How do Biden's new sanctions affect Jewish charities that donate in Israel?

(JTA) — When the Biden administration announced new sanctions meant to stop the flow of U.S. donations to extremist Israelis, many watchdogs assumed that one charity would be especially concerned.

But the Central Fund of Israel says it is unfazed by the new sanctions, which were announced amid a push by the White House to rein in violence in the West Bank. The sanctions came alongside a warning against funneling money to nonprofits that promote violence.

The Central Fund is a New York-registered charity that distributes tens of millions of dollars every year to hundreds of Israeli nonprofit groups, including some operating in the West Bank. For more than a decade it has been subject to attention from media outlets and advocacy groups that say it distributes donor money to extremist Israeli settlers. Critics say those donations may be violating a U.S. law that prohibits charitable support for violence.

The charity has repeatedly denied those allegations. Now, its president says he expects no effect from the sanctions. 

“CFI has always been very careful to follow American laws 100 percent,” Jay Marcus told the Jewish Telegraphic Agency by email. “We don’t have anything to do with anyone involved in violence and this has been our policy long before the new regulation. So as far as we are concerned, it is business as usual.”

T’ruah, a liberal rabbinic human rights group, has for years filed complaints with the IRS about the Central Fund’s tax-exempt status, tracing what it says are ties between the Central Fund and extremist groups that terrorize Palestinians. One example of an alleged Central Fund beneficiary is Lehava, a group that says it opposes intermarriage and is known for marching through Palestinian neighborhoods of Jerusalem and chanting “death to Arabs.”

A complaint filed by T’ruah in 2015 resulted in a brief criminal investigation by the IRS, whose law enforcement division takes up few cases due to its limited budget. The investigation was closed without any charges against the Central Fund, and the organization has continued to operate without interruption. Last year, a group of New York state lawmakers led by State Assemblymember Zohran Mamdani introduced a bill to block charities in the state from supporting Israeli settlements. Mamdani named the Central Fund as one of the main targets of the bill, known as the Not on Our Dime Act, which failed to advance after opposition from legislative leaders. 

Many critics of Israel’s West Bank occupation expressed optimism when, earlier this month, the Biden administration took an unprecedented step: the Treasury Department placed four Israeli settlers on a list of sanctioned individuals, barring any donations that would benefit them, based on their alleged involvement in violent attacks against Palestinians and Israeli peace activists.

The executive order authorizing the sanctions allows for anyone else determined to be “threatening the peace, security, or stability of the West Bank” to be added to the list. 

“This executive order is a really important step toward curbing rampant violence in the West Bank,” said T’ruah CEO Rabbi Jill Jacobs. “It’s also a sign that the United States is doubling down on its long-term policy of working toward a two-state solution because one of the major blocks to two states is the expansion of settlements and the displacement of Palestinians.”

These moves were significant to the question of donations because U.S. sanctions law has teeth, while the tax code governing charitable giving generally doesn’t, experts say. 

On the same day that the White House announced the new sanctions, the Treasury Department’s financial crimes unit issued a warning to financial institutions against processing payments to nonprofit organizations with ties to violent extremism in the West Bank. The warning did not name any specific nonprofits.

Though it has been a focus of controversy because of its links to settler groups, the Central Fund is just one of many U.S.-based Jewish charities that offer to connect donors here to causes in Israel. 

None of these charities have expressed any concern about the sanctions in interviews or public statements. One of the largest charities allocating money to Israel, the Jewish Federations of North America, said it is “exceedingly unlikely” that it has any links to the four sanctioned Israelis but that it is consulting with lawyers about the potential implications of the sanctions. 

PEF Israel Endowment Funds, a pass-through organization used by many mainstream Jewish donors for their Israel charity, did not respond to inquiries. 

“I haven’t observed an impact on charitable giving, and I don’t foresee one, at least in the short term,” said Andrés Spokoiny, the CEO of the Jewish Funders Network, an association of more than 3,000 foundations and philanthropists. The donors he represents tend to give to nonprofits in Israel, not individuals, Spokoiny said, adding that to his knowledge, no nonprofits have been implicated by the sanctions. 

No flurry of new business should be expected for lawyers specializing in sanctions at the moment, according to Hal Eren, a Washington, D.C., attorney who advises businesses and organizations on the issue.  

“These sanctions haven’t created business for us because these are pretty narrow and minor sanctions,” he said. “It’s not like the sanctions against Iran or Russia, where you’ve got the whole country to deal with.”

But, Eren added, the situation could change if the Biden administration expands its list of targets. 

“There’s a kind of a warning implicit in there that more people could be added,” he said. “The executive order spells out the criteria that would need to be met for other people to go on the list.”

The potential for Biden — or subsequent presidents — to build on the executive order and expand the list of targets — has been on the mind of Joel Braunold, the managing director of the S. Daniel Abraham Center for Middle East Peace. In a social media post that circulated among policy wonks, he called the executive order a “gigantic stick,” a “game changer” and “a weapon of mass destruction in the sanctions world.” Braunold’s post on X also covered the donations issue.

“For foundations who have been supporting settlements, call your lawyers,” he wrote. 

Braunold was speaking from experience. He has worked on promoting Israeli-Palestinian peace for the past 15 years and witnessed how U.S. sanctions make it challenging for peace organizations to operate in the West Bank, given that sanctioned groups and individuals can be found among many Palestinian institutions. American donors to peace groups, for example, must take special precautions to ensure their money does not indirectly or inadvertently benefit anyone who has been sanctioned by the American government’s Office of Foreign Assets Control, or OFAC.

“U.S. sanctions are a serious deal and it is a new topic that the Jewish philanthropic sector has not had to deal with in general in the past,” Braunold told JTA. “Like those in the peacebuilding space — donors should ensure they have protocols in place to ensure compliance with OFAC regulations including beneficiaries vetting.”

Jacobs said Jewish foundations and donor-advised funds should treat this moment as an opportunity to establish strict guidelines to ensure donations do not fall into the hands of extremists. 

“They can get ahead of the curve, or at least get ahead of the law and check where their money’s going,” Jacobs said. 

Operating out of the home of its president Jay Marcus, in the Israeli West Bank settlement of Efrat, the Central Fund of Israel is a lean operation. The organization is all volunteer-run, except for Marcus, who draws a $95,000 salary, according to tax records. 

Taking no commission, the Central Fund distributes donor funds to Israeli charities fitting into one of six categories: humanitarian aid, community projects, education, religious institutions, medical, and security. 

The model has proven popular with donors, who mostly give to the Central Fund through third-party donor-advised funds, such as Fidelity Investments Charitable Gift Fund, which shields their identity from public disclosure. In the fiscal year ending Jan. 31, 2022, the Central Fund distributed about $55 million from donors, providing grants to hundreds of Israeli nonprofits, a total dollar amount that had increased in each of the previous five years.

The bare-bones style of the Central Fund’s philanthropy contrasts with the more elaborate infrastructure offered by a platform called IsraelGives. 

As a fundraising platform, IsraelGives allows Israeli nonprofit organizations to launch a campaign and collect tax-deductible donations from people in the United States and 22 other countries. Two million donors have supported 42,000 Israeli charities from across the political spectrum, including settler groups, through IsraelGives, and the number of donations has skyrocketed since Hamas attacked Israel on Oct. 7, according to IsraelGives CEO Jonathan Ben-Dor. He said the rate of donations increased by 467% during the last quarter of 2023 when compared to a year prior. 

At the same time, IsraelGives is not only a tech platform: It’s also a registered financial services institution in Israel that charges a small fee to vet recipient charities. 

“As such, every organization we send money to undergoes a full and extensive know-your-customer process, supervised by a compliance officer, including reporting to the Israeli money laundering and sanctions authorities about every controlling party in the recipient charity,” Ben-Dor said in an interview.

This infrastructure positions IsraelGives to deal with the new sanctions, according to Ben-Dor, who said he hasn’t had to disqualify any of the charities his platform works with.  

“We’re already ensuring compliance with the sanctions and our donors can sleep soundly,” he said. 

Ben-Dor declined to comment on the Central Fund or any other charity distributor, but he said that such organizations will have to be careful and suggested some may find themselves unprepared to comply with the sanctions.

“Unless other entities are set up to do similar oversight as IsraelGives, they may indeed place a freeze on their giving or will have to substantially alter their distribution protocols to ensure that the organizations that they fund have no connection with the individuals under sanction,” he said. “It’s quite possible a lot of organizations will say this is a risky problematic situation.”