Treasury Department Releases Updated Anti-Terrorist Financing Guidelines for Charities

By Andrew Cochran

The U.S. Treasury Department today released updated anti-terrorist financing guidelines and voluntary best practices for U.S.-based charities, and invited public comments on the guidelines. As the "Introduction" state, "Investigations have revealed terrorist abuse of charitable organizations, both in the United States and worldwide, often through the diversion of donations intended for humanitarian purposes but funneled instead to terrorists, their support networks, and their operations." The Holy Land Foundation, Benevolence International, and Global Relief Foundation were among those shut down by federal authorities after 9/11 for providing material support to Islamic extremists. After the 9/11 attacks, when I was senior oversight counsel at the House Financial Services committee during the drafting of the USA PATRIOT Act, I reviewed publicly available federal tax filings of these organizations. I learned from Steven Emerson and his Investigative Project staff that the filings disclosed few details of the sources and uses of funds, because the Internal Revenue Code allows non-profits to so withhold those details (in contrast to for-profit companies). The guidelines (Acrobat file) include a number of measures already required of publicly held companies, including (for charities with groa annual income over $250,000) an annual audit conducted by an independent CPA firm to audit and the issuance of the audited financial statement to the public. The release also comes as the U.S. Senate Finance Committee, chaired by Sen. Charles Grassley, continues to grapple with possible legislative changes to the Internal Revenue Code to mandate more accountability and transparency by all non-profits, and might try to pass some reforms next year.

The Treasury Department has set up a special website to receive public comments on the new guidelines, and I hope knowedgeable CTB readers will provide constructive comments.

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