U.S. Government Releases Revised Antiterrorism Regulations

The U.S. Department of Treasury today released new guidelines to help nonprofit groups prevent their charitable funds from unwittingly being used to support terrorists.

The new guidelines, which are voluntary standards for foundations and charities to follow, replace ones Treasury issued three years ago, to much criticism. InterAction, the Council on Foundations, and other associations that represent nonprofit groups objected to the department's suggested rules, saying they would stifle international philanthropic efforts.

The protests prompted Treasury to meet with nonprofit officials to discuss their concerns, but the agency has insisted that guidelines are necessary to prevent violent acts.

"Charitable giving is an act ingrained in the culture of America, and the people of this country give selflessly to vast vital causes," said Patrick O'Brien, the department's assistant secretary for terrorist financing and financial crime, in a statement released today as part of the new voluntary rules. "Sadly, terrorist networks and their sympathizers have preyed upon this goodwill to raise and move money in support of their deadly agendas." The guidelines cover a wide range of nonprofit procedures, from governance practices to accounting standards. A number of them are considered common practice within the nonprofit world. For example, Treasury encourages nonprofit groups make annual reports publicly available.

While the new guidelines in many parts closely resemble the original rules, they include several additions and changes.

The largest addition is a new introduction that tries to clarify Treasury's purposes and seeks to ameliorate concerns that the department's original suggestions were too broad.

The "guidelines are intended to assist charities in developing a risk-based approach to guard against the threat of diversion of charitable funds for use by terrorists and their support networks," the introduction says. "Given the risk-based nature of these guidelines, we recognize that certain aspects will not be applicable to every charity, charitable activity, or circumstance." For instance, the department says the guidelines would be difficult to meet during large-scale disasters.

The Treasury largely left untouched three sections on governance, financial accountability, and transparency efforts, but made substantial revisions to its "Antiterrorist Financing Best Practices." For example, the Treasury has eliminated a controversial recommendation that foundations and charities vet banks and other financial institutions where their overseas nonprofit partners maintain accounts. The voluntary rule was considered too onerous by many U.S. groups.

The department also clarified how charitable organizations should review the backgrounds of senior employees and board members at foreign nonprofit groups that they support. To find out if such personnel have links to terrorists, the Treasury urges nonprofit groups to check the employees' and trustees' names against two lists of suspected terrorists maintained by the U.S. government and the United Nations. Previously, foundations and charities were encouraged to check names using at least four separate catalogs of suspects.

In a change from the old guidelines, however, Treasury now asks nonprofit groups to call a toll-free telephone number to inform federal authorities if a name appears on either of the two lists. The Treasury also added a new section titled, "Fundamental Principles of Good Charitable Practice," which includes several basic, if overly obvious, standards, such as: "Charitable organizations must comply with the laws of the United States."

Nonprofit officials praised the department for reworking the guidelines, but said the agency did not go far enough to assuage their worries.

The revised guidelines "certainly are a step forward in the sense of emphasizing that they are only voluntary in nature, but the same basic flawed logic that existed in the first guidelines seems to still be there," said Gary Bass, executive director of OMB Watch, a Washington watchdog group. For example, while Treasury said nonprofit groups should adhere to the most stringent parts of the guidelines, such as checking names, in situations where money is likely to be diverted for nefarious purposes, the government agency never outlines the specific warning signs that charities are supposed to respond to. "They still make requirements on list checking, which is based on a 'risk-based approach' and never lays out any risk factors."

What's more, Mr. Bass said that the guidelines seek to solve a problem that may not be as dire as Treasury's warnings. "They still assume that charities are big sources of diversion for funds for terrorism and there still is no evidence of that," he said.

The department will accept comments on the voluntary rules until February 1, after which it will release a finalized version of the guidelines. The document
-- "U.S. Department of the Treasury Antiterrorism Financing Guidelines: Best Practices for U.S.-Based Charities" --
is available on the Web at http://www.treasury.gov/offices/enforcement/key-issues/protecting/docs/guidelines_charities.pdf.