In 2007, the effects of the ineffective and counterproductive legal regime governing counterterrorism programs and charities demonstrated that the current system, based on a short-term emergency response to the 9/11 attacks, needs to be reassessed and reformed for the long term. Misleading Congress and the Public about Nonprofits

Grantmakers Without Borders Challenges Treasury's Senate Testimony June 26, 2007

In May, the Director of the Treasury Department's Office of Strategic Policy for Terrorist Financing and Financial Crimes told the Senate Homeland Security and Governmental Affairs Committee that Treasury's revised Voluntary Anti-Terrorist Financing Guidelines are "based on extensive consultation between Treasury and the charitable and Muslim communities." This is despite the fact that in December 2006, more than 40 U.S. charitable sector organizations called for withdrawal. Grantmakers Without Borders (Gw/oB) sent a letter to the committee leadership correcting Treasury's portrayal of its relationship with nonprofits. The letter noted that the committee had no non-governmental witnesses, although this would have provided a more accurate, complete description of the negative impact Treasury's counterterrorism procedures have had on charitable programs. The Guidelines remain in place despite consistent calls from the nonprofit sector for their withdrawal.

Treasury Posts Risk Matrix for Charities April 17, 2007

Further evidence of the inaccuracy of Treasury's claims to have close cooperation with the nonprofit sector is seen in its failure to respond to a June 2006 letter from nonprofits that asked for a public comment period on a risk matrix that was in development. Instead, in March, the Treasury's Office of Foreign Assets Control (OFAC) published the Risk Matrix for the Charitable Sector on its website, without public announcement or comment. The matrix has been criticized by groups such as Gw/oB, which has called for the matrix to be withdrawn because it stigmatizes international grantmaking.

Charities Respond to Treasury's Overbroad Allegations of Terrorist Ties June 12, 2007

In June, nonprofits challenged a report from the Treasury Inspector General for Tax Administration (TIGTA) that claimed charities are a "significant source of alleged terrorist activities." A group of charities called upon Treasury to retract this claim as lacking evidence, saying, "Treasury needs to recognize that charities are part of the solution and not part of the problem."

House Hearing on Nonprofits Sees the Positive Aug. 7, 2007

The House Ways and Means Subcommittee on Oversight held a hearing on tax-exempt charitable organizations in July, where Rep. Bill Pascrell (D-NJ) challenged the Department of Treasury's assertion that charities are a "significant source of terrorist funding," observing that Treasury seems to be "painting the sector with a wide brush."

Seized Charitable Funds Remain Frozen Indefinitely

Nonprofits Call for Release of Frozen Funds

Treasury did not respond to a November 2006 letter from a group of 20 charities seeking a meeting to discuss releasing the frozen funds of shuttered charities to alternative charitable programs until a member of Congress expressed concern. It now appears a meeting will be held in January 2008.

Definition of Support for Terrorism Expands to Association, Non-listed Charities

New Executive Order on Iraq Expands Problems for Charities July 24, 2007 and Congress Misses Oversight Opportunity on Charities and Anti-terrorism Financing Laws Oct. 10, 2007

The range of activities and associations constituting illegal support for terrorism expanded in two instances. In both cases, clear definitions are lacking, and behavior far removed from the actual illegal act, such as charitable relief provided in disaster areas where terrorist groups operate, could result in criminal sanctions. First, Executive Orders on Iraq and Lebanon extended the criteria for sanctions to a "threat to national security."

Second, in October, Congress approved an amendment to the International Emergency Economic Powers Enhancement Act (IEEPA) that includes vaguely defined conspiracy and aiding and abetting language that could lead to unpredictable results for the unwary. Once again, there were no non-governmental witnesses in the Senate hearing on the bill, and the House did not hold a hearing.

Court Upholds Islamic American Relief Agency Asset Freeze Feb. 21, 2007

In February, a federal appeals court upheld OFAC's designation and asset seizure against the Islamic American Relief Agency because of the group's past relationship with a Sudanese group that was designated as a terrorist organization in 2004. There was no finding or allegation that the U.S. group used funds to support terrorist activities, and no criminal charges have been filed.

No Conviction, Mistrial for Holy Land Foundation Oct. 23, 2007

In October, a federal jury in Texas deadlocked on all charges against the Holy Land Foundation (HLF), most of the charges against five of its leaders, and acquitted another of 31 of 32 charges. The defendants were charged with money laundering, material support of terrorism and conspiracy. The prosecution did not claim HLF provided support to Hamas or paid for violent acts. Instead, it said the charitable aid was delivered in partnership with local charities that were controlled by Hamas, even though the government has never designated them as terrorist supporters.

A conviction on this legal theory would mean no U.S. charity could protect itself from prosecution by using government watchlists for guidance about who to work with. The government has indicated that it will retry the case.

Watchlists: Inaccuracies, Unintended Consequences

IRS Urged to Use Terror Watchlists to Check Nonprofits May 30, 2007

A May report by the TIGTA said the Internal Revenue Service (IRS) should check nonprofit tax filings against the FBI's Terrorist Screening Center's (TSC) consolidated watchlists, despite the fact that a 2005 Justice Department Inspector General report confirmed many deficiencies with the TSC.

The proposal could cause unnecessary damage if and when false positive matches are found. A report by the Lawyer's Committee for Civil Rights of San Francisco Bay Area (LCCR) demonstrates how use of watchlists by private companies has caused innocent people to be flagged as terrorists, creating problems with everything from buying a car to getting a job. The IRS has accepted the recommendations, including one that it meet with key stakeholders. However, to date, the sector has not heard of any organizations that have been solicited to provide input.

Scrutiny of Anti-Terrorism Watchlists Increases Nov. 20, 2007

Both the House and the Senate have been paying increased attention to problems within the watchlist system. At a House Homeland Security Committee hearing in November, Chairman Bennie Thompson (D-MS) expressed concerns about the quality of watchlist data and the overall growth in the number of watchlist names. He said, "We can do better — and we have to do better…"

A draft report from the Council of Europe legal committee reviewed procedures similar to those in the U.S. It said the methods used for sanctioning individuals and organizations that do not include any "procedures for an independent review of decisions taken, and for compensation for infringements of rights" constitute a human rights violation.

USAID Temporarily Delays Implementation of Partner Vetting System

In July, the U.S. Agency for International Development (USAID) announced a new Partner Vetting System (PVS), that would "[ensure] that neither USAID funds nor USAID-funded activities inadvertently or otherwise provide support to entities or individuals associated with terrorism." All nonprofits applying for grants would be required to collect and give the government highly detailed personal information about employees, executives, trustees, subcontractors and others associated with the organization. USAID would check the information against watch lists. Charities filed comments objecting to the program as unwarranted and asked that it be withdrawn.

InterAction, a coalition of U.S.-based foreign aid groups, including many that receive USAID funding, said the proposal could put international aid workers at increased risk, saying, "If they are perceived to be extension of the U.S. intelligence community, terrorist attacks against them can only increase." It also said there is no statutory basis for the PVS. Because USAID said it "cannot confirm or deny whether an individual 'passed' or 'failed' screening," OMB Watch submitted comments that said, "PVS will more than likely result in the creation of a secret USAID blacklist of ineligible grant applicants, based on PVS results."

The program was proposed without any consultation with relief and development organizations with experience in international aid. USAID temporarily delayed implementation of a new database but is moving forward with a pilot program for aid recipients working in the West Bank and the Gaza Strip.

The Right to Dissent: Chilling Impact of Counterterrorism Policies

Study Commission or Thought Police? Dec. 4, 2007

A proposal to create a commission and research center to study "violent radicalization" and "extremist belief systems" that can lead to homegrown terrorism passed the House in October and has been introduced in the Senate. The American Civil Liberties Union (ACLU) and other groups are raising concerns that its vague definitions, broad mandate and minimal oversight could lead to ethnic profiling and censorship based on personal, religious or political beliefs.

Since 9/11, the Federal Bureau of Investigation, Joint Terrorism Task Force and Department of Defense have been using anti-terrorism resources and databases to track and sometimes interfere with groups that publicly and vocally dissent from administration policies. Anti-war groups have suffered from these abuses the most, but it is not limited to them. See our companion article on nonprofit speech rights for details.

Reasons to Hope for Positive Changes

The State Department's Guiding Principles on Non-Governmental Organizations December 2006

In early 2007, we learned that the State Department published a set of principles that set out ten standards for government treatment of nongovernmental organizations (NGOs). One of the standards says, "Criminal and civil legal actions brought by government against NGOs, like those brought against all individuals and organizations, should be based on tenets of due process and equality before the law."

The principles recognize the essential role NGOs play in "ensuring accountable, democratic government" and cite the UN Universal Declaration of Human Rights and other international standards that support "the right of freedom of expression, peaceful assembly and association…" Nonprofits hope that in the future, this vision of the appropriate approach to counterterrorism and charities policy will prevail over the secrecy and lack of due process in the Treasury Department's procedures for shutting down charities.

What's Needed in 2008

In the coming year, Congress needs to provide more oversight over the current system and assess its negative consequences. The nonprofit sector itself needs to be ready with a consensus on reform proposals. Most importantly, millions of dollars in frozen funds must be used for charitable purposes.

Key questions for congressional oversight in 2008 include:

• How has Treasury treated charities under Bush's Patriot Act-era executive orders?
• Why does Treasury refuse to meet with charities about ways to release frozen funds for genuine charitable programs?
• Why is there no independent review of designation of charities?
• Why do charities get shut down, but companies like Chiquita pay fines that are small relative to their assets?