The Problem
Terrorism and philanthropy, two concepts that couldn't be further apart, have become regrettably entangled over the past few years. Ever since the events of September 11, 2001, fear has forced us to become a nation of watchdogs, on the alert for any weak links that could conceivably be exploited by terrorists. Much of this increased scrutiny has been cast upon the processes of philanthropy, specifically the overseas activities of charitable institutions.
Funds earmarked for philanthropy flow from this country on a regular basis as individuals, public charities, and private foundations seek to support foreign organizations providing direct aid to those in the greatest need. The vast majority of these organizations are legitimate charities performing vital functions. But the fear exists that a lack of oversight may allow organizations to misrepresent their missions and pass donations along to terrorist groups.
The U.S. Government's Response
Last month, President Bush ordered the assets of five overseas charities frozen. Four of the charities are based in Europe, one in Lebanon, and all are accused of supporting the militant Palestinian organization known as Hamas. The assets of three U.S.-based charities—the Benevolence International Foundation, the Global Relief Foundation and the Holy Land Foundation—have already been frozen because of suspected ties to terrorism.
The Department of the Treasury recently issued their Anti-Terrorist Financing Guidelines, a document outlining voluntary best practices for nonprofits. Although these guidelines include some fairly standard suggestions for organizational transparency, there's been some controversy regarding the suggested steps for U.S. nonprofits to follow before distributing funds to foreign organizations.
Some of the recommended procedures include:
- Gathering information on subcontracting entities, sources of income, and groups the foreign organization supports.
- Searching public information to determine if the organization has been implicated in any questionable activity or appears on any lists of organizations linked to terrorism.
- Identifying the financial institutions with which the organization maintains accounts.
- Conducting on-site audits whenever possible.
The Nonprofit Sector's Perspective
Some in the nonprofit sector feel that these procedures place an unreasonable burden on their shoulders. Even though the guidelines are voluntary, the pressure to comply—and the possible public relations implications of noncompliance—has the sector on edge. With short staffs and budgets stretched to the breaking point, taking on additional responsibilities may seem an impossible endeavor. The alternatives, however, are limited and could result in the termination of a charitable mission. For example, in July, shortly after the guidelines were released, Cisco Systems announced its intention to end its employee-giving program rather than attempt to take on the role of watchdog. Last year, Cisco matched more than $2.9 million in employee gifts.
GuideStar's Solution
To help grantmakers assure their charitable gifts aren't being abused or misdirected, GuideStar has partnered with Regulatory DataCorp (RDC) and ChoicePoint to develop a new global due diligence service called CharityGuardSM. CharityGuard is designed to simplify the due-diligence process, providing organizations the ability to check up on organizations quickly and easily. The service works like this: A list of grantees is submitted and matched to information contained in the combined databases of GuideStar, RDC, and ChoicePoint. A file is generated and organizations with risk-relevant information are highlighted, with details provided on subsequent pages. The file is delivered to the customer in just a few working days and follow-up monitoring notices are sent if Global Regulatory Information Database (GRID) alerts occur in the next 12 months.
GRID is RDC's worldwide clearinghouse of public information. It is designed to help identify and manage serious threats created by terrorism, money laundering, fraud, corruption, securities fraud, organized crime, and other suspicious financial activities.
By combining GRID, the GuideStar database of nonprofit information, and ChoicePoint's database of public records (including liens, judgments, state filings, and the Combined Federal Campaign National/International List of Approved Agencies), CharityGuard can offer global due diligence in a single report.
To learn more about the CharityGuard service, contact GuideStar's business department at 800-421-8656 or charityguard@guidestar.org.
Patrick Ferraro, 2003
© Philanthropic Research, Inc.
Patrick Ferraro is a marketing coordinator for GuideStar.
