International Charitable Work and Anti-terrorist Financing Guidelines – Part 2

This is Part 2 of a blog post specific to of international charitable distributions and compliance with U.S. regulations to deter anti-terrorist financing. Part 1 summarized the Treasury Anti-Terrorist Financing Guidelines (TATFG) and Part 2 will now discuss what some organizations are doing from a policy, internal control and process standpoint to ensure compliance with U.S. regulations. The scope of Part 2 of the blog post does not extend to the unique requirements of private foundations, which are subject to equivalency determinations or expenditure responsibility as designated by executive order pursuant to 22 U.S.C. 288 (Treas. Reg &53.4945-5(a)). Although public charities are not subject to equivalency determinations or expenditure responsibility, they still have to be able to prove that charitable distributions (domestic or international) serve the exempt purpose of the organization.

• Based on a limited survey, the environment related to international disbursements (grant-related and vendor-related) and compliance with the Patriot Act is described below:

o Most organizations are checking the OFAC list
o “Have not heard of anyone having a legitimate hit on the OFAC list”
o Typically organizations working in the field are a U.S. organization or are working with U.S. organizations
o Larger organizations have resources to send staff or to have local staff (e.g. field auditors) monitor situation on the ground
o Larger organizations are using a screening tool that assists with screening vendor and partner names
o Smaller organizations tend to rely on intermediaries and have personal relationships with those working in the field
o In the private foundation world, most organizations are performing expenditure responsibility procedures. There is a current proposal to the IRS for an equivalency determination repository that can be relied on by other charities.

• What organizations should do:

o Read Treasury Guidelines
o It is important for organizations first to do a cost-benefit analysis of adhering to the Treasury Guidelines (TATFG) as the guidelines can be onerous and the TATFG do no provide a safe harbor to organizations for failure to comply with the law.
o Establish adequate policies that address the following:
      Detailing expected compliance with relevant laws
      Clarity on who needs to be screened,
      Monitoring standards,
      Reporting standards for international grantmaking
      Procurement policies
      Exception processes (e.g. Follow up procedures if a vendor or partner name shows up on one of the lists)
o Ensure adequate documentation for the following:
      International disbursement, screening, due diligence and monitoring processes
      Details for each transaction such as:
         • Identification of how the funds are transmitted
         • Document the names of the people who will have control of the money and check in with them regularly
         • When the functional currency (currency of the gift/grant/donation) is converted to the operational   currency, is the amount whole?
         • Did the grant recipients get the money and how much did they get?
o Work with people that you know and make sure there are lots of touch points during the grant period so you have visibility in terms of what they are doing.
o Have someone you know on the ground that can help oversee operations and monitor (e.g. local chartered accountants).

• Resources

Principles of International Charity (Nonprofit Sector commentary on the TATFG)

Handbook on Counterterrorism Measures

Independent Sector



Council on Foundations

Special thanks to Jane Searing, Shareholder, Clark Nuber PS, for providing valuable input for this blog post.


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