On June 14 the Georgetown Public Policy Institute’s Center for Public and Nonprofit Leadership (CPNL) hosted Safeguarding Charity in the War on Terror, a panel discussion on the post-9/11 regulatory environment and its effects on the nonprofit sector. The discussion highlighted the ineffective, inefficient, harmful nature of the new administrative burdens nonprofits face in their government-prescribed role of investigators in the war against terror.

Panelists included:
• Teresa Odendahl, Waldemar A. Nielsen Chair in Philanthropy, CPNL
• David Cole, Professor of Law, Georgetown University Law Center
• Nancy Billica, Political Advisor, Urgent Action Fund for Women’s Human Rights
• Daniel Mitchell, McKenna Senior Fellow in Political Economy, The Heritage Foundation
• Laila Al-Marayati, Chairperson, KinderUSA

Teresa Odendahl, the 2004/2005 Waldemar A. Nielsen Chair in Philanthropy at CPNL, opened the discussion with the charge that charities have been inaccurately identified as significant sources of terrorist financing and unfairly targeted in the war on terror. This increased oversight of charities has been disorganized and heavy handed, posing substantial threats to the mission of the nonprofit sector. Drawing from interviews conducted over the past year with senior executives and compliance managers at ten of the largest international grantmaking foundations, she reported that the Treasury Department's Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities have created an environment of confusion and fear. Foundations now commonly check terror watch lists and some have adopted new anti-terrorism language into their grantee letters. Often the required action is seen as administrative formalities unlikely to yield either effective results in preventing diversion of funds to terrorism, or legal protection against forced shut down of an organization. In addition to steps taken by foundations, she noted with concern that present policies have led to the targeting US Muslim charities and de-funding of organizations due to heightened concern over the risks involved in working in certain regions or issue areas. David Cole, a professor of law at the Georgetown University Law Center, gave an overview of the constitutional rights and freedoms at stake in the government’s war on terror. He reported that with our return to a “preventive paradigm” of preemptively weeding out threats to national security, guilt by association has been resurrected from the McCarthy era. While it was illegal in the 1950’s to be a member of the Communist Party, it is now a crime to support an individual or organization on a terror watch list, although the government can designate and freeze assets without a showing of actual ties to terrorism or illegal acts. He also noted that government is increasingly turning to public-private partnerships to reinforce and broaden the impact of its anti-terrorism policies. While the House Un-American Activities Committee once relied on the private sector to mete out punishment through the destruction of reputations and careers, today measures such as the Anti-Terrorist Financing Guidelines have turned funders into the new enforcers. In this light, he said the nonprofit sector has an obligation to resist such a partnership with government. Cole reviewed three main statutory regimes now being employed by the government to combat terrorism. These are:

• Laws such as the USA PATRIOT Act Executive Order 13224 make it a crime to provide material support to an individual or organization on a terror watch list. “Material support” has been interpreted loosely to include peacemaking assistance to a group such as the Kurdistan Workers Party or a link on a website, which resulted in the arrest of one individual. This statute effectively circumvents due process, which is conspicuously absent from the process of designation.
• The International Emergency Economic Powers Act (IEEPA). Although originally designed for embargoes, during the Clinton administration government started using it for anti-terrorist purposes, putting “embargoes” on political groups or individuals under suspicion. Again, in the absence of a hearing or notification of charges, this is a violation of due process.
• Immigration Law. An immigrant cannot support any group that has threatened to use a weapon. Because this law is retroactive, even support for an organization such as the African National Congress that was legal at the time is an offense that could lead to deportation.

He concluded by asserting that support for the lawful activities of designated group should not be unlawful, and that the sector needs to insist that constitutional rights apply in the war on terror. Nancy Billica, a political advisor to the Urgent Action Fund for Women’s Human Rights, drew from her experience working with a small international grantmaker. As a political scientist, she pointed out that her work with an international organization with no lobbying interests and no political agenda is a sign of the “deep concern” felt by many organizations over an increasingly uncertain and threatening regulatory environment. She noted that current policies have a disproportionate impact on both small organizations with few resources and organizations engaged in international philanthropic efforts. For smaller organizations in particular, the Treasury Department’s Anti-Terrorist Financing Guidelines are “administratively onerous” and “logistically impossible.” For example, the Guidelines presume that a grantmaker has the staff and other resources necessary to oversee all grant monies until fully expended by the ultimate grantee. She reports that guidelines such as these have forced organizations to divert an increasing share of their already limited resources to administrative overhead, although such steps ultimately provide no meaningful protection against legal liability and investigation. Billica also pointed out that as a result of current policy, nonprofit due diligence has largely been reduced to listchecking, a narrow and ineffective approach that treats grantmakers as extensions of the US government and threatens the ability of organizations to develop grantee relationships built on respect and trust. Furthermore, she noted that this approach has led groups to suspend international partnerships and stifle innovation and experimentation in their grantmaking. In contrast to the one-size-fits-all approach of the Guidelines, she said the process of oversight and due diligence should be tailored to fit the different goals of grantmaking organizations and programs. Dan Mitchell, the McKenna Senior Fellow in Political Economy at the Heritage Foundation, addressed the issue within the context of a principled cost-benefit analysis. Noting in his opening remarks that “this is not an ideological issue,” he pointed out that the anti-terrorist financing campaign has cost the private sector billions of dollars and has entailed a sweeping invasion of privacy, yet there is “nothing much to show for it.” The government’s approach defies common sense and has turned the traditional approach to law enforcement upside down. To this end he said the FBI has not been able to develop a financial profile of a terrorist that was any different from a regular banking customer. In the absence of a way to target our efforts, the government is overwhelmed with data it cannot use and the banking sector has effectively been “looking for a needle in a haystack.” Similarly, in terms of the new administrative burdens facing charities, there is no reason to believe that there is anything in the guidelines could prevent a terrorist from forming a front group and complying. Thus, short of reading people’s minds, he said there is no way to systematically track down terrorists or terrorist financing sources this way, and pursuing such a strategy is a waste of valuable resources. One “hopeful sign” he brought up was the 314 (a) “pointer program,” wherein a bank must report the transactions of a specified list of people. According to Mitchell, this should lead to better targeting of terror suspects and ultimately, a more efficient use of resources in the fight against terrorist financing. If this program yields results, he suggested that the charitable sector may want to explore it as a model. Laila Al-Marayati, Chairperson of KinderUSA, discussed the disproportionate effects anti-terrorist financing policies have had on Muslim organizations in the US, arguing that the government is using anti-terrorist financing program as a political tool to profile and discriminate against Muslim charities. To date, only Muslim groups have been shut down. Out of the ten US Muslim charities involved in international programs, four are now closed and two are under investigation. Yet other groups and donors, such as Jack Abramoff, who used charity to funnel money to an extremist group in Israel, drew no such scrutiny or legal action. The results of this campaign against Muslim charities were clearly illustrated in the Tsunami relief effort: not one Muslim charity appeared on the US government’s list of approved organizations. Al-Marayati argued further that the USA PATRIOT Act undermines due process, giving government the right to freeze assets while an investigation is pending and to use secret evidence against a charity. Yet for all of these new powers to investigate and prosecute, there has not been a single conviction related to Al Queada or the 9/11 attacks and government has never been able to make the case that the money trail leads to charities. Regardless, Muslims are largely afraid to give for fear that they will unwittingly support a group that may someday be declared a terrorist organization. For this reason, there is a pressing need for safe harbor and legal protections for organizations and donors alike. Al-Marayati concluded her comments by outlining the following recommendations:

• National security should be treated as a bipartisan issue.
• The relationship between government and the nonprofit sector should not be focused solely on law enforcement.
• The government should institute a process by which to deal with harassment complaints.
• The use of secret evidence should be curtailed.
• Anti-terrorist financing regulations should incorporate the Principles of International Charity.