On June 8, charities wrote to the Secretary of the Department of Treasury, Henry Paulson, to express their concern about continuing statements from Treasury that allege charities are a significant source of terrorist financing. The letter was sparked by a report from the Treasury Inspector General for Tax Administration (TIGTA) published in late May that claimed charities are a "significant source of alleged terrorist activities." The charities' letter calls upon Treasury to retract this claim, saying, "Treasury needs to recognize that charities are part of the solution and not part of the problem." Treasury Lacks Hard Evidence The letter notes that instead of providing data to substantiate its claim that charities are a significant source of terrorist activities, Treasury cites news reports about front organizations, primarily non-U.S. groups or the role of terrorist networks in natural disaster relief areas. The letter argues that Treasury has never provided information that proves a considerable portion of charitable funds are diverted to terrorist organizations. In fact, its own data shows that overall, charities only account for 8.75 percent of the individuals, companies and organizations on Treasury's Specially Designated Nationals (SDN) list. There are 43 charities on that list, and only six of these are based in the United States, making U.S. charities 1.25 percent of the designations. This hardly justifies Treasury's broad claims about the role of charities in supporting terrorism, according to the charities that sent the letter. Anti-Terrorism Measures Taken by the Charitable Sector Have Been Treated Dismissively The letter argues that Treasury does not respect the positive role charities play in the world, saying, "Daily more than 1 million 501(c)(3) organizations provide charitable services within their communities and throughout the world. Many of these activities act as a counter balance to terrorist influences." It also notes several steps the nonprofit sector has taken to guard against diversion of funds to terrorism, including the 2005 publication of Principles of International Charity. Unfortunately, Treasury still relies heavily upon its own guidelines and has ignored the sector's requests that they be withdrawn. Watch Lists Are Riddled With Errors Treasury's over-reliance on inaccurate watch lists, such as the SDN list, raises major concerns about the TIGTA recommendation that the Internal Revenue Service (IRS) use the even larger Terrorist Screening Center (TSC) watch list. Referencing yet another inaccurate watch list is not the most effective use of resources, according to the charity letter. Moreover, grantmakers have spent thousands of dollars checking the SDN list with little benefit for doing so. The letter was signed by the following organizations:

• American Civil Liberties Union
• Fellowship of Reconciliation
• Fund for Nonviolence
• Global Fund for Women
• Grantmakers Without Borders
• Islamic Society of North America
• Kinder USA
• Life for Relief and Development
• Moriah Fund
• Muslim Advocates
• Muslim Public Affairs Council
• National Council of Nonprofit Associations
• OMB Watch