Frozen Funds

If a charity's assets and funds, including donations, are seized by the government, there is no process to release the charitable funds to programs that respect the intentions of the donors. Frozen charitable funds seized by the government is estimated between $7-19.8 million. 

CSN's Principles and Procedures for the Release of Frozen Funds for Charitable Purposes

 

Frozen Funds

KindHearts Case Timeline

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Date: 
July 9, 2010

On Aug. 18, 2009, a federal judge ruled the Treasury Department’s seizure of a charity’s assets without notice or means of appeal is a violation of the Fourth and Fifth Amendments. KindHearts for Charitable Humanitarian Development was shut down by the Treasury Department "pending investigation" on Feb. 19, 2006.  To date it has not been designated as a supporter of terrorism. This timeline details the issues and procedural history of the case, which illustrates the problems created by using post 9/11 emergency measures for long term regulation of charities in the national security context.

KindHearts, Government To Settle Case Challenging Process to Shutter Charity

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Date: 
January 16, 2012

In late December 2011 an Ohio based charity whose assets were frozen by the Treasury Department in 2006 "pending investigation" into possible ties to terrorism  announced it is dissolving, the Associated Press reports. KindHearts for Charitable Humanitarian Development (KindHearts) successfully challenged the constitutionality of Treasury's process in shutting it down and the court ordered further proceedings to decide on a remedy. According to a Dec. 31, 2011 court filing, KindHearts and the government have reached a settlement that “provides for a number of preliminary steps prior to dismissal of this case. The parties anticipate completing those steps by July 1, 2012.” No other details of the agreement have been made public.

Review of Legislative History Shows Treasury's Position on Frozen Charitable Funds Without Basis

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Date: 
June 15, 2011
Author: 
Sahar Aziz, Senior Legal Advisor to the Charity and Security Network

Representatives of the U.S. nonprofit sector have been seeking release of frozen charitable funds for charitable purposes since 2006 when 20 organizations sent a letter to the Department of Treasury asking for release of the funds for charitable purposes. Specific procedures based on current Treasury regulations were proposed. However, Treasury rejected the request, and continues to resist releasing the funds, based on a claim that Congress intended the funds to be held in case victims of terrorism file suit against the shut down charities. Since that has only happened in one case, the rest of the funds remain frozen indefinitely. The Charity and Security Network undertook research of the Congressional Record and the law and found no evidence to support Treasury's position. This memo describes the outcome of that research in detail.

Chart: How Many Children Could be Helped if Frozen Charitable Funds Were Released?

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Date: 
November 9, 2009

The Office of Foreign Assets Control report for 2009 indicates up to $19.8 million in assets have been frozen for individuals and entities on its watchlist. There is no public information on how much of that comes from charities, but news reports indicate at least $7 million in U.S. charitable assets are frozen.

Instead of the money remaining frozen at Treasury, the money could be used to help millions of children and families in need. As an example, we used statistics from the US Fund for UNICEF* to illustrate how frozen funds could be used for immunizing children, clean water and shelter for displaced families.

One Year After Cairo Speech, Obama Needs to Address Charitable Problems

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Date: 
June 16, 2010

Sahar Aziz has written a blog on the CNN.com website about the need for changing the “draconian legal regime” that restricts U.S. humanitarian aid organizations and prevents millions of privately raised dollars from being used for their charitable purposes. Aziz says reform measures should include judicial oversight of Treasury’s designation process to ensure an independent review of the process. Currently, Treasury acts as prosecutor, judge, jury and executor of any group either designated or “pending investigation.” (See KindHearts case)

Charity and Security Network 2008 Reform Proposals

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The following proposals that would allow legitimate charitable work to be completed were submitted to the Obama transition team in late 2008:

Trick or Treat for Frozen Funds

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Date: 
November 16, 2009
Author: 
Kay Guinane

On Halloween a neighborhood kid dressed as a vampire stopped by my house collecting for UNICEF, the United Nations fund for children founded in 1946 "to work with others to overcome the obstacles that poverty, violence, disease and discrimination place in a child’s path." She had a chart that outlined how many children could be helped with small donations. For example, $25 wil

UK Court Rules Asset Freeze Process Exceeds Government Authority

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Date: 
February 11, 2010

On Jan. 27, the United Kingdom (UK) Supreme Court upheld a challenge to asset freezing orders against five suspected terrorists, who said the 2006 orders should have been considered and approved by Parliament. None of the five have been charged with a terrorism related offense. The court suspended its judgment for 30 days, and UK Treasury officials said they would seek fast-track passage of legislation on asset freezing. That may change the current program, as Parliament may consider fairness problems in the current program that were cited by the court.

Summary of Economic Sanctions Laws and Regulations Authorizing Treasury to Shut Down Charities

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Date: 
September 15, 2009

The legal authority for the Department of Treasury to designate a person or organization as a Specially Designated Global Terrorist (SDGT) or freeze assets "pending investigation" is based on laws providing for economic sanctions against foreign nations, going back to the Trading With the Enemy Act in 1917 and ending with the Patriot Act.  

Kindhearts v. Treasury: Successfully Challenging the Constitutionality of Treasury Shutting Down a Charity

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Date: 
November 24, 2009

The Aug. 18, 2009 federal court ruling in KindHearts v. Treasury is a positive step forward in the ongoing efforts of U.S. charities to make national security laws fair and ensure they protect vulnerable people that depend on charities for vital aid. The 100 page order found that the Department of Treasury's (Treasury) seizure of KindHearts assets without notice or means of appeal is a violation of the Fourth and Fifth Amendments.