On August 11, 2010, the commencement of the observance of Ramadan, a charity alert was issued by the United States Treasury Department.  Treasury acknowledged the importance of charitable giving during the month-long observance and used this opportunity to express concern about possible exploitation of all charities by terrorist organizations.  The alert outlines steps for charities and donors to take in order to “guard against terrorist abuse.”

The alert links to a Treasury website that provides information in four areas:

1.      “Private Sector Outreach”

The government provides further links that offer tools for fostering a partnership between the government and charities to identify terrorist concerns.  These links include, for example, Treasury’s Office of Foreign Assets Control “Risk Matrix for the Charitable Sector,” which sets forth the common risk factors related to disbursing funds to grantees (especially overseas).  There is also a valuable link to Treasury’s “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.–Based Charities” and the recently issued “Protecting Charitable Giving Frequently Asked Questions.”

2.      “Coordinated Oversight”

Treasury describes its interactive cooperation with other federal agencies and with state and local officials in developing anti-terrorist abuse policies for charities.  Links with additional relevant information are also provided.

3.      “Targeted Investigation”

Treasury describes the activities of its Office of Intelligence and Analysis, the IRS Criminal Investigation Division and OFAC in investigating terrorist financing in the charitable sector.  Links with additional relevant information are also provided.

4.      “International Engagement”

Treasury describes its information sharing and oversight concerning the national charitable sector through multilateral entities, such as the Financial Action Task Force.  Treasury also provides links with additional relevant information, including a link to FATF’s “International Best Practices for Combating the Abuse of Non-Profit Organizations.”

In the Frequently Asked Questions link, Treasury sets forth the following important advice:

  • “Charities should conduct a risk-assessment of their operations to determine if they are vulnerable to terrorist exploitation, such as the types of activities in which they are engaged and the regions in which they are operating.  OFAC’s Risk Matrix can be a particularly useful tool for this purpose.
  • Charities should consider adopting measures to mitigate these risks, such as those found in the Treasury Department’s Voluntary Guidelines.

For those charities operating in high-risk regions, Treasury provides guidance on how to mitigate the risks of terrorist exploitation. These anti-terrorist financing procedures include, but are not limited to, the following steps that a charity should take before any charitable funds are distributed to foreign recipient organizations:

  • Collect basic information about recipients of funding;
  • Conduct basic vetting of recipient organizations, including checking their names against OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”);
  • Conduct basic vetting of key employees, including checking their names against the SDN List;
  • Review the financial and programmatic operations of the foreign recipient organization (e.g. periodic reports, on-site visits, etc.).“

The Treasury Release and associated links should be studied by all charities and their advisors.