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We continue our series, in partnership with the Zakat Foundation of America, with an overview of the complexities of giving in Syria. Zakat Foundation of America’s General Counsel, Lara Kalwinski, describes principal obstacles and frustrations for donors and grantees in sanctioned countries and conflict zones. She also offers insight on ways the sector can work together to overcome some of these obstacles.
Will My Charitable Funds Get to Syria?
When news breaks of atrocities or disasters, many of us run to our wallets or webpages to make a donation. Our hearts go out to those suffering and we search for ways to lessen the trauma our world neighbors face. Our hearts have broken over and over again for those caught in natural and man-made catastrophes in Syria, Yemen, Puerto Rico, and Haiti. The list goes on far too long.
What does it take to get money, medicine, water, and supplies to the front lines of a crisis? To help Syrians, the maze of legal and financial access issues can feel insurmountable. We hope this post will help you understand what it takes to get your donation to those who need it, using Syria as an example.
In the case of a country like Syria, both a conflict zone and a country under U.S. sanctions, sending resources is complex. For U.S. individual donors who wish to make a tax deductible gift, they must find (1) a U.S. charity working in Syria, or (2) a U.S. charity working in partnership with an organization in Syria, or (3) a U.S. charity working with Syrian refugees outside of Syria. Private foundations and donor-advised funds who wish to avoid making a taxable expenditure are similarly restricted, though they may also give to a non-U.S. organization either by exercising expenditure responsibility or by obtaining an equivalency determination (ED).
U.S. Charities Working In Syria
For Syria, charities are covered by the U.S. government General License. The Treasury’s Office of Foreign Assets Control (OFAC) allows general licenses in order to authorize activities that U.S. sanctions would otherwise prohibit. For charities, a General License allows organizations to deliver charitable aid in sanctioned countries but also requires fluency in the regulation, adherence to pertinent regulations, and thorough record keeping. The general license is meant to help U.S. charities respond to crises; however this tool is not well known or understood.
A General License is recognized by the United States Government. However, almost all other countries have their own independent and disparate licenses or regulatory mechanisms, so the U.S. General License is not well understood by other countries or banks in the U.S. and abroad. Most overseas funds transfers destined for Syria will need to go through a correspondent (intermediary) bank in the U.S. and a correspondent bank working with local banks in or on the border of Syria. Those banks will require a specific license, like the U.S. General License, and may delay or deny the fund transfer if the license is missing or even if just misunderstood. In addition, a funds transfer into a foreign country can be costly and risky for the issuing and receiving banks. After the Patriot Act and Bank Secrecy Act were passed in the wake of the 9-11 attacks, the scrutiny on international wire transfers and participating banks increased significantly, as did the likelihood a financial institution might be fined for any lack of due diligence on high-risk clients or fund transfers. Given that humanitarian aid is most needed in conflict zones, the banking risks and regulations often lie in contrast with the humanitarian needs resulting in increased difficulty in getting help to where it is most crucial. Some financial institutions simply mitigate the risk altogether by avoiding working in these areas – leaving those in need caught in regulatory limbo and the resources they so desperately need caught across borders,
Navigating the General License and banking issues likely requires internal and external legal expertise, which adds to overhead costs for charities responding and working in these conflict and disaster areas. In addition, when the banks do not make transfers or close accounts, the time and expertise required to determine how to maintain operations can also be costly and time-consuming. We at the Zakat Foundation of America have had our partner organizations go without payments because we cannot get funds to them. This is difficult to explain to our partners and to our donors. Everyone is in agreement that humanitarian aid is important, but the mechanisms to make it happen were not created with humanitarian aid in mind; therefore, it looks like a high-risk transaction and thus is treated like one, making international aid and funding difficult and often far too slow.
The Zakat Foundation of America is covered by a General License for working in Syria and reports on our work through https://www.zakat.org/en/where-we-work/syria/.
U.S. Charity Partnership with a Foreign Organization Working in Syria
A U.S. private foundation or donor-advised fund (DAF) can also make a grant directly to a foreign organization working in Syria using either expenditure responsibility (ER) or an equivalency determination (ED). NGOsource is a great, cost-effective tool for funders seeking to obtain an ED, and often helps build capacity of your grantees through the addition of their ED to the NGOsource repository. Obtaining an ED does not, however, resolve potential banking issues, as banks may still reject the transaction if they do not have adequate assurances that the transaction will satisfy anti-money laundering and counter-terrorist financing regulations, even if they meet the U.S. legal requirement for being an eligible grantee.
Charities Working with Syrian Refugees
The Syrian diaspora has left refugees spread throughout the world and in every corner of it. You may have heard about Syrian refugees in Turkey, Lebanon, Jordan, Europe, and the United States. If you work with an organization in the U.S., you do not require additional legal work vetting your U.S. grantee. However, if you work with an organization that is not based in the U.S., you may have the same legal and banking considerations discussed above.
Many donors become, understandably, so frustrated with the legal and banking regulation and compliance that they give up completely. In other cases, donors work with U.S.-based charities and leave the compliance issues to them. Unfortunately, there are few U.S. organizations able to absorb the cost and risk of working in conflict zones, leading to the charity that does survive being limited to the bare basics like water, food, and medicine. We are keeping people alive, but we are having difficulty stabilizing communities by building a system for basic needs like shelter, health care, and education.
Costs of Bringing Humanitarian Aid to Sanctioned Countries, Conflict Zones, and to Refugees
These are some basic compliance issues that might arise when making a grant in “high-risk” areas, but there are two other things to keep in mind. First, charities engaged in humanitarian and disaster response may have significant overhead expenses due to the additional legal requirements, government filings, expert staff, and relationship building with banks and regulators. Second, a bank is not required to make a transfer just because a charity has spent the funds on compliance and can demonstrate the compliance to the bank. Banks are allowed by the U.S. Treasury Department to mitigate risk as they choose, and they are fined when bank examiners do not see tough enough due diligence policies and procedures. Therefore, if these transactions create concerns, the bank may not have enough compliance documentation or, if they fear they might risk a penalty, they can reject the transfer, bar transfers to certain countries, create suspicious activity reports, and even close accounts. To add insult to injury, because we work in conflict zones, some legitimate charities have been accused of funding or engaging in terrorism. See, for example, https://www.bbc.com/news/blogs-trending-43745629.
Regardless of the barriers, Zakat Foundation of America will keep finding legal ways to bring hope and lifesaving supplies to people caught in crises trying to survive one. Finding ways to work in these areas is not just an option: it is a decision to help a community stay alive or become extinct.
If you want to give in Syria, learn more through:
Efforts to Solve the Problem are Underway
Organizations serving Syria gain support from coalitions trying to break through the counterterrorism barriers. Among these efforts is a multi-stakeholder dialogue sponsored by the World Bank and Association of Certified Anti-Money Laundering Specialists, in which both Zakat Foundation of America and TechSoup Global (of which NGOsource is a program) participate. It brings together civil society groups, banks, and other stakeholders to find practical solutions to overcome obstacles to global aid funding. In addition the Charity & Security Network’s Financial Access Working Group coordinates civil society advocacy on these issues.
You can learn more about this and other proactive coalitions through:
This article was written by Lara Kalwinski, Zakat Foundation of America General Counsel, with editing from NGOsource.