After summarizing current law on how U.S. charities may be shut down for supporting terrorism and citing problems with the lack of due process for charities to defend themselves, this article presents the rationale for a new approach and specific reforms that can bring the system into compliance with constitutional standards.
Summary of Current Law
To designate an organization, the United States government (USG) only needs to have a “reasonable suspicion” that it is providing “financial, material, or technological support for, or financial or other services to” a designated terrorist organization or “otherwise associate[ing]” with a designated organization. [1] Consequences of designation include the seizing and freezing of all tangible and financial assets and significant civil and criminal penalties. Designated organizations may be Foreign Terrorist Organizations (FTO) listed by the Secretary of State or Specially Designated Global Terrorists (SDGT) listed by the Department of Treasury.
In October 2001 the Patriot Act expanded IEEPA by allowing sanctions pending an investigation, so that “all the blocking effects of a designation, including freezing an organization’s assets indefinitely and criminalizing all its transactions, without designating it as a SDGT. [2] The Treasury only needs to assert that it is investigating whether the entity should be designated.” It also allows the court to review classified information in the agency record without notice to or knowledge of the blocked organization.
On June 6, 2003 Treasury issued regulations at 31 CFR 501.807 that “permits designated entities to seek administrative reconsideration by USG after they have been designated and had their property frozen.” However, this procedure is inadequate. For example, groups do not have to be notified in advance that they are under investigation, before their assets are frozen. This limits their ability to respond in their own defense and effectively imposing a severe penalty before any finding of fact is made. Once a group is listed Treasury’s enforcement office needs only to provide the entity with notice of the unclassified administrative record and an opportunity to provide responsive evidence in writing. Classified evidence does not have to be shared, meaning that determinations may be made on hearsay and coerced testimony, and nonprofits are not entitled to cross examine witnesses or present witnesses of their own. In short, once designated, getting off the list is nearly impossible. Charities also cannot present evidence in an appeal to the federal courts.
Before an attorney can represent a designated organization, he or she must get a license from Treasury. [3] Representing a designated organization without a Treasury license is considered “material support” to a designated organization and is illegal. In addition, if an organization wishes to pay its legal fees with assets frozen and seized by Treasury’s Office of Foreign Assets Control (OFAC), typically the only funding available, it must ask for a separate Treasury license. [4]
Problems with Current Law
The lack of meaningful recourse for nonprofits raises substantial constitutional and human rights problems. OFAC functions as prosecutor, judge, jury and executioner. Combined with a lack of transparency, this wide discretion opens the door to mistake and abuse. The lack of fundamental fairness also undermines public confidence in the USG’s enforcement efforts.
This legal regime is now subject to reconsideration, as two federal courts have held it to be unconstitutional as applied to two U.S. charities. On Nov. 7 Judge Garr King of the United States District Court in Oregon ruled that the Department of Treasury’s action in shutting down Al Haramain Islamic Foundation, Inc. in 2004 violated basic due process rights. The judge also ruled that the definition of “material support” of terrorists is unconstitutionally vague. [5] On Aug. 18, 2009, a federal judge ruled the USG’s seizure of KindHearts for Humanitarian Charitable Development’s assets without notice or means of appeal is a violation of the Fourth and Fifth Amendments. [6]
Rationale for Proposed Solution
The procedures outlined below are specially designed to address the unique circumstances presented when national security laws are applied to the operations of charitable and philanthropic organizations. Because the mission of such organizations serves the public interest and addresses fundamental human needs, USG enforcement policy in this context should address national security issues, be consistent with international human rights standards and protect the ongoing operation of legitimate charitable work.
The proposed procedures provide general standards for adequate notice, legal representation and handling of secret evidence. The Classified Information Procedures Act informs the evidence procedures and the Civil Asset Forfeiture Reform Act generally guides the formal due process procedures. In addition, the emphasis on compliance and cooperation between nonprofits and the USG is reflected in an initial investigation and compliance phase, similar to that used to enforce white collar criminal laws.
The proposal does not specify which agency of the U.S. government should be responsible for enforcement of security laws in the context of nonprofit programs. Because OFAC has structural, jurisdictional and resource limitations, and no mandate to take human rights obligations into consideration, it should not be presumed that it is the best agency in this context. In addition, the proposal suggests use of an Ombudsman to review listing decisions, mirroring a process supported by the USG in UN Resolution 1904, approved in December 2009.
Fair Procedures for Listing and Delisting When the USG determines there may cause to believe a nonprofit may be supporting a listed SDGT/FTO, the following procedures should apply: