The Department of Treasury has continuously mischaracterized international U.S. charities as a national security threat since 2001.

Using Treasury's own data, it is clear that charities do not make up a significant portion of Specially Designated Global Terrorists (SDGTs). These figures suggest that U.S. based charities represent less than two percent of organizations with suspected ties to terrorists.

Anti-Terrorism Financing Overview

January 16, 2012

Since 9/11, measures designed to criminalize financial support for terrorist organizations are increasingly linked to laws and regulations governing charities and non-profits.  Under this framework, repressive regimes and financial institutions can restrict the legitimate activities of civil society through the imposition of extensive legal and financial requirements.   This trend needs to be curbed so the important work that civil society organizations do to address the conditions conducive to the spread of terrorism can continue.

 

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See related issues: Financial Action Task Force (FATF) and Financial Access

Abstract: Anti-Money Laundering and Countering the Financing of Terrorism

Date: 
March 12, 2019

In Untangling a Marriage of Convenience: Anti-Money Laundering and Countering the Financing of Terrorism, authors Tracey Durner and Danielle Cotter argue that, although anti-money laundering (AML) and countering the financing of terrorism (CFT) efforts have much in common, this melding places “undue burden on the private sector to understand the intent of criminals behind the actual transactions.” Some even contend that “misguided” CFT policies are leading to ineffective, and perhaps even harmful results.

Treasury Updates National Terrorist Financing Risk Assessment, Finding Measures to Protect Charities Largely Effective

Date: 
January 8, 2019

The Department of Treasury published an update to its 2015 National Terrorist Financing Risk Assessment (NTFRA) on Dec. 20, 2018 as part of a new National Strategy for Combating Terrorist and Other Illicit Financing, which also covers money laundering and nuclear proliferation.  The NTRFA cited the top threats as ISIS, Hizbollah, Al Qaeda and al-Shabaab and banks and money services businesses as the most vulnerable to abuse. Cash transactions were cited as an increasing threat. The NTFRA recognized that the charitable sector overall is low risk, but noted that charities operating in areas where terrorist groups operate are face increased risk, particularly in Afghanistan, Pakistan, Somalia, Syria and Yemen. The U.S. nonprofit sector provided input to Treasury on the NTFRA, noting that increasing difficulties accessing financial services from regulator providers forces charities to use more risky methods of moving funds, including carrying cash. The NTFRA did not mention this issue.

UNOSC Issues Terror Financing Risk Assessment Guidance

July 31, 2018

A guidance manual issued by the United Nations Office on Drugs and Crime in June 2018 provides a methodology for member states conducting terrorist financing risk assessments. The document, Guidance manual for Member States on terrorist financing risk assessments, notes that terrorist financing needs to be countered in an efficient manner, emphasizing the importance of coordination and cooperation among financial intelligence units, law enforcement entities and intelligence services.
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If it Ain’t Broke …..

Date: 
August 14, 2017
Author: 
Andrea Hall

As the old saying goes, if it ain’t broke, don’t fix it.

The spokesman for the “let’s-shut-down-U.S.-charities-because-they’re-conduits-for-terror-finance” school of thought has been pushing this outdated and discredited narrative in Washington, D.C. over the past year or more. He seems to believe that the Obama administration’s enforcement policy was negligent in its duty to “bust terrorist charities” (his words, not ours), that U.S. nonprofits have been given a free pass over the past eight years, and the result has got to be more terror financing. He is urging lawmakers and the new administration to take us back to the time when he served as a terrorism finance analyst at U.S. Treasury during the George W. Bush administration, and his research seems to reflect those outdated strategies. Since a Hill hearing was held in May 2016, this spokesman has been active in the blogosphere. He has convinced Rep. Ted Poe (R-TX) to introduce a bill that, if passed, would create more problems than it would solve.

C&SN Submits Comments to U.S. Treasury on Update to National Terrorist Financing Risk Assessment

Date: 
June 11, 2018

On June 11, 2018 the Charity & Security Network sent comments to the U.S. Department of Treasuryt regarding its pending update to the 2015 National Terrorist Financing Risk Assessment. Thie comments, which reflect input and insights from C&SN members, also request a meeting to follow up on the April 12 discussion Treasury hosted on this topic. Overall, the comments point out that net risk of terrorist financing abuse of legitimate NPOs is low, due to the combination of government oversight and robust nonprofit sector good governance and due diligence practices. They also note the importance of the need to distinguishing between risks for in two categories - sham/fraudulent charities and abuse of legitimate NPOs - since different types of risk reduction measures are needed for each. 

ODI Report: Impact of Derisking on Humanitarian Response in Yemen

Date: 
February 13, 2018

As bank "derisking" persists, areas of dire humanitarian need around the globe are hardest hit. In the case of Yemen, individuals, nonprofit organizations (NPOs) and businesses alike have been adversely affected by this global trend. 

A new study from the Humanitarian Policy Group at the Overseas Development Institute (ODI), Counterterrorism, de-risking and the humanitarian response in Yemen: a call for action, examines the impact of derisking on humanitarian organizations in Yemen, and the degree of financial access afforded these groups.In Yemen, bank derisking has prevented Yemeni non-governmental organizations (NGOs) from receiving much-needed funds for humanitarian assistance, especially following the onset of war in March 2015, the study found. Derisking is contributing to the war economy and corruption in the country. 

Given the fact that Yemen represents on of the world's largest humanitarian crises, the study highlights the urgent need to address the adverse effects of derisking in the country. 

The study makes four recommendations to alleviate this problem, including facilitating the flow of funds through a proportional approach to counter-terrorist financing (CFT), lifting the economic sanctions on Yemen, revitalizing Yemen's central bank, and revisiting American and European CFT policies. 

Read the full report

Senate Hearing Hits on Derisking, Risk-Based Approach

Date: 
January 11, 2018

In a January 9 Senate Banking committee hearing, both legislators and witnesses touched on the importance of a risk-based approach (RBA) in the federal anti-money laundering and counter-terrorist financing regime. 

While the hearing, Combating Money Laundering and Other Forms of Illicit Finance: Opportunities to Reform and Strengthen BSA Enforcement, mostly focused on information sharing and beneficial ownership, there was much discussion of getting regulators to support the RBA, particularly in regard to bank examinations. The Charity & Security Network has consistently promoted the need for a RBA in combating terror financing, and cited lack of adherence to it as a factor in the global bank derisking crisis that has adversely impacted nonprofit organizations (NPOs). 

In a discussion of greater information sharing as a tool to enhance ALM/CFT programming, Heather Lowe, legal counsel and director of government affairs for Global Financial Integrity, noted that it "needs to be done with some appropriate safeguards, especially where it may result in somebody being delayed banking services." She argued that anyone in such a situation needs "an opportunity to disprove whatever information has been collected on them and give them access if they do have legitimate business." Reliance on misinformation in determining risk has also been cited as a factor in bank derisking of NPOs, and those impacted by this trend have asserted the need to correct any perceived problems or deficiencies. 

Greg Baer, president of the Clearing House Association, introduced discussion of the RBA in his opening remarks: "An effective approach should be risk-based," he said. "Unfortunately, banks have been pushed away from risk-based approaches because their performance is graded not by law enforcement .... but by bank examiners, who do not track how the intelligence is actually used," Baer explained. He noted that this has lead to bank derisking, dropping clients perceived as high risk rather than managing the risks, which undermines development and financial inclusion goals. 

Lowe noted that financial institutions are generally attempting to implement the RBA, but have been stymied by bank examiners who are "not open to the risk-based approach that financial institutions have put in place. They're checking the boxes." Dennis Lormel, president and CEO of DML Associates and the former chief of the FBI's financial crimes program, echoed this assertion when he said, "Regulators now put an emphasis on check boxes. Getting important information from banks to law enforcement has gotten contorted because of perceived concerns of regulators Targeted monitoring is better."

Lowe surmised that bank examiners are reluctant to endorse a RBA because it is more work "when you have a totally risk-based system and can't use one-size-fits-all," adding," That shift needs to happen, and it will be a big one." 

Controversial "Operation Choke Point" Program Has Ended

Date: 
August 21, 2017

Updated August 23, 2017

In an August 16, 2017 letter to Congress, the U.S. Department of Justice (DOJ) announced that its controversial program dubbed "Operation Choke Point" has officially ended. In the letter, DOJ also repudiated the program, which it described as a "misguided initiative." Significantly, the letter states that DOJ "will not discourage the provision of financial services to lawful industries." 

Operation Choke Point was established during the Obama administration to "choke" payday lenders, gun dealers and other business sectors by forcing banks to end relationships with clients deemed "high-risk," a term also used to describe charities in the Bank Examiners Manual. According to the letter to Congress, under the program, a series of subpoenas were issued in 2013, accompanied by a Federal Deposit Insurance Corporation guidance document that listed a number of "elevated risk" merchants. An October 19, 2015, article in American Banker documented the impact on money service businesses and correspondent banks, thereby contributing to the global "de-risking" crisis

Senate Hearings Stress Value of International Aid, Highlight Nonprofit Banking Woes

Date: 
May 10, 2017

Two Senate committee hearings in early May highlighted the importance of philanthropy and international aid, as well as the challenges faced by nonprofits in accessing banking services to finance that aid. 

On May 3, the Senate Foreign Relations Subcommittee on Multilateral, International Development, Multilateral Institutions, and International Economic, Energy and Environmental Policy held a hearing on "Global Philanthropy and Remittances and International Development." Speakers included InterAction CEO Sam Worthington and leaders in global philanthropy. Worthington described ways the U.S. government could improve partnerships with nongovernmental organizations (NGOs), including recognizing NGOs as donors, and leveraging private actors to give NGOs a diplomatic space in which to operate. He noted that 70 percent of international development response in Nigeria, Yemen, Somalia and South Sudan is performed by NGOs. 

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