An April 1 Senate Finance Committee hearing continued an unfortunate pattern of insufficient congressional oversight of anti-terrorist financing programs, neglecting to address the unnecessarily harsh impacts the programs have on U.S. charities and philanthropy. Despite an OMB Watch request that the committee hear from additional witnesses, members only heard from Under Secretary for Terrorism and Financial Intelligence Stuart Levey. Both Committee Chair Max Baucus (D-MT) and Levey raised issues relating to charities that left important questions unasked and unanswered. However, committee staff has agreed to meet with nonprofit representatives. In his opening statement, Baucus referred to failed criminal prosecutions of charities suspected of having ties to terrorism, asking if the prosecutions "were off base" or if the government should "do a better job of monitoring these organizations?" Levey did not address this issue in his testimony. Another witness could have explained the problem raised in the trial of the Holy Land Foundation, where prosecutors admitted all funds were spent for charity but argued it was illegal to provide aid through organizations that are not on the terrorist watchlists because the group "should have known" of ties to Hamas. That case ended in a mistrial.

Baucus also said he is not satisfied the Internal Revenue Service (IRS) "is being aggressive enough in establishing links between nonprofits and terrorism financing." This was a reference to a problematic 2007 Treasury Inspector General for Tax Administration (TIGTA) recommendation that the IRS check nonprofit filings against the FBI's enormous and inaccurate Terrorist Screening Center watchlist. Nonprofits wrote a letter to Treasury Secretary Henry Paulsen in 2007 objecting to the plan and to the TIGTA claim that charities are a significant source of terrorist financing. This information was provided to the Senate Finance Committee but not mentioned at the April 1 hearing.

Ranking member Charles Grassley's (R-IA) statement focused on the need for better coordination between federal agencies but did not address the contradiction between Treasury's treatment of nonprofits and the Department of State's Guiding Principles on Nongovernmental Organizations, which indicate action by government "should be based on tenets of due process and equality before the law." Grassley also said he will update S. 473, the Combating Money Laundering and Terrorist Financing Act of 2007, which addresses loopholes in the law.

The hearing was the first time Levey had testified before the committee since he was confirmed four years ago. His testimony primarily focused on large-scale problems relating to anti-terrorist financing, including use of pre-paid credit and debit cards and smuggling. He outlined a general shift from broad sanctions to a more strategic approach of "targeted financial measures" and following investigative leads to disrupt terrorist networks, in line with recommendations from the 9/11 Commission.

In the short portion of his testimony devoted to charities, Levey failed to include crucial information the committee needs to fulfill its obligations to both prevent terrorist financing and protect and encourage the charitable mission of U.S. nonprofits. For example:

• Levey noted that Treasury has "designated approximately 50 charities worldwide as supporters of terrorism, including several in the United States, putting a strain on al Qaida's financing efforts." This fails to note that U.S. organizations account for only seven of 47 designated organizations among 479 Specially Designated Global Terrorists. In addition, not all are accused of funding al Qaida. Some of the U.S. organizations are accused of funding Hamas, the Tamil Tigers, and Hezbollah.
• Levey claimed "active engagement with the charitable sector" and "a comprehensive outreach campaign to the charitable sector" as successes, without disclosing criticisms of Treasury's shut-down of charities. This also mistakes civility from nonprofits for support of Treasury's policy, without recognizing the way its power to shut down charities inhibits honest dialog.
• The testimony noted Treasury has "issued guidance to assist charities in mitigating the risk of exploitation by terrorist groups" without acknowledging repeated calls for withdrawal of the guidelines from a diverse group of nonprofits that say the guidelines are counterproductive and harmful to charities' operations.
• Levey said Treasury's engagement with the nonprofit sector "is particularly important because we want humanitarian assistance to reach those who are truly in need through channels safe from terrorist exploitation" without mentioning the department's refusal to release frozen charitable funds to reputable nonprofits so that the dollars can reach those in need.

After the hearing, OMB Watch issued a press statement and said, in part, "Anti-terrorist financing programs have had a widespread and negative impact on the U.S. nonprofit sector, including program cutbacks, decreased international giving, and increased fear of speaking out on important public issues. Witnesses from charities and foundations could have provided the committee with a full picture of the real damage the financial war on terror is causing charities, foundations, and the people we serve. Instead, the public record is left incomplete, which will likely lead to continuation of flawed programs that do little or nothing to stop terrorism."

The limited witness list also meant the committee has not heard from experts on money laundering, who are critical of Treasury's overall current approach to terrorist financing. These include:

• Ibrahim Warde, author of the book The Price of Fear, summarized in a Power Point presentation
• Professor Nikos Passas, author of Setting Global CFT Standards: A Critique and Suggestions