Increased Focus on “Sham Charities” Complicates the Landscape for Companies Operating in Israel and the Middle East

Introduction

As the world focuses on conflicts in the Middle East, including the effective closure of the Strait of Hormuz, Israel and the United States are attempting to curb the influence of foreign terrorist organizations (FTOs) in the region. On March 12, 2026, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated four “sham charities” on its list of Specially Designated Nationals (SDN List) for allegedly funding Hamas. (The U.S. State Department designated Hamas as an FTO in 1997.) OFAC announced these designations shortly after the Supreme Court of Israel temporarily paused the Israeli government’s plans to suspend the operations of dozens of international non-governmental organizations (NGOs) that provide aid to Palestinians.

These parallel developments create a challenging compliance landscape for multinational companies and NGOs that support humanitarian efforts in the Middle East. Organizations not only face increased risk of being targeted by U.S. sanctions, but also civil and criminal liability under U.S. sanctions and anti-terrorism statutes.

Factual Background

OFAC sanctioned three Turkey-based organizations—Ghazi Destek Dernegi, Hayat Yolu, and the Palestinian White Hands Assistance and Solidarity Association—and Indonesia-based Komite Nasional Untuk Rakyat Palestina on March 12, 2026 because the four alleged “sham charities” “directly fund Hamas’s Military Wing and its terrorist activities militants and enable the group to sustain its terrorist operations.”[1] OFAC’s designations follow similar actions by the Treasury Department in June 2025 and January 2026 aimed at disrupting Hamas’s access to global financial networks. 

These U.S. sanctions follow legal challenges faced by NGOs providing aid to Palestinians. In December 2024, Israel’s government approved Resolution No. 2542 (Resolution), which requires international NGOs providing relief in the Palestinian Territories to register with its Ministry for Diaspora Affairs and Combating Antisemitism (Ministry) by December 31, 2025. Thirty-seven NGOs did not comply by the deadline and were ordered to cease operations by March 1, 2026.

While the Israeli Government has said the Resolution is necessary “to prevent the exploitation of aid by Hamas” and to “protect [Israel’s] sovereignty, its citizens, and the integrity of humanitarian action,”[2] these NGOs have argued that the Resolution may hinder efforts to provide food and medical support and chill reporting in the region.[3]

The aid groups appealed to the Supreme Court of Israel, arguing that the registration requirements violate international humanitarian law and privacy regulations, including the European Union’s General Data Protection Regulation (GDPR). While the Court has yet to issue a final ruling, on February 27, 2026, it issued a temporary ruling allowing the affected NGOs to continue operating pending the Court’s decision. 

Implications

Although the OFAC designations and the Resolution are distinct actions by different governments, they signal the heightened risk that multinational companies and NGOs engaging in humanitarian efforts face under both Israeli law and U.S. law. If the Supreme Court of Israel allows the Resolution to go into effect, these entities will no longer be able to provide aid unless they register with the Ministry. But even if the Court prevents the Israeli government from enforcing the Resolution, OFAC’s recent designations suggest that companies providing aid in the Palestinian Territories could be targeted under U.S. sanctions if the relief is provided to NGOs or organizations with links to Hamas. 

Also, companies may face significant exposure under U.S. civil and criminal anti-terrorism statutes if they engage with FTOs or organizations with ties to FTOs.

On the civil side, the Anti-Terrorism Act (ATA) allows U.S. nationals injured by an act of international terrorism to sue companies that engage with FTOs and recover treble damages. Two recent cases in the Second Circuit reaffirmed that, to succeed on a direct liability claim, a plaintiff must prove that the defendant not only knew its actions could benefit terrorists, but also shared the FTO’s motive: a difficult standard. 

A more likely risk for companies is secondary ATA liability for “aiding-and-abetting” an FTO or conspiring with an FTO. The standard for aiding-and-abetting liability under the ATA is evolving, but the case law is clear that a defendant may possibly be held liable if it knowingly and substantially assisted the FTO in committing the act of international terrorism. See Twitter, Inc. v. Taamneh, 598 U.S. 471 (2023). In a recent decision, for instance, the D.C. Circuit Court found that providing money to the Iraqi Ministry of Health, which Plaintiffs alleged was directly controlled by a designated FTO, may be sufficient for aiding-and-abetting liability. See Atchley, 165 F.4th 592 (D.C. Cir. 2026).

Finally, companies could also face liability under criminal anti-terrorism statutes. See 18 U.S.C. § 2339B.

Key Takeaways

The current environment demands a proactive and dynamic compliance strategy. Although risk profiles depend on the specific conflict and industry, multinational companies should consider continuously monitor evolving enforcement priorities and developments on the ground. Steps to consider include:

• Identifying whether partners are, or may be affiliated with, individuals and entities targeted by the State Department’s FTO List or OFAC’s SDN List through robust supply chain mapping and sanctions screening;
• Monitoring partners’ activities by exercising audit rights (or other inspection rights) in supplier agreements at regular and frequent intervals;
• Considering public reporting and allegations about partners’ ties to FTOs;
• Establishing clear protocols for conducting robust investigations, including documenting the investigation process; and
• Implementing training programs to ensure that employees are aware of these risks and know how to report potential exposure. 

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This blog post is part of an ongoing series exploring the legal, commercial, and strategic complexities of operating in conflict zones and high-risk jurisdictions. Contributors to this series include Freshfields attorneys Timothy Harkness, Nabeel Yousef, Kate Cooper, Joshua Kelly, Sylvia Noury, Alexandra van der Meulen, Carsten Wendler, Matthew Haggans, Piusha Bose, Maria Slobodchikova, Paige von Meheren, Andrew Bulovsky, Jackson Myers, Heather Cameron, Elischke de Villiers, Keian Razipour, Omeed Askary, Jordan McGuffee, Paloma Palmer, and Ian Maurer. Stay tuned for upcoming posts, and please reach out with topics, questions, or experiences you’d like us to cover as part of this ongoing conversation.

For a collection of related previous posts and webinars, please click this link.