Mistakes happen most often to people who have the same or very similar names as an actual terrorist, the San Francisco-based group found, and it obtained more than 100 records from people asking the Treasury to remove them from its list of terrorists.
The Treasury Department didn't say whether anyone has been erroneously investigated or added to its list, and said it has never lost a court case where a specific designation was challenged.
But in its report, the LCCR highlights multiple lawsuits that have ended in settlements in which names were removed from the list.
The group also pointed to two court cases where the terrorist designation process itself was found to be unfair -- with a district court in one case ruling that the Treasury Department's seizure of assets without warning or reason was a violation of the Fourth Amendment.
And the records the group obtained from the Treasury Department show just how stressful being on this list can be.
One person requesting removal said being flagged as a terrorist caused "hefty damages and harm not only to my family, but emotionally, morally and also economically since this situation led to the closing of my company and to fire personnel."
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People aren't even notified that they're a suspected terrorist -- they find out only when they go to the ATM or at a store checkout. Then they often have no idea what they did to warrant suspicion, and "can be forced to wait years until a determination is made, during which time their assets remain frozen," the report states.
"I have never understood why my name was put on this list. I was never interviewed by you or had any communication from you or any of your officers or representatives," another person wrote to the Treasury. "I have no doubt that had you chosen to interview me . . . you would have not taken the decision you did at the time."
The Treasury Department told CNNMoney that it doesn't tell people that they are suspected of being a terrorist because that would give them the opportunity to hide their money before the government is able to freeze it. But it said it makes a public statement once someone is officially added to the list, and that it goes through many efforts to ensure that the designation is deserved -- including conducting an "extensive investigation" and a "rigorous review" of any evidence.
Once you're on the list, it's a battle to get off -- the process is murky and not having access to funds makes it that much harder to hire legal counsel or other assistance, according to the LCCR report.
The Treasury Department said that people are able to contact it immediately if they believe they should be removed from the list. If that doesn't work, they can challenge the designation in a U.S. district court.
There are currently more than 800 people, organizations and companies on the list, which also includes drug traffickers. The full list is public here.