Informed Generosity: Donations to Foreign Charities
When a distant nation is devastated, our country gives generously. In the wake of the 2004 tsunami and the recent earthquake in Pakistan and Central Asia, the United States government has given billions of dollars in aid.
In addition, international charitable organizations often ask American citizens and corporations to supplement their government’s contribution with private donations. The Center on Philanthropy at Indiana University estimates that private donations amount to over $1 billion for tsunami relief alone. International philanthropy is a multi-billion-dollar business, and one which sustains many developing economies.
Our citizens’ generosity is laudable, but how can we be sure that the money is going to the people who need it most? How do we know that we are supporting a legitimate charitable organization? Some foreign charities have used donations to fund terrorist organizations or line private pockets. In the global post-9/11 environment, the U.S. government and the international community have engaged in a sustained campaign against the sources and conduits of terrorist financing. The U.S. Department of Treasury, Department of State, and the Department of Commerce all publish detailed lists of prohibited persons and organizations. U.S. citizens may not donate money (or engage in any financial transaction) with these entities.
When disaster strikes overseas, the U.S. government wants its citizens to give wisely. The Department of the Treasury has released the Anti-Terrorist Financing Guidelines in order to enhance donor awareness and avoid the illegal diversion of charitable funds. Private individuals, corporations and U.S.-based philanthropic organizations should all be aware of these guidelines before giving money to a foreign organization. The Department of Treasury recommends that donors collect the following basic information:
• Name, physical address, purpose, business organization, and other financial supporters);
• Names and addresses of other organizations to which the foreign recipient provides or proposes to provide support; and
• Names and addresses of any subcontracting organizations utilized by the foreign recipient.
The U.S. government then recommends that donors conduct a reasonable information search to determine whether the foreign charity has ever been implicated in any questionable activity. Philanthropists should be sure to check the U.S. government lists of prohibited entities, as well as the lists generated and maintained by the United Nations and the European Union.
Identifying the foreign charity and its subsidiaries, however, still is not enough. With the advent of internet banking, terrorists and criminal organizations created transnational networks to transfer and legitimize funds. In order to ensure that the donation will be used appropriately, philanthropists should identify the financial institutions with which the foreign charity maintains accounts. The donor (or donor’s counsel) should establish whether the charity’s financial manager is: a shell bank; operating under an offshore license; licensed in a jurisdiction that has been determined to be non-cooperative in the international fight against money laundering; licensed in a jurisdiction that has been designated by the Secretary of the Treasury to be a primary money-laundering concern; and licensed in a jurisdiction that lacks adequate anti-money laundering controls and regulatory oversight. Legitimate charities use legitimate banks.
When the world is hurting, Americans should give wisely. As U.S. citizens, we have a moral and legal obligation to scrutinize the stewards of our charitable donations and prevent our gifts from funding criminal activity.
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Joseph J. Dehner Joe Dehner concentrates his practice on multinational business and securities disputes. He counsels a wide variety of companies, domestic and foreign, on issues confronting global business, including transnational investment, mergers and acquisitions, joint ventures, customs and trade issues, international business structures, distribution and agency agreements and the resolution of international disputes.