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31 October 2006
[Federal Register: October 31, 2006 (Volume 71, Number 210)]
[Notices]
[Page 63838-63848]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc06-116]
=======================================================================
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DEPARTMENT OF THE TREASURY
Anti-Terrorist Financing Guidelines: Voluntary Best Practices for
U.S.-Based Charities
AGENCY: Office of Terrorism and Financial Crime, Treasury.
ACTION: Notice of updated guidelines.
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SUMMARY: The U.S. Department of Treasury (``Treasury'') is publishing
an updated version of its Anti-Terrorist Financing Guidelines:
Voluntary Best Practices for U.S.-Based Charities (``Guidelines'')
along with a new Annex. The Guidelines were originally released in
November 2002. A revised version of the Guidelines was published for
public comment on December 5, 2005. Treasury received nine (9) comments
on the revised Guidelines and, as explained below, made a number of
additional revisions in response to those comments.
DATES: Effective Date: The updated Guidelines were published on
Treasury's Web site on September 29, 2006.
FOR FURTHER INFORMATION CONTACT: Office of Terrorist Financing and
Financial Crime, Department of the Treasury, Washington, DC 20220:
(202) 622-3786 (not a toll-free call).
SUPPLEMENTARY INFORMATION: The Guidelines, the Response to Comments
Submitted on the U.S. Department of the Treasury Anti-Terrorist
Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities
(``Response''), and additional information concerning the protection of
charities are available on the Treasury's Web site at http://
http://www.treas.gov/gov/offices/enforcement/key-issues/protecting/.
The Response and Guidelines are reprinted below.
Dated: October 16, 2006.
Patrick M. O'Brien,
Assistant Secretary of the Treasury.
Response to Comments Submitted on the U.S. Department of the Treasury
Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-
Based Charities
In response to the threat of terrorist financing in the charitable
sector and to assist charities in protecting themselves from such
abuse, Treasury initially
[[Page 63839]]
released its Anti-Terrorist Financing Guidelines: Voluntary Best
Practices for U.S.-Based Charities (Guidelines) in November 2002. After
receiving numerous comments from the sector regarding these Guidelines,
Treasury hosted an Initial Outreach Event in April 2004, at which time
Secretary Snow committed that Treasury would continue to work with the
sector to amend and revise the Guidelines to improve their utility for
the sector in protecting against terrorist abuse. On December 5, 2005,
after extensive discussions with other government authorities and the
charitable sector, Treasury released a draft revised version of the
Guidelines and invited public comment on the revisions.
Treasury received a total of nine submissions during the comment
period from a wide range of organizations. A number of organizations
prefaced their comments with a general recommendation that Treasury
withdraw the Guidelines based on their perception that the Guidelines
are potentially harmful to the charitable sector given existing
regulations governing the operations of charities. We do not believe
that the voluntary adoption of the Guidelines--whereby charities with a
higher risk of vulnerability to terrorist financing should consider
adopting the best practices to better defend against that risk--would
adversely affect the financial health, or obstruct the day-to-day
operations, of the charitable sector.
Treasury is uniquely positioned to provide recommended measures to
the charitable sector that are particularly relevant for combating the
ongoing and pervasive terrorist abuse and exploitation of charities.
Such voluntary measures are intended to assist charities build upon
pre-existing controls and protective measures by adopting and applying
appropriate counter-terrorist financing safeguards. Treasury also
believes the sector is better served through ongoing dialogue regarding
the evolving nature of the terrorist threat, particularly with respect
to the charitable sector, and effective voluntary protective measures
that the sector can adopt to combat this threat.
Treasury initially conceived the Guidelines as a direct response to
requests from the sector for policies and practices to protect against
potential terrorist abuse and assist in compliance with new terrorist
financing authorities, including Executive Order 13224. The Guidelines
not only provide such measures in the form of voluntary ``best
practices,'' but their release initiated a strong and ongoing dialogue
with the charitable sector. This dialogue has led to a greater
awareness of the risks of terrorist abuse in the charitable sector, and
as a result, charities have adopted more proactive approaches to
protect their assets and the integrity of their operations. Treasury's
engagement with the sector has also resulted in the evolution of the
Guidelines into a more effective, relevant, and applicable resource for
the sector. In addition, we encourage charities to consult other
available publications or materials on good governance and sound
charitable practices. We hope that the adoption of the policies and
procedures contained in the Guidelines serve to strengthen donor
confidence and contribute to the charitable sector's continued
vitality.
For the above reasons, Treasury has not withdrawn the Guidelines.
Instead, after careful consideration of all comments and
recommendations, Treasury has further amended the Guidelines to enhance
their usefulness for the charitable sector in adopting practices that
better protect it from the risks of terrorist abuse. The purpose of
this document is to summarize the content of the comments received and
describe our response, including any changes to the Guidelines and the
reasoning supporting those changes. The summary of the comment
submissions has been organized according to the layout of the
Guidelines.
1. Title
Comments: Many commenters indicated that part of the title of the
Guidelines, ``Voluntary Best Practices,'' is a misrepresentation for
two reasons. First, the commenters stressed that it is inaccurate to
suggest that the Guidelines are a compilation of the charitable
sector's best practices. Due to the diversity within the charitable
sector, there is not a commonly agreed upon set of best practices that
applies to all charities. Second, many commenters expressed the belief
that the Guidelines are not voluntary. Their concern is based primarily
upon the recent incorporation of the Guidelines into the memorandum
accompanying the regulations for the 2006 Combined Federal Campaign
(CFC), issued by the Office of Personnel Management (OPM). Moreover,
concern exists that other federal agencies will adopt the
recommendations included in the Guidelines as requirements, thus
conferring upon the Guidelines de facto legal authority. A few
commenters suggested that Treasury should change the title of the
Guidelines to ``Suggestions for Complying with Anti-Terrorist Financing
Laws.''
Treasury Response: Although we acknowledge the concerns of the
commenters, the title of the Guidelines remains unchanged, because it
does not misrepresent the purpose and intent of the Guidelines. We
believe the Guidelines represent sound best practices that help to
prevent terrorist abuse of charitable organizations, and were, in fact,
conceived after reviewing a wide spectrum of existing due diligence
best practices employed by the sector. To address the concerns of the
commenters, we have revised the Introduction to the Guidelines to state
more clearly that these best practices are neither exhaustive nor
comprehensive. Rather, the Guidelines represent one set of best
practices specifically aimed at combating terrorist financing. Other
best practices may exist that would be more suitable for combating
other abuses that charities may face, but which may also be relevant or
helpful in protecting charities from terrorist abuse. Nonetheless, the
Guidelines contain many best practices that will help charities in
adopting an appropriate risk-based approach to protect their assets and
operations from terrorist financing abuse and facilitate their
compliance with existing U.S. legal obligations, including the Office
of Foreign Assets Control (OFAC) administered sanctions programs.
Similarly, we disagree that the Guidelines may become de facto
legal requirements. We have been clear both in the Introduction to the
Guidelines, as well in our public discourse regarding the Guidelines,
that they are voluntary and do not create, modify, or supersede any
existing U.S. legal requirements. In addition to the title, their
voluntary nature is reiterated throughout the text of the Guidelines.
We have also amended Footnote 1 (formerly Footnote 3) to make clear
that non-adherence to the Guidelines does not, in and of itself,
constitute a violation of existing U.S. law. Moreover, the
incorporation of the Guidelines into the CFC commentary does not
indicate the evolution of the Guidelines from a voluntary undertaking
to a legal requirement, but, in fact, speaks to their usefulness as
practical advice to protect charities from abuse. The incorporation of
the Guidelines by other federal agencies encourages consistency across
the U.S. Government and signals the acceptance of the central tenet of
the Guidelines--charities should apply a risk-based approach in
adopting appropriate measures to protect themselves against the threat
of terrorist abuse. For these reasons, we have not changed the title to
the Guidelines.
[[Page 63840]]
2. Introduction
Comments: Many commenters expressed concern that the introductory
paragraphs broadly overstate the extent of diversion of charitable
assets to terrorist organizations and their support networks. In
particular, several comments singled out the following sentence:
``Investigations have revealed terrorist abuse of charitable
organizations, both in the United States and worldwide, often through
the diversion of donations intended for humanitarian purposes but
funneled instead to terrorists, their support networks, and their
operations.'' The commenters recommended that Treasury include data and
other information to support these statements.
Treasury Response: We have taken this comment under advisement and
have revised the sentence quoted above by including an Annex that
describes and references the various indicators of terrorist financing
in the charitable sector. There exists a large library of open source
information describing the use of charities by terrorists and their
supporters that is available to the public. Terrorist financing risk in
the sector is evidenced by: (i) open source media reports; (ii)
designations of charities; (iii) results of investigations and
prosecutions of charities and individuals associated with charities;
and (iv) international actions. The Annex also notes that much of the
information evidencing the terrorist financing risk in the charitable
sector is available on Treasury's Web site at http://www.treas.gov/offices/enforcement/key-issues/protecting/index.shtml.
3. Fundamental Principles
Comments: Several commenters noted that the Guidelines do not
include two principles from Principles of International Charity, which
was developed by the Treasury Guidelines Working Group of Charitable
Sector Organizations and Advisors and released in March 2005. The first
principle asserts that charitable organizations are non-governmental
entities and are not agents for enforcement of U.S. or foreign laws or
their policies. The second principle states that each charity ``must
safeguard its relationship with the communities it serves in order to
deliver effective programs. This relationship is founded on local
understanding and acceptance of the independence of the charitable
organization.''
Treasury Response: We agree with both of these principles.
Therefore, we have revised the first principle in Fundamental
Principles to state: ``Charities are independent entities and are not
part of the U.S. Government. Like all U.S. persons, charitable
organizations must comply with the laws of the United States, which
include, but are not limited to, all OFAC administered sanctions
programs.'' With this revision, we recognize the necessity of
independence for charities to perform their work effectively. We also
acknowledge that charities, by virtue of their separation from the
government, are not agents for the enforcement of U.S. or foreign laws
or their respective policies. Moreover, we do not believe that
charities become agents of the government by virtue of their obligation
to abide by U.S. law, or by applying any of the best practices within
the Guidelines. Based on this revision, we do not think it is necessary
to revise the Fundamental Principles further to include the second
principle, because our revision captures the meaning, and is consistent
with, the second principle. The recognition of the independence of
charities ensures that the foundation forming a charity's relationship
with the community it serves will not be shaken.
4. Governance, Financial Practice, and Disclosure/Transparency
Comments: This section will group together comments falling under
the sections for Governance, Financial Practice, and Disclosure/
Transparency in Governance and Finances, due to the interrelated nature
of those comments. Several commenters suggested combining the Financial
Practice section with the Disclosure/Transparency section into one
section, entitled ``Accountability.'' The commenters felt that such a
section, dealing only with financial practices, would be more
applicable to Treasury's expertise.
In the event that Treasury should choose to keep the practices
pertaining to governance in the Guidelines, the commenters recommended
the following specific changes:
Section III.B: A few commenters noted the need for an
appropriate exception to the suggestion that the governing board of a
charity consist of at least three members. They explained that this
provision does not take into account certain trusts, religious
organizations, and corporation soles, which may not be able to have
more than one member on the board.
Section III.B.4: Many commenters expressed concern with
the provision recommending that governing board records be immediately
turned over to appropriate law enforcement authorities, stating that
such a provision goes beyond federal and state disclosure laws and
constitutional protections.
Section V.B: Two commenters noted that the definition of
``key employees'' expands on the definition contained in Form 990 from
the Internal Revenue Service (IRS), and it could be interpreted to
include people who exert influence over charitable activities, but who
are not directly related to the charitable projects.
Section V.A.3: One commenter remarked on the lack of a
definition for subsidiaries or affiliates and cited the need for
clarification.
Section IV.C: One commenter stated that the provision in
the Guidelines recommending independent audits for charitable
organizations if the charity's annual gross income exceeds $250,000 is
inconsistent with the auditing standards issued by OMB Circular A-133.
Treasury Response: Based on the comments received, we extensively
reorganized these three sections to clarify the objectives of each
section:
We changed the original section, ``Governance,'' to
``Governance Accountability and Transparency.'' Within this section, we
incorporated all provisions relating to governance from the original
``Disclosure/Transparency'' section.
We renamed the original ``Financial Practice/
Accountability'' section to ``Financial Accountability and
Transparency'' and incorporated all provisions relating to financial
practice from the original ``Disclosure/Transparency'' section.
We revised the original ``Disclosure/Transparency''
section and renamed it ``Programmatic Verification,'' which conveys the
purpose of its remaining provisions more clearly, and aligns more
closely with existing international best practices for non-profit
organizations. It also incorporates the provisions on how charities
should best review the programmatic operations of their grantees, which
were originally located in the final section on anti-terrorist
financing best practices.
We also considered the specific comments received on these three
sections and made the following revisions (the section numbers
correspond with the current sections in the Guidelines).
Section III.B: We deleted the provision calling for a
minimum of three members on the governing board of a charity. We agreed
with the commenters that this provision did not adequately take into
account the existence of certain types of organizations that would not
be able to
[[Page 63841]]
meet this recommendation. Thus, we revised the section that originally
discussed best practices for a charity's board of directors, renaming
it, ``Independent Oversight.'' Within this section, we added a preamble
conveying the importance of both independent oversight of charitable
organizations and flexibility for an organization to choose the
oversight structure that best fits its needs. We have also included the
acknowledgement that independent oversight may be unfeasible for
certain charitable organizations, such as houses of worship and
corporation soles. The remaining provisions within this oversight
section merely highlight certain basic principles that are hallmarks of
good governance: (i) Independence of the governing board; (ii)
development of conflict of interest policies and procedures; (iii)
accountability of the governing board; and (iv) recordkeeping.
Section III.B.2: We agreed with one commenter's concern
about the confusion caused by a governance provision calling for the
board to adopt, implement, and oversee practices consistent with the
principles contained in the Guidelines. We understand that some may
interpret the provision to mean that the best practices provided in the
Guidelines are either mandatory or represent a comprehensive list of
best practices to protect against terrorist financing in the charitable
sector. As stated earlier, the Guidelines do not purport to be an
exhaustive compilation of best practices, and are voluntary. Therefore,
we have changed this provision to clarify that members of a charity's
governing board are responsible for the oversight of practices that
will effectively safeguard charitable assets.
Section III.B.6: We have added a footnote (Footnote 6)
defining subsidiaries and affiliates, as the terms are used in the
Guidelines. The definition is similar to the one used by Form 990:
``Subsidiaries or affiliates are organizations that are subject to the
general supervision or control of a parent or central organization.''
Section III.B.7: In response to some commenters' concern
with the provision governing the disclosure of records, we revised the
provision to state the following: ``When served with process or when
other appropriate authorization exists, charities should produce
requested records maintained in accordance with these Guidelines to the
appropriate regulatory/supervisory and law enforcement authorities in a
timely fashion.''
Section III.C: We agreed with the commenters who noted the
difference between the definition of key employees in the Guidelines
and the definition used by the IRS. We amended the definition of key
employees to mirror the definition used by the IRS in Form 990.
Section IV.C: We disagree that the Guidelines are
inconsistent with the audit standards set forth by OMB Circular A-133.
First, OMB Circular A-133 only applies to audits performed on
expenditures of federal grants or awards. While many charities may
receive federal grants, the Guidelines are intended to provide best
practices that charities may apply regardless of whether they receive
federal funds or private donations. Second, while Circular A-133 sets
standards among Federal and State governments regarding the audits of
non-profit organizations expending federal awards, it does not preclude
charities from having additional independent audits performed if they
wish. Third, as stated in the eighth footnote of the Guidelines, the
$250,000 threshold figure is drawn from the June 2005 final report to
Congress of the Panel on the Nonprofit Sector, convened by Independent
Sector, and is thereby consistent with industry's suggested threshold.
Finally, the Guidelines are not obligatory, but voluntary steps that
charities may choose to take as additional protective measures. Thus,
the provision on financial audits remains unchanged in the Guidelines.
5. Anti-Terrorist Financing Best Practices
Comments: The majority of the comment submissions expressed
concerns with various provisions in this section. The following
summarizes the specific comments:
Section VI: One commenter noted the difficulty of
assessing risk pursuant to the Guidelines' risk-based approach without
any corresponding advice.
Sections VI.A and B: Several comments focused on the
amount of information-collection provisions, regarding them as onerous,
unrealistic, and having limited value in protecting against terrorist
financing.
Sections VI.B.1 and 4: Many commenters objected to the
inclusion of the publicly available information, including the
Internet, as a means to vet grantees or employees. They argued that
Internet searches would yield widely varying and unverified information
about certain organizations or individuals.
Section VI.B.3: A few commenters objected to the
incorporation of other government lists of designated parties created
pursuant to UNSCR 1373. They claimed that Treasury is inadvertently
legitimizing these other lists by citing to them.
Section VI.B.5: A few comments focused on the provision
suggesting that charities request certifications from grantees with
whom they contract or work. They suggested deleting the provision or at
least revising the certification to adopt the approach of the 2006 CFC.
This approach would involve a grantee certifying its compliance with
U.S. law, as opposed to certifying that it has checked certain lists.
Section VI.D: Some commenters recommended deleting the
voluntary reporting provision in its entirety, arguing that it creates
the impression that charitable organizations are agents of the U.S.
Government.
One commenter suggested the Guidelines should explicitly
state that it is permissible for a charity to engage in normally
prohibited transactions with a group, entity, or individual on the
Specially Designated Nationals and Blocked Persons List (SDN List) if
OFAC issues a license to charities for such transactions.
Treasury Response: We have made the following revisions to the
anti-terrorist financing best practices section based on the comments
(the section numbers correspond with the current sections in the
Guidelines):
Section VI: In response to the comment requesting further
assistance in assessing the risk of terrorist abuse or exploitation,
Treasury continues to produce information and engage in outreach to
assist charities in understanding the nature of ongoing terrorist
abuse. Such materials and outreach are available on or through the
Treasury Web site and are further described or referenced in the Annex
to the Guidelines.
Sections VI.A and B: We disagree with the comment that the
information-collection procedures are burdensome and of little utility.
We recognize that the information-collection practices are expansive
and are purposefully designed so that a charity can gather as much
information as possible to ensure the greatest transparency and
accountability over charitable operations. This type of information-
gathering is essential for the charity to know its grantees and to be
assured that its assets will not be diverted to terrorist organizations
or their support networks. Moreover, the general risk-based approach
governing the Guidelines affords charities the opportunity to tailor
the scope of these information-collection procedures to the terrorist
financing risk they face. A charity
[[Page 63842]]
should perform its own terrorist financing risk assessment based on its
particular operations and projects. Depending on its particular risk
profile, a charity should then choose appropriate protective measures
that will adequately safeguard its assets from terrorist financing
abuse and ensure their delivery to legitimate beneficiaries. As stated
above, the best practices of the Guidelines are not a comprehensive or
exhaustive listing of all best practices. Charities are free to apply
other measures that they believe will protect their assets from
diversion.
In order to lessen any perceived administrative burden on
charities, we have amended the Guidelines by replacing the word
``recipient'' with ``grantee'' throughout the document and defining
``grantee''. This revision is intended to clarify the information-
collection recommendations by explaining what charities should do for
immediate grantees versus downstream grantees. ``Grantee'' is defined
as an immediate grantee of charitable resources or services. To the
extent reasonably practicable, charitable organizations should also
apply or ensure the existence of applicable safeguards in any
downstream sub-grantees or recipients to protect charitable resources
from diversion. Finally, we caution charities against entering into a
relationship with a grantee where any doubts exist about the grantee's
ability to ensure safe delivery of charitable resources.
Sections VI.B.1 and 5: We agree with commenters that the
Internet often provides information that may be false or unverified.
For this reason, we have removed the clause suggesting that charities
look to the Internet for further information about potential grantees
or employees. However, the Guidelines still encourage charities to
employ all reasonably available means, including publicly available
information, to determine the level of risk accompanying a particular
charitable operation or when engaging in appropriate vetting
procedures. List-checking alone does not guarantee the safe delivery of
charitable assets to intended beneficiaries. Properly using publicly
available resources, such as open source media reports or other federal
agency lists and information, can provide a charity with adequate and
comprehensive information from which to make informed decisions about
the kinds of protective measures it should take.
Section VI.B.4: We do not agree with commenters that
Treasury is legitimizing the UNSCR 1373 lists adopted by other
governments by merely providing information that such lists exist. The
purpose of including information on UNSCR 1373 lists in the Guidelines
is not to endorse such lists, but to provide charities with an
understanding of the varying laws under which they may operate in other
jurisdictions. However, in response to the objections raised in some
comments and to clarify the purpose of the information, we have added
the following sentence to Footnote 14: ``The Guidelines do not
legitimize or endorse the UNSCR 1373 lists adopted by foreign
jurisdictions.''
Section VI.B.6: We agree with the importance of carrying a
consistent message throughout the U.S. Government. For that reason, we
have accepted the suggestion of one commenter to align the
certification more closely with the one adopted in the 2006 CFC. The
new provision also delineates different certifications for U.S. and
foreign grantees. Instead of having grantees certify that they checked
the SDN List, the new certification suggests that U.S. grantees certify
that they are in compliance with all laws restricting U.S. persons from
dealing with parties subject to OFAC sanctions. With regard to foreign
grantees, they should certify that they do not deal with parties
subject to OFAC sanctions or anyone else known to support terrorism.
Section VI.D: We disagree with the notion that the
voluntary reporting provision creates the impression that charities are
agents of the U.S. Government. As with all parts of the Guidelines,
this provision is voluntary and charities are not under any obligation
to report any information. This provision is also consistent with U.S.
guidance to other sectors regarding terrorist financing or other
illicit finance risks. In addition, we have clearly acknowledged in the
Fundamental Principles of the Guidelines that charitable organizations
are independent entities and are not a part of the U.S. Government. The
voluntary reporting measure explains what steps a charity may
proactively take to assist in protecting itself from abuse by
terrorists and their support networks. Since charities occasionally
have direct access to evidence of terrorist activities in the course of
their operations, voluntarily reporting such evidence provides the
appropriate authorities with the opportunity to conduct further
investigations, and helps reduce the threat that terrorist financing
poses to the charitable sector. Thus, the provision is an important
component of anti-terrorist financing best practices, and it remains in
the Guidelines with only minor changes.
While the comment regarding OFAC's licensing authority is
accurate, we believe that the Guidelines make sufficient reference to
this authority in Footnote 2 (formerly Footnote 8), which states:
``OFAC can issue licenses to U.S. persons to engage in transactions
that would otherwise be prohibited, if there is a policy-permissible
reason to do so, and if permitted by statute.'' In addition, the
footnote refers to further information, available on OFAC's Web site,
regarding licensing procedures for non-profit organizations wishing to
undertake humanitarian activities in sanctioned countries. To provide
more information on licensing, we have added the link to OFAC's Web
site, which has information about the types of available licenses and
the process for requesting a license.
Conclusion
As the Annex to the Guidelines illustrates, the risk of terrorist
abuse of the charitable sector is both ongoing and significant.
Recognition of this reality is the first step in finding ways to
protect both donors and charities.
Treasury is sensitive to the concerns raised by the charitable
sector and appreciates the insightful comments submitted. The release
of these revised Guidelines reflects a further positive development in
the ongoing dialogue between the charitable sector and Treasury.
Treasury believes that the Guidelines offer a framework of voluntary
best practices that is attuned to the unique challenges and risks
facing charities. These best practices provide the necessary framework
to safeguard against terrorist abuse of the charitable sector by
offering protective measures to help ensure that the vital services
provided by charities are not exploited by terrorists or their
organizations.
Treasury remains deeply committed to working with the charitable
community on future initiatives to combat terrorist abuses. While
Treasury believes that the Guidelines represent a positive step in
combating terrorist abuse of the charitable sector, the Guidelines also
underscore the need for continued public outreach as a critical element
of our comprehensive approach to combating terrorist abuse of the
charitable sector.
[[Page 63843]]
U.S. Department of the Treasury Anti-Terrorist Financing Guidelines:
Voluntary Best Practices for U.S.-Based Charities \1\
---------------------------------------------------------------------------
\1\ This document is a revised version of the original Anti-
Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-
Based Charities released by the U.S. Department of the Treasury in
November 2002. This revised version incorporates comments received
in response to the issuance of the draft revised Guidelines released
for public comment in December 2005.
These Guidelines are designed to assist charities that attempt
in good faith to protect themselves from terrorist abuse and are not
intended to address the problem of organizations that use the cover
of charitable work, whether real or perceived, to provide support to
terrorist groups or fronts operating on behalf of terrorist groups.
Non-adherence to these Guidelines, in and of itself, does not
constitute a violation of existing U.S. law. Conversely, adherence
to these Guidelines does not excuse any person (individual or
entity) from compliance with any local, state, or federal law or
regulation, nor does it release any person from or constitute a
legal defense against any civil or criminal liability for violating
any such law or regulation. In particular, adherence to these
Guidelines shall not be construed to preclude any criminal charge,
civil fine, or other action by Treasury or the Department of Justice
against persons who engage in prohibited transactions with persons
designated pursuant to the Antiterrorism and Effective Death Penalty
Act of 1996, as amended, or with those that are designated under the
criteria defining prohibited persons in the relevant Executive
orders issued pursuant to statute, such as the International
Emergency Economic Powers Act, as amended. Please see Footnote 12
for an explanation of the master list of Specially Designated
Nationals (the ``SDN List''), which includes all such designated
persons. These Guidelines are also separate and apart from
requirements that apply to charitable organizations under the
Internal Revenue Code (``IRC'').
---------------------------------------------------------------------------
Table of Contents
I. Introduction
II. Fundamental Principles of Good Charitable Practice
III. Governance Accountability and Transparency
IV. Financial Accountability and Transparency
V. Programmatic Verification
VI. Anti-Terrorist Financing Best Practices
I. Introduction
Upon issuance of Executive Order 13224, President George W. Bush
directed the U.S. Department of the Treasury (``Treasury'') to work
with other elements of the federal government and the international
community to develop a comprehensive and sustained campaign against the
sources and conduits of terrorist financing. Investigations have
revealed terrorist abuse of charitable organizations, both in the
United States and worldwide, to raise and move funds, provide
logistical support, encourage terrorist recruitment or otherwise
cultivate support for terrorist organizations and operations. This
abuse threatens to undermine donor confidence and jeopardizes the
integrity of the charitable sector, whose services are indispensable to
both national and world communities.
In response to this threat, Treasury first released the Anti-
Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based
Charities (``Guidelines'') in November 2002. In December 2005, based on
extensive review and comment by public and private sector interested
parties, Treasury revised and released the Guidelines in draft form for
further public comment. Based on the comments received, Treasury has
further amended the Guidelines to improve their utility to the
charitable sector in adopting practices that can better protect it from
terrorists and their support networks.
The Guidelines are designed to enhance awareness in the donor and
charitable communities of the kinds of practices that charities may
adopt to reduce the risk of terrorist financing or abuse. These
Guidelines are voluntary and do not create, supersede, or modify
current or future legal requirements applicable to U.S. persons,
including U.S. non-profit institutions. Adherence to these guidelines
does not constitute a legal defense against any civil or criminal
liability for violating any local, state, or federal law or
regulations. In addition, these Guidelines do not represent an
exhaustive or comprehensive compilation of best practices. Many
charities, through their extensive experience and expertise in
delivering international aid, have already developed effective internal
controls and practices that lessen the risk of terrorist financing or
abuse. In view of this fact, Treasury does not want charities to
abandon proven internal controls and practices. Rather, the Guidelines
are intended to assist charities in developing, re-evaluating, or
strengthening a risk-based approach to guard against the threat of
diversion of charitable funds or exploitation of charitable activity by
terrorist organizations and their support networks.
In addition, these Guidelines are intended to assist charities in
understanding and facilitating compliance with preexisting U.S. legal
requirements related to combating terrorist financing, which include,
but are not limited to, various sanctions programs administered by the
Office of Foreign Assets Control (``OFAC''). These preexisting legal
requirements are clearly marked in the text of the Guidelines.
The risk-based nature of these Guidelines reflects Treasury's
recognition that a ``one-size-fits-all'' approach is untenable and
inappropriate due to the diversity of the charitable sector and its
operations. Accordingly, certain aspects of the Guidelines will not be
applicable to every charity, charitable activity, or circumstance.
Moreover, Treasury acknowledges that certain exigent circumstances
(such as catastrophic disasters) may make application of the Guidelines
difficult. In such cases, charities should maintain a risk-based
approach that includes all prudent and reasonable measures that are
feasible under the circumstances. Charities and donors are encouraged
to consult these Guidelines when considering protective measures to
prevent infiltration, exploitation, or abuse by terrorists. Although
adherence to these Guidelines does not guarantee protection from
terrorist abuse, effective internal controls which incorporate the
principles and practices set forth in these Guidelines can prevent the
diversion of charitable resources from their proper uses, as well as
identify situations involving terrorist financing or abuse.
Treasury recognizes the vital importance of the charitable
community in providing essential services around the world. Treasury
also understands the difficulty of providing assistance to those in
need, often in remote and inaccessible regions, and applauds the
efforts of the charitable community to meet such needs. The goal of
these Guidelines is to facilitate legitimate charitable efforts and
protect the integrity of the charitable sector and good faith donors by
offering the sector ways to prevent terrorist organizations from
exploiting charitable activities for their own benefit.
II. Fundamental Principles of Good Charitable Practice
A. Charities are independent entities and are not part of the U.S.
Government. Like all U.S. persons, charitable organizations must comply
with the laws of the United States, which include, but are not limited
to, all OFAC-administered sanctions programs.\2\
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\2\ OFAC sanctions programs include those relating to particular
countries or regimes (country-based programs), as well as those
relating to groups, individuals, or entities engaged in specific
activities (list-based programs). Sanctions programs normally: (i)
prohibit U.S. persons from engaging in certain transactions, such as
trade in goods and services and financial transactions, and/or (ii)
require U.S. persons to block the assets and property of persons
designated under the relevant Executive order or law. The particular
prohibitions and/or obligations of U.S. persons vary by program.
OFAC can issue licenses to U.S. persons to engage in transactions
that would otherwise be prohibited, if there is a policy-permissible
reason to do so, and if permitted by statute. Further information on
how to apply for specific licenses is available at http://www.treas.gov/offices/enforcement/ofac/faq/index.shtml#license
.
For further information on OFAC-administered sanctions programs
and general licensing under these programs, please see http://www.treas.gov/offices/enforcement/ofac
.
OFAC guidelines for non-governmental organizations wishing to
undertake humanitarian activities in sanctioned countries are
available at http://www.treas.gov/offices/enforcement/ofac/regulations/ngo_reg.pdf
.
Other helpful guidance materials for charities relating to
protection from terrorist abuse may be found at http://www.treas.gov/offices/enforcement/key-issues/protecting/index.shtml
.
The United States relies on a wide array of federal criminal
statutes in fighting the threat of terrorist financing. Charities
should be particularly aware that in its efforts against the
financing of terrorism, the U.S. relies on, among others, the
federal statutes that prohibit:
the financing of terrorism (18 U.S.C. 2339C),
providing material support or resources to terrorists
(18 U.S.C. 2339A), and
providing material support or resources to designated
terrorist organizations (18 U.S.C. 2339B).
In that effort, the U.S. also particularly relies upon the
federal statutes which criminalize:
the laundering of monetary instruments (18 U.S.C.
1956), and
engaging in monetary transactions in property derived
from specified unlawful activity (18 U.S.C. 1957).
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[[Page 63844]]
B. Charitable organizations are encouraged to adopt practices in
addition to those required by law that provide additional assurances
that all assets \3\ are used exclusively for charitable or other
legitimate purposes.\4\
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\3\ An asset is any item of value, including, but not limited
to, services, resources, business, equitable holdings, real estate,
stocks, bonds, mutual funds, currency, certificates of deposit, bank
accounts, trust funds, and the property and investments placed
therein.
\4\ A charitable organization may never use charitable assets
for illegal purposes; however, a charitable organization may accrue
unrelated business taxable income in the course of legitimately
doing business as a charitable organization. Even though an
organization is recognized as tax exempt, it still may be liable for
tax on its unrelated business taxable income.
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C. Individuals acting in a fiduciary capacity for any charitable
organization should exercise due care in the performance of their
responsibilities, consistent with applicable common law as well as
local, state, and federal statutes and regulations.
D. Governance, fiscal and programmatic responsibility and
accountability are essential components of charitable work and must be
reflected at every level of a charitable organization and its
operations.
III. Governance Accountability and Transparency
A. Governing Instruments: Charitable organizations should operate
in accordance with governing instruments, e.g., charter, articles of
incorporation, bylaws, etc. The governing instruments should:
1. Delineate the charity's basic goal(s) and purpose(s);
2. Define the structure of the charity, including the composition
of its governing body, how such body is selected and replaced, and the
authority and responsibilities of the body;
3. Set forth requirements concerning financial reporting,
accountability, and practices for solicitation and distribution of
funds; and
4. State that the charity shall comply with all applicable local,
state, and federal laws and regulations.
B. Independent Oversight: It is important for charitable
organizations to have independent oversight of charitable operations,
and each charitable organization should determine what oversight
structure best suits that organization and will provide for unbiased
scrutiny of its operations. The following provisions set forth basic
principles for the creation of a transparent and accountable oversight
body (the ``governing board'').
1. Members of the governing board ordinarily should not have an
active role in the day-to-day management of the charitable
organization.\5\
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\5\ Certain charitable organizations, such as houses of worship,
certain trusts, and corporations sole, may not be able to apply this
practice due to their varying organizational and operational
structures.
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The charity should establish a conflict of interest policy for both
members of the governing board and employees. That policy should
establish procedures to be followed if a member of the governing board
or employee has a conflict of interest or a perceived conflict of
interest relating to the management or operations of the charity.
2. The governing board should be responsible for the charitable
organization's compliance with relevant laws, its finances and
accounting practices and for the adoption, implementation, and
oversight of practices, including financial recordkeeping that will
safeguard charitable assets effectively.
3. The governing board should maintain records of its decisions.
4. Charities should maintain and make publicly available a current
list of members of the governing board, their salaries and their
affiliation with any subsidiary or affiliate of the charitable
organization.
5. While fully respecting individual privacy rights, charities
should maintain records of additional identifying information about the
members of the governing board, such as available home, email and URL
addresses, social security number, citizenship, etc.
6. While fully respecting individual privacy rights, charities
should maintain records of identifying information for the members of
the governing boards of any subsidiaries or affiliates \6\ receiving
funds from them.
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\6\ Subsidiaries or affiliates are organizations that are
subject to the general supervision or control of a parent or central
organization.
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7. When served with process or when other appropriate authorization
exists, charities should produce requested records maintained in
accordance with these Guidelines to the appropriate regulatory/
supervisory and law enforcement authorities in a timely fashion.
C. Key Employees \7\
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\7\ Key employees include not only highly compensated employees
but employees who have responsibilities, powers, or influence
similar to those of officials, directors, or trustees. Key employees
also include chief management and administrative officials of a
charitable organization, including those involved in the
disbursement of funds.
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1. Charities should maintain and make publicly available a current
list of their five highest paid or most influential employees (the key
employees) and the salaries and direct or indirect benefits they
receive.
2. While fully respecting individual privacy rights, charities
should maintain records containing identifying information (such as
available home, email and URL addresses, social security or other
identification number--e.g., taxpayer identification number, national
identity, or passport number--citizenship, etc.) about their key, non-
U.S. employees working abroad. Such information should be similar to
that maintained by charities in the normal course of operations about
all U.S. employees, wherever employed, and foreign employees working in
the United States.
3. While fully respecting individual privacy rights, charities
should maintain records containing identifying information for the key
employees of any subsidiaries or affiliates receiving funds from them.
IV. Financial Accountability and Transparency
A. The charity should have a budget, adopted in advance on an
annual basis and approved and overseen by the governing board.
B. The governing board should appoint one individual to serve as
the financial/accounting officer who should be responsible for day-to-
day control over the charity's assets.
[[Page 63845]]
C. If the charity's total annual gross income exceeds $250,000,\8\
the governing board should select an independent certified public
accounting firm to audit the finances of the charity and to issue a
publicly available, audited financial statement on an annual basis.
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\8\ The $250,000 figure is drawn from the June 2005 final report
to Congress of the Panel on the Nonprofit Sector, convened by
Independent Sector. This report, which offers a comprehensive
approach to improving oversight and governance of charitable
organizations, recommends independent financial audits for charities
that have more than $250,000 in total annual revenue. This report is
available at http://www.nonprofitpanel.org/final/.
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D. Solicitations for Funds
1. The charity should clearly state its goals for and purposes of
soliciting funds so that anyone examining the charity's disbursement of
funds can determine whether the charity is adhering to those goals.
2. Solicitations for donations should accurately and transparently
tell donors how and where their donations are going to be expended.
3. The charity should substantiate on request that solicitations
and informational materials, distributed by any means, are accurate,
truthful, and not misleading, in whole or in part.
4. The charity should fully, immediately, and publicly disclose if
it makes a determination that circumstances justify applying funds for
a charitable purpose different from the purpose for which such funds
were contributed or solicited.
E. Receipt and Disbursement of Funds
1. The charity should account for all funds received and disbursed
in accordance with generally accepted accounting principles and the
requirements of the Internal Revenue Code. The charity should maintain
records of the salaries it pays and the expenses it incurs
(domestically and internationally).
2. The charity should include in its accounting of all charitable
disbursements the name of each grantee,\9\ the amount disbursed, the
date, and form of payment for each disbursement.
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\9\ The term ``grantee,'' as it is used throughout these
Guidelines, means an immediate grantee of charitable resources or
services. To the extent reasonably practicable, charitable
organizations should also apply or ensure the existence of
applicable safeguards (as described in Sections III, IV, V, and VI)
in any downstream sub-grantees or recipients to protect charitable
resources from exploitation by terrorists, terrorist organizations,
or terrorist supporters. Charities should not enter into a
relationship with a grantee where any doubts exist about the
grantee's ability to ensure safe delivery of charitable resources
independent of influence by or association with any terrorist
organization.
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3. The charity, after recording, should promptly deposit all
received funds into an account maintained by the charity at a financial
institution. In particular, all currency donated should be promptly
deposited into the charity's financial institution account.
4. The charity should make disbursements by check or wire transfer
rather than in currency whenever such financial arrangements are
reasonably available. Where these financial services do not exist or
other exigencies require making disbursements in currency (as in the
case of humanitarian assistance provided in rural areas of many
developing countries, or in remote areas afflicted by natural
disasters), the charity should disburse the currency in the smallest
increments sufficient to meet immediate and short-term needs or
specific projects/initiatives rather than in large sums intended to
cover needs over an extended time frame, and it should exercise
oversight regarding the use of the currency for the intended charitable
purposes, including keeping detailed internal records of such currency
disbursements.
F. Mechanisms for Public Disclosure of Distribution of Resources and
Services
1. The charity should maintain and make publicly available a
current list of any branches, subsidiaries, and/or affiliates that
receive resources and/or services from the charity.
2. The charity should make publicly available or provide to any
member of the general public, upon request, an annual report. The
annual report should describe the charity's purpose(s), programs,
activities, tax exempt status, the structure and responsibility of the
governing board of the charity, and financial information.
3. The charity should make publicly available or provide to any
member of the general public, upon request, complete annual financial
statements, including a summary of the results of the charity's most
recent audit. The financial statements should present the overall
financial condition of the charity and its financial activities in
accordance with generally accepted accounting principles and reporting
practices.
V. Programmatic Verification
A. Supplying Resources
When supplying charitable resources (monetary and in-kind
contributions), fiscal responsibility on the part of a charity should
include:
1. Determining that the potential grantee of monetary or in-kind
contributions has the ability to both accomplish the charitable purpose
of the grant and protect the resources from diversion to non-charitable
purposes or exploitation by terrorist organizations and/or their
support networks;
2. Reducing the terms of the grant to a written agreement signed by
both the charity and the grantee;
3. Ongoing monitoring of the grantee and the activities funded
under the grant for the term of the grant; and
4. Correcting any misuse of resources by the grantee and
terminating the relationship should misuse continue.
B. Supplying Services
When supplying charitable services, fiscal responsibility on the
part of a charity should include:
1. Appropriate measures to reduce the risk that its assets would be
used for non-charitable purposes or exploitation by terrorist
organizations and/or their support networks; and
2. Sufficient auditing or accounting controls to trace services or
commodities between delivery by the charity and/or service provider and
use by the grantee.
C. Programmatic Review
The charity should review the programmatic and financial operations
of each grantee as follows:
1. The charity should require periodic reports from grantees on
their operational activities and their use of the disbursed funds;
2. The charity should require grantees to take reasonable steps to
ensure that funds provided by the charity are neither distributed to
terrorists or their support networks nor used for activities that
support terrorism or terrorist organizations. Periodically, a grantee
should apprise the charity of the steps it has taken to meet this goal;
and
3. The charity should perform routine, on-site audits of grantees
to the extent reasonable--consistent with the size of the disbursement,
the cost of the audit, and the risks of diversion or abuse of
charitable resources--to ensure that the grantee has taken adequate
measures to protect its charitable resources from diversion to, or
abuse or influence by, terrorists or their support networks.
VI. Anti-Terrorist Financing Best Practices
Charities should consider taking the following steps before
distributing any charitable funds (and in-kind contributions). As
explained in Section I, these suggested steps are voluntary. The
purpose of these steps is to enable charities to better protect
themselves from the risk of terrorist abuse and to
[[Page 63846]]
facilitate compliance with U.S. laws, statutes, and regulations, with
which all U.S. persons, including U.S. charities, must comply.
Depending upon the risk profile of an individual charitable
organization, adopting all of these steps may not be applicable or
appropriate. When taking these steps, charities should apply a risk-
based approach, particularly with respect to engagement with foreign
grantees due to the increased risks associated with overseas charitable
activity.
A. The charity should collect the following basic information about
grantees:
1. The grantee's name in English, in the language of origin, and
any acronym or other names used to identify the grantee; \10\
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\10\ Charities should also be mindful of the possibility that a
grantee may have changed its name or transformed its organizational
structure to avoid being associated with prior questionable
activity. If a charity has any reason to believe that the grantee is
operating under a different identity or has used a different name in
the past, the charity should undertake reasonable efforts to uncover
any such prior identity or name.
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2. The jurisdictions in which a grantee maintains a physical
presence;
3. Any reasonably available historical information about the
grantee that assures the charity of the grantee's identity and
integrity, including: (i) the jurisdiction in which a grantee
organization is incorporated or formed; (ii) copies of incorporating or
other governing instruments; (iii) information on the individuals who
formed and operate the organization; and (iv) information relating to
the grantee's operating history;
4. The available postal, e-mail and URL addresses and phone number
of each place of business of a grantee;
5. A statement of the principal purpose of the grantee, including a
detailed report of the grantee's projects and goals;
6. The names and available postal, e-mail and URL addresses of
individuals, entities, or organizations to which the grantee currently
provides or proposes to provide funding, services, or material support,
to the extent reasonably discoverable;
7. The names and available postal, e-mail and URL addresses of any
subcontracting organizations utilized by the grantee;
8. Copies of any public filings or releases made by the grantee,
including the most recent official registry documents, annual reports,
and annual filings with the pertinent government, as applicable; and
9. The grantee's sources of income, such as official grants,
private endowments, and commercial activities.
B. The charity should conduct basic vetting of grantees as follows:
1. The charity should conduct a reasonable search of publicly
available information to determine whether the grantee is suspected of
activity relating to terrorism, including terrorist financing or other
support. Charities should not enter into a relationship with a grantee
where any terrorist-related suspicions exist; \11\
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\11\ List-checking alone (as described throughout this section)
does not guarantee the safe and secure delivery of charitable funds
and services in high-risk areas. For this reason, the Guidelines
encourage charities to employ all reasonably available resources
both when determining the level of risk in a particular charitable
operation and when engaging in appropriate vetting procedures. One
example of publicly available information of which charities should
be aware is the Terrorist Exclusion List (the ``TEL''). The TEL was
created pursuant to the USA PATRIOT Act, which authorizes the
Secretary of State to designate organizations or groups for
inclusion on the TEL in consultation with or upon the request of the
Attorney General. Inclusion on the TEL allows the U.S. Government to
exclude or deport aliens who provide material assistance to, or
solicit assistance for, designated TEL organizations. Although many
of the organizations included on the TEL are also included on the
Office of Foreign Assets Control (``OFAC'') SDN List, several TEL
organizations are not listed on the SDN List because of the
different purposes and legal criteria associated with these lists.
TEL designations do not trigger any legal obligations for U.S.
persons; however, the TEL does provide charities with additional
terrorist-related information that may assist charities in making
well-informed decisions on how best to protect themselves from
terrorist abuse or association. For further information regarding
the TEL, including access to the list containing all TEL designees,
please refer to the U.S. Department of State's Web site at http://www.state.gov/s/ct/rls/fs/2004/32678.htm
.
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2. The charity should assure itself that grantees do not appear on
OFAC's master list of Specially Designated Nationals (the ``SDN
List''), maintained on OFAC's Web site at http://www.treas.gov/offices/enforcement/ofac/sdn/
,\12\ and are not otherwise subject to OFAC
sanctions.\13\
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\12\ The master SDN List is an integrated listing of designated
parties with whom U.S. persons are prohibited from providing
services or conducting transactions and whose assets are blocked.
OFAC's designations are available in a variety of formats and can
easily be broken down into subsets of the master list by program, by
country of residency, individuals vs. entities, and other variations
for appropriate use in a charity's risk-based approach. Each charity
should determine which OFAC listings align with the specific risks
the charity faces in its operations and should check grantees
accordingly.
OFAC routinely updates information on its targets, including
persons designated under country-based and list-based economic
sanctions programs, such as individuals and entities designated
under the various Executive orders and statutes aimed at terrorism.
OFAC offers a free email subscription service that enables
subscribers to keep current with these updates. With respect to
terrorism-related OFAC sanctions programs, SDN listings include
persons designated under Executive Order 13224, Executive Order
12947, or the Antiterrorism and Effective Death Penalty Act of 1996,
as amended; such persons are called ``Specially Designated Global
Terrorists'' or ``SDGTs'', ``Specially Designated Terrorists'' or
``SDTs'', or ``Foreign Terrorist Organizations'' or ``FTOs'',
respectively. SDN listings also include parties subject to OFAC
sanctions pursuant to other list-based programs (such as counter-WMD
proliferation and counter-narcotics) and country-based programs.
In addition to checking appropriate SDN listings, charities
should consult OFAC's Web site for other information relating to
sanctioned activities or countries that may implicate their
operations.
\13\ As discussed in Footnote 12, the SDN List is an integrated
list of individuals, organizations, and entities that the U.S.
Government has designated pursuant to both country-based and list-
based OFAC administered sanctions programs. U.S. persons, including
U.S.-based charities, are prohibited from dealing with any of the
parties included on the SDN List. A charity wishing to engage in
activity in a country subject to economic sanctions should contact
OFAC directly about any authorizations necessary to engage in such
activity. Although the SDN List includes persons meeting the
criteria established in the authorities or Executive orders that
define certain OFAC sanctions programs, transactions with actors not
named on the SDN List may nevertheless violate U.S. sanctions due to
interests of designated parties in such transactions or prohibitions
owing to country-based OFAC administered sanctions programs. For
example, if a charity engages in a particular transaction with a
party not on the SDN List that involves the property or interests in
property of a designated actor, the transaction may be subject to
OFAC sanctions. This underscores the importance of charities knowing
their grantees and monitoring their programs and transactions
through the use of appropriate due diligence measures. Therefore,
while the SDN List is a critically important compliance tool that
can assist charities in meeting their legal obligations under the
variety of sanctions programs that OFAC administers, it should only
form one part of a charitable organization's broader risk-based
approach to protect against the risks of terrorist abuse.
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3. With respect to key employees, members of the governing board,
or other senior management at a grantee's principal place of business,
and for key employees at the grantee's other business locations, the
charity should, to the extent reasonable, obtain the full name in
English, in the language of
[[Page 63847]]
origin, and any acronym or other names used; nationality; citizenship;
current country of residence; and place and date of birth. The charity
should assure itself that none of these individuals is subject to OFAC
sanctions.
4. Charities should be aware that other nations may have their own
lists of designated terrorist-related individuals, entities, or
organizations pursuant to national obligations arising from United
Nations Security Council Resolution 1373 (2001).\14\
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\14\ Under United Nations Security Council Resolution 1373
(2001) (UNSCR 1373), UN Member States must generally freeze without
delay the funds and other financial assets or economic resources of
persons financing or otherwise supporting terrorist activity or
terrorist-related individuals, entities, or organizations. In
addition, UN Member States must generally prohibit their nationals
from engaging in transactions with such parties. In order to
implement these obligations under UNSCR 1373, each UN member state
should, as a practical matter, develop its own list of parties
sanctioned under the criteria of UNSCR 1373. For example, the SDN
List incorporates those parties designated by the United States
pursuant to its national obligations under UNSCR 1373.
The Guidelines do not legitimize or endorse the UNSCR 1373 lists
adopted by foreign jurisdictions. Rather, this information is
intended to assist charities in developing their own risk-based
programs based upon a full understanding of the law in those
jurisdictions in which they may operate. Charities operating in a
foreign jurisdiction may choose to take the additional precautionary
measures of determining whether that jurisdiction maintains a
national list under UNSCR 1373 and screening the identities of
grantee organizations (including their directors and key employees)
against any such list. Such precautionary measures may protect
charities from potential sanctions or other consequences to which
they might be subject from foreign jurisdictions as a result of
engaging in transactions with individuals, entities, or
organizations deemed to be financing or otherwise supportive of
terrorist activity under the laws of those jurisdictions.
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5. With respect to the key employees, members of the governing
board, or other senior management described in the preceding paragraph,
the charity should also consider consulting publicly available
information to ensure that such parties are not reasonably suspected of
activity relating to terrorism, including terrorist financing or other
support; and
6. As a pre-condition to the issuance of a charitable grant, the
charity should require grantees to certify that they are in compliance
with all laws, statutes, and regulations restricting U.S. persons from
dealing with any individuals, entities, or groups subject to OFAC
sanctions, or, in the case of foreign grantees, that they do not deal
with any individuals, entities, or groups subject to OFAC sanctions or
any other persons known to the foreign grantee to support terrorism or
to have violated OFAC sanctions.
C. The charity should conduct basic vetting of its own key
employees as follows:
1. The charity should conduct a reasonable search of publicly
available information to determine whether any of its key employees is
suspected of activity relating to terrorism, including terrorist
financing or other support. Charities should not employ a person where
any terrorist-related suspicions exist; and
2. The charity should assure itself that none of its key employees
is subject to OFAC sanctions or have violated OFAC sanctions.
D. Should a charity's vetting practices lead to a finding that any
of its own key employees, any of its grantees, or any of the key
employees, members of the governing board, or other senior management
of its grantees is suspected of activity relating to terrorism,
including terrorist financing or other support, there are a number of
available mechanisms and resources that a charity may utilize:
1. If the charity believes there is a match between the name of one
of the individuals or organizations listed above and a name on the SDN
List, the charity should take appropriate due diligence steps to
ascertain whether the match is valid. These steps and further guidance
are available on OFAC's Web site at http://www.treas.gov/offices/enforcement/ofac/faq/answer.shtml#hotline
; and
2. The charity should provide information on any suspicious
activity relating to terrorism, including terrorist financing or other
support, which does not directly involve an OFAC match, through a
referral form available on Treasury's Web site at http://www.treas.gov/offices/enforcement/key-issues/protecting/index.shtml.
In addition, the
Federal Bureau of Investigation maintains local field offices to which
charities should provide such suspicious information. A list of the
locations and phone numbers of the FBI's field offices is available at
http://www.fbi.gov/contact/fo/fo.htm.
Annex to Guidelines
The risk of terrorist abuse facing charitable organizations is
ongoing and significant and cannot be measured from the important but
relatively narrow perspective of terrorist diversion of charitable
funds to support terrorist acts. Rather, terrorist abuse also includes
the exploitation of charitable services and activities to radicalize
vulnerable populations and cultivate support for terrorist
organizations and activities. As reported through a wide range of media
sources, terrorist organizations deliberately establish, infiltrate, or
otherwise exploit charitable organizations to build terrorist support
networks.\15\ Recent developments--such as the exploitation by Lashkar
e Tayyiba (a.k.a. Jamaat-ud-Dawa) and other terrorist entities/
charitable fronts of relief efforts following the October 2005
earthquake in South Asia, the critical role of Hamas-associated
charities in building popular support in the Palestinian territories
for the terrorist organization, and Hezbollah's substantial control of
charitable distribution networks in southern Lebanon--demonstrate the
ongoing intent and effectiveness of terrorist organizations in
exploiting charitable organizations and relief efforts.
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\15\ See, e.g., Matthew Levitt, HAMAS: Politics, Charity and
Terrorism in the Service of Jihad; New Haven, CT: Yale Univ. Press,
2006 (documenting the logistical and financial support Hamas
charities provide for the group's political and terrorist
activities); Heather Timmons, British Study Charitable Organizations
for Links to Plot, N.Y. Times, Aug. 25, 2006 (describing the risks
inherent in delivering charitable aid and resources to high-risk
areas where terrorist organizations are known to operate); Robert F.
Worth & Hassan M. Fattah, Relief Agencies Find Hezbollah Hard to
Avoid, N.Y. Times, Aug. 23, 2006 (describing Hezbollah's efforts to
cultivate support by controlling the provision of charitable
resources and services across southern Lebanon); Laila Bokhair,
Political Struggle Over Earthquake Victims, Norwegian Defense
Research Establishment, Nov. 23, 2005 (documenting terrorist
organizations such as Lashkar-e-Taiba and Jaish-e-Mohammed efforts
to provide humanitarian aid to affected areas in the months
following the earthquake in South Asia); Christopher Kremmer,
Charities Linked to Extremists Lead Quake Relief, Age, Nov. 21, 2005
(reporting that in addition to providing relief in South Asia,
terrorist organizations are recruiting and indoctrinating orphan
children in their extensive network of orphanages); Evan Kohlmann,
The Role of Islamic Charities in International Terrorist Recruitment
and Financing (2006), Danish Institute for International Studies:
available at http://www.diis.dk/graphics/[fxsp0]Publications[fxsp0]/
WP2006/DIIS%20WP%202006[fxsp0]-7.web.pdf (tracing the historical
link between charitable organizations and terrorist activities from
the Soviet-Afghan war through to the present); BBC News, Faith, hate
and charity: Transcript, BBC One, Recorded from Transmission, July
30, 2006 (reporting on one of Britain's leading Islamic charities,
Interpal, and illustrating Interpal's use of a network of charities
in Gaza and the West Bank to support and fund Hamas, a terrorist
organization designated by the U.S. Government and the European
Union).
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Treasury, together with other Departments across the U.S.
Government, is continuing to combat such terrorist abuse of the
charitable sector by: (i) Administratively sanctioning terrorist-
related charities and charitable officials through terrorist financing
designations; (ii) contributing financial information and investigative
resources and expertise to advance criminal investigations and
prosecutions of charities and charitable officials providing material
support for designated terrorist organizations or
[[Page 63848]]
activities; (iii) facilitating international action to address these
abuses; and (iv) conducting comprehensive outreach to the charitable
sector to raise awareness of terrorist exploitation and the steps
charities can take to protect themselves from such abuse.
U.S. designations of charities and charitable officials demonstrate
the breadth of the problem of terrorist infiltration and exploitation
of the charitable sector. To date, the United States has designated
forty-three charities worldwide and twenty-nine associated individuals
for their support of terrorist organizations and operations. These
seventy-two charities and individuals comprise over fifteen percent of
all U.S.-designated terrorist supporters or financiers, indicating the
primary importance of charities as a critical means of support for
terrorist organizations and activities. Treasury maintains a summary of
all designated charities, including unclassified background information
summarizing the basis of each designation, to assist the donor and
charitable communities in identifying those charities associated with
terrorist financing and support. Further information and press releases
relating to these designations are available on the Treasury Web site
at http://www.treas.gov/offices/enforcement/key-issues/protecting/charities_exec-orders.shtml
.
In addition to these ongoing efforts by Treasury and the U.S.
Government, other countries and organizations from around the world
have recognized and helped curb abuse of the charitable sector by
terrorist organizations. The Financial Action Task Force (FATF)--the
premier inter-governmental organization responsible for developing and
promoting global policies to combat money laundering and terrorist
financing--has studied the problem of terrorist financing and abuse
across the charitable sector globally and has published typologies of
such abuse. The FATF has also published Best Practices for Non-Profit
Organizations and more recently issued interpretive guidance
strengthening the international standard for combating terrorist abuse
of non-profit organizations. Additionally, FATF style regional bodies
(FSRBs) such as the Asia Pacific Group (APG), Eurasian Group (EAG) and
the Middle East and North Africa Financial Action Task Force (MENA
FATF) are developing typologies and studies on the active threat of
terrorist financing and support through charities that operate within
their regions.\16\ These organizations and their member countries are
implementing measures to actively combat this threat through the
development and application of supervisory, investigative, and
financial authorities to identify and dismantle charities engaged in
terrorist financing or support. Many of these documents, which
underscore the threat that terrorist organizations and operations pose
to the charitable sector, are available on the Treasury Web site at
http://www.treas.gov/offices/enforcement/key-issues/protecting/index.shtml.
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\16\ The efforts of the MENA FATF are particularly exemplary of
international efforts to combat terrorist abuse of charities. MENA
FATF Member States have issued a best practices paper, based on the
FATF's international standard for combating terrorist abuse of the
non-profit sector, tailored to the specific religious, social, and
economic values of the region. The comprehensive framework, crafted
by the MENA FATF, outlines legislative, regulatory, and procedural
measures to ensure that the charitable sector is not misused or
abused by terrorist financiers. The MENA FATF charities best
practices paper is an indispensable tool for the Middle East and
North Africa region in helping to protect against terrorist abuse of
charities by offering guidance to promote transparency and
accountability in the charitable sector.
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Treasury continually engages in outreach and updates its Web site
to communicate useful information regarding: (i) The ongoing risks of
terrorist abuse in the charitable sector; (ii) ongoing U.S. and other
governmental efforts to mitigate these risks and combat terrorist
abuse, and (iii) steps the sector can take to protect against such
abuse. Treasury's Guidelines represent one essential component and
product of the ongoing outreach that Treasury is conducting with the
charitable sector to empower and protect the sector from terrorist
abuse. Another example of available resources is Treasury's December
2005 advisory paper, which provides information to charities delivering
relief in areas affected by the 2005 South Asia earthquake by detailing
typologies of terrorist abuse of charities and reports on activity by
militant and terrorist groups in those areas. This paper also shows,
through media reports, the extent to which terrorist organizations pose
a risk to charities trying to deliver aid in unstable areas, where
terrorist organizations themselves and/or their charitable fronts are
often engaged in delivering relief as an effective recruitment
mechanism in building broader support for their organizations.
Treasury will continue its outreach and informational efforts as
part of its larger mission to combat terrorist financing and safeguard
the charitable sector from terrorist abuse.
[FR Doc. 06-8961 Filed 10-30-06; 8:45 am]
BILLING CODE 4811-37-P