Islamic charities struggle from terrorism fallout.

Imam Mahdi Bray struggles these days as he stumps in fundraising circles. Bray's Falls Church, Va.-based Muslim American Society (MAS) Freedom Foundation is a religious, educational, and civic organization with 56 chapters in 35 states. As executive director, he worries that the freezing of charities' assets by the U.S Department of the Treasury hasn't been done properly and really affects donors.

"The state of Islamic charities is abysmal," he said. "I've been to places where once it was easy for me to raise $100,000, but now I'll simply get $60,000 to $70,000. During the last three years, most Islamic charities are 30 to 40 percent below what they would ordinarily bring in."

Bray also finds a larger amount of pledges rather than actual funds. Direct giving has decreased as monthly payments are promised.

Muslim charities have been affected by government seizure of assets when those charities have links to terrorist activities. However, many charities also have good reputations dealing with relief for non-Muslims as well as Islamic causes. Recently, the tsunami and earthquake in Pakistan have brought some focus as they deal with other non-Muslim agencies.

"All the government has to do is say it suspects a charity of being involved with terrorism and this affects donors," Bray said. "People stop to examine every part of the organization they want to support."

The seizing of the funds of the Holy Land Foundation for Relief and Development (HLF) in 2001 was the beginning of the current crisis, according to Bray. "Many donors contributed to that charity and they had nothing to do with the running of the organization, but suddenly they received calls from the government."

Many Muslims respected HLF for work outside the Muslim community for causes such as the relief after the Oklahoma City bombing, according to Bray.

Islamic charities faced seizure of funds after the September 11th attack. Less than three months after that event, the HLF in Richardson, Texas, was closed and searched by federal officials. It was alleged by the federal government that donations were used to support HAMAS terrorist causes. In July 2004, Attorney General John Ashcroft announced that seven HLF leaders were indicted by a federal grand jury in Dallas.

Since, then, the U.S. Department of the Treasury has designated 41 Islamic charities worldwide, with five based in the United States, as having ties to terrorist activities. The four besides the HLF are the AL Haramain Foundation, the Benevolence International Foundation, the Global Relief Foundation, and the Islamic African Relief Agency. The NonProfit Times attempted without success to contact a spokesperson for the five organizations.

"The presumption of guilt hits because of guilt by association," Bray said. "Donors fear an FBI agent will call them."

Many of the organizations have gone to court, "to get the government to produce all they have on the issue," Bray said. "The issue of the charity itself hasn't been resolved." Bray pointed to the Religious Freedom Restoration Act (RFRA), which states that the government has to have compelling evidence before venturing into religious rites.

Giving is a major part of the Muslim religion and way of life, so the Islamic community sees the effect as an infringement to religious freedom. A requirement of alms giving lies at one of the five pillars of being a Muslim. The zakat is a type of giving considered mandatory. Often, the zakat is 2.5 percent of the wealth, to be paid at the end of the Ramadan fast.

"Holy Land was once recommended by the State Department on its list of acceptable charities," said Kareem Shora, director of legal policy for the American-Arab Anti-Discrimination Committee, based in Washington, D.C., a national grassroots civil rights organization that works in 38 states. "Our issues are for the seven million donors and what they should do when they want to donate," he said. "We want to examine the government's role in protecting those rights."

There are several examples where the U.S. government has gone after donors by applying the law retroactively. "The donor may have contributed 20 years ago, and find themselves in an awkward position," he said. "Often the media or court mentions that a person has donated to such a charity even though the case has nothing to do with terrorism, and the case could be a simple immigration or tax issue."

Donors need to know that a transaction not in question at the present time will not hurt them in the future, according to Shora. "They should not have to worry 10 to 20 years from now that the agency will desire to go after donors," he said. "How can a person have documentation that far back?"

However Shora stated that while prosecutors use the information, he doesn't have figures on how many donors have been affected. "The problem is the impact on the community," he said. "If the Treasury is trying to build a relationship with the community, then the policy should allow officials to become aware of how these issues are perceived."

Part of the problem is the connective layers of politics and relationships. A charity raising money to help orphans overseas could conceivably aid an orphan who is related to a terrorist. Yet, neither the charity official nor the donor would have that information.

"Technically, that's material support for terrorism," he said. "Although most Americans would not know that."

A parallel exists with the Irish community, according to Shora. Irish charities did have some connections with funds going to the outlawed Irish Republican Army, even though the charities or donors were not at fault.

"However, the government didn't move as aggressively against that community," he said. "The government today is looking at this as more of a threat to the national security."

The Treasury Department doesn't see a problem with the way the designation of the nonprofit occurs. "There is a lack of full understanding of how the designation tool contributes to combating terrorism," said Chip Poncy, director of strategic policy, Office of Terrorist Financing & Financial Crimes of the U.S. Department of the Treasury. "The designations are not a substitute for criminal investigation as the prosecution, information gathering, and other actions by the government happen at the same time, so the designation process is a compliment."

The designation of having a link with terrorism, that allows the Treasury to seize funds, stems from Sec. 3. of Executive Order 13224. The criteria defines the term "person" as an individual or entity. The term "entity" means a partnership, association, corporation, or other organization, group, or subgroup. The term "United States person" means any United States citizen, permanent resident alien, or entity organized under the laws of the United States.

The term "terrorism" is defined as a violent act or an act dangerous to human life, property, or infrastructure that appears to be intended to intimidate or coerce a civilian population or to influence the policy of a government by intimidation or coercion. This can also occur by a government performing mass destruction, assassination, kidnapping, or hostage-taking.

However, the actual complexities belie the definitions. Charities must be on guard on several fronts, according to experts. Charities must make sure they do not accept funds from those identified as suspected terrorists. On a day-to-day basis, this can be difficult when many donations arrive as $10 or $20 bills given by anonymous donors at religious services.

Also, charities must make sure that employees and board members are not affiliated with many individuals seen as militant by the U.S government. Once money is obtained, charities must oversee that finance doesn't go to a project or person linked to militant or banned groups. Regions exist where Islamic militant groups often have significant charitable operations. This means that telling the difference between legitimate and covers can be difficult.

Poncy admitted the hypothetical of the scenario means these situations are difficult to implement and enforce. "But this doesn't in any way call into question the need for the designation authority," he said. "The tool requires a financial compliment and gives us the real ability to assist in the overall counter terrorist effort."

Leaders in the Muslim funding community would like the Treasury Department to sit down with other federal agencies to see how the FBI, Homeland Security and Department of Justice deal with the community, Shora said. "They are more effective by regularly consulting with us when they make policy changes while the Treasury hasn't reached that level of communication."

Poncy disagreed with the contention. "With over a million registered charities in the country, it's not fair to say we're not engaged in a robust activity," he said. "We have a longstanding outreach program since 9/11, and our site reflects the best practices that reflects work with global standards."

Ihsan Alkhatib now serves as director of law and government relations for Life for Relief & Development, a Muslim charity based in Southfield, Mich. "They hired me as an attorney to help guide them to ensure on legal compliance," he said. "We make sure that everything possible is done in delivering goods besides helping the needy to double check the items to avoid them falling into terrorist hands--if there's any doubt, we don't send the shipment."

Since inception, LIFE has provided more than $50 million in humanitarian assistance to more than 13 million people around the globe. LIFE programs started with basic emergency assistance during disasters, then expanded to cover health, education, and social projects.

"The seizure of charity funds has had a bad effect, "Alkhatib said. "Things have not improved because we have a wait-and-see environment where nothing happened for a while, and then all of a sudden we hear that another organization is shut down."

One aspect of the extra work required Alkhatib to prepare for a regional conference to describe to overseas members what is allowed and the limitations.

Atkhatib's biggest challenge is before Ramadan. "Actually, donor anxiety is bigger than the reality because the government isn't going after many people," he said. "But rich people who want to contribute don't want the headache."

The biggest issue for Atkhatib is what he calls the failure of the U.S. government to recognize the due process system. "How can you respond when evidence used against you is not shared with you?," he asked rhetorically.

However, the designation of an organization is classified and considered sensitive up until the moment they are public, according to Poncy. "We exercise painstaking care before we act, particularly in investigating a charitable organization, and the evidence supporting our actions has been compelling," he said. "If individuals or entities were given the heads-up that they were about to be designated, we would risk asset flight."

According to Poncy, several judicial suits have been filed challenging the designations of charities. Judges in each of these cases conducted examinations of the classified and unclassified evidence. "Our actions have been upheld without exception, with agreement by every judge involved, that we proceeded properly," he said.

That's not so, according to Harvey Dale, a professor of philanthropy and law at New York University School of Law. This review process is an ex parte process where no notice occurs to the nonprofit, according to Dale. The organization has no right to learn of or confront the evidence. The standard for freezing and seizing assets is a "reasonable basis to suspect or believe" basis. Yet this basis is the same standard rejected by the Supreme Court in an issue dealing with Guantanamo Bay, according to Dale.

Despite the fears held by donors, charities have recently re-emerged as relief agents during natural disasters. Islamic Relief U.S.A., based in Burbank, Calif., works in 30 countries internationally and also within the U.S to aid Katrina victims. "The cash in-kind was upwards of $10 million plus for Pakistan," said Salar Rizvi, finance and administrative director. "We have a large ex-patriot community from Pakistan, which is part of why we did so well."

After September 11, some donor support dropped off, but rebounded later. Causes like an appeal for Afghanistan during the early days helped. Planners saw a big problem in the county due to an emerging drought.

"Once the initial shock of 9/11 wore off, people came back to help" he said. "Much was changed because of partnerships."

The last fiscal year saw a jump to $46 million of in-kind funds from $14 million the year before. The year of 2002 saw $8 to $9 million.

"We've done a lot to build bridges with coordinated projects with other organizations like the Church of Jesus Christ of Latter-Day Saints," he said. "We're changing the stereotypes people have about what Islamic charities are."

Donations arrived from the Conrad Hilton Foundation for $500,000 and the Latter-Day Saints partnership for the Pakistani quake that allowed Islamic Relief to send hygiene, medial, and food supplies.

The change in direction has aided Islamic agencies. "We're using this approach during the last two years to go out to more than our usual donor base," Rizvi said.

Mahdi Bray also talks about changing the approaches to help Islamic fundraising. The effects from September 11 occurred with other fundraising challenges. "We're reaching a donor fatigue for the methods we use," he said. "Our community has grown with private schools, and in the D.C. area a fundraiser happens almost every week."

RELATED ARTICLE: Charity as a duty.

Charity is part and parcel of the Muslim religion. Several forms of giving fill Islamic life. The zakat is a charitable duty usually deemed as 2.5 percent of wealth, and is paid at the Ramadan fast as proof of a self-discipline and dedication to others. Another form, called the sadaga, requires some voluntary charity apart from money. The kaffara is a duty for breaking an oath. And Shi' a Muslims consider the khoms a duty that is determined at 20 percent of annual profits.

"The amount of decline in the giving is hard to tell," said Mahdi Bray, executive director of the Falls Church, Va.-based Muslim American Society Freedom Foundation. "Many organizations tell us a chilling effect is occurring because people are giving money without signing a check, but by giving cash."

Philanthropy peaks and drops, usually picking up in the month of Ramadan. Yet, even the fixed savings of zakat has decreased.

"Many expatriates are giving cash without going through a charity," said Solar Rizvi, finance and administrative director for Islamic Relief U.S.A., based in Burbank, Calif. "Many will wire money back to people or villages through a network of family or relatives."

No study exists on how much money is being diverted this way, according to Rizvi. Some families ore setting up their own trust funds.

Fundraisers know about the differences between designated funds and non-designated money. Yet even when the donor gives a contribution without specifically stating where to spend it, it can be assumed the money goes to some direction of concern. But, use of donor funds for legal fees remains an issue.

When the government seized funds from the Richardson, Texas-based Holy Land Foundation for Relief and Development, $13 million had arrived one year from donors. In the course of the litigation, the government allowed some funds to be used for legal fees.

"If I give money to an organization, my desires have yet to be executed with those funds," said Bray. "The Department of the Treasury hasn't cooperated to provide some fiduciary relations to allow the money to go back to the people."

"Donors hove funds in good faith and didn't know where the money was going," said Solar Rizvi, finance and administrative director for the Islamic Relief USA, in Burbank, Calif. "But at the end of the day, those funds are their money."

That's not so, according to Chip Panty, director of strategic policy, Office of Terrorist Financing & Financial Crimes of the U.S. Department of the Treasury. "That's not a legal argument," he said. "A counter argument is that once a donor gives the money, the transaction is done."

The Treasury's role is Io be a steward of those assets, according to Poncy. "We do not take possession and the funds continue to be owned by the charities," he said. "We have to make sure the funds are frozen so they can fit in with the desires of any legal action."

Poncy did comment that a charity or owner of the assets could petition the government. He further stated that the government does not disclose the total amounts of funds seized through the charities designated as having terrorist links.--Tom Pope

Tom Pope, a New York City-based journalist writes on management issues.