When disasters strike, generous people around the world rush to open their wallets to give to those in need. And when those disasters happen in the United States, US donors have quick and easy tools to deploy funding and support relief efforts. But when disasters happen outside our borders, and especially when they occur in countries facing high risk for sanctioned activities, getting funding to those most vulnerable can be a slow, complicated process. Often, this results in donors either giving less generously—or in many cases, not giving at all.
US funders who want to support disaster relief efforts overseas must comply with strict rules governing international financial transactions. Sanctions—IRS restrictions on granting to non-exempt organizations, and in many cases donee-country rules for bringing grants across their own borders—create a complicated regulatory framework that grantmakers must navigate before they can approve a donation. But while the framework is complicated, if funders can follow the rules the resulting impacts can be extremely meaningful.
This resource defines the regulatory framework for international disaster response grantmaking, and gives examples of how we have been able to follow them in the past to get funding to charities in high-risk countries.
HUMANITARIAN SANCTIONS REGIME
Why It’s More Difficult To Provide Relief in Restricted Areas
What is a sanction?
Sanctions are economic and trade penalties enacted by one nation against another entity, such as an individual, group, or government. Countries implement sanctions to exert economic, trade, political, and diplomatic pressure on the sanctioned party, aiming to curtail specific behavior. For instance, the US has sanctions prohibiting the import and export of goods, services, and technology from/to North Korea. With this program, the US intends to prevent the support of—if not compel changes to—the regime’s approach to nuclearization and human rights
What sanctions do my grants have to follow?
Grants made by donors through CAF America—and all US-registered grantmaking intermediaries—must comply with two levels of grantmaking sanctions for NGOs: domestic (US) and foreign. They must also consider foreign funding regulations in the recipient country.
1. United States Sanctions
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) oversees US sanctions targeting foreign entities by using measures like freezing assets, restricting transactions, and prosecuting violators. NGOs providing basic needs assistance are typically not subjected to these measures if they avoid collaboration with blocked entities listed on the Specially Designated Nationals (SDN) list, but this doesn’t apply in regions under the most comprehensive sanctions (e.g., Syria, after the 2023 earthquake). This includes a set of general licenses written specifically for humanitarian work and issued in December 2022. In spite of these regulatory permissions, high due diligence requirements and complexities mean that many funders avoid these high-risk areas. With the correct risk-based approach for grant oversight, and a good understanding of the sanctions regime in place, all funders should be able to continue to supply compliant grants at any level of risk. These decisions are made on a case-by-case basis by each funder.
2. Multilateral and Foreign Sanctions
Donors giving abroad should also consider foreign and multilateral sanctions beyond OFAC’s umbrella. At the international level, the United Nations Security Council issues sanctions with occasional humanitarian exceptions for disaster relief. For example, Resolution 2664 provides a permanent blanket exemption for humanitarian assistance under all UN sanctions, but not all member states have aligned their domestic legislation with its scope. Though it sponsored the resolution, the US faces challenges due to potential conflicts with its laws concerning ‘material support’ for terrorism. While OFAC has issued several humanitarian licenses in line with Resolution 2664, they only provide exemption to their own sanctions, not material support laws. This discrepancy creates obstacles for practical pathways of grants, as financial institutions are cautious about possible violations. This can slow or impede funds transfers to areas under terrorism-related sanctions.
Similarly, some foreign sanctions may affect the ability of US donors to make grants abroad, even if they don’t align with OFAC rules. For example, if the EU has different sanctions from the US, a grant going through an EU-based bank will be subjected to those requirements as well.
Recent Trends in Disaster Relief Giving: Humanitarian Licenses
In the last decade, the US government has increasingly given out humanitarian licenses for sanctioned areas currently experiencing disaster or crisis. These licenses ease compliance pathways to sanctioned regions, helping facilitate a faster humanitarian response while continuing to comply with regulations and sanctions. For more information on humanitarian licenses, please refer to this blog, podcast episode, and whitepaper published in partnership with the Charity & Security Network.
Additional Considerations: Foreign Funding Regulations
Many countries also have laws that regulate foreign funding, including for charitable endeavors. US grantmakers must maintain compliance with these regulations. In certain cases (e.g., China or Nepal), this involves providing advance notice to the government and receiving approval ahead of the grant. While this does not sound conducive to quick humanitarian aid, some countries have abbreviated protocols for disaster relief.
CASE STUDIES
Navigating Sanctions and Regulatory Pathways for Faster Aid
Below are three hypothetical examples describing disaster relief in heavily regulated or sanctioned areas, and how CAF America could help donors navigate the grantmaking process.
1. Granting to Syria: OFAC’s General License 23 Expiration
Scenario: A donor makes a grant recommendation to fund a Syrian organization that is providing relief after a disaster. This is allowed in spite of existing sanctions in Syria: regulations permit humanitarian transactions so long as they do not go to blocked entities. CAF America, as the donating entity, is required to perform sanctions checks, which we do as part of our Expenditure Responsibility (ER) process.
Challenge: However, changes to exemptions may affect the financial pathways available for a grant. In February 2023, OFAC issued General License 23, allowing financial institutions to rely on the “originator of a funds transfer” to perform the necessary compliance on grants related to earthquake relief. This lessened the burden perceived by financial institutions to perform extra due diligence on grants to Syria, given sanctions on the region. However, General License 23 expired in August 2023, and many financial institutions subsequently “de-risked” their portfolios by terminating or restricting business relationships with Syrian organizations. Because they feel less protected from sanctions and material support laws, financial institutions may refuse to transfer charitable funds to high-risk areas – even when the beneficiary is fully vetted.
Solution: Because CAF America has fully vetted the charities it supports and our protocols are designed to manage the risks of these grants, typically we can provide the extra documentation required by financial institutions to substantiate most transactions. If we have not already collected that information as part of our regular validation process, we are able to reach out to our charity partners to find a solution and ensure the donation can be sent both securely and quickly.
2. Granting to Afghanistan: UNSC 2664
Scenario: A donor makes a grant recommendation to fund an Afghan organization that is providing relief after a disaster.
Challenge: After the Taliban returned to power in 2021, many high-level government positions were filled by sanctioned individuals. Some of these posts may oversee disaster relief funds, or receive ‘incidental benefits’ from dues or fees on such aid. Under United Nations Security Council Resolution 2664, such transactions are permissible if necessary to ensure the timely delivery of humanitarian assistance. However, aid providers are required to make “reasonable efforts” to minimize diversion/capture of aid.
This exemption must be reflected in the sanctions regime of the relevant country (e.g., the United States’ program under OFAC) to be enforceable. And while the US helped lead the initiative for UNSC 2664, the exemption is not formally codified across all its laws. While OFAC sanctions typically include a similar exemption, there are separate laws restricting transactions with designated terrorists (Material Support clauses). It is unclear how the Department of Justice might enforce those clauses in this scenario.
Solution: CAF America addresses this issue through its risk-based grantee vetting process, which adapts proportionately to each circumstance. For grant purposes that fund activity near areas where designated terrorist groups operate, our reviewers complete additional follow-up questions to ensure we are minimizing the risk of diversion. In certain cases, CAF America will set up a tailored approach that may mandate special reporting requirements or gather extra assurances about how and where grantees would use grant funds.
3. Granting to Nepal: Memorandums of Understanding (MOUs)
Scenario: A donor makes a grant recommendation to fund a Nepalese organization that is providing relief after a disaster.
Challenge: In Nepal, the government requires a Memorandum of Understanding (MOU) ahead of foreign grants. Complying with these foreign funding regulations can take time as the grantee files for approval.
Solution: In emergency situations, Nepal has legislation which allows agencies to approve funds quickly from international NGOs. After a disaster in Nepal, CAF America would track government decision-making with input from local charity partners; this helps us efficiently get on-the-ground information and would inform our response. Our experience with navigating regulatory pathways like MOUs ensures that our donors’ funds reach affected communities as soon as possible.
CONCLUSION
Regulations and sanctions can play both constructive and challenging roles in disaster relief efforts, depending on their design and implementation. Sanctions prevent exploitation and misuse of resources, promote enhanced accountability, and streamline international cooperation, resource allocation, and prioritization. Complying with foreign funding regulations ensures we protect the reputation of our grantee partners and our donors in the recipient country.
Although both sanctions and foreign funding regulations can seem complicated, CAF America regularly helps our donors navigate regulatory pathways whenever they give. During times of disaster, that expertise is critical to getting much-needed aid to people in sanctioned areas as quickly as possible.
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