U.S. Stopped Blacklisting Domestic Terror Charities Under Obama
The last time the federal government designated a U.S. charity as a front for terrorist fundraising, President Barack Obama had been in office for less than a month and Osama bin Laden was still at large. On Feb. 11, 2009, the Treasury Department designated the Tamil Foundation, a Maryland-based charity allegedly raising funds for the Tamil Tigers, a Sri Lankan foreign terrorist organization that today barely exists.
Since then, the Obama administration has overseen a financial war against Iran and targeted the oil revenue of the Islamic State. The Treasury Department has pressured banks to cut ties with terrorist fronts and worked closely with Gulf states to modernize financial systems and crack down on dodgy charities and other money launderers.
But the practice of blacklisting charities inside the U.S., a key tool of President George W. Bush’s war on terrorism, has come to a standstill under Obama.
Many experts and some members of Congress are beginning to ask why. Susan Phalen, the communications director for the House Homeland Security Committee told me this week that her committee was beginning to look into the issue. Jonathan Schanzer, a former terrorism finance analyst at Treasury, told me, “My understanding, based on conversations with several senior Treasury officials, is that this is no longer a Treasury function.”
Schanzer, who is now the vice president of research at the Foundation for the Defense of Democracies, added that Treasury’s Office of Terrorism and Financial Intelligence “sees itself as more of an global intelligence shop, leaving the domestic work to domestic agencies like the FBI.” He continued: “My concern is that the FBI may be overwhelmed with direct threats to the homeland, thereby relegating domestic terrorism-finance cases to a third- or fourth-tier priority. Is anyone taking the threat of domestic terrorism finance as seriously as the Treasury did back in its heyday? I don’t know.”
No Treasury official agreed to talk about this issue on the record. But a spokeswoman told me in a written statement that “there is no change in policy regarding designating U.S. persons that violate sanctions, and it is incorrect to claim that Treasury principals or staff have said otherwise.” The spokeswoman added that it remains a priority to take action to protect the U.S. financial system overseas and in the U.S.
And yet an examination of the Treasury’s own website that lists charities designated for terrorist fundraising shows a precipitous drop since Obama came into office. Between the Sept. 11, 2001, attacks and the February 2009 designation of the Tamil foundation, the U.S. designated eight major U.S.-based charities for terrorist fundraising. These included al-Qaeda fronts such as the U.S. branch of the al-Haramain Foundation and the Benevolence International Foundation. In this period, the U.S. government also blacklisted groups that raised money for the Palestinian terror group Hamas, including the Holy Land Foundation, and for the Lebanese militia and political party Hezbollah, like the Good Will Charitable Organization.
While the Obama administration has not designated any U.S. charities since its first month in office, it has nonetheless continued to squeeze not only al-Qaeda but also Hezbollah and Hamas. On Wednesday, Daniel Glaser, the assistant secretary of Treasury for terrorist financing, told the Foundation for the Defense of Democracies that his office has waged a campaign over the last five years to keep Hezbollah out of the international financial system.
Some experts say the U.S. has stopped designating U.S.-based charities in part because terrorist groups have determined it’s too risky to set up a philanthropic front in the U.S. these days. “Our enforcement efforts did have an effect on the ability of groups to openly organize and use non-governmental organizations as fundraising mechanisms for designated terrorist organizations,” Juan Zarate, a deputy national security adviser for counter-terrorism under George W. Bush, told me.
Zarate is in a position to know. He is one of the architects of the U.S. government’s post-9/11 policy on counter-terrorist financing. He said the days of major charity designations like the Holy Land Foundation “are over in part because it is now understood the U.S. government will look closely and not sympathetically on any groups that are set up to mask or to hide funding for terrorist organizations.”
While Zarate and other experts I spoke to said it would be a mistake to assume that no terrorist groups would try to set up fronts to raise money in the U.S., the nature of the business has nonetheless changed. “ISIS doesn’t have to create a U.S. NGO, they run a war economy,” said Zarate. “Al-Shabaab, they are taxing people, they are engaged in other kinds of illicit trade.”
Matthew Levitt, a former FBI counterterrorism analyst and deputy assistant secretary of the Treasury, told me one factor that may explain the drop in U.S. charity designations is that these cases often bring the risk that the charities themselves will challenge the designation in court.
Levitt, who is now the director of the counterterrorism and intelligence program at the Washington Institute for Near East Policy, agreed with Zarate that prior prosecutions of charities have made the U.S. a less attractive venue for terrorist financing. “When an authority does find an entity worthy of this kind of attention, the first inclination is not to designate, which has limited consequences, but rather to investigate and prosecute,” he added.
One person who continues to investigate is Schanzer. Last month, he testified before Congress that his research has found that three individuals who were involved in the Holy Land Foundation (but not indicted in a subsequent prosecution) are today working closely with a new group known as American Muslims for Palestine, which funds college groups that agitate for boycotting, divesting from and sanctioning Israel.
Of course, raising money for anti-Israel activism is not the same as raising money for suicide bombers -- legally or morally. Today Hamas is the sovereign of Gaza, where it has generated resources for rockets it launches at Israel. Hamas no longer needs an American charity to covertly raise funds for its military war against the Jewish state. So the remnants of its former charity are free to raise funds for the war of ideas against the Jewish State at American colleges.
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