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  • Analysis - U.S. National Terrorist Financing Risk Assessment 2015 Sets Stage for Review of Rules Impacting Nonprofit Organizations
    Reports SARS that include charitable organizations there is no information on what if any actual abuse may have been revealed It is not possible to draw any conclusions from this information since there is no data on the trend in total SARS filed during the same period It may be that SARS filing has increased substantially and the increase in reports on charities is proportionate to an overall rise More data is needed for this information to be useful in assessing risk Sham Organizations and Fraud Not Legitimate NPOs One of the most important and useful points regarding NPOs states that While some terrorist supporters create sham charities as a cover to raise and move funds other terrorist groups and their supporters use charities to provide funds or otherwise dispense critical social or humanitarian services to vulnerable populations in an effort to radicalize communities and build local support Charities established and controlled by terrorist groups and persons assisting their causes can help fund the operation of schools religious institutions and hospitals that may create fertile recruitment groups or generate dependency among vulnerable populations for these essential services p 38 This taken together with the examples and other statements in the assessment establish that the primary risk to the charitable sector is fraud either through sham organizations or social wings of terrorist groups that abuse their programs for recruitment and propaganda purposes Charity related prosecutions and examples of U S charities that have been listed as terrorist supporters support this conclusion These cases demonstrate that there have been few instances of terrorist financing abuse of legitimate American charities Where abuse has occurred most of Treasury s information points to social wings of terrorist groups as the problem rather than legitimate charities recognized by the U S government This has implications for the review of U S terrorist financing restrictions on NPOs which are one size fits all rather than risk based Risk Based Approach or One Size Fits All Restrictions Treasury says it takes a risk based approach to protect the U S charitable sector from terrorist abuse p 35 However the broad restrictions placed on U S NPOs are not based on risk Instead they impose blanket prohibitions on all NPOs with inadequate exemptions and licensing procedures The Charity Security Network and Council on Foundations detailed these problems in a July 2015 memorandum to FATF 6 Outreach Not Engagement In describing its approach to risk mitigation Treasury says its efforts include enforcement action increased IRS reporting on international activities and sustained outreach to the charitable sector and donor communities to raise awareness of the vulnerability and provide guidance on risk mitigation best practices p 38 While Treasury makes presentations at events with NPOs present and conducts quarterly informational meetings with NPOs that focus on international work it has not engaged in the two way dialog between governments and NPOs that is recommended in FATF s Best Practices Paper on Combatting the Abuse of Nonprofit Organizations 4 The section on outreach

    Original URL path: http://www.charityandsecurity.org/print/1349 (2016-02-16)
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  • Treasury’s Informational Licensing Guidance for Humanitarian NGOs Falls Short | Charity & Security Network
    which are people or groups on Treasury s terrorist list or any entity owned 50 or more by blocked persons Countries subject to sanctions Cuban Iran Sudan and Syria 4 In areas controlled by armed groups where the leader but not the group has been put on the list In these cases transactions including taxes and access payments with the group itself are not prohibited However the guidance says due diligence should be employed to ensure the listed person is not profiting from the transactions Two additional paragraphs state OFAC s policy on enforcement 5 OFAC incorporates a policy from its 2011 Frequently Asked Questions on Somalia saying incidental benefits to listed groups that are made unwittingly in times of urgent need and in the context of unstable and dangerous environments are not a focus for OFAC sanctions enforcement This does not preclude imposition of sanctions including asset freezes and being listed as a terrorist supporter but it indicates the current administration is unlikely to pursue them where the nonprofit exercises due diligence and aid leakage is unwitting 6 Where minimal incidental payments of fees and taxes to listed groups are necessary to access civilians OFAC says it will work with nonprofits to address the situation on a case by case basis This will be an interagency process and although OFAC promises it will be handled in an expeditious manner there is nothing concrete to indicate a change in the pattern of delays that nonprofits say hinders program implementation The Guidance came about after InterAction and several of its members engaged in a ten month long dialog with the State and Treasury Departments to address problems humanitarian organizations have experienced with the licensing system The dialog began after release of a report that documented the way U S legal restrictions

    Original URL path: http://www.charityandsecurity.org/news/OFAC_Guidance_Falls_Short (2016-02-16)
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  • Summary and Analysis: President Obama’s September 2014 Civil Society Memorandum and Initiatives
    to civil society or communities Notably it requires agencies engaged abroad to review regulations and procedures to ensure that rules do not inadvertently impede civil society operations Opposing Undue Restrictions on Civil Society and Fundamental Freedoms agencies shall oppose undue restrictions by foreign governments support reform efforts including through international bodies Facilitate Exchanges Between Government and Civil Society including assistance in drafting laws that respect civil society rights Commentary Nonprofits concerned about the impact of counterterrorism restrictions on their work can draw encouragement from these statements which are consistent with principles the Charity Security Network has articulated over the past five years However for the U S to effectively take global leadership on the issue of strengthening civil society it must first address its own restrictions that are inconsistent with the fundamental rights of expression peaceful assembly and association as well as international humanitarian law particularly in the area of national security law U S civil society has spelled out a variety of ways this can be achieved from helping to draft pending legislation to recommending regulatory changes 5 On Sept 15 the Charity Security Network and 11 civil society groups filed comments with the UN Human Right Commission 6 as part of its periodic review of the U S human rights record The comments lay out examples of how current laws and policies infringe on fundamental civil society rights and recommends that the administration engage in dialog about how to align security and human rights concerns Publication of the Presidential Memorandum one week later indicates that both the government and civil society share common goals and agree that the work of a strong independent civil society is necessary to address causes of violent extremism This should make dialog that leads to workable solutions possible The comments to the UN make the case for change Given the state of the world and the increasing pressures on civil society rights around the world there is not time to lose Opportunities for U S civil society and U S government engagement Specific items in the Presidential Memorandum that the U S nonprofit can follow up on include Agencies working on programs to counter violent extremism should be interested in talking with U S civil society about how independent nonprofit programs contribute to this goal and how a more enabling legal environment can increase effectiveness Regulators should discuss how to make their counterterrorism rules and policies impacting nonprofits meet the standard of being proportionate and targeted The required review of agency rules and policies is an opportunity to concretely address issues such as the Treasury Dept s licensing process the State Dept and USAID vetting requirements for grant applicants and redress procedures for groups put on Treasury s terrorist list Agencies responsible for human rights issues should discuss the ways U S laws infringe on protected rights of association peaceful assembly and expression and explore ways to re align them with human rights standards As a whole the administration should be interested in

    Original URL path: http://www.charityandsecurity.org/print/1266 (2016-02-16)
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  • Vetting in Afghanistan: Issues with the Defense Department, State and USAID
    further dialogue to improve their existing measures but expressed concern with proposals that would indiscriminately expand the DOD contracting provisions to the Department of State 9 USAID likewise expressed a belief that their agency s efforts are not hindered by a lack of Section 841 authority but stated that they would welcome an independent grant of authority to terminate contracts for default to ensure that no U S funds go to prohibited parties USAID also expressed concern that any new procedures and responsibilities could disrupt the effective programs currently in place and would indiscriminately expand DOD contracting provisions to the agency USAID emphasized that USAID and DOD have different purposes and modalities for contracting resulting in the need for different vetting processes In addition as discussed below USAID recently adjusted its vetting procedure to incorporate a lower vetting threshold expanded its definition of prohibited parties and increased responsibility for prime awardees to verify the information provided regarding key individuals involved in each proposed sub award III WHAT ARE THE CURRENT PROGRAMS EMPLOYED BY STATE AND USAID While State and USAID are not subject to Section 841 both currently employ grantee and contractor vetting processes to prevent the distribution of U S funds to those who threaten U S security and foreign policy interests Vetting is a term used by the counterterrorism community to describe the process of screening the names of individuals and organizations against various lists of terrorists and their supporters The purpose of the vetting process is to practice due diligence to ensure that U S Government funds are not inadvertently awarded to terrorists or terrorists sympathizers 10 State vets all non U S companies competing for U S funded grants and contracts through the Office of Risk Analysis and Management Information provided by the grantee is compared to various databases to determine whether derogatory information exists that links the company or its key officials to enemy groups This information is forwarded to the assistant secretary of the office funding the activity who makes the final decision regarding whether the grantee and personnel are eligible for a grant or contract USAID similarly vets all non U S prime contractors and subcontractors in the competitive range to receive grants valued at over 25 000 USAID produced an updated Mission Order 201 05 on July 8 2013 immediately preceding the recommendations of SIGAR to expand the DOD Section 841 procedure and authority to State and USAID This new Mission Order lowers the previous vetting threshold from 150 000 to 25 000 and makes this threshold amount cumulative over all awards granted to a particular entity Mission Order also changes the definition of Prohibited Party from An individual or entity for which there are reasonable grounds to believe that such individual or entity is or was engaged in criminal terrorist or intelligence activities that are inconsistent with the interests of the US national security or the integrity of the USAID programs Mission Order 201 04 11 to An individual or entity that USAID knows or has reasonable grounds to suspect i Supports or has supported terrorist activities ii Is or has been engaged in terrorist activities iii Poses a significant risk of committing terrorist activities or iv Is or has been engaged in other activities which are contrary to the national security or foreign policy interests of the United States 12 This much expanded definition of prohibited parties allows the USAID Office of Security wider latitude in determining whether a party qualifies as a prohibited party and is therefore ineligible to receive a USAID grant or contract While USAID automatically performs vetting on all non U S recipients of USAID grants in excess of 25 000 Mission Order 201 05 makes it clear that even if vetting would not otherwise be required under these rules vetting will be conducted whenever USAID has reason to believe that the Awardee or Sub awardee could be a Prohibited Party 13 Whenever an entity is vetted each of its key individuals who are not U S citizens or permanent legal residents must also be vetted 14 The Mission Order makes clear that vetting is required for key individuals but is not required for the ultimate beneficiaries of the cash or in kind assistance such as food water medical care micro enterprise loans and shelter 15 Entities applying directly to USAID for the award are required to submit a detailed information package for each key individual including copies of government issued photo identification a copy of each individual s passport and tazkera 16 and information regarding the individual s tribal affiliation father and grandfather s names place and date of birth occupation residence and pseudonyms 17 These prime awardees are also responsible to take reasonable steps to verify the required information contained in the information forms and submitting the information to the Vetting Support Unit VSU 18 USAID s Vetting Support Unit then reviews the information package from the grantee or contractor for completeness and accuracy If there are no problems in the information package the USAID mission forwards the package to the agency s Office of Security in Washington D C for additional investigation The security office will them submit a recommendation of eligibility for the contract if the office does not identify any derogatory information regarding the person or entity The USAID Senior Deputy Mission Director makes the final determination as to whether to declare a contractor eligible for a contract IV PROPOSED LEGISLATION INCORPORATES SOME SIGAR RECOMMENDATIONS BUT NOT EXPANSION OF SEC 841 TO STATE AND USAID In proposed legislation the House and Senate each incorporated some SIGAR findings and recommendations into their drafts of the National Defense Authorization Act NDAA for the fiscal year FY 2014 The proposed bill would expand Section 841 authority within the DOD However neither the House nor the Senate expanded the legislation to grant State or USAID Section 841 authority or require compliance with a Section 841 determination The House which passed its version of FY 2014 NDAA on June 14 2013 expanded Section 841 to apply not only to the United States Central Command in Afghanistan but also to the U S European Command the U S Southern Command and the U S Pacific Command excluding only U S Northern and Africa Commands The House bill also repeals the sunset provision of the NDAA 2012 which is currently set to expire December 31 2014 19 The Senate Armed Services Committee which reported its version of the FY 2014 NDAA on June 20 2013 likewise proposed an expansion of Section 841 The Senate Committee recommends extending the provision to all combatant commanders 20 These combatant commanders would in consultation with the Under Secretary of Defense for Policy the Under Secretary of Defense for Acquisition Technology and Logistics and the relevant US embassy determine an appropriate plan of action to mitigate the flow of funds to designated persons or entities When that plan of action includes contract actions the head of the contracting activity may terminate or void the grant contract or cooperative agreement and restrict future awards to such persons or entity The Senate Committee also recommends providing for post deprivation due process for the listed group within 30 days of the receipt of notification of the entities failure to satisfy Section 841 requirements 21 V WHAT IS AT STAKE The current use of Section 841 by DOD and potential expansion of this authority to State and USAID raises serious concerns both for NGOs and potential Section 841 designees The lack of clearly defined guidelines to determine when a person or entity is actively supporting an insurgency or otherwise opposing United States or coalition forces and the failure of the DOD to provide information to parties regarding the reasons for their Section 841 designation raise serious due process concerns for those whose grants are voided A negative Section 841 determination could also appear on a grantee s Past Performance Evaluation which would make it nearly impossible for the grantee or contractor to receive any government contracts for a period of three years or longer Likewise the lack of a clear definition and guidelines as to when a person will qualify for a Section 841 designation could create a culture of fear amongst potential grantees and cause a chilling effect in the awardees protected right to freedom of association and freedom of expression Additionally requiring NGOs USAID and State to provide personal information and potentially actionable intelligence regarding their key personnel and sub grantees to the DOD may risk the neutrality of the NGOs putting their immunity under International Humanitarian Law at risk and risking the safety of its members on the ground A DUE PROCESS CONCERNS While it appears that the designation undergoes many levels of internal informational and legal review the reasons for the designation and information upon which the designation is based are not available to the designees Although Section 841 designation itself is unclassified the information CENTCOM uses to make a determination may be classified and is not automatically shared with contractors As a result the prime grantees cannot share with subcontractors the reasons for the termination of the contract and prime awardees may not know themselves the reasons for their Section 841 designation Such information according to Section 841 may only be shared pursuant to a protective order issued by a court of law 22 Not only do these situations constitute a potential violation of due process for the designees but they may expose prime awardees to litigation for breach of contract under the domestic law of the host country Similarly prime grantees may be forced to absorb the cost of finding new subcontractors to complete the desired work under the terminated contract DOD implemented a two phase procedure in order to exercise the authority granted under Section 841 In phase one DOD s Task Force 2010 TF2010 compiles a package of information on potential designees to determine whether a person is actively supporting an insurgency or otherwise opposing the U S or coalition forces This information package includes known civil and criminal activity affiliations and associations with malign actors and known terrorism and insurgent ties and may include classified and unclassified date TF2010 uses this information to ultimately determine whether the potential awardee is actively supporting an insurgency or otherwise opposing U S or coalition forces based on the quality quantity timeliness and level of corroboration of the evidence Once a person or group is designated by TF2010 the information package undergoes an external legal review TF2010 also conducts a contract impact analysis to identify any potential second tier or third order effects to determine the consequences in the area of operations if the designated person or group could not perform under the contract based on a Section 841 designation The information package if approved is routed through a series of coordinating agencies within the International Security Assistance Force ISAF Joint Command for review and agreement before it reaches CENTCOM for a final decision The Section 841 designation package receives a number of senior level approvals including approvals by the Deputy Chief of Staff of ISAF Joint Command the Commander of the ISAF Joint Command and the Commander of the ISAF U S Forces Afghanistan before finally reaching CENTCOM Once at CENTCOM the package is subject to another intelligence review and legal evaluation from the CENTCOM Judge Advocate The CENTCOM Commander then reviews the package and all of the information compiled up to this point and makes the final determination as to whether to designate the person or entity as a prohibited party If the CENTCOM Commander approves the package the Commander creates an unclassified Section 841 notification letter listing the person or groups identified along with a request that the head of agencies or heads of contracting activities exercise the authority granted by Section 841 to restrict terminate or void contracts with those designated as prohibited parties under Section 841 CENTCOM will then distribute the notification letter to the key heads of agency and select heads of contracting authorities In phase two the key heads of impacted agencies and select heads of the contracting authorities determine if they have any contracts with the person or group designated in the CENTCOM notification letter There is no formal procedure to determine whether the contracting authorities are engaged with prohibited parties The policies used by these entities to determine whether they are engaged in contracts with designated parties ranges from formal to ad hoc according to a survey conducted by SIGAR The process concludes when the head of the contracting authority responds to CENTCOM with information on the number and value of any contracts with the prohibited person or entity and the actions taken on the contracts 23 B NEUTRALITY OF INTERNATIONAL NGOS According to the International Committee of the Red Cross ICRC under customary International Humanitarian Law IHL civilian humanitarian relief personnel are protected against attack according to the principle of distinction This requires the parties to any conflict to distinguish between civilians and combatants at all times Attacks may only be directed against combatants and must not be directed against civilians unless and for such a time as the civilians take a direct part in the hostilities 24 Likewise under the Statute of the International Criminal Court intentionally directing attacks against personnel involved in a humanitarian assistance mission during an international armed conflict is a war crime as long as the humanitarian organizations are operating in accordance with the Charter of the United Nations and such personnel are entitled to the protection given to civilians under IHL 25 These humanitarian organization rely on their neutrality and separation from participation in the hostilities in order to claim protection as civilians under International Humanitarian Law The provision of actionable intelligence to a party to the conflict may threaten the organization s neutrality classification as civilian and therefore protection under IHL The collection of actionable intelligence by U S funded humanitarian organizations also places these organizations at serious risk of retaliatory attacks from the members of the communities they are trying to serve These humanitarian organizations rely largely on community acceptance and the perception of independence and neutrality in order to function safely in their respective communities Should these communities believe that the organizations are providing intelligence to the U S or any party to an armed conflict the ability of that organization to function in a principled and safe manner may be gravely threatened not only by the loss of protection under IHL but also by retaliatory action by those who perceive the organization as an agent of the United States government Therefore Congress should exercise caution in expanding this program to State and AID and should consider carefully the impact that the expansion of this program will have on the safety of the humanitarian organization and their employees serving the communities on the ground C RESTRICTION OF FREEDOM OF ASSOCIATION AND EXPRESSION The lack of clarity and transparency in determining which individuals and entities are designated under Section 841 as actively supporting an insurgency or otherwise opposing U S and coalition forces may have a chilling effect on the rights to free expression and association of potential DOD grantees According to the Universal Declaration of Human Rights and International Covenant on Civil and Political Rights every person has the right to freedom of opinion and expression 26 and the right to freedom of peaceful assembly and association 27 These rights may only be subject to restrictions which are prescribed by law and necessary in a democratic society in the interests of national security or public safety public order the protection of public health or morals or the protection of the rights and freedoms of others According to the United Nations Office of the High Commissioner for Human Rights OHCHR clear safeguards must exist to ensure that the right to association is not curtailed unnecessarily The principles of necessity and proportionality must be respected in all cases and the principle of legality must be respected in properly defining terrorism The OHCHR specifically emphasizes the need to specifically define terrorism terrorist acts and terrorist groups in order to ensure that groups are not criminalized without warrant Accordingly any decision to proscribe a group or association as terrorist needs to be taken on a case by case basis and must be assessed by an independent judicial body with full notice to the affected group This process must present the possibility of appeal 28 The Special Rapporteur on Human Rights and Counter Terrorism has likewise stressed the importance of ensuring that all decisions which limit human rights are overseen by the judiciary so that they remain appropriate proportionate and effective and so that the government may ultimately be held accountable for limiting the human rights of individuals The DOD process lacks such oversight by an independent judicial body fails to provide full notice to the affected individuals and lacks any review procedure presenting a serious threat to the enjoyment of the freedom of assembly and expression of the potential DOD grantees Without clarity to determine which actions and contacts will render an individual ineligible to receive a DOD grant many individuals may cease their association with even legitimate organizations and individuals out of fear that these contacts may result in a Section 841 designation and the loss of potential grants or contracts VI CONCLUSION The expansion of the DOD Section 841 procedures and authority to State and USAID while recommended by SIGAR has so far not been adopted by either the House or the Senate The threat of expansion has in any event prompted a pre emptive response from USAID which expanded the scope of its own vetting procedures Congress should continue to exercise caution when considering expanding the DOD program to these agencies due to the differences in the mission and purpose of DOD State and USAID In expanding the DOD program Congress could risk interrupting the currently functioning systems at State and USAID and risk

    Original URL path: http://www.charityandsecurity.org/print/1151 (2016-02-16)
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  • CSN Files Comments on Proposed USAID Rule that Gathers Data on Charity Partners
    information if the hit turns out to be a false positive Does the applicant get an opportunity to cure or challenge a match prior to a decision on vetting Are any distinctions made on these different levels of potential ties to terrorism published terrorist list unpublished terrorist list affiliated with or linked to Foreign laws How will USAID handle situations where law in country where program being carried out prohibits collections of such information by a foreign government or others Are foreign NGOs that apply to be prime awardees covered by the proposed rule The Risk Based Analysis lacks adequate structure and definitions The Risk Based Analysis RBA concept is not adequately defined and developed While it provides some general key factors to be considered there are no standards Instead it says the details will be dictated by specific circumstances This is an excessive delegation of authority to individual USAID staff and can result in inconsistent application and potentially discriminatory or other inappropriate criteria For example the announcement says the RBA review will consider the likelihood that individuals linked to terrorists may benefit from the program Under these criteria a baby could be denied medical or food assistance because s he is linked to someone affiliated with terrorism This would violate the fundamental humanitarian principle that assistance be based on need alone The heavy emphasis of the RBA requires that there be a consistent policy and procedure for how it will be implemented Logistical issues It is not realistic to require vetting of sub awardees at the application stage since NGOs often are not yet able to identify them prior to a decision on the grant application In addition it is not clear what happens when a new key individual comes on board such as with staff turnover whether or not the NGO has to wait for vetting results or can move forward Waiting could cause program delay and implementation problems 6 Fundamental Due Process is Lacking The process for challenging an adverse finding from vetting is insufficient as the applicant will not necessarily be given reasons or enough information to make a meaningful response Adequate notice of reasons and meaningful opportunity to respond are at the core of due process protections and are lacking here There is too much discretion left open USAID employees to determine how much information an applicant may get about an adverse finding This can prevent an applicant from making an adequate response and lead to inconsistent implementation uneven results and over caution by USAID employees Definitions and clear guidance are needed There is no process of a key individual to challenge an adverse finding These individuals can lose their livelihood and have other problems as a result of an adverse finding and should have some method of redress Cost Benefit Analysis 1 Counterproductive Policy Impacts PVS is contrary to the U S goal of making allies For example U S policy as articulated in USAID s Country Development Cooperation Strategy 5 seeks to cultivate positive relationships with local communities it serves PVS will undercut this goal by creating the perception of using USAID programs for intelligence gathering undermining the political neutrality of its partners PVS will have unintended consequences on program effectiveness For example in programs that address underlying grievances that cause instability and conflict or that promote peaceful political transitions facilitate reconciliation and similar goals people that are necessary participants may be excluded by PVS if deemed to have linkage to terrorism or meet one of the other undefined criteria Groups engaged in research and conflict management programs on the ground need the very people that vetting may prohibit from participation to be successful 2 PVS will Deter Applications from Qualified NGOs The notice states that PVS will deter terrorists and their affiliates from applying for USAID funds Unfortunately systems such as PVS tend to create barriers to effective delivery of aid programs and will discourage NGOs from applying for grants and alienate international partners without effectively addressing national security concerns The pool of effective partner organizations is likely to shrink due to their objections to turning over detailed personal information to be shared with law enforcement and intelligence agencies In the case of local staff the request amounts to a collection of their identifying information by a foreign government an intrusion into privacy that many are likely to object to Many highly qualified internationally respected NGOs have legal and or principled objections to turning over detailed personal identifying information on their staff and board members to a governmental entity For example the former head of the United Nations Office for the Coordination of Humanitarian Affairs 2003 to 2006 and current Secretary General of the Norwegian Refugee Council Jan Egeland said the following in a September 2013 interview with the Global Observatory My own organization is today having to turn away money we really need for water and sanitation projects in the biggest refugee camp on earth which is the Dadaab camp for Somali refugees in Kenya because we ve been asked by a donor which is a very good donor in general to do something bad which is to hand over bio data on all of the staff involved in this project and all of our partners and contacts in this project so that they this western donor can vet these people That is prohibited by our board we cannot do that We have to avoid being seen as an instrument for any political or other actor in this world and especially in a sensitive place like the Somali refugee programs 6 3 PVS Undermines the Independence and Neutrality of NGOs Creating Threats to Safety Independence and political neutrality are central principles that humanitarian organizations adhere too These principles have both a moral and practical basis They ensure that aid is used solely to relieve human suffering and not to further political or military agendas They also ensure that aid organizations can operate effectively in crises As Nan Buzard Executive Director of

    Original URL path: http://www.charityandsecurity.org/print/1115 (2016-02-16)
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  • A License to Aid? How Politics Delays Aid to Civilians in Conflict Zones
    years In February 2013 Charity X received a decision on its 2010 request It read No further information was presented with the denial OFAC considered the case closed and welcomed the charity to reapply According to the Executive Director of the charity during those two years without word from OFAC we had to revamp our processes to ensure compliance with U S laws all while ensuring our work for the well being of humanity and those we serve prevails Without the license the charity was forced to change its plans and was limited in the scope of the work it could conduct The fact that approval was required from the State Department appears to show that political considerations are weighted more than humanitarian ones when it comes to licensing decisions The State Department has no authority for approving or denying licenses under the law that governs the U S economic sanction regime It is solely the responsibility of the Treasury Department The lack of foreign policy guidance from the State Department should not be the operative consideration in a licensing request Rather as the Executive Director of the charity stated humanity not politics should be the chief concern for supplying aid to needy individuals in Gaza or elsewhere Without the license Charity X was unable to extend the reach of its aid programs to students in non UN chartered schools It faced greater difficulty moving in and out of Gaza and ran into additional barriers when transferring money into the territory An All to Common Problem As an isolated incident the inability of this charity to get a license to provide aid to children is troubling enough However in other sanctions regimes similar cases abound In Somalia a large scale drought was exacerbated by the terrorist group al Shabaab which controlled swaths of territory in Southern Somalia Al Shabaab much like Hamas acted as a de facto thought far less organized government in some of the areas hardest hit by drought and food shortages iv Aid groups were concerned that providing food and shelter in al Shabaab controlled areas could expose them to legal liability because of the sanctions against the terrorist group According to a May 2013 report Commissioned by the UN and USAID legal restrictions on aid contributions in addition to other factors contributed to the nearly 260 000 deaths during the famine v Interaction an association of over 200 aid and development organizations requested that OFAC issue a General License for Somalia to allow unimpeded access to starving civilians by aid groups The General License unlike the specific license requested by Charity X in Gaza would have applied to all aid groups and would have bypassed the lengthy and inefficient process of each individual group s obtaining its own individual license OFAC denied this request stating only that the situation in Somalia does not lend itself to a broad general license vi If the government s strict enforcement of sanctions against terrorist groups in Gaza and Somalia

    Original URL path: http://www.charityandsecurity.org/print/1069 (2016-02-16)
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  • How the FATF Is Used to Justify Laws That Harm Civil Society, Freedom of Association and Expression
    must be translated into Azeri Penalties apply if there is no written contract that meets these requirements Commentary The harsh penalties and high level of government intrusion into NPO operations and restrictions on fundraising and use of resources in Azerbaijani law exceed what is necessary or reasonable to protect against terrorist financing or fraud The UN Report of the Special Rapporteur on the rights to freedom of peaceful assembly and association 7 makes it clear that The right to freedom of association not only includes the ability of individuals or legal entities to form and join an association but also to seek receive and use resources from domestic foreign and international sources It notes that transparency and accountability regulations for civil society must be the least intrusive means to achieve the desired objective Bangladesh Despite already having an onerous NPO regulatory framework 10 in late August 2012 the Bangladeshi government initiated the process of establishing a new 11 member commission which according to the International Center for Not for Profit Law 11 would be responsible for bringing all non governmental organizations under a single authority to hold them accountable and ensure transparency in their financial transactions The commission would also draft a new law to regulate NPO activities and be responsible for investigating any allegations of anti state activities or terror financing carried out by NPOs and other voluntary organizations The drive for these changes is rooted in the country s desire to be removed from the FATF sanctions list If we fail to regulate the unethical activities of the NGOs and micro credit organizations the country might be downgraded from the current grey list to dark grey list of FATF one official said 12 The NPO Affairs Bureau which is a regulatory body authorized to coordinate and regulate the activities of civil society organizations operating with foreign funding released The Foreign Donations voluntary activities Regulation Ordinance 2011 in January 2012 If enacted it would Prohibit individuals and organizations from receiving foreign donations contributions for the purpose of carrying out any voluntary activity without prior government approval Require all organizations wishing to receive and use foreign donations contributions to register with the NPO Affairs Bureau Require all organizations seeking to carry out activities with foreign donations to secure advance project approval Require every NPO registered with the Bureau to establish a board of directors consisting of at least 7 members and a general board consisting of 21 members Penalize NPOs if the Director General of the NPO Affairs Bureau believes that NPOs are engaged in activities which are illegal or harmful for the country Commentary These limits on foreign donations and government control exerted over NPO operations using foreign funds are inconsistent with the right of association International human rights law does not limit the right to associate only with one s fellow citizens but to all people The Report of the Special Rapporteur on the rights to freedom of peaceful assembly and association 7 makes a special point of such restrictions must be strictly limited to those necessary to protect national security or public safety and even then must be both necessary in a democratic society proportional and the least restrictive means necessary to achieve a legitimate end The power to impose penalties on NPOs engaged in a very vaguely defined harmful to the country activities opens the door to politically motivated action against NPOs that may publicly criticize or disagree with government policy thereby violating freedom of expression Bahrain Despite having a relatively small NPO sector with just over 420 organizations Bahrain has an extensive regulatory framework governing it According to the UK Charity Commission 13 the primary law regulating associations operating in Bahrain is the Law of Associations Decree No 21 issued in 1989 and Decree No 1 issued in 1990 The legal framework for NPOS contains specific rules covering issues such as licensing procedures the funding sources of NPOs and their relationship with government In June 2012 Bahrain officials began clamping down on NPOs as part of their efforts to meet international AML CFT standards Fatima Al Beloushi Bahrain s social development minister called on NPOs 14 and other local groups to comply with the regulations concerning receiving or sending funds overseas The law clearly specifies that sending or receiving funds from abroad requires the approval of the ministry and while societies in general have upheld the rules others have failed to report the transactions Al Beloushi said She did not identify the NPOs which had not reported transactions with foreign entities but described the dealings as suspicious Commentary The need for government approval on foreign funding for NPOs which implies it can be withheld infringes on the right of association As UN Special Rapporteur on the rights to freedom of peaceful assembly and association Kiai said The right to freedom of association not only includes the ability of individuals or legal entities to form and join an association but also to seek receive and use resources from domestic foreign and international sources British Virgin Islands BVI The British Virgin Islands BVI proposed Non Profit Organizations Bill seeks to register and monitor the operations of all non profit organizations in the BVI Proponents of the bill including Ronnie Skelton the Minister for Health and Social Development explicitly linked passage of the bill to meeting the recommended standards of the FATF In October 2012 Skelton told members of the BVI s House of Assembly that adopting the bill would make the country more likely to be compliant with FATF standards in future assessments After recapping the history of FATF the Objects and Reasons section of the bill states Special Recommendations VIII SR VIII of the Financial Action Task Force FATF concerns non profit organizations It requires countries to review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism When the Virgin Island s Anti Money Laundering Combating the Financing of Terrorism regime was assessed by the Caribbean Financial Action Task Force CFATF in 2008 the Territory s non profit organizations regime was evaluated not to be at the desired level Sections of the proposed bill of concern for non profit organizations include Section 11 1 would require the annual registration of all nonprofit organizations The definition of a nonprofit organization includes a body of persons promoting social purposes Under Section 11 2 the penalty for failing to register is a fine not exceeding fifty thousand dollars or imprisonment for a term not exceeding three years or both Under Section 23 2 and 23 3 a nonprofit with more than three employees must appoint a Money Laundering Reporting Officer Under Section 23 4 and as confirmed by the FSC nonprofits with less than three employees are required to perform the Money Laundering Reporting Officer functions though they need not appoint a MLRO Under Schedule 3 of the bill fines range from 3 000 30 000 including a 5000 for failure to maintain any records required to be maintained This issue was a particular concern to smaller nonprofits including those with all volunteer staff Under Section 24 organizations with gross annual income over 25 000 are required to submit audited financials Several organizations both large and small expressed distress over meeting the administrative and financial costs outlined in the bill if it s passed These groups include ones working on crisis intervention family support a group cataloguing species of plants and animals the local chamber of commerce and the local search and rescue league Commentary UN Special Rapporteur Kiai notes that unregistered associations have protection under international human rights standards and are eligible to access funding He also notes that the International Covenant on Civil and Political Rights makes no distinction between registered and unregistered associations The BVI universal registration requirement clearly violates freedom of association The other provisions are unnecessarily burdensome and are disproportionate violating the international law standard that requires restrictions on association to be both necessary in a democratic society proportional and the least restrictive means necessary to achieve a legitimate end In addition the BVI rules go beyond what the FATF s own Interpretive Note on Nonprofits IN recommends IN para 3 e which calls for a targeted approach IN para 6 b which states that supervisory measures should apply to NPOs that account for a significant portion of the financial resources under the control of the sector and a substantial share of the sector s international activities IN para 3 b which states that Measures adopted by countries to protect the NPO sector from terrorist abuse should not disrupt or discourage legitimate charitable activities The BPP which states that oversight should be flexible effective and proportional to the risk of abuse In addition it states that Small organisations that do not raise significant amounts of money from public sources and local based organisations or organisations who primary function is to redistribute resources among members may not necessarily require enhanced government oversight Kyrgyzstan Kyrgyzstan s money laundering anti terror finance law The Counteracting Terrorist Financing and Legalization of Proceeds from Crime 15 was adopted in November 2006 and amended in 2009 in accordance with the FATF s recommendations according to the Eurasian Group 16 EAG on Combating Money Laundering and Terrorist Financing an FATF style regional organization The law creates a regulatory body which is directed to develop rules aimed at use of non commercial entities and charitable operations for terrorist financing Charitable financial transactions are among those listed as subject to compulsory control which is defined as regulatory acts in relation hereto on control over operations with financial means or property based on data provide by the entities engaged in such operations as well as on check of such provided data in accordance with legislation of the Kyrgyz Republic In April 2013 Kyrgyzstan s financial investigative unit the State Financial Intelligence Service asked the legislature to pass a law to address the country s AML CFT deficiencies cited by the FATF in its February 2013 assessment 17 so the country can be removed from the dark gray list These deficiencies include failure to adequately criminalizing terrorist financing and clarifying the legal framework for identifying tracing and freezing terrorist assets Possibly inspired by neighboring states like Russia a member of Kyrgyzstan s Parliament also called for checking the foreign funding sources for NPOs What s their purpose here What ideologies they have They might be financed by terrorists Their members get several thousands of dollars cash not through banks but in the U S Embassy MP Tursunbay Bakir uulu said Commentary If Kyrgyzstan moves in the direction of excessive control of foreign funding for NPOs or if its regulations under the compulsory control provision of the 2009 are overly intrusive there could be human rights issues At this time we do not have sufficient information to comment Russia In Russia a number of laws 18 have been adopted in recent years that have had a chilling effect on NPO activities According to a European Union coalition of civil society organizations 19 an NPO law adopted by the Duma in 2006 Increases the intrusive power of the state by allowing unprecedented control over independent NPOs Creates an overly complicated registration procedure for NPOs and permit government officials to deny registration arbitrarily Subjects NPOs to inspections and audits at any time and without limitation Liquidates NPOs unable to obtain registration Outlaws foreign representative offices Despite these severe restrictions in 2008 the FATF found Russia to be only partially compliant 20 with its standards Since then Russia has introduced additional measures including one from July 2012 21 that requires NPOs that receive foreign funding to register as foreign agents and provide increased financial data to the government Failure to comply with the law could result in four year jail sentences and or fines of up to 300 000 rubles 9 200 Another law passed in October 2012 22 altered the definition of treason so that it allows the government to brand anyone or organization as a traitor This overly broad and vague definition seems deliberately designed to make people think twice before doing international human rights advocacy said Hugh Williamson Europe director at Human Rights Watch These laws opened the door for Russian authorities in March 2013 to raid hundreds of NPO offices across the country including Amnesty International Human Rights Watch and Memorial Russia s oldest human rights organization Commentary Victoria Nuland the former State Department spokeswoman described the raids as a witch hunt against NPOs The sheer scope of these inspections now which are now as I said targeting not just NGOs who are subject to the changes under Russian law but also targeting civil organizations that are not subject to those laws like religious organizations educational organizations really gives us concern that this is some kind of a witch hunt she said We think that these laws are extremely restrictive that they are chilling the environment for civil society which is taking Russian democracy in the wrong direction Sri Lanka In June 2012 the FATF s assessment 23 of Sri Lanka s compliance with it standards praised its regulations to establish freezing procedures to implement UN Security Council Resolutions 1267 and 1373 but said the country needs to address the remaining issue regarding adequate criminalization of terrorist financing or the country would remain on the gray list As a result Sri Lanka s parliament amended The Suppression of Terrorist Financing Act No 25 of 2005 just days before the FATF s February 2013 meeting The updated law gives authorities the power to seize property and other assets of suspected terrorists without first obtaining a court order A previous version of the law only applied to recognized terrorist groups and property in the country But now the law has been expanded 24 to include individuals suspected of being a terrorist see footnote 3 and any kind of assets whether tangible or not in or outside of Sri Lanka going further than the standards found in FATF policy Opponents of the law said its definitions of the word terrorist and act of terrorism are so vague that they infringe on basic political expression Ajith Kumara 25 an opposition lawmaker said it could deny Sri Lankans the right to take their grievances to the United Nations or from holding demonstrations or conducting hunger strikes to seek redress Commentary Freedom of expression is endangered by the volatile combination of a vague definition of terrorism and a narrow technical approach to anti terrorist financing laws The result could be that asset freezing and other sanctions could be imposed on NPOs or individuals for political reasons with the end result that FATF standards are implicated in human rights violations Turkey Turkey s parliament adopted an anti terror finance law in February 2013 under pressure from FATF but it drew widespread criticism from civil society and opposition lawmakers who fear it will be used to wrongly label people or organizations as terrorists and freeze their assets without notice Critics of the law say it expands an already overly broad definition 26 of a terrorist organization going further than the definition used by the United Nations and that it allows alleged terrorist assets to be seized without first obtaining a judge s ruling 27 Prominent members of Turkish civil society say the law will impede the delivery of humanitarian aid 28 Turkish politicians also voiced objections over the possibility of the law s misuse Considering the fact that those who oppose the ruling party have been put in jail for being terrorists a government authorized commission will be able to freeze financial assets of all dissident media outlets associations companies labor unions political parties businesspeople foundations and trade bodies opposition lawmakers 29 said in their dissenting comments on the law Nobody should be surprised if an operation is launched against individuals who provide financial assistance to a dissident association they added In October 2012 the FATF had said it would suspend Turkey s membership 30 in late February 2013 unless the country adopted CFT legislation and established a legal framework for identifying and freezing terrorist assets consistent with the FATF recommendations Despite passing the law the FATF says Turkey remains partially non compliant 31 Commentary As with Sri Lanka above freedom of expression is endangered by the volatile combination of a vague definition of terrorism and a narrow technical approach to anti terrorist financing laws The result could be that asset freezing and other sanctions could be imposed on NPOs or individuals for political reasons with the end result that FATF standards are implicated in human rights violations Jurisdictions with Laws Harming Other Civil Society Organizations Rights Nigeria Laws passed in 2011 on curbing money laundering and financing of terrorism in Nigeria are creating problems for the country s non financial institutions including attorneys who say the laws violate the client lawyer privilege Under the requirements of The Money Laundering Prohibition Act 2011 and The Terrorism Prohibition Act 2011 attorneys must register with the country s Special Control Unit against Money Laundering SCUML report financial transactions above certain levels to regulatory authorities and establish internal AML CFT policies and procedures According to Emeka Nwadioke 32 a Nigerian attorney familiar with The Money Laundering Prohibition Act 2011 several sections of the law are troublesome for lawyers These include Section 5 1 says that non financial institutions whose businesses involve cash transactions shall submit to the relevant ministry a declaration of its activities Section 5 1 b enacts that prior to any transaction involving a sum exceeding 1 000 or its equivalent about N150 000 the legal practitioner shall identify the customer by requiring him to fill a standard data form and present his international passport driving license national identity card or such other document bearing his photograph as may be prescribed by the ministry Section 5 1 c which enacts that the legal practitioner shall record all transactions under this section in chronological order

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