On Dec. 5 the U.S. Department of the Treasury released a revised version of its November 2002 Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities. The Treasury Department announcement requested public comment on the revisions by Feb. 1, but stated the revised guidelines are now operational. The 2005 version not only does not incorporate the Principles of International Charity, a proposed alternative to the earlier guidelines developed by a working group of nonprofit organizations and released in late 2004, but moves in the wrong direction by adding new and onerous requirements on nonprofits. The revised guidelines apply to all charities, including foundations and grantees, both foreign and domestic. An expanded introduction notes that adherence to the guidelines provides no legal protection from government sanctions, including the freezing and/or seizing of assets, and makes three new points: 1) the guidelines are voluntary, 2) they are intended to assist the sector in avoiding the risk of diversion of funds, and 3) they are a response to what the Treasury Department perceives as a widespread problem of terrorist abuse of charities. The introduction states, "Investigations have revealed terrorist abuse of charitable organizations, both in the United States and worldwide, often through the diversion of donations intended for humanitarian purposes but funneled instead to terrorists...This abuse threatens to undermine donor confidence and jeopardizes the integrity of the charitable sector, whose services are indispensable to both national and world communities." No facts are presented or referenced to support this sweeping claim. Four very general Fundamental Principles are listed: that charities should 1) follow the law, 2) exercise due care in performing their duties, 3) maintain fiscal responsibility, and 4) consider precautions that are above and beyond legal requirements. The guidelines then address general governance and accountability measures in a detailed and expanded section on anti-terrorist financing "best practices." The revised guidelines drop some of the overly specific provisions in the 2002 version's Governance section, such as the number of board meetings that should be held in a year and definitions of conflicts of interest that were inconsistent with IRS rules. The revised guidelines add two new recommendations for Boards of Directors, stating each member is responsible for ensuring the charity complies with all laws, and records of organizational decisions "should immediately be made available for inspection by the appropriate regulatory/supervisory and law enforcement authorities," without any reference to normal standards for regulatory investigative thresholds or search warrants. The section on financial accountability calls on groups with budgets over $250,000 to conduct audits and make these audits public, and also limit cash distributions to small amounts in short timeframes. The transparency and disclosure provisions continue to at times duplicate and at times contradict IRS and state regulatory requirements in this area, expanding beyond the 2002 version, exceeding what is required in the IRS Form 990, the information return filed annually by charities and foundations. The section on anti-terrorist financing best practices encourages charities to "apply a risk-based approach, particularly with respect of foreign recipients" but does not explain what factors indicate increased risk or what types of responses are appropriate to different levels of risk. In addition, it does not distinguish between foundation grants to charities and charitable aid, including services, provided to individuals. It recommends extensive information collection on board members, key employees, and recipients of funds or in-kind contributions. This includes searches of public information to determine if recipients, board members, key employees or senior management have been suspected of terrorist-related activities if they received funds or in-kind contributions. The new guidelines say charities should comply with programs administered by the Office of Foreign Assets Control (OFAC) and assure themselves recipients and their own board members, key employees and senior management at all business locations do not appear on the Specially Designated Nationals (SDN) terrorist watch list. Footnotes encourage checking other lists, including those of other countries. This raises obvious ethical problems in countries that use terrorist watch lists to suppress dissent. If a match is found with the SDN list, the charity should "immediately" report it to OFAC. The guidelines also indicate that the charity "can provide" information on "any suspicious activity" to OFAC and the FBI. No definition of what constitutes suspicious activity is given, but the guidelines instead encourage charities to check publicly available information. The guidelines also call on charities to require recipients of funds and in-kind contributions to certify that they do not employ, transact with, provide services to or deal with groups or people listed or known to support terrorism. For recipients to complete this certification, they will likely need to certify all the people and groups they provide services to, as well as all the vendors they deal with. The call for certifications goes beyond what is required by the Combined Federal Campaign's new rule for charities participating in the federal workplace giving program. Obvious questions also arise about the value of obtaining such certifications. After all, will a terrorist refuse to sign a certification? The overall effect of the new guidelines is to place charities in the role of government investigators and informers, diverting resources from charitable activity to what may prove to be useless information collection and reporting. It reflects a larger problem with the federal government's approach to anti-terrorist financing: instead of focusing resources on following investigative leads, the government is collecting vast amounts of information in the hope that something will turn up - in essence, looking for the proverbial needle in a hay stack - a wholly ineffective method of preventing the diversion of funds to terrorist networks. The larger legal context governing federal anti-terrorist financing programs and the prohibition on providing "material support" to terrorists in the USA PATRIOT Act give these so-called "voluntary" guidelines more legal weight than they merit. Unchecked powers to freeze and seize charitable assets based on secret evidence, with no meaningful recourse, make the voluntariness of these guidelines questionable. However, by calling them voluntary, the Treasury Department avoids the rigors of the formal rulemaking process that governs creation of enforceable regulations. A more detailed summary of the guidelines is available, as well as a side-by-side comparison of the 2002 and the 2005 revised version.