ACNC External Conduct Standards: rules for charities operating overseas

What the External Conduct Standards are

The External Conduct Standards (ECS) are rules that registered charities must follow when they operate outside Australia or work with overseas third parties. These Standards were introduced under the Australian Charities and Not-for-profits Commission Act 2012 and the ACNC Regulation 2013, and came into effect on 23 July 2019.

The ECS are designed to help charities manage risks associated with their overseas activities and ensure they are acting with integrity and accountability. They provide a framework for charities to assess and mitigate potential issues that may arise when working internationally.

Four Standards apply, each addressing a key area of risk for overseas charity activity.

Standard 1 — Activities and control of resources

Charities operating overseas must take reasonable steps to ensure resources provided outside Australia are used appropriately. This means the charity must be satisfied that the use of these resources aligns with its stated purpose and maintains its not-for-profit status.

Meeting this standard requires a considered approach. Charities should undertake due diligence on overseas partners, implement project-level oversight mechanisms, and establish clear arrangements governing the control of funds and assets transferred internationally.

The level of effort required to take these reasonable steps is not fixed. It is determined by factors including the charity’s size, the type of activity being undertaken, and the inherent risks associated with the country or sector involved.

Standard 2 — Annual review of overseas activities

Charities operating overseas must conduct an annual review of those activities. This review is a requirement of the External Conduct Standards. The purpose of the review is to identify material risks associated with the overseas activities and to assess whether those risks were adequately managed.

Findings from the annual review should be used to inform the charity’s planning, policies, and partner arrangements for the subsequent year. This ensures that ongoing operations consider and respond to identified risks.

The annual review process is designed to provide board-level visibility of the risks associated with the charity’s overseas activities, supporting informed governance and oversight.

Standards 3 and 4

Standard 3 requires charities to actively manage risks associated with financial crime. This includes taking reasonable steps to mitigate the risk of corruption, fraud, money laundering, terrorism financing, modern slavery, and other financial crimes arising from activities undertaken overseas.

Standard 4 focuses on the protection of vulnerable individuals. Charities must take reasonable steps to safeguard vulnerable individuals – such as children, people with disability, and victims of violence – when operating overseas. This obligation includes implementing safeguarding policies and conduct standards.

Failure to meet the External Conduct Standards, including Standards 3 and 4, can result in the ACNC taking compliance action. This action may include, but is not limited to, revocation of the charity’s registration in cases of serious non-compliance.