Memo to the Biden-Harris transition team
To: 2020 Presidential Transition
U.S. Department of the Treasury Team
c/o Elizabeth Rosenberg, Center for a New American Security
erosenberg@cnas.org
From: Lift Sanctions Save Lives Coalition
Contact: Paul Carroll, Director, Charity & Security Network
pcarroll@charityandsecurity.org
Re: Recommendations regarding U.S. sanctions programs
Date: December 19, 2020
This memo is intended to assist the Biden-Harris transition team by providing recommendations regarding U.S. sanctions. We hope that the new administration will take a fresh look at the issues described below and we look forward to engaging with U.S. Treasury and its sub-agencies following the Inauguration.
The Lift Sanctions Save Lives Coalition (https://www.liftsanctionssavelives.org/) is an informal network of humanitarian, research, peacebuilding, faith-based, human rights and other civil society organizations working to raise concerns about the impact of broad U.S. sanctions on countries and regions around the world.
Overview
Nonprofit organizations (NPOs), particularly those that carry out programs that promote peace and human rights, aid civilians in areas of disaster and armed conflict and build democratic governance, have seen their work hindered by sanctions that target countries, regions and economic sectors, as well as designate individuals and entities. Among the various consequences of sanctions, one that has proved incredibly complex, is that of bank derisking and its impact on nonprofit organizations (NPOs).
As unilateral coercive measures implemented by the U.S., sanctions have an unparalleled power due to the disproportionate influence of the U.S. over the global financial system and its various actors. In addition, U.S. sanctions programs have grown exponentially since the 1990s and continue to expand despite evidence of limited effectiveness and increased human cost.
The obstacles U.S. sanctions create for exercise of human rights and provision of humanitarian assistance result from the breadth and vagueness in sanctions laws. The harsh penalties, combined with a lack of clarity about what is and is not permissible, have a chilling effect on all stakeholders, including civil society organizations and financial institutions.
A growing body of research has demonstrated the harmful consequences of sanctions on civilian populations in targeted countries or locations controlled by targeted groups. For example, a recent Human Rights Watch report documented how U.S. economic sanctions against Iran have resulted in shortages of life-saving medicine and the implementation of humanitarian programs. Similarly, reports on other countries targeted by sanctions under IEEPA, such as Venezuela and North Korea, have estimated thousands of excess deaths due to broad financial and sectoral sanctions.
The gendered impacts of sanctions have also been documented as they take a heavy toll on caretakers and industries in which women are disproportionately represented, such as North Korea and Iran’s textile industries. Further, the global pandemic has shown the severe risk to global and U.S. national security that results from isolating entire populations and weakening global health infrastructures. These impacts of sanctions have not been recognized by U.S. policymakers and there remains a dire need to create a human-centered approach to sanctions regulations.
IEEPA, Executive Orders and UN Security Council Resolution 2462
The problems created by U.S. sanctions have their roots in the International Emergency Economic Powers Act (IEEPA) and the Executive Orders (EOs) issued under it. Lack of clarity and standards for evaluating the effectiveness of sanctions contribute to problematic outcomes. Although Congress must remedy many of the problems created by IEEPA, the executive branch can have significant impact by taking steps we recommend below.
In addition, in March 2019 the UN Security Council passed Resolution 2462, which consolidated its previous counterterrorism sanctions programs. The resolution emphasizes that such sanctions programs must be aligned with international humanitarian, human rights and refugee law. The steps we recommend below would significantly contribute to a better alignment of U.S. measures with these standards.
The Effect of Sanctions on U.S. Nonprofit Organizations
Many of the problematic impacts sanctions have on civilian populations are due to the ways in which sanctions constrict the ability of NPOs to carry out their programs, including humanitarian and medical assistance. These problems range from the role of secondary sanctions to the inefficiencies of the licensing process at the Office of Foreign Assets Control.
For example, rather than governing bilateral trade between the U.S. and another country, U.S. sanctions that include secondary penalties become ‘global sanctions’ by threatening all financial institutions, business entities, and governments that wish to maintain access to the world economy. This is particularly important when considering the role of financial institutions and banks in transactions involving humanitarian assistance. Humanitarian organizations risk severe penalties, reputational harm, and jeopardize their ability to operate altogether if they wish to transact in countries and locations subject to U.S. secondary sanctions.
NPOs have found that adhering to generally accepted best practices, due diligence procedures, and good faith provide no legal protection from criminal or sanctions penalties in the event inadvertent sanctions violations occur. In addition, lack of clarity on legal standards forces NPOs to guess about where the vague and broad restrictions draw the line between permissible and impermissible activity.
The Norwegian Refugee Council report Principles under Pressure: The Impact of Counterterrorism Measures and Preventing/Countering Violent Extremism on Principled Humanitarian Action,[1] published in 2018, provides in-depth analysis of how “the ‘war on terror’ with all its legislation aimed at countering terrorism, has had the unintended consequence of making it more difficult and dangerous to aid and protect victims of terror.”
U.S. sanctions have also impacted the ability of NPOs to import items needed for humanitarian response in sanctioned countries and locations where sanctioned entities govern or have a significant presence. Medical workers have complained of difficulties in obtaining medical equipment needed to fight the Covid-19 pandemic, for example, and employees of pharmaceutical companies have claimed that medical suppliers have refused to work in Iran during the pandemic, due to US sanctions risks.
U.S. sanctions also hinder the ability of peacebuilding organizations to function in the very places where their services are needed. In the June 2010 case Holder v. Humanitarian Law Project (HLP), the Supreme Court upheld the power of Congress to apply the material support prohibition to speech and communications aimed at conflict resolution training.[2] HLP had sought to train the Kurdistan Workers Party (PKK) and Liberation Tigers of Tamil Elaam (LTTE), both designated FTOs, how to use UN procedures and international law to resolve disputes peacefully. The court said HLP could speak and write about the PKK and LTTE as long as it did not do so in coordination with them or under their direction or control. The Court did not define "coordinated speech” or “under the direction or control of” a sanctioned entity or person.
The practical effect of the decision has been to impose a permanent, blanket ban on engaging sanctioned groups for peacebuilding purposes, limiting the potential to reduce conflict as well as the speech and associational rights of organizations that wish to conduct such programs. An example from Somalia and restrictions on contact with Al-Shabab is illustrative. At a conference last year, a participant from an NGO doing health work in Somalia expressed concern that the provision of emergency medical care to the child of someone affiliated with Al-Shabab would place them at risk. In that instance they would have to choose between humanitarian principles of providing care to those in need and antiterror sanctions. Additionally, bank derisking meant that most channels for money transfers were not working, leading to cash-based assistance and transfers, which created their own serious risks.
The breadth of restriction is illustrated by the United States Agency for International Development (USAID), which bars grantees in Gaza from having any contact with private Palestinians or public officials unless “they are not affiliated with a designated terrorist organization (DTO).” “Contact” is defined as “any meeting, telephone conversation, or other communication, whether oral or written.”[3] In the Gaza strip, where Hamas is the governmental authority, this bars organizations operating USAID-funded programs from making any logistical arrangements with government officials, or using government facilities, such as public schools or clinics, to access civilians in need.
Recommendations for Improved Administration of U.S. Sanctions
1. Impact assessment (including humanitarian impact)
High COVID-19 related death rates in heavily sanctioned countries illustrate the grave consequences of deficient healthcare infrastructures, weakened in part by sanctions. In 2019, the Government Accountability Office issued a report that noted, “[s]anctions may also have unintended consequences for targeted countries, such as negative impacts on human rights or public health.” In addition, the report concluded that unilateral sanctions measures are difficult to assess and are not necessarily effective in achieving foreign policy aims. We urge the implementation of regular assessments to better understand the human costs of sanctions and whether sanctions are effective in achieving their purpose.
Recommendation: U.S. Treasury and Department of State should undertake an assessment of the impacts on currently sanctioned countries and locations, to be provided to the National Security Council. A requirement for such an assessment should accompany all new Executive Orders for sanctions programs. This should include:
• impacts on civilian populations including access to clean water, sanitation, public health services, and food supply chains;
• changes in general mortality rate, maternal mortality rate, life expectancy, rates of infectious diseases, rates of malnutrition and stunting, and literacy;
• environmental impacts experienced by the country including crop production, soil fertility, energy consumption, and fossil fuel usage;
• the delivery of humanitarian aid and/or development projects in the country; • rates of migration including any increase or decrease in refugees or migration from the country or internally displaced people in the country;
• economic, political and military impacts;
• reactions of the country to imposed sanctions, including policy changes and internal sentiment; • the degree of international compliance and non-compliance of the country.
In addition, impact assessments should include the following information regarding impacts on U.S. policy and U.S. security:
● Impact on U.S. national security;
● Whether stated foreign policy goals of sanctions are being met;
● Degree of current or anticipated international support or opposition;
● Degree of compliance of sanctions regime with international law- including compliance with provisions of UNSCR 2462;
● Impact on U.S. economy, businesses, and consumers;
● Impact on financial institutions and suppliers working with humanitarian actors in sanctioned locations;
● Criteria for lifting sanctions; Prospects for fully enforcing sanctions.
2. Restore the humanitarian exemption in IEEPA
Although the International Economic Emergency Powers Act (IEEPA) has a humanitarian exemption,[4] since 9/11, most terrorism-related Executive Orders (EOs) issued under IEEPA use its authority to cancel this exemption, without stating a basis for such action or setting time limits.[5]
The humanitarian exemption in IEEPA bars the president from blocking “donations of food, clothing and medicine, intended to be used to relieve human suffering," unless the president determines that such donations would “seriously impair his ability to deal with any national emergency,” are “in response to coercion” or would “endanger Armed Forces of the United States.”[6] This national emergency exception was invoked as the basis for cancelling the humanitarian exemption in EO 13224, signed by President George W. Bush on Sept. 24, 2001.[7] It has since become routine for the humanitarian exemption to be cancelled in Executive Orders. [8]
By cancelling the humanitarian exemption, EO 13224 placed humanitarian aid on the list of prohibited transactions with designated terrorist organizations, affecting everything from negotiating access to civilians to coordinated rescues during earthquakes and floods.[9]
Recommendation:
Because Congress has failed to use its existing oversight and renewal power to remedy this problem, a new administration should issue an EO that would revoke the cancellation of the humanitarian exemption, beginning with EO 13224, affecting counter-terrorism financing and those relating to certain crisis areas. It could include the following language:
The prohibitions in the EOs listed in the Annex to this Order shall not exclude donations, by persons subject to the jurisdiction of the United States, of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering, except to the extent that the President determines that such donations (A) would not reach civilian populations, (B) are in response to coercion against the proposed recipient or donor, or (C) would endanger Armed Forces of the United States which are engaged in hostilities or are in a situation where imminent involvement in hostilities is clearly indicated by the circumstances; and ensures that (D) such limits must be temporary and proportionate to the security threat.
3. Improve licensing transparency and procedures
The licensing process at the Office of Foreign Assets Control (OFAC) is dysfunctional and overwhelmed. The Charity & Security Network (C&SN) report Safeguarding Humanitarianism [10] explains, “…although there is a licensing process that allows the Treasury Department to make exceptions under one set of regulations for limited humanitarian action, this process is often described as excruciatingly slow and ineffective. It lacks any consideration of international law in its decision-making procedures. The licensing regime contains no explicit exceptions for critical humanitarian assistance. If a license is granted, the conditions of it may compromise the core operating principles of humanitarian
organizations, particularly neutrality. The result of such a process is to make addressing urgent humanitarian need the exception, rather than the rule.”
While General Licenses issued by OFAC exempt some humanitarian trade from sanctions, they are often insufficient to meet all of the needs of a humanitarian response. For example, there is no General License exempting certain crucial devices and equipment for COVID-19 prevention, diagnostics, and treatment in Iran. These require special licenses, which can take up to an average of 77 business days for approval by OFAC. In some contexts, such as North Korea, aid agencies report the process taking anywhere from nine months to three years.
Recommendation:
U.S. Treasury should take concrete steps to make the licensing process more efficient increase transparency for both applicants and the public.
Transparency for the license applicant:
• In all specific license applications, the applicant shall be supplied with the name and contact information of the OFAC official responsible for processing the application. Decisions shall be made in writing. In cases where a license is denied there shall be an explanation of the reasons for the denial and information on the process for
reconsideration.
• The standards for approving licenses for humanitarian assistance and peacebuilding projects shall be clearly defined, available to the public, consistent with humanitarian principles and promote effective programs by being sufficiently flexible to ensure that applicants can conduct their activities with impartially, speed and discretion.
• The independence and neutrality of humanitarian assistance programs will be respected, and as such, not be compromised by political or foreign policy considerations.
• To avoid undue delays that might jeopardize the viability of a proposed humanitarian, development or peacebuilding projects, OFAC shall review each application within a reasonable time and either grant or deny the license. If, after a reasonable time has elapsed from submission of the application, OFAC has not yet made a determination, then the applicant may proceed with the plan described in the application. If OFAC rejects the license after such work has begun, the applicant may not be prosecuted or sanctioned for any such activities that it conducted between the 91st day and the time at which it is informed of the denial. In the case of a declared humanitarian emergency the applicable period of time will be seven days.
Transparency for Congress and the public:
• Provide the number of specific licenses related to humanitarian assistance issued by the Office of Foreign Assets Control;
• Provide the number of requests for specific licenses related to humanitarian assistance denied by the Office of Foreign Assets Control with explanations for the denials; • Provide the number of requests for specific licenses related to humanitarian assistance that have been pending for 30 days or more;
• Provide the number of requests by persons who are not U.S. citizens, lawful permanent residents, or entities, for sanctions waivers related to humanitarian assistance that have been pending for 30 days or more as of the date of the report, with explanations for the delays.
4. Issue a Global Temporary General License for Duration of the Covid-19 Pandemic
The current COVID-19 pandemic highlights the precarious and, in some cases, critical state of the health infrastructures and economies of these sanctioned locations, and how, without immediate intervention, millions of people face severe economic hardship, infection, and death.
We urge the new administration to enact the principles put forward in a letter to Secretary Mnuchin and Secretary Pompeo from Senator Warren, Representative Garcia and over 70 other members of Congress to issue a temporary global general license to expedite COVID-19 related aid. There is bipartisan precedent for such an act; for example, President George Bush issued such a license in the wake of an earthquake in Iran in 2003. We support UN Secretary-General António Guterres in his call “for the waiving of sanctions that can undermine countries’ capacity to respond to the pandemic.”
Recommendation:
Specifically, we urge you to issue emergency universal exemptions for humanitarian goods. The exemptions could take the form of an emergency universal general license that would allow humanitarian agencies to respond to the crisis quickly and more effectively.
The license would need to, at minimum, exempt:
1) Aid necessary for the treatment of COVID-19;
2) Equipment used in the recovery from the disease;
3) Goods required to address simultaneous needs and issues exacerbated by the pandemic such as food security, water supply, civilian energy infrastructure, and other health-related needs such as medical kits and equipment;
4) Necessary training required for the use of medical and humanitarian equipment; 5) Communication and partnerships with non-sanctioned organizations and individuals. (These exemptions would be necessary for contexts such as North Korea where a specific license is required for partnerships with non-sanctioned organizations and individuals).
6) Transactions and communications ordinarily incidental and necessary to accessing civilian populations in need of assistance.
Finally, the universal general license must address the reluctance of financial institutions, as well as other entities within supply chains, to carry out transactions required for the delivery of this aid.
5. Address NPOs’ Lack of Financial Access
A 2017 empirical study found that two-thirds of U.S.-based NPOs face difficulties in accessing financial services,[11] with the most common problem being delays in wire transfers. In focus group sessions conducted to supplement the statistical data in the report, NPO participants noted that delays typically lasted weeks or even months, severely impacting time-sensitive programming.[12] “When programs are delayed or canceled because of the inability to transfer funds, peace is not brokered, children are not schooled, staff is not paid, hospitals lose power, the needs of refugees are not met and, in the worst cases, people die.”[13]
While the same study found smaller numbers of NPOs struggling with account closures or refusals to open accounts (15% in total[14]), the impact on NPO operations is significant.”
Many banks and regulatory officials are unaware of the risk assessment and due diligence measures NPOs routinely undertake, not only to comply with sanctions and CFT regulations, but also to account to donors and manage risks to operations and employees.[15]
There has been a shift in the perception of terrorism financing risk in the NPO sector over the past 20 years, from the notion that NPOs are “particularly vulnerable” to terrorist abuse to recent U.S. Treasury statements that the vast majority of US-based NPOs are not high risk for terrorist financing and emphasizing use of the risk-based approach. (This history and the Treasury statements are outlined in the Annex attached to this letter.)
While welcome and important, these statements do not have the force of law or regulation. As governments’ understanding of the sector has evolved, that progress has not been reflected in NPOs’ ability to access the financial services necessary to carry out their vital programming. Instead, the global phenomenon known as “derisking” has become, for most NPOs operating abroad, a significant hurdle and for many, an existential crisis. (Please see Annex to this letter for examples.) Although there are likely multiple drivers of the derisking crisis, the failure of the regulatory structure to keep pace with the evolving understanding of the sector is an important factor.[16]
Recommendations:
To address financial access barriers for NPOs, U.S. Treasury and the FFIEC regulators should update the NPO sections of the FFIEC BSA/AML Examination Manual[17] at the earliest possible date. In October 2017, a group of NPOs and banks came together to draft proposed revisions to the NPO sections of the Manual, which were then submitted to the bank regulators. We continue to hear from bankers that there is a disconnect between the increasingly good statements made by Treasury officials and what they hear from examiners. Until the Manual is updated and bank examiners are trained on this material,
banks will not have the reassurance they need from examiners to manage rather than avoid any actual risk posed by NPOs.
In addition, U.S. Treasury should update guidance and other documents on due diligence for banks to provide clarity and a level of assurance that will encourage them to manage rather than avoid any real risks posed by NPO clients.
• Develop a formal mechanism to solicit input from NPOs and banks on all guidance, fact sheets and other formal statements relating to financial access for NPOs.
• Publish as guidance to banks a statement that any 501(c)(3) charity is de-facto legitimate. • Clarify to banks that they should not engage in negative media searches due to the likelihood of disinformation creating an inaccurate “red flag.” Financial institutions should limit searches to information contained in U.S. government or United Nations lists such as U.S. Treasury’s Specially Designated Nationals list. (The U.S. Agency for International Development recently changed its contract and certification process to clarify that grantees need only check U.S. government and UN terrorist lists when screening partners and other persons and entities, among other changes.[18])
• Clarify for banks that NPOs operating under US government grants have undergone due diligence and risk mitigation sufficient to satisfy the bank’s due diligence requirements. • Publish the November 2020 Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations as guidance. Develop additional guidance for banks to provide clarity on what is NOT required when banking charities.
Going forward, U.S. Treasury should participate in good faith in any US-based multi-stakeholder dialogue on bank derisking of NPOs, , including any new such effort, based on the lessons learned and best practices of the UK Tripartate Working Group. As part of this or as a separate workstream, U.S. Treasury should develop, in conjunction with USAID and the U.S. State Department (as donors), NPOs and banks, a plan to share any actual risks posed by NPOs operating in high-risk environments. Increasingly, NPOs are expected to shoulder all these risks.
Finally, to ensure that the provisions of the National Defense Authorization Act for Fiscal Year 2021 relating to bank derisking can assist NPOs with financial access in the most timely manner, U.S. Treasury should provide the NPO sector with a timeline and steps to meet the Congressionally imposed requirements around derisking, regulatory review and revisions, and bank examiner training contained in this bill.
6. Provide adequate due process for U.S. persons and entities added to Treasury’s SDN list
Current sanctions resolutions do not address the issue of what happens when sanctions laws, designed to be imposed against foreign countries, entities and persons, are applied to persons with the ability to bring Constitutional claims. This occurs when Executive Orders allow Treasury to designate those who it
believes provide support to or are “otherwise associated with” sanctioned parties. During the George W. Bush administration nine U.S. charities were listed as such supporters, and had their assets frozen
without the right to meaningful appeal. The two most recent court cases to address this issue found that the process, as applied to these organizations, is inconsistent with the Fourth and Fifth Amendments. The regulation has not been revised to address this issue. (See
https://charityandsecurity.org/analysis/mind-the-gap-when-it-comes-to-nonprofits-the-tax-code-and sanctions-regime-are-in-conflict/)
Recommendation:
Amend 31 CFR 501.807 to add a section on due process protections for U.S. persons: (e) DUE PROCESS FOR PERSONS WITH THE ABILITY TO BRING CONSTITUTIONAL CLAIMS
(1) WARRANT REQUIREMENT FOR PERSONS WITH THE ABILITY TO BRING
CONSTITUTIONAL CLAIMS.—
The assets or other property owned in whole or in part by any person with the ability to bring Constitutional claims, shall not be frozen, blocked and their possessory interest in property shall not be interfered with, without a warrant based on probable cause issued by a neutral magistrate.
(2) NOTICE REQUIREMENT.-
As soon as practicable following any action pursuant to this regulation, and in no event later than 7 days after such action, the president shall provide notice to any property or property interest of a person with the ability to bring Constitutional claims is made subject to such action. Notice shall include—
(A) the unclassified administrative record upon which such action is based; and
(B) an unclassified summary of any classified information in the administrative
record, which summary is sufficient to provide the subject of the action with
meaningful notice of the factual basis on which the action was taken.
(3) HEARING REQUIREMENT.-
Within 90 days of any action pursuant to these regulations, which time period may be extended by mutual agreement of the parties, any person with the ability to bring Constitutional claims whose property or property interest is made subject to such action shall be afforded an in-person administrative hearing and may provide documents and other written submissions for the record.”
(4) PROTECTION OF CHARITABLE FUNDS -
(A) NOTICE TO CHARITIES; OPPORTUNITY FOR COMPLIANCE- In any case which anticipates imposing asset blocking on a U.S. charity recognized as exempt under Sec. 501(c)(3) of the Internal Revenue Code, before imposing the sanction, he charity shall be notified in writing, by delivery to the chief executive officer or chair of the governing body of the charity, of the facts, events, persons, and other relevant information serving as the basis for imposing the sanction, and setting forth the steps the charity may take to avoid imposition of the sanction. The charity shall have ten days to respond to the government's proposed steps to achieve compliance.
(B) CHARITIES – If probable cause is found to block the property of a charity the court shall appoint a conservator to oversee the charity’s funds, for the purpose of ensuring that funds are spent for charitable purposes only and that assistance to innocent beneficiaries is not unduly withheld or interrupted.
ANNEX
Shift in perception of NPOs’ terrorism financing risk and Treasury statements
In the weeks and months following the 9/11 attacks, national and international bodies erroneously identified charities as conduits for terrorist financing. This thinking was reflected in the Financial Action Task Force’s (FATF) initial Recommendation 8 on Nonprofits, which referred to the sector at “particularly vulnerable” to terrorist abuse.[19] More recently, government agencies and multilateral organizations have begun to recognize that NPOs are not uniformly high-risk for terrorist financing and that they play an important role in aiding communities worldwide and in countering terrorist propaganda and recruitment.
This greater understanding of the NPO sector has resulted in a gradual shift in the perception of NPOs in relation to terror finance risk by governments and the FATF. In 2015, FATF noted, “the threat environment has evolved, government experience implementing Recommendation 8 has advanced, and the non-profit organisation (NPO) sector and self-regulatory mechanisms have also continued to evolve.”[20] One year later, FATF revised Recommendation 8, removing the “particularly vulnerable” language, directing governments to first identify the subset of NPOs that are at risk for terrorist abuse, and then develop proportionate, risk-based measures to address the actual threats. Notably, the revision says such measures should not disrupt the activities of legitimate organizations.
After a series of informal statements made at financial industry gatherings over the past four years, the U.S. Treasury Department, in its 2020 update of the National Strategy for Combating Terrorist and Other Illicit Financing, stated that “U.S.-based tax-exempt charitable organizations play an important role in delivering aid to communities worldwide and in countering terrorist propaganda and recruitment.” It went on to state that financial institutions should “apply the risk-based approach to the opening and maintenance of charity accounts, as the vast majority of U.S.-based tax exempt charitable organizations are not high risk for terrorist financing.”[21]
More recently, in November 2020, the banking regulatory agencies issued a Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations,[22] emphasizing that banks should use the risk-based approach and try to mitigate the potential risk some charities may pose.
Examples of derisking of NPOs
Recent anecdotal data demonstrate that the derisking of NPOs is not going away and may be worsening:
Over the last year, the Norwegian Refugee Council (NRC) had 736 cases where payments were questioned because of banks derisking due to fear of sanctions-related penalties if the funds end up in the wrong hands. Some major banks are not willing to take the risk working with NGOs because the profit margin in low. 91% of these cases were in payments in USD, with about 5-10% of USD transfers being questioned and held up. As of spring 2020, NRC was unable to transfer money from donors to support their work with Afghan refugees in Iran for a full year despite falling under the sanctions exempt humanitarian categories provided by OFAC. Their problem, one that many other organizations and companies face, is the lack of banks outside Iran that have direct or intermediary relationships with banks in Iran in order to engage in the transfer of funds. The organization has had to spend hundreds of thousands of Euros on extra legal analyses and advice in order to assuage the banks’ fears they may have about US sanctions.
A foreign aid organization with a U.S. office has experienced numerous bank derisking problems in attempting to send money to Venezuela, stemming from U.S. sanctions, with blockages lasting one to four weeks.
A U.S.-based aid organization working in North Korea has to move funds in via cash carry, due to the lack of a financial channel into the country (the UN also has to do this). Due to travel restrictions and border closures from the Covid-19 pandemic, cash carry is no longer an option, so the organization has no way to move program funds into the country for a well-drilling project related to support two pediatric hospitals. That work is done under an OFAC license.
A US organization working in the Horn of Africa has not been able to move money for its programs in Sudan for more than six years, despite having OFAC licenses for its work.
[1] https://reliefweb.int/sites/reliefweb.int/files/resources/nrc-principles_under_pressure-report screen.pdf
[2] Holder et. al. v. Humanitarian Law Project et. al., 130 S.Ct. 270, 177 L. Ed. 2d 355 (2010). [3] USAID Mission Order 21
[4] 50 USC §1702(b)(2)
[5] For example, see EO 13886 (Sept. 10, 2019), updating EO 13224 (Sept. 25, 2001, concerning counter terrorism financing); EO 13536 (April 12, 2010, establishing the Somalia sanctions).
[6] See 50 USC §1702(b)(2), https://www.law.cornell.edu/uscode/text/50/1702 [7] EO 13224 (Sept. 25, 2001)
[8] EO 13224 stated in Sec. 4: “I hereby determine that the making of donations of the type specified in section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) by United States persons to persons determined to be subject to this order would seriously impair my ability to deal with the national emergency declared in
this order, and would endanger Armed Forces of the United States that are in a situation where imminent involvement in hostilities is clearly indicated by the circumstances, and hereby prohibit such donations as provided by section 1 of this order.”
Similarly, EO 13536 stated, in part: “(c) I hereby determine that, to the extent section 203(b)(2) of IEEPA (50 U.S.C. §1702(b)(2)) may apply, the making of donations of the type of articles specified in such section by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to subsection (a) of this section would seriously impair my ability to deal with the national emergency declared in this order, and I hereby prohibit such donations as provided by subsection (a) of this section.”
[9] See Charity & Security Network “Deadly Combination: Disaster, Conflict and the U.S. Material Support Law” April 2012. Available online at https://charityandsecurity.org/wp content/uploads/2019/06/deadlycombination.pdf
[10] Charity & Security Network Safeguarding Humanitarianism in Armed Conflict July 2012
[11] Charity & Security Network, Financial Access for U.S. Nonprofits,
www.charityandsecurity.org/FinAccessReport
[12] For example, a U.S.-based NPO planned to carry out a winterization program in Afghanistan, but it was never implemented because by the time the funds were transferred, winter was over. (p. 81-82) Another U.S.-based organization was prevented from sending immediate relief to the Rohingya minority in Myanmar in the midst of a dire humanitarian crisis. (p, 50) Charity & Security Network, Financial Access for U.S. Nonprofits, www.charityandsecurity.org/FinAccessReport
[13] Ibid, p. 94.
[14] Ibid, p. 40.
[15] The fact that NPOs are subject to a complex system of regulation and oversight at the federal, state and local levels, and required to register and be monitored by the IRS and state authorities is not well understood. In addition to reporting requirements, many NPOs also adhere to voluntary self-regulatory standards and controls to improve individual governance, management and operational practice, beyond internal controls required by donors and others. These regimes primarily regulate raising, spending and accounting for funds, seek to protect the public from fraud, and encourage charitable giving. NPOs receiving federal grants undergo additional review by grant making agencies to comply with standards required by OMB (e.g. Agency for International Development recipients are subject to rigorous scrutiny, compliance, and independent auditing requirements). See Sue Eckert, International and Domestic Implications of De-Risking, Testimony before the Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, U.S. House of Representatives, June 26, 2018, at https://charityandsecurity.org/system/files/Eckert%206_26_18%20Final%20Statement.pdf
[16] As noted in a 2018 Congressional hearing, “[T]he fact that there have been no changes to regulations or guidance to encourage financial institutions to update their risk assessments of NPOs ensures that de-risking of NPOs will continue. Without action by government, financial institutions will continue to be reluctant to bank NPOs. Ibid.
[17] https://bsaaml.ffiec.gov/manual
[18] USAID, Certifications, Assurances, Representations, and Other Statements of the Recipient, Partial Revision May 18, 2020, p. 4 at https://charityandsecurity.org/wpcontent/uploads/2020/05/Certifications-ETC-ADS-Chapter-303.pdf; Charity & Security Network, USAID Revises Grantee Documents Relating to Anti-Terrorism Requirements at https://charityandsecurity.org/false-claims-act-lawsuits/usaid-revises-grantee-documents-relating-to anti-terrorism-requirements/
[19] Sue Eckert, International and Domestic Implications of De-Risking, Testimony before the Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, U.S. House of Representatives, June 26, 2018, at
https://charityandsecurity.org/system/files/Eckert%206_26_18%20Final%20Statement.pdf
[20] Financial Action Task Force, Best Practices: Combating the Abuse of Non-Profit Organisations (Recommendation 8), June 2015, p. 4 at https://www.fatf-gafi.org/media/fatf/documents/reports/BPP combating-abuse-non-profit-organisations.pdf
[21] U.S. Treasury, National Strategy for Combating Terrorist and Other Illicit Financing, February 2020 at https://home.treasury.gov/system/files/136/National-Strategy-to-Counter-Illicit-Financev2.pdf
[22] https://www.occ.gov/news-issuances/news-releases/2020/nr-ia-2020-155a.pdf.