4. Sanctions and counterterrorism clauses in grant and partnership agreements

Where are sanctions and counterterrorism clauses found? 

Sanctions and counterterrorism clauses are found in the following types of grant and partnership agreements:

• Agreements between a donor, including countries and international bodies such as the UN or the EU, and a humanitarian organisation
• Humanitarian pooled fund agreements
• Agreements between humanitarian organisations, in which:
  • An organisation is the recipient of bilateral funds from a donor that requires it to include or “flow-down” sanctions and/or counterterrorism clauses in all sub-agreements linked to the funding of the project. In some cases, even if a bilateral agreement does not stipulate that the grantee must include such clauses in sub-agreements, it may still be responsible if a sub-grantee violates them.
  • An organisation has a policy of including sanctions and/or counterterrorism clauses in its sub-agreements, usually reflected in its templates. Most UN agencies, for example, include such clauses in their standard templates for partnership agreements, and they are also common in consortium agreements.
• Commercial or service contracts between a donor country or multilateral institution and a humanitarian organisation
• Contracts between a private donor and a humanitarian organisation

Donors may adopt a standard clause that they insert into all contracts, or they may adapt clauses or include additional requirements depending on the area of operation, programme or recipient of funds. 

Sanctions and/or counterterrorism clauses are sometimes inserted in the sections of grant agreements that cover anti-bribery, anti-fraud and anti-corruption measures, but they can also appear in the general conditions or the special conditions. Donors do not always inform partners when they change the wording of sanctions and/or counterterrorism clauses or introduce new ones.

Parties to grant agreements must comply with all clauses of the agreements and apply them in good faith, making it vital that organisations review drafts thoroughly before signing to ensure they are fully aware of the requirements, even if they have entered into agreements with the same donor in the past. A thorough review helps to ensure that any problematic language is identified and gives the organisation an opportunity to seek clarity, renegotiate wording if necessary and make a considered decision about whether to sign the agreement if the language cannot be changed.

Sanctions and/or counterterrorism requirements do not only appear in grant agreements. They can also arise in pre-contract negotiations. USAID’s Bureau for Humanitarian Assistance’s emergency application guidelines, for example, require agencies to conduct risk assessments and adopt mitigation strategies for diversion. 

BHA requires more detailed analysis and mitigation strategies in environments that it identifies as high risk “due to the presence of groups and individuals sanctioned by the US government”. USAID’s certifications and assurances must also be signed and submitted with proposals. Such documents also form part of agreements with donors and must be considered in decision-making processes.

Counterterrorism and sanctions clauses can include provisions that dictate operating requirements, processes or additional information that recipients must provide. Under new contractual provisions introduced during 2024, USAID recipients are required to submit a biannual report if they become aware that any activity funded under a USAID award involves a transaction with, or the provision of resources or support for sanctioned entities, including any transactions covered under a specific or general license. The report must include information on the type, amount and circumstances of such transactions. Recipients must also report on any diversions of funds, supplies, or services under the award by sanctioned individuals or entities.

Recipients of USAID funding in certain countries may also be required to provide details of potential partners, subcontractors and key employees for vetting by USAID. The ‘Partner Vetting System’ has raised concerns in the humanitarian community about its impact on operations and principled action.

The table in Tool 7 provides examples of some current or recent sanctions and/or counterterrorism clauses in agreements with donors, country-based pooled funds, NGO downstream partnerships and development donor grants. They show that the content and scope of the clauses varies significantly. They are provided as examples and should not be considered best practice, nor as being compatible with principled humanitarian action.

Sanctions and/or counterterrorism clauses may include vague language, making it difficult for organisations to understand what they are committing to. Confusion about the nature of liabilities if the clauses are breached may also arise.

Clauses may also include requirements that are incompatible with principled humanitarian action, such as a requirement to screen and potentially exclude final beneficiaries of assistance. 

Definitions and scope of terminology 

Sanctions and/or counterterrorism clauses in partnership agreements may use expressions such as:

• “Employ all reasonable efforts to ensure” or “apply the highest reasonable standard of diligence to ensure” that funds or assets do not reach persons or entities designated under sanctions or proscribed groups. This means an organisation may be considered to have violated the agreement if funds or assistance are diverted and the required standard of due diligence has not been applied. The specific wording used will determine the degree of care required.
• An organisation is prohibited from providing “material support” whether “directly or indirectly” to designated individuals or entities or proscribed groups and those “associated with” them. Such terminology is problematic because of the broad definition of material support and the potential impact on capacity for an impartial response. It is also problematic because it requires organisations to determine who is “associated”, including relatives of members of such entities or communities where they are active.
• An organisation must comply with sanctions frameworks and is prohibited from making funds or economic resources available to “designated persons” or “entities”.  In some cases the applicable sanctions list is clearly stated – “UN sanctions”, “US sanctions”, ‘’EU sanctions’’ – but in others donors may use unclear language such as “international sanctions”. Ideally such clauses should also make clear that the prohibition does not apply to payments permitted by relevant humanitarian exceptions.

Agreements may have references to ‘knowledge’ and ‘intent’

• If humanitarian assistance is diverted to a person or entity designated under sanctions or a proscribed group, the grant recipient may not be aware and is very unlikely to have intended it to happen. Sanctions and/or counterterrorism clauses may indicate whether “knowledge” or “intent” are required and the impact this might have on the organisation’s liability in the event of diversion.

Agreements may have flow-down clauses or implications

• Humanitarian organisations can include sanctions and/or counterterrorism clauses in their subcontracts to ensure that implementing or consortium partners comply with their donors’ requirements. This also means that one donor’s sanctions and/or counterterrorism clause may flow down to or across many organisations and subcontractors.

Agreements may have references to or implications for screening

• To ensure that funds or other assets are not made available to designated individuals or entities or proscribed groups, sanctions and/or counterterrorism clauses sometimes require recipient organisations to ensure their staff, contractors and the staff of implementing partners are not designated.

Some donors, especially non-humanitarian ones, may also require the names of potential beneficiaries. This is unacceptable and compromises adherence to the humanitarian principles.

Processes for understanding and addressing sanctions and/or counterterrorism clauses

Humanitarian organisations must understand the implications of a grant agreement before they sign it, and should use a systematic process to identify and try to address any concerns. There is no one correct approach to take, but the following serves as guidance.

1. Organisations should develop and implement procedures to review grant agreements, even if they have previously worked with the same donor.  Donors may change clauses without giving notice of having done so. Management, policy, legal and other departments should review the whole agreement as necessary (see Tool 8).
2. Internal codes of conduct and anti-corruption, risk management and other policies should be consulted to ensure sanctions and/or counterterrorism language in a grant agreement is consistent with them.
3. Before entering into negotiations with a donor on a partnership agreement, organisations should establish a position on which terms would be acceptable and which would constitute a breach of their policies and values.
4. Consult other humanitarian organisations that receive funds from the same donor.
5. Organisations could consider asking the donor for its own interpretation of the clauses and the consequences of violating them, acknowledging that the donor’s interpretation is likely to be the most restrictive.
6. Organisations should consider whether additional resources are needed to meet their obligations under a new agreement. They should ensure they are able to provide clear guidance and the necessary resources to staff responsible for implementation. If additional resources will be required, they should consider asking the donor to cover any related costs.
7. Organisations can use  Tool 9 to help decide whether a particular funding opportunity should be pursued.
8. Collective advocacy and the adoption of common positions among humanitarian organisations are always extremely helpful to push back against problematic requirements in funding agreements. This could include asking the donor to make explicit references to humanitarian exemptions. 
9. Organisations should recall that it may be possible to negotiate sanctions and/or counterterrorism clauses with donors, but if particular sanctions or counterterrorism measures also apply directly to an organisation by virtue of its nationality or because they have been adopted by a host country, it will have to comply with them in their entirety regardless of what it may have committed to in a funding agreement.

Screening of staff, partner staff, contractors and final beneficiaries

Screening is a process by which an organisation conducts checks that anyone who receives a payment or a resource, including staff, prospective staff, contractors, and staff of partner organisations, does not appear on lists of individuals or entities designated under sanctions or proscribed groups under counterterrorism measures.

The sanctions and counterterrorism measures applicable include those which the organisation’s country of registration has adopted, those of the country in which it conducts operations, and any others it may have undertaken to comply with in a funding agreement. 

Screening can be done manually by checking against relevant lists adopted by the UN, EU and individual countries, or by using commercial services that check names against several lists at once. Organisations tend to perform periodic checks on some staff, depending on their grade, and on contractors and suppliers depending on the value of the transactions involved, as part of due diligence measures.

Deep dive V: Screening of final beneficiaries

In some cases, donors may require organisations to check whether final beneficiaries of programmes are designated under sanctions. This can be stated expressly in the grant agreement – which at times specifically requires grantees to perform screening – or it can be indicated by vague language about ensuring that no assistance or funds are made available to designated individuals.

Screening final beneficiaries is a red line for humanitarian organisations, and most donors to humanitarian activities accept this. The 2021 model grant agreement of the Directorate-General for European Civil Protection and Humanitarian Aid Operations, for example, states: 

“EU restrictive measures in humanitarian aid

The beneficiaries must ensure that the EU grant does not benefit any affiliated entities, associated partners, subcontractors or recipients of financial support to third parties that are subject to restrictive measures adopted under Article 29 of the Treaty on the European Union or Article 215 of the Treaty on the Functioning of the EU. 

The need to ensure the respect for EU restrictive measures must not however impede the effective delivery of humanitarian assistance to persons in need in accordance with the humanitarian principles and international humanitarian law. Persons in need must therefore not be vetted.”

Requirements to screen final beneficiaries are, however, increasingly common in grant agreements with development donors, which tend to impose more stringent sanctions and counterterrorism measures than their humanitarian counterparts. Sometimes this is because they are development banks, which require adherence to financial regulators’ AML and CTF requirements. Development donors that are government agencies should not impose conditions that are incompatible with the country’s obligations under international law, including IHL.  

Negotiating the removal of clauses that require the screening of final beneficiaries from funding agreements with development donors has proved extremely difficult.  Arguments based on their incompatibility with the humanitarian principles have been dismissed, because they do not consider that they fund humanitarian operations.

As a matter of law, the institutional funding stream is irrelevant to screening requirements. The stark division between humanitarian and development funding is artificial, and the difference between activities is increasingly blurred, partly reflecting the shift towards nexus programming which seeks to achieve sustainable  across humanitarian, development and peacebuilding interventions. Funding for nexus programming has created opportunities for humanitarian organisations to engage in longer-term projects that focus on resilience and early recovery, particularly in settings where development donors do not have access or have suspended bilateral assistance. It has also created challenges, however, because of grant conditions that undermine the humanitarian principles.

Development donors should exchange best practices on how to navigate sanctions and counterterrorism requirements, including in fragile settings where activities address the basic needs of vulnerable people. They should include specific provisions in funding agreements that lift the requirement for beneficiary screening requirements to be lifted if the funded activities address humanitarian or basic needs. Approaches to doing so should be standardised and case-by-case approaches should be avoided.

What do humanitarian exemptions mean for requirements to screen final beneficiaries?

Requirements to screen final beneficiaries are a way for donors to ensure they comply with the prohibition on making funds or resources available to designated persons. 

Exemptions provide additional grounds for resisting donor requirements to screen, and therefore potentially exclude, final beneficiaries. The exemption in UNSCR 2664, for example, allows funds or resources to be made available to designated individuals and entities when it is necessary for humanitarian assistance or activities that address basic human needs.

Consequently, when organisations that fall within the scope of the exemption conduct such projects and programmes there should be no need to screen the final beneficiaries. 

UNSCR 2664 does not define what constitutes activities that address basic human needs, but these are contextual and clearly different and additional to humanitarian assistance and can include activities covered by development donors in fragile settings.