At a hearing last month Sen. Mark Kirk (R-IL) complained to USAID Administrator Rajiv Shah that USAID has not implemented the Partner Vetting System (PVS). Kirk said the program would “ensure U.S. taxpayer money does not go to terrorists…” (Our news story is here.)

But would it? If the program is implemented as outlined in the 2009 Final Rule, it is more likely to alienate communities the U.S. wants to befriend, endanger the safety of aid workers and discourage effective charities from working with USAID. If, on the other hand, the program is re-designed to reflect the best practices developed by nongovernmental organizations and based on decades of experience, then PVS could turn out to be an effective means of protecting resources from diversion to terrorists. So far, there is no public information to indicate USAID is undertaking such a shift, although Shah has said they are working on vetting systems in a variety of conflict zones.
With the outcome uncertain, the question is, will PVS be one of the good, bad or ugly counterterrorism measures adopted by the U.S.? (Here I am borrowing from the analytic framework of the Fourth Freedom Forum‘s analysis of U.S. counterterrorism measures.)   USAID consultation with the nonprofit sector is crucial, so that the outcome benefits from the experience and expertise within the sector.
A key point to remember: U.S. nonprofits strongly support smart and effective due diligence and vetting procedures to make sure their assets are used exclusively for charitable purposes, and are not diverted to terrorism or any other illegal use. When nonprofits are critical of bad or ugly due diligence it is not because they don’t think due diligence is important, but because these practices (described below) are harmful to their programs and wasteful of limited resources.
For due diligence of humanitarian and development programs, the good, bad and ugly shape up like this:
Good due diligence measures
There are many collections of best practices for nonprofits that operate international programs. You can see a list of examples here. In addition to careful planning and implementation practices, and thorough documentation of financial transactions, one thing they have in common is an emphasis on strong ties and relationships in the communities where programs operate. For grantmakers, it is called “Know Your Grantee.” For operating charities the same principle applies.  Frequent site visits, research on the local community and maintenance of long term relationships with key local contacts provide in-depth knowledge about the people running local organizations and their place in the community.
Ethical principles are also brought to bear on operations. For example, the International Committee of the Red Cross Code of Conduct requires that “the humanitarian imperative comes first” and bans discrimination in aid eligibility determinations. The Do No Harm Handbook provides methods for avoiding negative impact for assistance programs in conflict areas. It recognizes that “assistance is often used and misused by people in conflicts to pursue political and military advantage,” and offers tools to understand how this occurs and prevent it.
The nonprofit sector is continuously evaluating and improving these practices to address current conditions on the ground. Launched in 1997, the Sphere Project is a collaboration of humanitarian NGOs and the Red Cross and Red Crescent movement. The Sphere Handbook was updated in April 2011 “to improve the quality of humanitarian response to populations affected by disaster and armed conflict…”
Bad due diligence measures
The Department of Treasury’s Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S. Based Charities win the prize for bad due diligence practices. These Guidelines, drafted without consultation with the nonprofit sector, have been consistently criticized by foundations and charities as unhelpful and potentially harmful. However, Treasury insists on keeping them. Many of the due diligence practices it encourages, such as anti-terrorist certifications, are unrealistic and ineffective.

As many nonprofits have noted, there is nothing to stop a determined terrorist from signing a certification, while charities operating in good faith cannot guarantee the future and are reluctant to sign certifications that attest to facts they have no way of knowing.  The Guidelines take a one-size-fits-all approach that is ill-suited to the variety of international charities and the different cultural, economic and security situations in locations where they operate.

The emphasis on broad information collection and reporting suggest charities are agents of government, undermining key relationships on the ground and threatening the safety of humanitarian workers. Heavy reliance on checking names of board members, key employees, recipients and others against Treasury’s terrorist list as a means of preventing diversion of funds to terrorists ignores alternative, more effective due diligence practices. Finally, following the Guidelines does not give a charity any credit for operating in good faith should Treasury decide to shut them down.

The types of “bad” due diligence measures reflected by the Treasury Guidelines do not replace a charity’s need to do “good” due diligence, as described above. Instead it creates additional work and expense that adds little or nothing in terms of protecting charitable resources. For example, many charities and grantmakers use expensive computer software to check names against watch lists, but rarely if ever, get a match. When names do match, further investigation usually proves it to be a false positive. I have heard this story over and over, but never heard about list checking coming up with a positive match. The explanation is simple: charities select the people they work with based on traditional, know-your-grantee principles, and their detailed knowledge of the communities where they work. So the names going into the list checking programs have essentially been pre-vetted.
Why do charities continue to waste time and resources on these ineffective measures? The answer is it is essentially a token gesture to keep an ill-informed government agency from interfering further in their operations.
Ugly due diligence practices
The USAID Partner Vetting System, as designed and currently in operation in the West Bank and Gaza, wins the Ugly due diligence award. Here is how it works: imagine you are a volunteer at a local charity, and your program depends on USAID funding. The U.S. charity, which controls the USAID funds you need to operate comes to the office as says, “Before we go any further, we need your name, place and date of birth, government identification number, home address, employer, citizenship and more so we can send it all to the U.S. government and have it fed into secret intelligence databases.”
What would you say? Would you object to turning your personal information over to a foreign government? Does your organization go without the USAID funds? How do you feel about the U.S. charity partner now? People you thought you had a working relationship with suddenly treat you like a suspected criminal. Do you become reluctant to share information about your community because it may be turned over to foreign intelligence services?
The PVS model in the 2009 Final Rule will harm partnerships U.S. charities have with local leaders and charities, without producing useful results. As Evan Elliott of InterAction stated at a March 2009 panel, “It’s almost silly to think that an FBI analyst here in the United States, sitting at a computer looking at a list, is going to be more effective in screening a potential employee than an NGO would be that has years of experience working in a particular community.”