On May 26, 2010 the first Congressional oversight hearing since 9/11 looked at the impact of anti-terrorist financing enforcement policies on the U.S. charitable sector. A Department of Treasury (Treasury) official acknowledged that the laws aimed at stopping terrorist financing have hurt charitable programs. Witnesses from the U.S. nonprofit sector explained the negative impacts on legitimate charities and the chilling effect of Treasury’s authority to shut down organizations without independent oversight or due process. The hearing, Anti-Money Laundering: Blocking Terrorist Financing and Its Impact on Lawful Charities, was held by the House Financial Services Subcommittee on Oversight and Investigations.
- Daniel Glaser, Treasury Department
- Kay Guinane, Charity and Security Network
- Mike German, ACLU
- Matthew Levitt, Washington Institute for Near East Policy
Treasury’s Deputy Assistant Secretary for Terrorist Financing and Financial Crimes, Daniel Glaser testified that “U.S. enforcement actions, including Treasury designations, have had an unfortunate and unintended chilling effect” on charitable contributions. While answering questions from subcommittee chair Dennis Moore (D- KS), who said the laws are impacting “lawful, law-abiding charities,” Glaser said Treasury’s efforts “have made it more difficult for people" to support U.S. charities since 9/11. In written testimony, Glaser added, “this is especially true with respect to charitable interests in servicing vulnerable and needy populations abroad.” Glaser said Treasury takes this problem seriously and is committed to working with the charitable sector to “mitigate the chilling effect.”
In his written testimony Glaser summarized Treasury's view of the problem and the legal framework. Most striking was his claim that "courts consistently have upheld both the Constitutional underpinnings of our authorities and our application of them." [p. 6] This statement ignores the fact that two federal courts have held Treasury's procedures for shutting down charities unconstitutional (see KindHearts and Al-Haramain).
Glaser's written testimony indicated "the total amount of funds blocked due to an interest of U.S.-based charities collectively, is approximately $3.2 million." This number apparently excludes the $5 million the Holy Land Foundation is reported to have had frozen. These funds were forfeited to the government when Holy Land was convicted of supporting terrorism, but their status is uncertain, since Holy Land was unrepresented at the trial and has appealed.
Kay Guinane, Program Manager at the Charity and Security Network, told the subcommittee that “the impact of U.S. Treasury enforcement on legitimate charitable organizations has largely been negative.” She said the “U.S. charitable sector condemns violence and terrorism” and since 9/11, the sector has “taken steps to increase accountability and transparency.” Treasury's unwillingness to withdraw the its Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S. Charities as nonprofit sector leaders have recommended, Guinane said demonstrates Treasury’s “lack of understanding for how charities operate.” She told the subcommittee members that “complete compliance of every suggested practice provides no legal protection” for charities and they risk being shut down and having all of their assets frozen “without notice, opportunity to see the evidence against it or present evidence on its own behalf.”
Her testimony identified problems with freezing funds indefinitely. Guinane said there is “no timeline or process for the long term disposition” of the approximately “$7 million in U.S. charitable funds” and assets seized by Treasury. Treasury has the authority to grant licenses that would allow the transfer of frozen funds for charitable purposes, Guinane said, but Treasury has “refused every request to do so.”
Guinane said she is receptive to meeting with members of the subcommittee and officials from Treasury and other agencies to discuss specific proposals developed by members of the Charity and Security Network.
Michael German, Policy Counsel at the American Civil Liberties Union, told the panel that laws that can make it illegal to promote “peacemaking, conflict resolution and human rights advocacy and the provision of aid to needy civilians” are counterproductive to US counterterrorism goals. "Unfortunately, at a time when humanitarian aid is needed the most, the Treasury Department's capricious, arbitrary and discriminatory enforcement of overbroad US anti-terrorism financing laws has made it far more difficult for nonprofit organizations to provide critical aid and service," German said.
In his written testimony, German provided examples of the severe penalties and lack of process U.S. charities face when sanctioned by Treasury. He cited a federal judge’s ruling that found Treasury’s 2006 seizure of a charity’s (Kindhearts) assets “pending investigation” and without any designation, notice or means of appeal is a violation of the Fourth and Fifth Amendments.
German also described the markedly different treatment of for-profit organizations that have allegedly violated terrorism financing laws demonstrates this unequal enforcement. In contrast to the treatment of U.S. charities, German said, “Chiquita Brands International was allowed to pay a fine of $25 million following its payment of $1.7 million directly to two designated terrorist groups in Colombia between 1997 and 2004. Chiquita admitted to these payments in 2003, but no criminal charges were filed, its assets were never seized or frozen, and Chiquita continues to operate. In another example, OFAC has never designated Halliburton or General Electric, or frozen their assets, despite both companies’ conduct of business with Iran, which is designated as a state sponsor of terrorism.”
Matthew Levitt of the Washington Institute for Near East Policy, said while most charities are “law-abiding,” some are started “with the express purpose of financing terror.” The charitable sector remains vulnerable to terrorist financing Levitt said, because “charities are subjected to lesser regulatory requirements than other entities, such as financial institutions or private companies.” He also said “due diligence on the part of charities is difficult and costly” and only has a “limited value.”