US Yemen policy opens the way for humanitarian NGOs to fund terrorists

The Iranian-backed Houthi militia in Yemen continues to threaten lives and global supply chains as it targets vessels along critical shipping lanes in the Red Sea. It killed three sailors in an attack earlier this month.

The U.S. has stepped up efforts to counter this threat, including carrying out airstrikes and sanctioning the group as a Specially Designated Global Terrorist entity.

At the same time, the U.S. government, which has provided more than $5.5 billion in humanitarian assistance to Yemen since 2015, continues to bankroll humanitarian non-governmental organizations (NGOs) and United Nations agencies in Yemen that are largely exempt from the sanctions. This contradictory policy allows the terror group to divert aid and benefit from these funds, exacerbating an already major security crisis.

In 2021, the Trump administration designated the Houthis, officially known as Ansarallah, as a Foreign Terrorist Organization, but the decision was rescinded shortly after Joe Biden took office. However, in January of this year, following increasing Houthi attacks in the Red Sea, the State Department applied to Ansarallah the “Specially Designated Global Terrorist” label and imposed accompanying sanctions.

But in published guidelines for navigating these sanctions, the U.S. Treasury Department’s Office of Foreign Asset Control includes major loopholes that undercut the sanctions’ purpose. The document states that NGOs are able to make payments to Houthi officials and institutions — as well as institutions controlled by Houthi officials — as long as these payments are for taxes, administrative fees, permits, public services or licenses. This is done ostensibly in the context of humanitarian assistance. With the Houthis controlling ports and other infrastructure and jurisdictions in Yemen, this means that NGOs can openly pass money to the terrorist group, as long as it is labeled as a tax or fee.

In addition, the document allows U.S.-funded NGOs to “coordinate with Ansarallah [the Houthis] regarding the transfer or distribution of humanitarian goods.” NGOs are also permitted to make payments to agencies and organizations led by Houthi officials; fund development projects that could be used by government institutions under direct Houthi control; and disburse “payments (e.g., cash incentives, per diems, and expenses) directly to healthcare workers, teachers, and other staff who may be associated with or formally employed by purported or actual administrative agencies or governing institutions controlled by Ansarallah.”

These broad exemptions effectively render the sanctions regime worthless and embolden the Houthis. They also reflect years of campaigning by U.S.-funded NGOs that work to reduce anti-terror vetting standards and champion engagement with terrorist organizations. 

Central among these is the Norwegian Refugee Council, which lists USAID as a funder of its Yemen operations, and which condemned both the Trump and Biden administrations for their respective designations of the Houthis.   

NRC, whose annual budget totals over $600 million, and has received more than $320 million in U.S. grants since 2020, has long lobbied the U.S. government and other donors to allow it to coordinate with designated terror groups. For instance, in a 2020 “toolkit” designed to train other NGO officials, NRC asserts that “engaging with non-state armed groups, regardless of whether they are [designated terror groups], is a key element of gaining and maintaining secure access to people in need.”

The NRC has lobbied the U.S. in other ways, as well. In 2020, it successfully forced USAID — the primary U.S. government agency for foreign aid distribution — to narrow its anti-terror vetting, including vetting of secondary partners.

Another NGO of concern receiving US funding for Yemen is Norwegian People’s Aid, which is getting $1.1 million from the State Department between  August 2023 and September 2024. In April 2018, NPA settled a civil fraud case with the Justice Department and USAID, in which the NGO was accused of providing material support to the Iranian military and Palestinian terror groups, including Hamas.

Likewise, NRC and its officials have advocated for direct Hamas involvement in aid distribution in Gaza. The terrorist organization has a history of looting aid for its own purposes, storing weapons in humanitarian facilities and planting terror members in positions in aid organizations.

Policymakers have drawn connections between the lax policies promoted by NGOs and the potential for aid diversion. In a February Senate hearing Senator Bill Hagerty (R-Tenn.) cautioned, “I think about what Hamas has done with the aid we’ve sent to Gaza, and I’m deeply concerned that the Houthis may, as well, divert the aid that we’re sending.” 

Governments that want to responsibly deliver humanitarian aid in conflict zones must learn  lessons from Yemen and Gaza. This includes stricter enforcement of laws forbidding provision of material support to terrorist organizations, particularly when these groups are in active combat against U.S. forces, as with the Houthis. 

In addition, NGOs seeking American taxpayer funds and any ultimate beneficiaries of U.S. assistance must be vetted to ensure that they are not linked to US-designated terrorist organizations.  This vetting must rely on all publicly available information — including publications and statements made by potential grantees, implementing partners, or beneficiaries, and their officials.

Only by instituting stricter policies can the U.S. ensure that taxpayer funds do not line the pockets of terror groups threatening the U.S. and its allies.

Yona Schiffmiller is director of research at NGO Monitor, a Jerusalem-based research institute.