Ter­ror­ism scru­tiny

Aid is de­layed as U.S. fi­nan­cial in­sti­tu­tions vet do­na­tions for links to ter­ror­ism

The Washington Post - - FRONT PAGE - BY ROB KUZNIA

is ham­per­ing fund­ing for char­i­ta­ble work in rav­aged coun­tries as banks fear money could go to rad­i­cal groups.

As the Syr­ian mil­i­tary be­gan lay­ing waste to the city of Aleppo in an of­fen­sive to van­quish rebel forces last year, a doc­tor was at his wit’s end.

Anas Moughra­bieh was try­ing to save civil­ian lives, treat­ing pa­tients via tele­con­fer­ence from his of­fice in Detroit. As peo­ple were rushed into the Syr­ian hos­pi­tal with grave head in­juries, doc­tors there had run out of hy­per­tonic saline, which re­lieves pres­sure in the brain. That and other sup­ply short­ages led many to die, in­clud­ing chil­dren. He looked on help­lessly from 6,000 miles away.

Al­though the hos­pi­tal was run by the Syr­ian Amer­i­can Med­i­cal So­ci­ety — a Washington-based char­ity that re­lies on do­na­tions — lack of fund­ing wasn’t the is­sue. And in this case, the bru­tal­ity of the Syr­ian regime wasn’t responsible for the sup­ply short­age. The prob­lem was a U.S. bank. Dur­ing the bloody siege, the med­i­cal so­ci­ety had tried to wire $80,000 to a ven­dor in Turkey so its hos­pi­tals could stock up on med­i­cal sup­plies. But the U.S.-based bank, in its dili­gence to en­sure that the funds were not be­ing fun­neled to over­seas ter­ror­ists, was hold­ing up the trans­fer. By the time the money went through six months later, the deadly siege was over.

“Pa­tients on life sup­port can­not be pa­tient,” Moughra­bieh said. “They ei­ther live or they die.”

The wire trans­fer de­lays dur­ing last sum­mer’s bloody cam­paign in Aleppo re­flect a broad pat­tern: At a time of his­toric hu­man­i­tar­ian need, banks are in­creas­ingly hes­i­tant to con­duct busi­ness with char­i­ties that work in dis­as­ter zones for fear that they could be caught up in fund­ing in­ter­na­tional ter­ror­ism.

Known in char­ity cir­cles as “de­risk­ing,” be­cause banks are seek­ing to avoid rather than man­age risk, the is­sue has been brew­ing for about three years, largely as an un­in­tended con­se­quence of stepped-up ef­forts to counter ter­ror­ism fi­nanc­ing, char­ity ad­vo­cates and fi­nance pro­fes­sion­als say.

“The in­abil­ity to get hu­man­i­tar­ian as­sis­tance to refugees from po­lit­i­cal con­flicts or nat­u­ral dis­as­ters can re­sult in death from star­va­tion, ex­po­sure, and dis­ease,” a 2016 re­port from the World Bank said. “The el­derly and the young are par­tic­u­larly hurt by de-risk­ing and are lit­er­ally dy­ing as a re­sult.”

Two-thirds of U.S. char­i­ties that work abroad are re­port­ing dif­fi­cul­ties ac­cess­ing fi­nan­cial ser­vices be­cause of the bank­ing trend, ac­cord­ing to one of two new stud­ies that show for the first time the scope of the im­pact that the bank­ing trend has had on aid providers work­ing in catas­tro­phe zones.

“I was sur­prised,” said Kay Guinane, di­rec­tor of the Washington-based Char­ity & Se­cu­rity Net­work, which rep­re­sents non­profit groups work­ing in cri­sis re­gions and is­sued one of the new re­ports. “I don’t think any of us had any idea how big a prob­lem this re­ally is un­til we got this data.”

The other re­port, re­leased last month by the Duke Univer­sity law school’s In­ter­na­tional Hu­man Rights Clinic and the Nether­lands-based Women Peace­mak­ers Pro­gram, found that in­sti­tu­tional donors such as Western gov­ern­ments and large foun­da­tions — as well as banks — are in­creas­ingly ne­glect­ing hu­man rights or­ga­ni­za­tions that fo­cus their work on women’s is­sues and op­er­ate in ar­eas such as Syria and Iraq.

One such grass-roots group pro­vides sec­u­lar ed­u­ca­tion to chil­dren in Syria to coun­ter­act Is­lamic State schools.

“Women’s rights and their de­fend­ers are re­ally of­ten caught in the crosshairs of these very riska­verse banks and overzeal­ous reg­u­la­tory au­thor­i­ties,” said Jayne Huckerby, a Duke law pro­fes­sor and an au­thor of the study.

The world is fac­ing its worst hu­man­i­tar­ian cri­sis since World War II, with the United Na­tions es­ti­mat­ing that 65 mil­lion peo­ple have been dis­placed by cli­mate change and war, and that 20 mil­lion are in dan­ger of star­va­tion.

Drought and famine are plagu­ing So­ma­lia, Nige­ria and South Su­dan. A Saudi-led block­ade of goods is starv­ing in­no­cents in Ye­men. The Syr­ian gov­ern­ment has been block­ing aid de­liv­er­ies to its peo­ple and this month was ac­cused of killing at least 80 civil­ians in a chem­i­cal weapons at­tack.

The de­risk­ing trend also has prompted re­cent clo­sures of or­phan­ages in Le­banon and Su­dan, has cut off re­lief for per­se­cuted mi­nori­ties in Burma and has ter­mi­nated school pro­grams for stu­dents in Afghanistan, ac­cord­ing to the Char­ity & Se­cu­rity Net­work re­port.

De­lays, fees, clo­sures

Funded by the Bill and Melinda Gates Foun­da­tion, the Char­ity & Se­cu­rity Net­work re­port as­serts that it is the first com­pre­hen­sive em­pir­i­cal study on the im­pact that bank de­risk­ing has had on non­profit or­ga­ni­za­tions.

The 305 char­i­ties sur­veyed said they ex­pe­ri­enced de­lays in wire trans­fers, re­quests for un­usual ad­di­tional doc­u­men­ta­tion, in­creased fees and ac­count clo­sures.

The is­sue stems from well-in­tended ef­forts to tighten con­trols on ter­ror­ism fi­nanc­ing in the wake of the Sept. 11, 2001, at­tacks. Since then, the Trea­sury Depart­ment has la­beled nine U.S. char­i­ties as sup­port­ers of ter­ror­ism and has des­ig­nated 54 world­wide.

No U.S. char­ity has been put on a ter­ror­ist list since 2009, but the re­port con­tends that at least 5,875 of the ap­prox­i­mately 8,665 U.S. char­i­ties that work over­seas have been ad­versely af­fected by bank­ing be­hav­ior aimed at dis­rupt­ing ter­ror­ism.

One Washington-based char­ity, which works to pro­mote gen­der equal­ity in sub-Sa­ha­ran Africa, Latin Amer­ica, Le­banon and else­where, was hit when Citibank froze its ac­counts March 10.

“Our checks have started to bounce,” said an ex­ec­u­tive, who asked that the char­ity not be publicly iden­ti­fied out of fear of ret­ri­bu­tion that could fur­ther stall its ef­forts. “We are work­ing for the bet­ter­ment of peo­ple’s lives in the world. We’re not do­ing arms trade, or some­thing hor­ri­ble like that. I am al­most be­side my­self with frus­tra­tion.”

Sue Eck­ert, lead au­thor of the Char­ity & Se­cu­rity Net­work study and an ex­pert on the in­ter­sec­tion of eco­nomics and na­tional se­cu­rity, said the fun­da­men­tal na­ture of ter­ror­ist fi­nanc­ing is chang­ing in part be­cause of the bank-led crack­down on tra­di­tional cash streams.

“It’s by and large not com­ing through the for­mal channels now,” she said, not­ing that Is­lamic State funds of­ten “de­rive from their phys­i­cal con­trol of ter­ri­tory — from oil, sale of an­tiq­ui­ties, and tax­a­tion and ex­tor­tion, in­clud­ing kid­nap­ping for ran­som.”

Bank as­so­ciates ac­knowl­edge the prob­lem. Rob Rowe, a vice pres­i­dent at the Amer­i­can Bankers As­so­ci­a­tion, said the chaos wrought by civil war in So­ma­lia, for ex­am­ple, has left bankers feel­ing blind.

“Un­for­tu­nately, banks just can’t send funds,” he said. “They look at it and say: ‘We can’t make the distinc­tion be­tween a char­ity that’s try­ing to get money to a starv­ing fam­ily ver­sus one that is ready to go out and buy a stock­pile of Uzis to fire on civil­ians. We don’t have enough in­for­ma­tion, we can’t make that call, and if we make the wrong guess we’re the ones that are in trou­ble.”

The fi­nan­cial sec­tor has been spooked by a spate of high-pro­file fines. HSBC — Bri­tain’s big­gest bank — was fined nearly $2 bil­lion in 2012 af­ter a U.S. Jus­tice Depart­ment probe found its con­trols for mon­ey­laun­der­ing in­ad­e­quate. Paris­based BNP Paribas was fined nearly $9 bil­lion in 2014 for vi­o­lat­ing sanc­tions against Su­dan, Cuba and Iran.

BNP was ac­cused, among other things, of strip­ping in­for­ma­tion from wire trans­fers so they could pass through the U.S. sys­tem with­out rais­ing red flags.

‘We can­not con­tinue’

On oc­ca­sion, even es­tab­lished char­i­ties have had their ac­counts closed. It hap­pened to the Syr­ian Amer­i­can Med­i­cal So­ci­ety in early 2015, more than a year be­fore its wire-trans­fer de­ba­cle dur­ing the Aleppo siege in sum­mer 2016. In Fe­bru­ary 2015, Chase Bank closed the so­ci­ety’s ac­count with lit­tle ex­pla­na­tion. JPMor­gan Chase’s media re­la­tions depart­ment de­clined to com­ment.

“Dur­ing that pe­riod of freez­ing we weren’t able to wire money; we weren’t able to pay our staff in the U.S.,” said Randa Loutfi, a pe­di­a­tri­cian and the or­ga­ni­za­tion’s di­rec­tor of pro­grams.

So­ci­ety of­fi­cials scram­bled to find a new bank. Large fi­nan­cial in­sti­tu­tions po­litely de­clined, Loutfi said. She thinks the word “Syria” in the ti­tle of her or­ga­ni­za­tion im­me­di­ately made banks wary.

“We show them the li­cense that we work un­der from the gov­ern­ment,” she said. “Still, many banks were scared. They start the process and then, ‘Sorry, we can­not con­tinue.’ ”

It took months for the or­ga­ni­za­tion — which treated about 1.4 mil­lion Syr­i­ans in 2014 — to get its fi­nances in or­der. The char­ity wound up split­ting its money among three smaller banks from the Mid­west.

An­other U.S.-based group, Syria Re­lief & De­vel­op­ment, which runs about 30 hos­pi­tals in Syria and has a shel­ter pro­gram for Syr­ian refugees in Jor­dan, has had its ac­counts closed by five banks since 2015. Mais Balkhi, the Kansas-based or­ga­ni­za­tion’s ad­vo­cacy and out­reach man­ager, said deal­ing with banks has been one of the group’s big­gest chal­lenges.

“We’re hav­ing more at­tacks, peo­ple are dy­ing, but we are some­times un­able to help be­cause banks are clos­ing ac­counts and de­lay­ing trans­ac­tions,” Balkhi said.

‘Par­tic­u­larly vul­ner­a­ble’

Much of the fo­cus on char­i­ties as po­ten­tial fronts for ter­ror­ism cen­ters on a sim­ple phrase: “Par­tic­u­larly vul­ner­a­ble.”

Help­ing to cre­ate the mis­trust of char­i­ties af­ter 9/11 was a highly in­flu­en­tial but lit­tle­known in­ter­gov­ern­men­tal or­ga­ni­za­tion called the Fi­nan­cial Ac­tion Task Force, an ad­vi­sory panel that formed in 1989 to com­bat money-laun­der­ing. Im­me­di­ately af­ter the at­tacks, the purview of the global task force ex­panded to ter­ror­ist-fi­nanc­ing con­cerns and it deemed non­profit or­ga­ni­za­tions “par­tic­u­larly vul­ner­a­ble” to ter­ror­ist abuse.

In June 2016, rec­og­niz­ing the harm to char­i­ties caused by that des­ig­na­tion, the Fi­nan­cial Ac­tion Task Force re­moved it. But the man­ual used by the state and fed­eral bank ex­am­in­ers in the United States who in­ves­ti­gate banks for eth­i­cal and le­gal lapses still re­flects the old stan­dard, char­ity ad­vo­cates say.

Bank de­risk­ing is not al­ways the most press­ing prob­lem plagu­ing aid givers in cri­sis­rav­aged coun­tries, where they are putting their lives on the line to help. In 2016, 14 doc­tors work­ing with the Syr­ian Amer­i­can Med­i­cal So­ci­ety were killed in com­bat zones, mostly when bombs fell on hos­pi­tals.

But the bank­ing woes com­pound the prob­lems.

“It’s silly to add the money is­sue to all the other chal­lenges,” Loutfi said. “We al­ready have enough chal­lenges.”

“We’re hav­ing more at­tacks, peo­ple are dy­ing, but we are some­times un­able to help be­cause banks are clos­ing ac­counts and de­lay­ing trans­ac­tions.” Mais Balkhi, ad­vo­cacy and out­reach man­ager for Syria Re­lief & De­vel­op­ment

BILL O'LEARY/THE WASHINGTON POST

Mais Balkhi of Syria Re­lief & De­vel­op­ment says that since 2015, five banks have closed the ac­counts of her Kansas-based non­profit group, which runs about 30 hos­pi­tals in Syria.

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