overcompliance cross over to the private sector, particularly by financial institutions adopting blanket high-risk ratings for all NPO customers regardless of their risk spectrum. This results in financial access challenges such as difficulty opening or operating bank accounts, account suspensions, blocked transfers or inflows, bank derisking etc. In June 2026, FATF revised Recommendation 6 to integrate the humanitarian exemption. The updated Standards ensure that sanctions measures do not block the flow of funds, assets, resources, goods, and services necessary for humanitarian assistance and basic human needs in line with the UN framework. Before then, FATF had updated Recommendation 1, reinforcing a proportionate and risk-based approach that emphasizes applying simplified measures to lower-risk situations.
