On May 20, 2007 the Senate Homeland Security and Governmental Affairs Committee held a hearing on "Violent Islamist Extremism: Government Efforts to Defeat It." Chip Poncy, the Director of the Department of Treasury's Office of Strategic Policy, for Terrorist Financing and Financial Crimes, testified about counter-terrorist financing strategy and explained outreach efforts to engage the Muslim and charitable communities. Mr. Poncy's characterization of Treasury's relationship with the charitable sector reflects a great disconnect between the Treasury's claims of a "close" relationship and "extensive consultation" and the fact that the charitable sector has asked for the withdrawal of the "U.S. Department of the Treasury Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities." Committee Chairman Joe Lieberman (D-CT) and Ranking Member Susan Collins (R-ME) questioned Poncy after his prepared testimony. What follows below is a summary of Poncy's answers, which raise disturbing issues for the charitable sector to consider. Sen. Collins first questioned Poncy after mentioning that she chaired terrorist financing hearings in 2003-2004. She cited a Council on Foreign Relations report which found that charities based in Saudi Arabia were the most important source of funds for Al-Qaeda. Collins validates Poncy's opening remarks and the difficulty in dealing with Islamic charities that may have a dual purpose; as both conduits for good work and a source of funding for terrorist activity. She notes that countering terrorist financing activity is difficult because of the good work that is done for the Muslim community. Collins asks Poncy how Treasury is counteracting these donations to charities that are doing both good legitimate charitable works while supporting terrorist attacks. Poncy responds that this is the most challenging aspect of this component of the terrorist financing strategy; the fact that they are not dealing with "charities that live in black and white universe." Out of the 44 charities designated (sanctioned under E.0. 13224) on account of terrorist financing activity, Treasury is not aware of a single charity "not engaged in some charitable assistance." Poncy does not specify to the committee how many of the 44 charities are based in the U.S. Poncy explains Treasury's approach to preventing donations to charities with this "dual purpose" is education of donors, charities, and the Muslim American community about the nature of the problem. If the U.S. government takes steps to shut down charities, a defense can not be that those charities were engaged in legitimate assistance because that is not the point from Treasury's point of view. Treasury's considers that if any aspect of an organization is engaged in terrorist support, then there is a problem with the entire charitable organization. Poncy mentions that this method "raises operational issues as to whether or not Treasury can look at minimalizing collateral damage." Seemingly contradictory are Poncy's subsequent statements that Treasury's approach so far has been to look behind the charity and at individuals in addition to the organization and at international branches of organizations. Purportedly this is done to get an analysis of potential distinctions between those that may be engaged in terrorist activity and those that are not. This allows for the designation of an entire global network of a charity, such as Al-Haramain, or just certain branches of an organization. Poncy asserts that outreach to the sector needs to begin with a fundamental recognition of the problem, which is the complicated grey area, "rather than the unfortunate fiction that there are charities that pretend to be, but aren't, and charities that just do charitable work." Collins responds in full agreement; affirming that this is what the previous hearings showed, that the vast majority of the charities that are problems are doing both. Lieberman then asks Poncy; "of the 44 charities sanctioned, are any subdivisions of a terrorist organization abroad?" Poncy responds that the relationship between charities and terrorist organizations is fact specific. Treasury has seen that the charities act as an essential element of a terrorist organization. Some countries look at the terrorist organization and break it down in different components, such as a political party, a militant wing, or charitable activities. Treasury has resisted this subdivision because money is fungible, in that giving money for social welfare services of terrorist organization frees up money to conduct militant activity, and because of the "control that is exerted across all the elements of its operations, including its charitable operations." Lieberman agrees that some of the charities that have been closed have had a unique relationship with Hezbollah or Hamas and did not start out as legitimate charities and inadvertently contribute to a terrorist group. Poncy asserts that most often the terrorist organization starts the charity or it becomes infiltrated, or a branch of a charitable group becomes infiltrated. Lieberman agrees; "they are playing on the ethnic identity or goodwill of those they are trying to raise money from. The relationship between local American based charities and foreign based terrorist groups is knowing; they intend to support them." Poncy responds, "that is certainly our view" Lieberman then asks what the purpose of outreach to American Muslim communities is. Poncy explains that the outreach is done broadly, under an umbrella. The broad objective is to assimilate the Arab community into the American community and the global economy, focusing on integration and engagement of an economic dialogue. With terrorist financing issues, Treasury has found four main points that the Muslim American community is not aware of, or points that can be "surprising" in the community.

• The community does not understand that the U.S. government supports charity, surprised that the government is charitable.
• Do not see it as a black and white issue as mentioned earlier in the exchange with Collins. Treasury therefore seeks to educate the Muslim community of the nature of the abuse problem.
• Treasury tries to explain to the community why the U.S. government acts this way and whether or not a charity engages in legitimate services is not a defense of the terrorist financing activity.
• The last point is the good work that can be accomplished if they (Treasury and Muslim American community) work together. Poncy says this is seen in the guidance put together from Treasury along with Muslim American community and the charitable community to explain what steps they can take to protect their operations and overseas participants. Working closely with the charitable sector has allowed for this guidance so that they know what to be looking for, and what questions they should ask. This would not have been possible without the charitable sector.