| Genuine and fake charities have been misused for | | | | the indicators are listed below: |
| terrorist financing and fraud. Financial institutions must | | | | - Corporate layering: transfers between bank |
| protect themselves from being used by terrorist to | | | | accounts of charities and directors or staff of the |
| financing terror operations. Similarly, individuals must | | | | charitable organization for no apparent reason |
| be alert no to donate their hard-earned money | | | | - Wire transfer by charitable organizations to |
| before they are confident that the money would not | | | | beneficiaries located in countries known to be bank |
| fall in the wrong hands. | | | | or tax heaven or countries of concern |
| Originally, charities were formed to provide aid to | | | | - Lack of apparent fund-raising activity (i.e. lack of |
| groups of the community that need assistance. The | | | | small checks or typical donations) connected with |
| majority of charities are legitimate channels to help | | | | charitable bank deposits |
| people in need. However, some charities are frauds | | | | - Transactions with no logical economic purpose (no |
| that have been created to take advantage of the | | | | link between the activity of the charitable |
| needy and the generous. | | | | organization and other parties involved in the |
| And some charities have been used for money | | | | transaction) |
| laundering or terrorist financing. For example, In | | | | Tips Before You Donate Money |
| February 2004, the assets of Al Haramain | | | | As a donor, you should have some answers before |
| Foundation's (AHF) branch in Oregon were blocked. | | | | you give money. Questions frequently asked are |
| AHF has allegedly violated currency and monetary | | | | "How do I know that this charity is legitimate?" and |
| instrument reporting requirements, tax laws, and | | | | "Where does this money go once I make a |
| other money laundering offences. According to | | | | donation?" The following tips are designed to help |
| International Narcotics Control Strategy Report of | | | | you know whether a charity is genuine and how to |
| 2005, individuals connected with AHF appear to have | | | | avoid being victimized by a charity that is not |
| concealed movement of over $100,000 to Chechen | | | | legitimate or that may fund terrorists without your |
| mujahideen. | | | | knowledge: |
| How Charities Raise Funds? | | | | - Do not give cash to strangers. You do not know if |
| Charities rely on several methods to collect funds for | | | | that person would use your hard-earned money for |
| philanthropic or humanitarian purposes. Most rely on a | | | | the charitable purpose or divert it elsewhere. |
| variety of income sources that can include: | | | | - Do your homework. Take the time to learn about |
| - Public support, | | | | the charitable organization you support or considering |
| - Government funding, | | | | supporting. Ask for literature and read it. Tell the |
| - Private foundations grants; or | | | | solicitor that you would like to do some research on |
| - Fees collected for services they provide as part of | | | | the charity. Read and understand everything before |
| charitable programs. | | | | you make a decision. Ask questions e.g. ask where |
| There are several solicitation methods, which include | | | | and how your contribution will be used. |
| mandatory religious donations. A charity can raise | | | | - Don’t be deceived by a convincing name. A |
| funds in many different ways. Examples of most | | | | fake or dishonest charity will often have an |
| poplar solicitation techniques are: | | | | impressive name, or one that looks like the name of |
| - Fundraising events, i.e., raffles, and marathons/races | | | | a reputable, legitimate charity. |
| - Direct in-person requests | | | | - Don’t let pressure win. Don’t |
| - Direct mail or telephone solicitation requests | | | | surrender to pressure and feel that you must |
| - Newspaper and magazine advertisement | | | | contribute on the spot. Legitimate organization will not |
| - Sales of tickets to special events or sales of | | | | expect you to donate instantly. Remember, you can |
| products | | | | say no. |
| Part of these funds have been and are vulnerable to | | | | - Don't pay cash. Once you have a satisfactory |
| being diverted to terrorist networks, often without | | | | answer to all your questions, you can make all |
| the donor's knowledge. | | | | donations by check to the charitable organization or |
| How Financial Institutions Apply `Know Your Charity' | | | | by credit card. But beware! Do not give your credit |
| Financial institutions must carry out enhanced due | | | | card number to someone you do not know. |
| diligence on charitable organization accounts. The | | | | On November, 7 2002, the US Treasury Department |
| relationship must be approved at a senior | | | | issued a document entitled "U.S Department of the |
| management level and risk-rated `high'. The | | | | Treasury Anti-Terrorist Financing Guidelines: Voluntary |
| relationship officer should visit the premises of the | | | | Best Practices for U.S Based Charities." The guidelines |
| charitable organization and prepare a visit report. The | | | | are mainly aimed at financial institutions and charitable |
| report should include sufficient details such as: | | | | organizations. However, the Treasury Department |
| - The organization's legal type, license of activity, | | | | also advises individual companies that donate directly |
| source of capital (if applicable), number of employees, | | | | to charities to regularly check its list of individuals and |
| years established, years at present location, nature | | | | organizations the department has designated as |
| of activity, geographical location of activity etc | | | | related to terrorism. (The list and the guidelines can |
| - Details about owners/directors and their powers | | | | be found at |
| - Check if a Politically Exposed Person (PEP) or a | | | | Donating to a charity is a way to support the needy |
| connected individual owns the charitable organization | | | | during these troubled times. Sadly, there are some |
| partly or fully | | | | people ready to take advantage of your kindness. |
| - Check if the charitable organization is authorized to | | | | Therefore, you must do your homework before |
| accept donations locally or overseas | | | | donating your hard-earned money and reasonably |
| - Financial institutions should recognize the `indicators' | | | | take all measures to ensure that the money does |
| or "red flags" that call for further scrutiny. Some of | | | | not fall in the wrong hands. |