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Sunday, November 18, 2007

CHARITIES AS POLICEMEN

Unbeknownst to many charities, they have been recruited as policemen in the war on terror. Anti-terrorist measures impose penalties on grant-making nonprofit organizations that make grants to individuals or organizations that engage in or support terrorism - nonprofits who fail to police their grantmaking and properly investigate their grant recipients could find themselves in trouble. Therefore, nonprofit organizations making grants abroad need to be knowledgeable of these counterterrorism measures and comply with them. Unfortunately, the exact scope of protective measures that needs to be undertaken to avoid penalties is not clear.

The key provisions that nonprofits need to be wary of are:

a. Executive Order 13224 (Sept. 14, 2001) entitled "Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism." The Executive Order prohibits transactions with individuals and entities deemed to be associated with terrorism. It blocks any assets controlled by the terrorist persons and those that have supported them. What is most troublesome about the Executive Order is that there is no knowledge or intent requirement. A nonprofit that has no intent to support terrorism and has no knowledge that it is doing so can still have its assets frozen if in fact a grant recipient is associated with terrorism; and

b. The USA PATRIOT ACT (10/26/01) imposes civil fines and imprisonment for persons providing material support or resources to terrorists.

So what should nonprofits do to minimize their exposure under these provisions? At a minimum, before making grants to foreign organizations or individuals (or even domestic organizations), they need to consult the government lists that identify organizations and individuals suspected of having connections to terrorism. The principal list is the Specially Designated Nationals list (the "SDN list") maintained by the Treasury Department's Office of Foreign Assets Control ("OFAC") and accessible at www.ustreas.gov/offices/enforcement/ofac/sdn. Other lists include the U.S. Government Terrorist Exclusion List ("TEL") maintained by the Department of Justice and lists maintained by the United Nations and the European Union. As a practical matter, nonprofits should consider subscribing to a commercial service that scans the databases. One of these is the OFAC Analyzer, accessible at http://www.ofac.us/index.cfm.

Various agencies and organizations have issued guidance on additional actions that nonprofits should undertake, beyond checking the lists. However, meeting all suggested actions would be cumbersome, expensive, if not near impossible for many nonprofits. Therefore, nonprofits will need to develop their own internal guidelines based on these recommendations - understanding that the further they stray from the recommendations the greater their exposure if in fact they unknowingly make a prohibited grant but balancing their budget, staff availability and other constraints on full compliance. The guidelines that should be reviewed in developing internal guidelines are:

a. The 2006 Treasury Department "Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S. Based Charities." These can be viewed online at:

 http://www.treas.gov/offices/enforcement/key-issues/protecting/charities-intro.shtml.

b. The Principles of International Charity, available online at:

http://www.independentsector.org/PDFs/treasury_guidelines.pdf.

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