Thousands of NGOs get foreign money but don’t report it

India’s home ministry has found that the number of non-governmental organizations receiving funds from outside India is on the rise, and that most of the groups receiving the foreign funds aren’t reporting it as they are required to do under the law, highlighting the vulnerability that such funding goes toward terrorist purposes.

Some of the external funding involved comes from Western nonprofits that send money to Islamic front charities or alleged Kashmiri relief groups that are actually turning over the cash to jihadi militants.

India isn’t alone in the struggle to get nonprofit organizations to disclose foreign sources of funding. Compliance in the U.S. with the Foreign Agents Registration Act is a joke. Penalties for noncompliance with 501(c)(3) filing requirements are miniscule. The tendency for regulators globally is to be tougher on existing groups that have gone through the registration process rather than on discovery of groups that have failed to register.

These noncompliant groups need a site visit from the police. The policemen can wait while a manager at the NGO completes the required paperwork.

From the Daily Mail‘s India edition:

Government warns of NGOs’ vulnerability to terror funding and money laundering

By Abhishek Bhalla

PUBLISHED: 21 March 2014

Thousands of NGOs which receive foreign aid, many of whom do not file returns on such contributions, are vulnerable to terror funding and money laundering, the home ministry has warned.

Though there are more than 22,000 NGOs registered under the Foreign Contribution Regulation Act (FCRA), intelligence inputs indicate that there are many others that work secretly and are not registered.

On the other hand, 19,000 of the registered organisations do not file returns on foreign contributions.

Foreign funding for NGOs has risen by almost 12 per cent in 2011-12, with Rs 11,549 crore being pumped into these organisations from abroad every year, according to the home ministry’s latest report on the FCRA.

According to the report, foreign contributions worth Rs 2,253 crore come for activities other than the most common causes listed by the Ministry of Home Affairs for foreign contributions.

The common sectors for foreign funding are rural development, welfare of children, health, awareness camps and religious purposes.

“We need to know where this money is being used. We need to coordinate with the authorities of the donor countries and crack down on some of these NGOs,” said an official in the home ministry.

The five major donor countries are the US, Britain, Germany, Italy and Netherlands. Countries like the UAE, Mauritius, Austria, Sweden and Spain are also among the top 15 donor nations…

Front charity news: recommended reading

• The Shakhsiyah Foundation receives £70,000 a year in taxpayer money even though Prime Minister Cameron called it a front charity for extremism… more>>

• Two would-be jihadists from North Carolina intended to use charity as a cover story for their mission overseas… more>>

• The Turkish “charity” IHH funds and supports Hamas, but has yet to be designated as a terrorist organization by the Obama administration… more>>

• İMKANDER, another Turkish charity, has taken to the streets in a massive rally to eulogize Doku Umarov, the terror chief of the Islamic Caucasus Emirate (h/t Ayre)… more>>

• A Dutch money launderer has signed his own death warrant by stealing $35,000 from a Hamas front charity… more>>

 

Charities paid off al-Shabaab to work in Somalia

Relief agencies operating in Somalia in 2011 made payments the terrorist organization al-Shabaab as a precondition for distributing aid to the famine-struck country.  This revelation comes to us from a new report by the Overseas Development Institute and the Heritage Institute for Policy Studies.

This travesty demonstrates the need for stronger supply chain management by international relief charities.  Paying kickbacks to a terror group for the “privilege” of operating on their turf simply helps the terrorist group continue buying weapons and victimizing the population within their territory.

When it’s a diamond mining operation or an international fruit company, leftists are justifiably quick to point out the evils of corporate protection money paid to militants because of slipshod management.  But when a charity does the same thing, universities and think tanks still tirelessly defend their right of charities to operate in conflict zones despite the risks of aid and supplies ending up in terrorists’ hands.

The BBC (h/t to Rushette and Jihad Watch) offers some details from the report:

…It gives one example of al-Shabab diverting food aid in the town of Baidoa, where it is reported to have kept between half and two-thirds of food aid for its fighters.

Al-Shabab, which is linked to al-Qaeda, developed a highly sophisticated system of monitoring and co-opting the aid agencies, even setting up a “Humanitarian Co-ordination Office”.

Aid groups had to deal with this office, even though they risked legal problems by doing so because of counter-terrorism laws in other states which forbid engagement with groups like al-Shabab.

The report says agencies who worked in al-Shabab-held areas had to complete special forms and sign a pledge saying they would refrain from certain social and religious activities.

It also describes how al-Shabab gave people extra food if they spied on the aid groups…

Canadian auditors: Game over for Islamic charity

It’s final.  ISNA’s tax-exempt status has been revoked by the Canada Revenue Agency after an efficient and pointed audit that revealed ISNA sent nearly $300,000 to a terrorist organization in Kashmir.  Language from auditors and tax professionals is normally guarded, nuanced, and measured.  Read with that understanding of their profession in mind, the public announcement by CRA of their findings is scathing.  An excerpt follows.  Thanks to the reliable Gisele for sending this in:

…Our analysis of the information obtained during the course of the audit has led the CRA to believe that the Organization had entered into a funding arrangement with the Kashmiri Canadian Council/Kashmiri Relief Fund of Canada (KCC/KRFC), non-qualified donees under the Act, with the ultimate goal of sending the raised funds to a Pakistan-based non-governmental organization named the Relief Organization for Kashmiri Muslims (ROKM) without maintaining direction and control. Under the arrangement, KCC/KRFC raised funds for “relief work” in Kashmir, and the Organization supplied official donation receipts to the donors and disbursed over $281,696 to ROKM, either directly, or via KCC/KRFC.

Our research indicates that ROKM is the charitable arm of Jamaat-e-Islami, a political organization that actively contests the legitimacy of India’s governance over the state of Jammu and Kashmir, including reportedly through the activities of its armed wing Hizbul Mujahideen. Hizbul Mujahideen is listed as a terrorist entity by the Council of the European Union and is declared a banned terrorist organization by the Government of India, Ministry of Home Affairs, under the Unlawful Activities (Prevention) Act of 1967.

Given the commonalities in directorship between ROKM and Jamaat-e-Islami, concerns exist that the Organization’s resources may have been used to support the political efforts of Jamaat-e-Islami and/or its armed wing, Hizbul Mujahideen.”

The Government of Canada has made it clear that it will not tolerate the abuse of the registration system for charities to provide any means of support to terrorism. Canada’s public policy recognizes that the tax advantages of charitable registration should not be extended to organizations whose resources may have been made available, knowingly or unknowingly, to a terrorist entity, whether such financing is direct or indirect through organizations that claim to have nominally “charitable,” social, or cultural aims…

Helping Hand honored despite close ties to a Hamas-funding Pakistani charity

Charity Navigator, a leading evaluator of nonprofit groups in the U.S., has published 15 different “top 10” lists to help donors assess charities.  Among those lists is a list of 10 charities with low overhead costs that rely on private donations.  Helping Hand for Relief and Development, a Michigan-based Islamic charity, ranks seventh on that list.

Charity Navigator does not appear to have factored in Helping Hand’s ongoing cooperation (see here and here) with the Al-Khidmat Foundation, a Pakistani charity which gave a 6 million rupee check to Hamas leader Khaled Meshaal in 2006.

The Pakistani tie-in is even more alarming considering that the auditing firm that prepared Helping Hand’s financial statement for 2011, the most recent year available, divulged that “We did not audit the financial statements of the Organization’s operations in Pakistan which reflect total assets and revenues constituting 55 percent and 60 percent, respectively, of the related consolidated totals.”

It is also worth noting that Helping Hand reported having $7 million in medical supply and drug assets in their last tax return.  The fair market valuation of drugs donated to and distributed by charities, especially deworming medication, has been an area of increased scrutiny.  Helping Hand states that it uses current accounting standards to comply with IRS mandates in this area, but some analysts still believe that in-kind donations to charities are being overstated.  This has the effect of exaggerating the net worth of some charities, and it makes administrative costs appear to be a small share relative to their size.  Charity Navigator is well aware of this ongoing controversy, but how closely it examined drug valuations by charities on their top 10 lists is unclear.

The Charity Navigator rating is already being exploited by Helping Hand, which is running a banner across its homepage in large font and all capital letters with misleading phrases “TOP 10 HIGHLY RATED CHARITY” and “DONATE WITH CONFIDENCE” along with Helping Hand and Charity Navigator logos.  Muslim news websites such as ABNA (hat tip to Creeping Sharia and Islamist Watch) have touted the rating as well.

The Muslim advocacy group ICNA has also congratulated Helping Hand for the rating in a press release.  But the ICNA statement should be taken with a grain of salt because 1) ICNA is a partner organization with Helping Hand, and 2) ICNA has received a loan from Helping Hand with favorable financing terms.  ICNA’s indebtedness to Helping Hand was not disclosed in the press release.

Institutional donors who may be considering donations to Helping Hand and private donors who intend to give zakat to Helping Hand should consider the serious questions about Helping Hand’s operations in Pakistan and donate elsewhere.  Banks with relationships with Helping Hand should also review the risk of maintaining those accounts.

Liberal judges toss Chechen financier’s conviction

Just four months after the Boston marathon bombing, two federal judges on a three-judge panel have overturned the conviction of the Oregon-based Islamic “charity leader” and terrorist fundraiser Pete Seda, who helped facilitate the transfer of $130,000 to Chechen terrorists in the early 2000s.

Activists like Seda have served as key conduits for funneling zakat donations from Western countries through Islamic front charities to jihadist causes around the world.  The revenues supported the creation of websites and recruitment tools that helped radicalize North Caucasus diaspora like Tamerlan Tsarnaev.

Seda’s conviction was overturned by Judge Mary Schroeder, who was appointed by Jimmy Carter, and Judge Margaret McKeown, who was appointed by Bill Clinton and considered for a Supreme Court appointment by Barack Obama, on the grounds of alleged unfairness during the Seda investigation and trial.

The two judges claim that the Seda trial began as a white collar crime case but ended as a terrorism case, that some information about a witness named Barbara Cabral was not shared with defense attorneys, and that the scope of a warrant served against Seda before the trial was exceeded by law enforcement.

Meanwhile, Judge Robert Tallman, a Republican who was appointed by Bill Clinton, delivered a vigorous dissent from the liberal judges’ opinion.  Oregon’s Daily Tidings summarizes Judge Tallman’s reasoning:

…In his dissenting opinion, Judge Richard Tallman wrote that the majority judges in the appeal improperly failed to take into consideration that [trial court judge] Hogan held a separate hearing on the Cabral issues before ruling the evidence would not have changed the jury’s verdict.

Tallman wrote that the appellate judges should not reverse Hogan’s ruling without it being “clearly erroneous,” which was not the case.

Moreover, Tallman’s minority opinion argued that the scope of the search warrant was not breached by agents searching Seda’s computers and that the other issues do not rise to the level necessary for overturning the jury’s guilty verdict.

Tallman also took issue with the majority opinion’s apparent dismissing of the key evidence in the actual tax fraud and conspiracy charges that were at the core of the case against Seda.

Seda and his codefendant, a Saudi national named Soliman Al-Buthe, went to great lengths and expenses to convert funds wired to Al-Haramain into $130,000 worth of hard-to-trace $1,000 cashier’s checks that Al-Buthe then carried from Ashland to Saudi Arabia in 2000, according to Tallman’s opinion.

Al-Buthe, also known as Al-Buthi, did so in violation of federal financial-reporting rules that he had complied with on nine other occasions, Tallman noted.

Also, Al-Buthe carried with him and failed to report that he was carrying a cashier’s check made out to him at an Ashland bank for $21,000, which Al-Buthe deposited in his personal bank account in Saudi Arabia.

“A reasonable jury could have concluded on this evidence that this was Al-Buthe’s ‘cut’ for serving as the courier,” Tallman wrote.

The jury also heard plenty of evidence on what Tallman calls the “deceitful manner” in which Seda hid the smuggled money by falsely declaring on a tax return that the money went toward the purchase of a prayer house in Missouri.

Had the men’s intent been not to smuggle the money to the Middle East, Seda simply could have wired the money directly to Al-Haramain’s main office in Saudi Arabia for about $15, Tallman wrote.

“The jury obviously thought the entire handling of the money reeked of criminal intent, as evidenced by its verdict,” Tallman wrote.

Hat tip to Rushette for alerting us to the appeals court decision.

FATF’s terrorist charity typologies

The Financial Action Task Force, an international financial watchdog, has updated its “Recommendation 8” pertaining to government oversight of nonprofit organizations.  (Thanks to Arye Glozman who sent in a link to the report).

Overall, the revised recommendations show greater deference to the nonprofit sector and urge restraint by governments in regulating charities than the 2002 version.  This deference is a bit strange considering that using charities as vessels for funding terrorism has not decreased since 2002 then, neither in the West as illustrated by organizations such as the Holy Land Foundation and WAMY Canada, nor in the Middle East and Northern Africa where Gulf-based charities have played a central role in funding and arming Islamist rebels of the Arab Spring.

That being said, the FATF report does present a useful set of typologies to categorize four different types of terrorist “misuse” of nonprofit groups:

1. Front charities, where everybody from the donors to the charity workers to the beneficiaries knows that the charity is a sham designed to fund terrorism.
2. Organizations defrauding donors by telling them the money is going toward legitimate programs but then redirect the proceeds to terrorism.
3. Branch offices of charities defrauding headquarters by misleading the leadership about the branch’s actual programs.
4. Charity workers abusing their positions to distribute aid to militants.

The “charities” used by Osama bin Laden to funnel money from wealthy Saudi donors to Al Qaeda in the 1990s are a good example of type #1.  Jamaat-ud-Dawa in Pakistan is a good example of a front charity today, with donors and recipients understanding that the money is really for the Lashkar-e-Taiba terrorist group.  Many analysts would probably say that the Holy Land Foundation fell into type #2, with donors unwittingly funding Hamas (although some donors knew that their zakat was funding “resistance” against Israel).  Islamic Relief Worldwide can be associated with types #3 and #4 by having a branch office in Gaza that passed money along to Hamas, allegedly without the knowledge of headquarters in England.

Carter seeks waiver so charities can deal with terrorists

Jimmy Carter has signed a petition developed by the Charity & Security Network to “exempt peacebuilding activities” from the U.S. prohibition against providing material support to terrorist organizations.

The problem with the proposal is that it would open up too much wiggle room for charities to interact with terrorist groups.  Which charities would be eligible for such an exemption?  Islamic Relief USA?  Under the exemption, charities like IR-USA could partner with Hamas charities or even directly with Hamas, and justify the joint venture on the grounds that they are pursuing peace-building efforts.

The limits on engagement with terrorist groups have been a longstanding grievance among left-leaning philanthropic and charitable organizations.  While many of those seeking a relaxation of the rules have their hearts in the right place with a genuine desire to seek world peace, the harsh reality is that some charitable entities (or some of their employees) would exploit the exemption to support, rather than to pacify, terrorist groups.  Even financial aid toward projects such as schools, orphanages, or food aid while working with a group such as Hamas or al-Shabaab would be problematic because aid is fungible, and such aid would generally serve to strengthen the terrorist group and its reputation among the populations they “serve.”

The Hill ran this article with a striking but misleading headline “Ex-President Carter wants sanctions weakened on terrorist groups.”  Not exactly—but what’s being proposed is equally alarming.  Read it all:

By Julian Pecquet – 06/20/13

Former President Jimmy Carter is spearheading an effort to convince the U.S. to weaken sanctions on terrorist groups so peace organizations can legally work with them.

In a petition to Secretary of State John Kerry delivered Thursday, Carter and other foreign policy experts ask Kerry to exempt peace groups from policies that make it a crime to offer negotiation training and humanitarian law classes to terror groups.

“The Secretary of State can, and should, exempt peacebuilding activities from this counterproductive application of the law,” says the petition. “Doing so would open the door for professional peacebuilders to fully engage in helping to end armed conflicts and suffering around the world, while making the U.S. safer.”

The Charity and Security Network, which is spearheading the petition, declined for legal reasons to provide examples of current programs impacted by anti-terrorism sanctions. The organization told The Hill that in the past, efforts to build bridges with the Taliban in Afghanistan, Hamas in the Palestinian territories and leftist guerillas in Colombia have all been stymied.

A 2011 report by the UK-based Overseas Development Institute said anti-terrorism laws passed in the decade since the Sept. 11, 2001, attacks have created bureaucratic red tape and fostered an atmosphere of “fear” and “confusion” that has endangered the lives of aid workers and made it impossible for them to work in many of the world’s hot spots.

“Rigid and over-zealous application of counter-terrorism laws to humanitarian action in conflict not only limits its reach in that context,” the report concluded, “but undermines the independence and neutrality of humanitarian organisations in general, and could become an additional factor in the unravelling of the legitimacy and acceptance of humanitarian response in many of the world’s worst humanitarian crises.”

The roadblocks have only gotten worse since the Supreme Court ruled in 2010 that such aid fit the Patriot Act’s definition of “material support” for terrorism. The high court in Holder vs. Humanitarian Law Project determined that such aid could free up terror groups’ resources for terrorist activities and legitimize them…

Islamic Relief’s financial rating tumbles

The financial health of the largest Islamic charity in the U.S. has been downgraded by Charity Navigator from four to two stars.  The financial rating lowered Islamic Relief USA’s overall rating down to three stars—IR-USA’s lowest rating since fiscal year 2001.  The following chart is a portion of Charity Navigator’s ratings from the present going back to 2008:

The rating was published in May and reflects data from 2011.  Charity Navigator is widely regarded as the nation’s top evaluator of nonprofits.

A decline in IR-USA’s stated revenues and soaring administrative costs contributed to the downgrade.  IR-USA reported $160 million in donations in 2010 but only $63 million in 2011.  At face value, the plummeting revenues suggest fewer donations, but a more accurate valuation and decrease of in-kind donations of medicine has more to do with the apparent financial nosedive.

In 2011, Forbes reported that Diana Sufian, an independent contractor, was terminated by IR-USA after hyper-inflating the charity’s assets over a five year period.  Sufian used grossly inaccurate valuations of deworming drugs.  The overstatement was no minor bookkeeping technicality—IR-USA’s drug stockpiles represented 75 percent of their stated assets.

Sufian was paid $510,000 for the year in which she was fired for services she performed.  One wonders why Ms. Sufian has never been charged with financial statement fraud.

Rather than being fired by the board of IR-USA over the Sufian drug value catastrophe, the charity’s CEO Adeb Ayoub is paid $168K a year, and has been reappointed by the Obama administration as an adviser to the State Department for the next two years.

IR-USA donates millions of dollars each year to Islamic Relief Worldwide, a UK-based organization that has aided Hamas and whose leadership is linked to the Muslim Brotherhood.  A Department of Justice official has implicated IR-USA for being a conduit for the flow of money from America to terrorist groups abroad.  Russian intelligence indicates that IR-USA funds militants in the North Caucasus—the region where the family of the Boston marathon bombers originate.

Lebanese businesses in Europe fund Hezbollah

Hezbollah’s financial activities in South America and West Africa are well known, but their European enterprises should also be scrutinized.

Lebanese businessmen, front groups, and khums donors who aid Hezbollah are seldom investigated because the EU does not consider Hezbollah to be a terrorist organization.

Fortunately, Tablet Magazine is looking into issue, and offered this informative article on June 4.  An excerpt follows:

…What Europe should really be worried about is the group’s European business empire and its ramifications for the continent.

Lebanese Shiite communities in Europe provide good recruiting pools for the Party of God and often donate money to Hezbollah-sponsored charities that raise funds for social causes in Lebanon. Businessmen affiliated with Hezbollah also set up façade companies in countries with lax legislation and weak and corrupt governments and then transfer their funds to respectable European accounts. The latter are more important to the Lebanese group. Technically abiding by the European laws and keeping a low profile, they make most of the money the group needs to finance not only its military program but also the schools, hospitals, and community activities meant to secure the group’s popular base inside Lebanon.

According to Lebanese University professor Hares Suleiman, Hezbollah started building its business empire in 2001-2002, following the example of the Iranian Revolutionary Guards, which had set up networks of companies in the Gulf. “Hezbollah started contacting businessmen and building partnerships, increasing its capital and investing in hotels, the car trade, clothes manufacturing, and wholesale,” he said. “At the same time, Hezbollah members and supporters—who were not businessmen to start with—opened new businesses, investments, and institutions in Lebanon and abroad, in places such as Africa and the Gulf. After the 2006 July War, the phenomenon increased,” he pointed out.

The change was obvious in South Lebanon, where castle-like villas sprang up out of nowhere after the July 2006 war. Most locals would give you the official line of the party they support: They built their villas to show how fast the Lebanese resistance could regenerate after the war with Israel. In the town of Kherbet Selem, where Hezbollah controls the local council, the mayor’s relatives built an actual castle with the Brazilian flag on top—a clue to the source of the money, in Hezbollah’s burgeoning South American business empire—and Hezbollah’s leader Hassan Nasrallah’s pictures lining the walls.

Most of the money channeled toward South Lebanon’s villages comes from Latin America and West Africa, where most of Hezbollah’s businesses are located. But informed sources say that even some of that money makes stops in Europe-based accounts belonging to financiers and is then laundered through European-based sister companies so it doesn’t attract too much attention.

Lebanese Shiite communities of Hezbollah supporters in Europe also raise funds for the Party of God through donations made to charities. Germany has a large community of Hezbollah supporters that has grown considerably during the past decade. German media reported in 2007 that 900 Hezbollah activists were in the country and that they regularly meet in 30 cultural community centers and mosques. These activists financially supported Hezbollah in Lebanon through fundraising organizations, such as the “Orphans Project Lebanon Association.” Funds donated to that association were then transferred to Hezbollah’s Al Shahid Association, which supports the families of the Party of God’s military personnel who are killed in action.

Sweden also hosts a strong community of Hezbollah supporters, which it allows to operate freely in the country. Several rallies organized by the party’s supporters had quite a considerable turnout in the country’s main cities and were supported by Sweden’s left-wing opposition parties. In the last year two Lebanese-Swedish men were arrested in separate instances for trying to plan attacks on Israelis in Bangkok and Cyprus. Hezbollah has also done public fundraising in other EU countries such as Denmark.

But the European authorities and law-enforcement agencies often do not look into Hezbollah’s fundraising activities, or into businesses that might have links to Hezbollah, because they are not seen as a threat to public security in Europe—no matter how clear the links are to organizations that sponsor violence elsewhere…

Hamas defines ‘Jihad with Money’

And it’s exactly what we’ve always told you…

From IDF Blog on May 23 (h/t Justice4Israel):

Last week, the Izz ad-Din al-Qassam Brigades, Hamas’ military wing, published an article on their website entitled ‘Jihad with Money’ (link in Arabic).

The term ‘Jihad with Money’ has two different meanings, the article’s author suggests.

“The general meaning [of the term] is to give money to charitable causes for the pleasure of God Almighty: to help the poor and needy, construct hospitals, mosques, schools, colleges and universities, [to assist] orphans and students, and help the unemployed.”

That sounds like a respectable concept – until you read on for the ‘special’ meaning.

“The special meaning: to make money for combat, such as the purchase of weapons, gear and clothing, and to develop the means to build factories for weapons and to support the families of the Mujahideen [terror fighters] and their families.”

For Hamas, charity and Jihad are one and the same. Hamas built their power base and gained the support of ordinary Gazans thanks to their extensive charity network. They also collect money around the world, ostensibly for the benefit of the Gazan people. But much of that money never gets to the people for whom Hamas claims it is intended.

Izz ad-Din al-Qassam Brigades’ website calls on its readers to give ‘zakat’, or charity, generously, and suggests that the Hamas government spends that money on a wide range of charity projects, in addition to its military activities. By associating its military activities with its charity work, Hamas attempts to justify its spending. But do not be fooled: Hamas’ priority number one is terror – and helping ordinary Gazans in need comes a distant second…