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Nonprofits and Antiterrorism: An Interview with Amit Sharma of the U.S. Treasury

On September 29, the U.S. Department of the Treasury released revised anti-terrorist financing guidelines. Dan Moore, GuideStar's vice president for public affairs, asked Amit Sharma, Treasury's senior advisor to the assistant secretary for terrorist financing, to elaborate on the topic for our readers.
GuideStar: We've just commemorated the fifth anniversary of the terrorist attacks of September 11th. With the anniversary as a backdrop, can you give us an update on the U.S. government's response—the global war on terrorism? What's important for the U.S. charitable sector to know and understand?

Sharma: The U.S. government continues to actively combat terrorism on a number of fronts, including our efforts with respect to combating terrorist financing. The unfortunate reality for all of us, is that the charitable sector continues to remain particularly vulnerable to exploitation by terrorist groups. We have seen, and continue to see, this globally, whether related to diverting funds to support terrorist acts themselves, or by terrorist groups taking advantage of good faith donor support and providing humanitarian assistance to gain support for their organization and continued support for their activities. What is important is that the charitable sector remains vigilant to these threats, and where necessary takes the appropriate steps to protect themselves from potential abuse. The Treasury Department has put together a lot of information on the nature of this abuse, which we urge the charitable sector to take a look at, including an updated version of the Anti-Terrorist Financing Guidelines. We also think it is important to continue our outreach, not only to educate the sector about what we see, but also to learn about what the sector itself is facing, and what steps it is taking to ensure that the integrity of its operations remains intact, and that legitimate humanitarian relief gets to intended beneficiaries.

GuideStar: Before September 11, 2001, not many people were aware of possible connections between charity and terrorism. Since then, we've needed to learn new acronyms like OFAC—the Office of Foreign Assets Control in the Department of Treasury—and USA Patriot Act—Unite and Strengthen America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. We've read about a number of nonprofits in the U.S. and abroad that have been identified as having suspected ties with terrorist groups. As leaders of nonprofit organizations, what do we need to know about the ties between charity and terrorism? Are they real? How wide spread a problem is it?

Sharma: Unfortunately, the threat is very real, and it is ongoing. Just recently we designated a charity operating in southern Lebanon—the Islamic Resistance Support Organization (IRSO). This is an organization that was explicitly raising funds not only for charitable activities, but also for rockets, bombs, and guns, to support Hezbollah. What leaders of nonprofit organizations need to know is that abuse can come in many forms. Not only can terrorists divert charitable resources toward terrorist activities, but they can in fact engage in the delivery of legitimate charitable activity as well. Many do so explicitly so they can ensure they continue to receive support from vulnerable populations in need, because it forms a recruiting base for them, and provides cover for their terrorist activities. Terrorists like to keep one foot in the legitimate space while operating with another foot in the illegitimate space. Designated terrorist groups around the world have been found, and continue to be seen, engaged in charitable activities, and this takes advantage of good faith donors. What leaders should also be aware of is how they can protect themselves from this risk—which means doing their due diligence. Understanding the nature of the threat is the first step—understanding the risks a charity faces given where and how it operates, and applying safeguards that are commensurate with that risk is necessary.

GuideStar: Our readers represent nonprofits in all mission categories, both domestic and international. They need news that they can use to help them accomplish their missions, raise funds, improve their programs, and comply with federal, state, and local regulations. What is most important for them to understand and to incorporate into their practices? What are the rules? Do they apply to leaders operating a Little League in Ames, Iowa, as well as to an international relief agency providing direct services to earthquake victims in Pakistan?

Sharma: First of all, we do not think that there is a specific kind or subset of charities that are inherently risky while others face no risk. Charities of all kinds, and engaged in a number of different missions—poverty alleviation, education, health, environment—they all operate in different environments, and some of those environments are more vulnerable or susceptible to the risk of terrorist financing. What we have always said, is that because different charities face different risks, and they operate across the entire terrorist financing risk spectrum, their countermeasures should be commensurate to that risk. The guidance we have issued also reinforces this concept. Thus we look to charities to understand the risks they face, and apply measures that are appropriate for their risks. The Little League in Ames, Iowa, faces a different risk to terrorist financing threats than one that provides services to earthquake victims in Pakistan. Naturally, charities engaged in those activities should protect themselves from exploitation and abuse by terrorists, as this helps to protect the integrity of their operations, and will provide much greater confidence to donors who support such vital work. This work is too important to have exploited or abused by terrorists.

GuideStar: Nonprofit organizations rely on the generosity of donors. That tends to make nonprofit leaders a generous group of donors in their own right. What do we need to know as donors? Should we be concerned about our donations to help respond to the Tsunami crisis in Southeast Asia or in response to earthquakes in Pakistan? What do we need to do to help out but not create any problems for ourselves?

Sharma: Donors should confirm that the charities they work with engage in appropriate due diligence, notably charities operating in high-risk areas, to help ensure their donations are going to legitimate ends. Thus, donors will have more confidence in the work they are supporting. After all, donors want to know that their money/food/support is going to intended beneficiaries and is also not benefiting terrorism.

GuideStar: Will the U.S. government provide a safe harbor that tells us all of the necessary steps of due diligence? Will it release an approved list of charities that are safe to contribute to?

Sharma: There are a number of reasons why the government cannot—and should not—provide an approved list. The Treasury Department believes that publishing such a list is not an appropriate mechanism to address this problem. As an initial matter, we are reluctant to identify specific charities as "safe," as creating such a list could never be comprehensive and might therefore inappropriately disadvantage some legitimate organizations. More importantly, we cannot provide safe harbor to organizations via a "safe" listing or other U.S. government labeling. Charities chosen or labeled as "safe" could nevertheless be manipulated for terrorist financing purposes. In fact, such charities might more likely be targeted as vehicles by terrorists or their supporters.

GuideStar: How do we balance complexity and uncertainty with added costs of doing business? How much is enough when no matter how much we do we still have possible liability?

Sharma: This is an excellent question and one faced by all sectors and in many different environments. Weighing the cost of compliance with the benefits of business will always be a challenge. It is an even more important issue in the charitable sector, where peoples' lives are often at stake as they are dependent on charitable works for support. The benefits of due diligence to prevent terrorist financing exploitation in charities can not be underscored and ultimately outweigh the alternative.

GuideStar: Thank you for helping our readers understand more about this important topic.

More information on the Patriot Act and OFAC.
Topics: Law and Regulations