Nonprofits Tell Subcommittee about Impact of Ineffective Counterterrorism Rules

On May 26, representatives from the nonprofit sector testified before a subcommittee of the House Financial Services Committee to address how anti-terrorist financing laws impact charities. The hearing marked the first time an oversight panel has considered how the Department of the Treasury's policies impact charitable groups and was a major step in bringing attention to the largely ignored challenges facing charities and foundations since the Sept. 11, 2001, terrorist attacks.

While some members of the committee and some of the panelists expressed support for the government's ability to shut down entities suspected of providing "material support" to terrorist groups, critics charge that the laws are too vague and have had a chilling effect on legitimate charitable giving. Nonprofit officials testified about the need for greater transparency and due process.

The hearing, "Anti-Money Laundering: Blocking Terrorist Financing and Its Impact on Lawful Charities," featured testimony from Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes at the Department of the Treasury (Treasury). Kay Guinane, director of the Charity and Security Network, a project of OMB Watch, also testified at the hearing. Other witnesses included American Civil Liberties Union (ACLU) Policy Counsel Michael German and Mathew Levitt, director of the Stein Program on Counterterrorism and Intelligence at the Washington Institute for Near East Policy.

Since 2001, efforts have been made to reform federal laws and policies that have targeted American charities, particularly Muslim charities, and donors. The nonprofit sector has been adamantly countering the charge that charities are a "significant source of terrorist financing," as suggested by government officials. This hearing was one of many requests for congressional oversight and reform.

Executive Order 13224, issued by President George W. Bush on Sept. 24, 2001, directed Treasury to designate Specially Designated Global Terrorists (SDGT) and take action to freeze all assets subject to U.S. jurisdiction. If Treasury finds a group has provided material support to an SDGT, or to be "otherwise associated" with an SDGT, the entity can be "designated" and have its assets frozen by the government.

In effect, an organization can be shut down without notice or hearing and without any judicial review. No criminal charges ever need to be filed in order to close a charity, and the charity may never be told what evidence or allegations led to its termination. The statistics undergird this reality: Treasury has designated nine U.S. charities, three of which faced criminal prosecution; only one has been convicted on terrorism-related charges.

Glaser acknowledged that the agency's work has "had the unfortunate and unintended consequence of causing a chilling effect on well-intentioned donor activity within Muslim American communities." But Glaser defended Treasury and argued that the designation process has safeguards to avoid unfairly targeting groups.

Glaser also highlighted that Treasury officials have met frequently with U.S. Muslim organizations to improve relations. However, charitable groups describe a more strained relationship. Guinane detailed various communications with Treasury in her written testimony. "While Treasury officials have made efforts to reach out to the charitable sector by speaking at events and meeting with charities, these efforts have not been productive," wrote Guinane. "There continues to be substantial disagreement about the nature of the problem and the proper way to address it."

Overall, Guinane and German highlighted the lack of basic due process rights designated charities face. Guinane stated that the hearing "is a critical first step in calling attention to an often overlooked and serious problem: barriers current national security laws and policies create for legitimate charitable, development, educational, grantmaking, peacebuilding, faith-based, human rights and similar organizations."

German, a former FBI counterterrorism instructor and recognized expert in terrorist group behavior, told the panel that "at a time when humanitarian aid is needed the most, the Treasury Department's capricious, arbitrary and discriminatory enforcement of overbroad US anti-terrorism financing laws has made it far more difficult for nonprofit organizations to provide critical aid and service."

Guinane noted that the Charity and Security Network has identified specific changes Treasury could make, such as giving charities more opportunity to correct mistakes before they are shut down. Her testimony states, "Changes are needed in the areas of transparency, accountability, proportionality and humanity."

Meanwhile, Levitt defended the government, saying that charities are "especially susceptible to abuse by terrorists and their supporters for whom charitable or humanitarian organizations are particularly attractive front organizations." This was a sentiment also expressed by Treasury’s Glaser.

Levitt argues that nonprofits should conduct even "greater due diligence" and the government should carry out "information campaigns." He said that the problem is not the laws, but rather the unintended impact on charitable giving.

The U.S. charitable sector does engage in extensive due diligence and has taken steps to address the threat of terrorism. For example, the Treasury Guidelines Working Group (a group of U.S. charitable organizations, foundations, and experts) published the Principles of International Philanthropy, and the Council on Foundations and Independent Sector released the Handbook on Counter-Terrorism Measures: What U.S. Nonprofits and Grantmakers Need to Know.

Most committee members did not seem to be alarmed about any negative impact on charities. However, Rep. Keith Ellison (D-MN) expressed an understanding of the experiences of charities and donors. Ellison asked about what happens to the frozen funds of charities and the lack of an appeal process for groups whose money has been frozen. Guinane responded that the estimate of funds being held range from $3-$7 million, with no process or attempt by government to distribute funds to other, similar charitable causes.

Upon questioning, Guinane said that the Obama administration has been more open to dialogue with charities, but it had not introduced any new policies or made other changes.

In a June 2009 speech from Cairo, Egypt, President Obama addressed the importance for American Muslims to be able to fulfill their religious donation, or zakat, and promised to "ease the hurdles to charitable giving." One year after he pledged to reform charitable giving laws, there have yet to be any policy changes. On May 12, 2010, a group of thirty charities, including OMB Watch, wrote to Obama, asking him to fulfill the commitment made in Cairo.

Advocates hope this oversight hearing is just a first step and that the unique position charities face will be considered more in-depth by legislative and executive branch policymakers. They note that anti-terrorist financing programs have indeed negatively affected the U.S. nonprofit sector with long-term consequences, such as decreased international giving and program cutbacks. Many American groups have even reduced their work in conflict zones where terrorist groups operate and where humanitarian aid is needed most. For more information, see the testimony from the Charity and Security Network.

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