Anti-terrorism financing

A small number of Minneapolis-area Somali money transfer shops have reopened amid heightened scrutiny from banks, reports the Minnesota Star Tribune on Jan. 25, 2012. Though the amount transferable is limited to $500, the services are the only means many Somali-Americans have available to send remittances to family living in Somalia, a country lacking a functioning government or banking system, and plagued by drought and civil strife for almost 20 years. The inability of nearly 70,000 Somalis that live in the state to send money home had drawn strong criticism from Sen. Al Franken (D-MN) and other Minnesota legislators. At the end of December, the state's 14 Somali money transfer shops were shut down after the last Minnesota bank to wire money to Somalia closed their accounts.

On Feb.13, the U.S. Court of Appeals for the District of Columbia upheld a lower court decision that allowed the Treasury Department's Office of Foreign Assets Control (OFAC) to freeze the assets of the Missouri-based Islamic American Relief Agency. The court said the asset seizure was lawful because the court found the organization is an affiliate of a Sudanese group that was designated as a terrorist organization in 2004, making this the first case to allow such designation based solely on an alleged branch relationship. There was no finding that the U.S. group used funds to support terrorist activities, and no criminal charges have been filed.

For years, charities put on U.S. terrorist watch lists by the Department of Treasury (Treasury) have had problems defending themselves, in part because, except in limited circumstances, it was illegal for lawyers to represent them without first getting a license from Treasury. That could be a slow and difficult process. But on Dec. 7, 2010 Treasury took a significant step toward solving this problem by issuing new regulations that permit free legal services and make it easier to arrange payment for lawyers. The move follows an ACLU lawsuit involving the old regulations. 

On Oct. 4, 2010, three leaders of Care International Inc., a defunct Massachusetts charity, argued their appeal of convictions for failing to report information about the charity’s newsletter to the Internal Revenue Service (IRS).   In 2005 federal prosecutors accused them of supporting jihadist movements.   Despite the prosecution’s claim that the cases were about supporting terrorism, the only charges made were related to tax fraud and no evidence of the use of charities to promote terrorism was produced during trial. 

On Jan. 11, three former leaders of an Islamic charity based in Boston were convicted of tax fraud and making false statements because they did not include a description of their newsletter and its content in their tax-exempt status application and annual Internal Revenue Service (IRS) Form 990 filings. The prosecution argued that the now-defunct group, Care International, supported jihadist movements in articles in its newsletter and postings on its website. The defense argued that no funds went to jihadist groups and that the leaders were being prosecuted for expressing unpopular political views. The convictions, which could result in prison terms of up to five years, are being appealed. The circumstances of the case, combined with public statements of the prosecutors, raise questions about the free expression rights of nonprofits and the level of detail required when reporting to the IRS.