by Dr. Laila Al-Marayati

Presented on December 3, 2004 at the Pace University School of Law Symposium, “Anti-Terrorist Financing Guidelines: The Impact on International Philanthropy.”


Within three months of the terrorist attacks on September 11, 2001, President Bush announced the designation of the Holy Land Foundation based in Dallas, Texas as a terrorist organization. He made this announcement at a press conference in the Rose Garden four days after a request from Israeli Prime Minister Ariel Sharon. Since then, three other Muslim charities based in the US were similarly designated, their assets frozen and their operations completely disrupted. The US government has not obtained a single terrorist conviction of any of the principles of these organizations nor has the government proven conclusively that any of the funds were used to finance activities at all related to the events of 9/11 or to al-Qaeda. Yet, the government continues to display its closures of Muslim charities as evidence of progress being made in the War on Terror. These actions raise numerous questions that seriously affect the rights of Americans both to engage in charitable giving and to know that their government’s efforts directly result in the increased safety and security of the American people.

Charitable Giving in Islam

Reliable data on charitable giving trends among American Muslims is non-existent. However, the tradition of charity, referred to in Islam as Zakat, is well-established as it is one of the five pillars of faith for Muslims and thus a religious obligation. The Qur’an describes the recipients of those who qualify as beneficiaries in the following manner:

The offerings given for the sake of God are (meant) only for the poor and the needy, and those who are in charge thereof, and those whose hearts are to be won over, and for the freeing of human beings from bondage, and (for) those who are over-burdened with debts, and (for every struggle) in God’s cause, and (for) the wayfarer: (this is) an ordinance from God – and God is all-knowing, wise. (9:60)

They will ask thee as to what they should spend on others. Say: “Whatever of your wealth you spend shall (first) be for your parents, and for the near of kin, and the orphans, and the needy, and the wayfarer; and whatever good you do, verily, God has full knowledge thereof. (2:215)

Therefore, at the peak times of giving, such as at the end of the month of fasting (Ramadan), Muslims the world over are keen to pay their alms to the poorest of the poor, neediest of the needy, especially among their brethren considering the fact that many of the world’s destitute are Muslims. Muslim American charities appeal to this urge with orphan sponsorship programs, food programs especially during the month of Ramadan, disaster relief and basic provisions of health care and education. Recently, more organizations are working on sustainable development projects that can have more long term effects on improving the lives of those in greatest need.

Government Tools Available in Targeting American Muslim Charities

Under the International Emergency Economic Powers Act (IEEPA), the government can block the assets of entities suspected of providing material and other support for terrorism (other than medicine or religious materials such as Bibles) . Executive Order 13224, issued by President Bush on September 23, 2001, “prohibits US persons from transacting or dealing with individuals and entities owned or controlled by, acting for or on behalf of, assisting or supporting, or otherwise associated with, persons listed in the Executive Order. Those designated and listed under the Executive Order are known as ‘Specially Designated Global Terrorists’ (SDGTs).” At a hearing before the House Financial Services Subcommittee on Oversight and Investigations, Richard Newcomb, then Director of the Office of Foreign Assets Control (OFAC) best explained the tools at the Treasury Department’s disposal in the aftermath of 9/11/2001:

The USA PATRIOT Act of 2001 has enhanced OFAC’s ability to implement sanctions and to coordinate with other agencies by clarifying OFAC’s authorities to block assets of suspect entities prior to a formal designation in ‘aid of an investigation’ In addition, the PATRIOT Act explicitly authorizes submission of classified information to a court, in camera and ex parte, upon a legal challenge to a designation. This new PATRIOT Act authority has greatly enhanced our ability to make and defend designations by making it absolutely clear that OFAC may use classified information in making designations without turning the material over to an entity or individual that challenges its designation. (emphasis added)

Changes in the law have greatly enhanced the Department’s ability to target and disable organizations and individuals based primarily on suspicion and not on proven evidence of wrong doing as would be required in a court of law for a conviction of terrorism. Apparently, officials at the Treasury and Justice Departments unanimously agree on the usefulness of these changes and look forward to additional enhancements in the future.

In the cases of the two Illinois based charities below, OFAC was able to freeze their assets during the “pendency of an investigation” which was made possible by provisions from the PATRIOT Act. According to the Monograph on Terrorist Financing presented to the National Commission on Terrorist Attacks upon the United States in August 2004,

This provision lets the government shut down an organization without any formal determination of wrongdoing. It requires a single piece of paper, signed by a midlevel government official. Although in practice a number of agencies typically review and agree to the action, there is no formal administrative process, let alone any adjudication of guilt (emphasis added).

…The administrative record needed to justify a designation can include newspaper articles and other hearsay normally deemed too unreliable for a court of law. A designated entity can challenge the designation in court, but its chances of success are limited. The legal standard for overturning the designation is favorable to the government and the government can rely on classified evidence that it shows to the judge but not defense counsel, depriving the designated entity of the usual right to confront the evidence against it.

Closures of Muslim American Charities

Holy Land Foundation

Based in Dallas, Texas, HLF was the largest Muslim American humanitarian organization providing assistance overseas with a budget of close to $12 million per year. HLF provided services in the West Bank and Gaza Strip, Kosovo, Chechnya and elsewhere. To the average Muslim living in the US, HLF was a trusted name. On December 4, 2001, HLF was designated under IEEPA as a terrorist organization because, the government alleged, they were providing assistance to Hamas in the Occupied Territories. The case of HLF continues with the recent arrests and indictments of several Board Members and employees of the organization, all of whom were not required to post bail and who currently are awaiting their trial to begin in the fall of 2005.

The case against HLF is mainly built around allegations related to financing charitable works that had supposed links to members of Hamas. The current indictments primarily revolve around donations to various Zakat Committees throughout the West Bank and Gaza which are comprised of members of the local Palestinian community and include individuals of various sociopolitical affiliations. Other non-Muslim organizations in the US and elsewhere also fund projects through the Zakat committees because they provide an efficient means of disbursing assistance to the local groups most suited for the humanitarian projects at hand. Yet, no other organization has been targeted for working with the Zakat committees besides HLF. None of the court cases to date appears to document an actual money trail of funds going from HLF to individuals or organizations resulting in actual terrorist activity.

Once HLF was so designated and its assets were frozen, the organization challenged the designation, lost and then appealed to the DC Circuit Court of Appeals where they lost again. Finally, the Supreme Court refused to hear their case. Based on these cases, the judge who is adjudicating the suit filed by the Boim family against HLF, feels there is ample evidence to support the allegation that HLF funded terrorism which will result in a substantial financial award to the plaintiffs who are citizens of Israel as well as the US (see below).

Global Relief Foundation (GRF)

Based in Illinois, GRF was the second largest American Muslim charity doing international work in Bosnia, Afghanistan, Kashmir, Chechnya and Lebanon. On December 14, 2001, GRF was designated by the Treasury department as a terrorist organization and its operations were shut down due to the freezing of its assets. While the government’s actions were upheld in court, no charges of terrorism were filed against any individuals. The main fund-raiser for GRF, Rabih Haddad, underwent closed deportation hearings due to supposed immigration violations. He was deported to Lebanon the following year where he lives as a free citizen of that country and all charges against him related to terrorism were dropped.

Benevolence International Foundation (BIF)

Also based in Illinois, BIF was designated on December 14, 2001 along with GRF. The efforts of BIF were concentrated in Bosnia and elsewhere. Eighteen months prior to the designation, BIF had begun to work in the Occupied Territories. The government’s case was enhanced when they obtained documents in Bosnia linking leaders of BIF to Osama bin Laden during the late 1980’s when the US government and military were actively supporting the bin Laden and the mujahideen against the Soviets in Afghanistan. During the criminal case, the government never provided evidence that BIF funded al-Qaeda. The case was built around previous associations that occurred ten years prior to the designation. Ultimately, Enam Arnaout, the executive director, entered into a plea bargain whereby he admitted to using some funds to provide boots and blankets to Chechen and Bosnian fighters. In this case, the government did reveal that the funds were not being used according to the donors’ wishes, which is fortunate, but again, no links to terrorism were ever proven. In fact, “the court held that the offense to which Arnaout pled guilty, racketeering conspiracy, was not a crime of terrorism defined by law,” and that the government was unable to prove that the Bosnian and Chechen beneficiaries were involved in any acts that could be considered terrorism.

Despite this fact, officials of the Treasury Department refer to BIF as having links to bin Laden in direct contradiction to the final judgment issued by the court. For example, in March 2003, Juan Zarate, Deputy Assistant Secretary in the Office of Terrorist Financing and Financial Crime, claimed that the designation of BIF, “a Chicago-based charity that was supporting al-Qaida” was an “example of the international community taking common action to cut off the flow of funds to al-Qaida.” His testimony referred to BIF as a supporter of terrorism despite the fact that the case to prove such allegations was still pending in court. Ultimately, the government dismissed all charges that BIF and Arnaout provided material support to any terrorist individuals or organizations.
Islamic American Relief Agency (IARA)

At the beginning of Ramadan in 2004, the US Government announced the designation of IARA as a terrorist organization under IEEPA. IARA is based in Missouri and focuses its efforts primarily in Africa. The allegations are related to supposed connections between IARA in the US and the Islamic African Relief Agency in Sudan and include alleged connections to Hamas. No criminal charges have been filed against any individuals affiliated with IARA here in the US. According to personal correspondence, it appears that at the time of the designation, IARA was a member in good standing of InterAction, an umbrella group that requires its affiliated organization “to ascribe to InterAction’s Private Voluntary Standards that help assure accountability in critical areas of financial management, fundraising, governance and program performance.” Similarly, “the Better Business Bureau of Eastern Missouri and Southern Illinois found the group met 22 of its 23 standards for charitable giving.”

According to the Staff Monograph on Terrorist Financing to the 9/11 Commission cited earlier, much of the evidence used against these groups in the terrorist designation process has been based on hearsay, media reports, documents collected in trash bins, and secret evidence. In addition, the cases of BIF and GRF “highlight fundamental issues that span all aspects of the government efforts to combat al Qaeda financing: the difference between seeing links to terrorists and proving funding of terrorists, and the problem of defining the threshold of information necessary to take disruptive action.”

Consequences on Muslim Charitable Giving

Through the Treasury Department, the US Government is able to freeze the assets of any organization before actually charging any individuals with engaging in terrorism or the support thereof. In addition, the Treasury Department is not obliged to prove its case in a court of law unless the targeted organization challenges the designation with the Treasury Department itself. Once the assets are frozen and the community becomes aware that an organization is under investigation, even if the accusation has no merit, the damage is irreversible resulting in the demise of the enterprise. Despite the fact that the government has not been able to show in any of the cases to date that funds were used to directly finance and support terrorism, all of the groups now are completely defunct.

Few have ventured to fill the void, meaning that only a small number of Muslim American groups remain that provide humanitarian assistance abroad. Prior to these closures, there were fewer than a dozen Islamic organizations based in the US doing charitable work abroad that were known to the community. Only two new organizations have emerged since 9/11. All groups function with the awareness that they can be closed down at any time regardless of any actions they take to remain transparent and functioning within the law. Despite attempts by the Administration, the Treasury Department and others to reassure American Muslims that neither they nor their institutions are being targeted unfairly, the facts suggest the opposite.

In addition, the government’s actions against Muslim American charities have little, if any, impact on making the rest of the American public more secure. Instead, these high profile cases result in the more dangerous consequence of leading people to believe that things are safer when they have made no difference whatsoever despite massive expenditures of taxpayer money.

For many years, Muslims in the United States felt they were fulfilling their religious obligation by giving to groups that provided and provide humanitarian assistance overseas in places like Lebanon, Kosovo, Palestine, Africa, South Asia, Chechnya and Afghanistan to name a few. Local and national groups engaging in grass roots issues such as civil liberties protection had to sell the idea that donating to those efforts also qualified as zakat. Now that the community’s choice of groups providing humanitarian assistance internationally continues to dry up, many have diverted their giving to focus on community based activities in the US . In addition, fear of being placed on a “government list” for donating to a charity that is suspect, negatively affects giving patterns as well. As a result, the yet-to-be-documented trends in giving among American Muslims are likely undergoing tremendous shifts.

The Treasury Department and the American Muslim Community

At the start of Ramadan in 2004, the Secretary of Treasury issued a “Ramadan” statement, cautioning Muslims against giving to questionable groups, “When you open your hearts to charity during Ramadan, we encourage you to educate yourself on the activities of the charities to which you donate, to help ensure that your generosity is not exploited for nefarious purposes.” He included the list of 27 groups that have been designated by the US Government for supporting terrorism and noted that it is a crime to support them in any fashion.

The government appears to function under the basic assumption that charitable donations on behalf of Muslims have been and will be corrupted intentionally or unintentionally and therefore, all acts of Muslim giving overseas are suspect. To date, the government has not been able to demonstrate a “money trail” that would confirm unequivocally the allegation that American Muslim charitable funds have been used to finance terrorism. However, the cloud of suspicion continues to grow despite modest efforts on the part of Treasury and other branches of government to convince the community otherwise.

Treasury issues Voluntary Best Practices Guidelines

The Treasury Department has engaged with the Muslim community on a variety of levels since they began their efforts to interdict funds directed at terrorist groups.

In 2002, the Treasury Department issued Anti-Terrorist Financing Guidelines: Voluntary Best Practices for US-Based Charities as a response to demands from the American Muslim community according to Juan Zarate during a speech at the Convention of the Muslim Public Affairs Council (MPAC) in December, 2002. The guidelines mainly provide recommendations that mirror most due diligence practices of charitable organizations with a few additions, some of which are cumbersome, impractical and unrealistic. For example, the Guidelines advise charities to determine if the financial institution with which the foreign recipient maintains accounts is a shell bank, operating an offshore license, licensed in a jurisdiction that is non-cooperative in the fight against money-laundering, licensed in a jurisdiction where there are inadequate money-laundering controls and oversight, etc. Section 4 of the Guidelines outlines these and other measures that would require a great expenditure of resources on the part of the charities, something that would be very difficult, especially for smaller organizations. In addition, the areas in greatest need are often the areas that have the least amount of government control and oversight, making it difficult to comply completely with the Guidelines in all circumstances.

At various meetings with the Muslim community, Treasury officials confirmed that complete compliance with the Guidelines does not protect against seizure of assets, closure, government investigations and ultimate designation as an entity supporting terrorism if the government so wills. In other words, full compliance with the Treasury Guidelines does not offer “safe haven” from government action against any group.

Shortly after the Guidelines were issued, the Treasury Department began to meet with Muslim groups, such as the Islamic Society of North America (ISNA) and MPAC, for what Treasury considered to be the “next step” in providing guidance with respect to charitable giving. Treasury sponsored a gathering that included individuals from the Better Business Bureau’s Wise Giving Alliance and the Evangelical Council on Financial Accountability to encourage Muslims to follow their models in forming an umbrella group under the auspices of an organization like ISNA which ultimately would provide some sort of “seal of approval” for member groups. At ISNA’s annual convention in Chicago in the fall of 2004, the representatives of Muslim charities doing work in the US and abroad raised concerns about which groups could best lead this effort and questioned whether Muslims needed to organize separately in the first place.

The major question raised was What could a separate Muslim umbrella organization offer that was not already being provided by more experienced, well-established groups, such as InterAction? At the meeting, the representative from the Treasury Department replied that “you have some things on your radar screen that we don’t.” Such a statement is open to various interpretations but, at a minimum, was not reassuring. When pressed about the role of Treasury in facilitating a process that would enable Muslims to give without worry, he acknowledged that the Treasury Department emphasizes investigation and enforcement, not facilitation.

Most importantly, however, is the fact that an umbrella organization that vets groups and issues a “seal of approval” does not give American Muslims what they want: a guarantee that the group is doing legitimate work from the American government’s point of view, that the group is not under investigation by any branch of law enforcement, and that they as donors will not be targeted by law enforcement under any future investigation.

After the closure of IARA at the start of Ramadan in 2004, Muslims in New Jersey called upon the government to issue a “white list” of acceptable charities to which they could donate without fear of donating to groups with terrorist ties. The Justice Department rejected the request stating that it was impossible to fulfill. According to Juan Zarate, Assistant Secretary for Terrorist Financing and Financial Crimes at the Treasury Department, “You can’t have the US government picking favorites in a multi-billion dollar industry.” He also cited market and First Amendment concerns as limitations.

Denial of Licenses to Transfer Funds

After the assets of HLF were frozen in 2001, Muslim donors expressed a desire to have their money returned or at least be transferred to another group providing similar humanitarian assistance. Once the HLF case was denied a hearing by the Supreme Court, the leaders of the organization agreed to file an application with OFAC for a license to release the funds to another group, namely, the Palestine Children’s Relief Fund, a US based organization providing medical and surgical services to Palestinians. The request was denied due to two lawsuits pending against HLF. The government’s refusal to honor the wishes of the donors to have their funds transferred to groups whose record is unscathed again belies the government’s claim that it is not interested in obstructing legitimate Muslim giving.

Soon after its assets were frozen, BIF applied for a license from OFAC to release over $700,000 to fund a Tuberculosis hospital in Tajikistan and a Women’s Hospital in Daghestan. Despite evidence of the valid, humanitarian nature of this work, OFAC refused to grant the license because it was concerned that “even funds sent to seemingly legitimate charities can be at least partially diverted to terrorist activities overseas” that OFAC is unable to monitor adequately.
Donors Funds Awarded to Victims of Terror

In November 2004, a federal judge ruled that HLF, along with several others, as alleged supporters of Hamas, are liable in the damages (around $600 million) filed by the Boims, an American Israeli family whose son was killed in a terrorist attack in Israel in 1996.

Now that one of the pending cases has been decided in favor of the plaintiff, the community’s worst fears have been realized. Not only is their money not reaching the intended recipients, it is being diverted to individuals who actively oppose efforts to help vulnerable Muslim groups, especially among Palestinians. There is no doubt that the families of any victims of murder should be adequately compensated. However, the funds of law-abiding, unwitting donors should not be used for such purposes since they themselves are not part of the lawsuit.

Indeed, attorneys in these cases want even more. In November 2002, a friend and advisor to the Boims, attorney Nathan Lewin, testified before the Senate Judiciary Committee that the seized funds of the designated groups should be made available to the plaintiffs’ attorneys in these types of cases if the groups are unsuccessful in their motion to dismiss. Similarly, the funds should go to the plaintiffs’ attorneys if the plaintiffs prevail at the pretrial stage. He argues that the government should share secret evidence with the plaintiffs’ (but not defendants’) attorneys. Finally, he advocates specifically going after donors to charities named in these lawsuits.

While the Boim case goes to appeal, a victory on behalf of the plaintiffs would set a worrisome precedent, especially since the government so far has not shown how funds raised by HLF actually got into the hands of a terrorist individual or organization. Without such proof, similar cases can be filed against any organization that some day may be designated as “terrorist” under the vagueness of IEEPA and any subsequent statutes that could emerge in the wake of the PATRIOT Act.

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