Post 9-11 Grantmaking
Updated 02.21.08
Since September 2001, new U.S. federal laws, rules and guidelines have been put in place that attempt to thwart the diversion of material support, in-kind support, and humanitarian or technical assistance, to terrorists. Some of these policies are specifically directed towards U.S. grantmakers and their international programs.
Below is general guidance on counterterrorism measures. This information is being provided for informational purposes only and not as part of an attorney-client relationship. The information is not a substitute for professional legal advice and may not be relied upon for the purposes of avoiding any penalties that may be imposed under any federal or state law.
Executive Order 13224
Executive Order No. 13224 prohibits transactions with persons who commit, threaten to commit, or support terrorism.1 The Order includes as an annex a list of known or suspected terrorists and allows the President, Secretary of Treasury, or Secretary of State to add to this list. A current version of this list, otherwise known as the Specially Designated Nationals (SDN) List, is available at the Office of Foreign Assets Control's (OFAC) website: http://www.treas.gov/offices/enforcement/ofac/sdn/.
Persons or entities suspected of engaging in illegal transactions with prohibited persons or entities risk having their U.S. assets frozen and being designated on OFAC's SDN List. This includes foundations and individual donors who might unwittingly be providing material support, including financial, technical or humanitarian assistance through their charitable activities.
Foundations wishing to act in accordance with EO 13224 should engage in extensive due diligence to ensure that their charitable support is being used for its intended charitable purpose and due diligence practices should be well documented.
Many organizations check potential grantees against OFAC's SDN List and the Secretary of State's Terrorist Exclusion List (TEL). Most check the name of the grantee, the grantee's senior management, and the members of the grantee's governing board. Lists are checked at varying frequency, including at the time the proposal is being seriously considered, before each grant payment is issued, weekly, and monthly.
The SDN list is not searchable on-line. However, it can be copied, pasted and saved onto a computer and then searched by using the find function. This is perhaps the easiest and most cost-effective way to list check and is well suited for grantmakers making a relatively small number of grants. For grantmakers making a large numbers of grants, there are a variety of list-checking software solutions. A list of these can be found in the publication, Seeking a Safe Harbor. Also, some large foundations have adapted their internal grants database software to download and search the SDN list at regular intervals.
It is important to note that EO 13224 never specifically requires list checking and some foundations refuse to adopt list checking into their grantmaking practices, citing constitutional objections to the existence and application of the lists, and the minimal protection provided by list checking.
Grantmakers Without Borders encourages organizations to recognize those circumstances when list checking may not be necessary, for example, when a grantee is well known to the grantmaker. Largely, it comes down to knowing your grantee and establishing a relationship that encourages trust and transparency.
Treasury Department's Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities
The Treasury Department's Office of Foreign Assets Control (OFAC) issued the Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-Based Charities (Guidelines) in November 2002, (revised in September, 2006). The Guidelines include suggested "best practices" for grantmakers with regard to governance, disclosure, financial accountability and anti-terrorist financing procedures.
Almost without exception, the grantmaking community finds the Guidelines unproductive, unrealistic and detached from the real-life experiences of the charitable sector. Grantmakers Without Borders has been one of the organizations active in calling for the complete withdrawal of the Guidelines.
In addition to list checking, the Treasury Guidelines contain other confusing and controversial recommendations, including an extensive pre-grant inquiry and certification language. The Treasury Guidelines Working Group, a diverse coalition of charitable organizations led by the Council on Foundations, has developed an alternative to the Guidelines, Principles of International Charity. To date, the Treasury has withheld an endorsement of the Principles and currently remains unwilling to withdraw the Guidelines.
Fortunately, the Guidelines are indeed voluntary, a point stressed regularly in meetings that Grantmakers Without Borders and other international organizations have had with representatives of the Treasury Department. Compliance with the Guidelines is not a formal requirement. Suggestions made in the Guidelines should be used by international grantmakers as deemed appropriate. The Council on Foundations recommends that each grantmaker engage in a risk assessment on the probability of grants being diverted to terrorists, decide whether an anti-terrorism compliance program is necessary, and, if so, implement an appropriate program.
The Treasury Department has also released a Risk Matrix for the Charitable Sector. The Risk Matrix asks grantmakers to apply a formulaic chart of ambiguous factors, eventually branding each grantee or grantmaking practice as "high," "medium," or "low" risk. The Treasury Department recommends that the higher the risk, the more voluntary practices a grantmaker should adopt from the Guidelines. Few organizations have found the Risk Matrix useful. Grantmakers Without Borders has called for the withdrawal of the Risk Matrix, finding that it is an impractical tool that neither helps nor protects U.S. grantmakers that support international work. (http://www.internationaldonors.org/advocacy/press_release053007.htm).
Anti-terrorism and Effective Death Penalty Act (commonly referred to as the USA PATRIOT Act)
The Anti-terrorism and Effective Death Penalty Act (AEDPA) was enacted in 1996 and later amended by the USA PATRIOT Act in 2001. AEDPA makes it a federal crime to knowingly provide material support to terrorists.2 Most grantmakers do not wish to support designated terrorist organizations, so they do not risk violating AEDPA.
There is currently ongoing litigation by the Humanitarian Law Project (HLP) challenging AEDPA. HLP wishes to assist the Kurdistan Workers' Party (PKK), a designated terrorist organization, with conflict resolution and human rights monitoring in Turkey. For more information on HLP's litigation, please visit the Center for Constitutional Rights' website: http://ccrjustice.org/learn-more/faqs/factsheet%3A-material-support.
Additional Resources
Footnotes:
1. EO 13224 has been codified into U.S. federal law within the International Emergency Economic Powers Act (IEEPA).
2. Executive Order 13224 does not contain this knowingly requirement. Any support, whether it be intentional or accidental, of any organization or person on one of the terrorist watch lists violates the Executive Order.
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