Although anti-terror financing efforts have yielded positive results, national and international guidelines that are in place to stem the flow of funds can have unintended consequences on legitimate business, charitable organizations, and communities in general. Specifically for Islamic charitable organizations, the negative effects are particularly bad because charities many times are created and operate in areas that support communities both affected by and interconnected with conflict. Islamic charities have drawn scrutiny after the attacks on September 11, 2001 and their ability to operate in the United States and elsewhere have run into roadblocks associated with anti-terror financing regulations. Several countries including the United States have started to regulate and monitor these organizations in an effort to stem the flow of funds to terrorist organizations. Yet, the policies can have an overall negative effect on the capability of these organizations to operate in the perceived constrained environment because of donor fear of being associated with Islamic charities, fear that donations will be misused, and/or fear from government retribution. This thesis will explore the trade-offs involved for shutting off the funding to Islamic charities and determine if a balance can be struck between the policies and charities.