The Washington Post

Terrorism scrutiny

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


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.
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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