The Charities Commission has produced a very helpful guide explaining how those involved in the charity sector can, among other things, identify and guard against money launderers who aim to legitimise money sourced in illegal activities, by chanelling it through charities. It also explains how charity funds have been siphoned off to finance terrorism – whereby charities operate as mere fronts for money laundering operations.  Illegal activities generating funding sources for terrorism can include the pornography industry (an exploitative and morally bankrupt multi-billion dollar sleaze industry world-wide) and its close bed mates prostitution and illegal drug trafficking. It can also involve those in the property development industry, for example company directors who set up a complex convoluted quagmire of company networks designed to avoid tax, confound enforcement agencies and safeguard their own financial interests, as opposed to those of their investors and secured and unsecured creditors, in situations where the companies become insolvent and are placed into liquidation or receivership. False residential addresses, bogus shareholding listings, NZ – based “virtual offices” run from overseas and multiple addresses listed across many companies for the same individual can be pointers for enforcement agencies in the direction of money laundering and even links to terrorism and/or illegal arms trading etc.

See: http://www.charities.govt.nz/news/fact_sheets/new%20info%20sheets/HOW-TERROR.pdf