In a positive step for federal anti-terrorist financing policy, the Office of Personnel Management's Combined Federal Campaign (CFC), the federal government's workplace charitable giving program, has finalized a rule change that moves away from its previous requirement that all participating charities check their employees names against government watch lists. Instead, the new CFC rule requires participating charities to certify that they are in compliance with existing anti-terrorist financing laws. Background The Combined Federal Campaign is the federal government's workplace charitable giving program, which allows federal employees to voluntarily deduct contributions to the charity or charities of their choice from their paycheck. Almost all federal employees are eligible, including postal and military employees, making it the world's largest workplace giving campaign. In 2004 the Combined Federal Campaign added language to its funding agreement that participating organizations must certify that they do not ""knowingly employ individuals or contribute funds to organizations" which the U.S. government suspects or believes to be terrorists. This language was widely understood to mean charities would not knowingly hire persons they knew to be on a government terrorist watch list. In July 2004, a New York Times article quoted the head of the Combined Federal Campaign, Mara Patermaster, saying that each of the thousands of nonprofits participating in the CFC has an affirmative obligation to check their employees against government terrorist watch lists. This appeared to be a step further than what many charities understood to be their obligation to comply with the certification. It created much confusion among participating nonprofits. Some, including the American Civil Liberties Union (ACLU), withdrew from the program in protest. CFC had issued no guidance on how charities were supposed to go about this afirmative terrorist check on their employees, or if it extended to volunteers, consultants, vendors, and other outside entities that they do business with. The only communication on the new standard to participating charities was a paragraph in their funding agreement certifying that the charity "does not knowingly employ individuals or contribute funds to organizations found on the following terrorist related lists promulgated by the U.S. Government, the United Nations, or the European Union." It named three specific lists and requires the group to notify CFC of any change within 15 days. In September OMB Watch wrote a letter to CFC seeking clarification and asking a series of practical questions about the certification requirement Nonprofits File Lawsuit On November 10, 2004, OMB Watch and 12 other nonprofits filed suit against the CFC challenging the terror watch list check policy. The complaint, filed in the federal district court for the District of Columbia, charges the policy violates the First Amendment rights of participating charities and was made without the required open rulemaking process. CFC Issues Guidance After months of silence the Combined Federal Campaign issued guidance on requirements on the terrorist hiring issue on November 24th, 2004. The CFC Memorandum 2004-12 provides background information and clarification, but does not change the interpretation that led a dozen nonprofits to file suit to block the policy. The memorandum states that the list-checking requirement applies to employees, not volunteers, consultants or vendors. It also applies to direct contributions to any organization, but does not include non-cash contributions, and does not include tracking the regranting of such contributions. The memo indicates it "does not intend...to encompass the procurement of goods or services... unless the organization has reason to believe that a vendor of such goods or services commits or supports terrorist acts." This caveat is not described further. If a match is found at the time of submitting the CFC application, even if it is an incorrect match, the group "may not complete the certification and will be denied participation in the CFC." If at a time subsequent to certification, the group finds a person it employs or an organization it contributes to on the watch lists, it must notify CFC "immediately." CFC will take "appropriate" steps, which could include suspension from the program, retraction of funds already disbursed, and notifying "investigative and/or enforcement authorities." The memo does not provide information on how often to check the lists, but clearly indicates that the list must be checked when applying. The memo is less clear when it describes what it means by "knowingly" employ individuals or contribute funds to groups on the watch lists. The memo creates an ambiguous standard where CFC "determines that an organization in fact has exercised appropriate care to check the lists." CFC continues: "Intentional ignorance... is not an excuse for not knowing...." CFC Shifts Position in Proposed Rule Published in March 2005 In a proposed regulation published in the Federal Register on March 29, the CFC shifted its position away from last year's requirement that participating charities check their employee's names against government terrorist watch lists. Instead, the proposed rule uses a certification that charities are in compliance with the law. The proposed rule appears to be a major step in the right direction. OMB Watch filed comments on the CFC proposed rule on May 31, 2005. The comments support CFC's shift away from its FY05 requirement that participating charities check employee names against government terrorist watch lists, noting that the new approach recognizes the variety of ways different types of organizations can comply with anti-terrorist financing laws. The new approach also recognizes the many structural protections against diversion of funds for non-charitable purposes that are inherent in charitable operations, including Internal Revenue Service (IRS) regulations and other CFC certifications on financial accountability and governance. However, the comments suggest the language of the proposed certification be clarified to recognize that no entity can ensure absolute compliance. The comments cite the Principles of International Charity developed by the nonprofit sector as a resource for charities to ensure their funds are not diverted to terrorist organizations. Status of the Lawsuit In February the Dept. of Justice, representing CFC, filed a motion to dismiss the case. The motion claims the Treasury Department?s Voluntary Anti-Terrorist Financing Guidelines as authority and cites activities by private foundations as justification for its actions. These guidelines have been widely criticized and are currently under review by Treasury. The background information in the motion reveals that the current list-checking rule was developed in a closed process with a coalition representing some of the largest CFC participating charities. After the proposed rule was released the parties agreed to an extension of plaintiffs time to file a response until 30 days after the final rule is approved. The court approved the extension. Since the final rule does not make list checking mandatory the case is likely to be dismissed. The Final Rule: List Checking Not Mandatory On November 7, the Office of Personnel Management withdrew a regulation requiring all nonprofits participating in the Combined Federal Campaign, the federal government's workplace charitable giving program, to screen employees and donation recipients for possible terrorist ties. The new final rule, which applies to 2006 CFC applicants, requires participating charities to certify that they are in compliance with existing anti-terrorist financing laws. OPM's explanation of the new rule notes that “OPM does not mandate that applicants check the Specially Designated Nationals (SDN) list or the Terrorist Exclusion List (TEL).” The new certification states, "I certify that the organization named in this application is in com pliance with all statutes, Executive orders, and regulations restricting or prohibiting U.S. persons from engaging in transactions and dealings with countries, entities, or individuals subject to economic sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control. The organization named in t his application is aware that a list of countries subject to such sanctions, a list of Specially Designated Nationals and Blocked Persons subject to such sanctions, and overviews and guidelines for each such sanctions program can be found at http://www.treas.gov/ofac. Should any change in circumstances pertaining to this certification occur at any tie, thte organization will notify OPM's Office of CFC Operations immediately."