U.S. Banking Regulators Issue CDD Guidance for Charities, Non-Profits
20 Nov 2020

U.S. federal authorities on Thursday issued fresh Bank Secrecy Act guidance for banks providing services to charities and non-profit organizations (NPOs) as part of an effort to ensure that the groups retain access to financial pipelines.

The joint fact-sheet—issued by the Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Financial Crimes Enforcement Network and National Credit Union Administration—noted that “charities and other NPOs do not present a uniform or unacceptably high” risk of money laundering or terrorist financing. Rather, the compliance risks of banking such non-profits “can vary dramatically depending on the operations, activities, leadership and affiliations of the organization,” they said.

Under U.S. law, NPOs must report specific information annually on IRS Form 990, including data on their finances, donors and cross-border payments, the regulators noted. Many charities separately adhere to voluntary self-regulatory standards intended to improve governance and internal controls.

While banks are not obligated to obtain such information from charities as part of their customer due diligence programs, they could find the following information useful when determining the risk profiles of the groups, the regulators said:

  • Purpose and nature of the NPO, including mission(s), stated objectives, programs, activities, and services. 
  • Geographic locations served, including headquarters and operational areas, particularly in higher-risk areas where terrorist groups are most active. 
  • Organizational structure, including key principals, management, and internal controls of the NPO. 
  • State incorporation, registration, and tax-exempt status by the IRS and required reports with regulatory authorities. 
  • Voluntary participation in self-regulatory programs to enhance governance, management, and operational practice. 
  • Financial statements, audits, and any self-assessment evaluations. 
  • General information about the donor base, funding sources, and fundraising methods, and for public charities, level of support from the general public. 
  • General information about beneficiaries and criteria for disbursement of funds, including guidelines/standards for qualifying beneficiaries and any intermediaries that may be involved. 
  • Affiliation with other NPOs, governments, or groups.

“FinCEN appreciates the critical role of those charities and NPOs who are on the front lines of the COVID-19 pandemic,” said bureau Director Kenneth Blanco, in a statement. “FinCEN demonstrates in this communication our joint resolve and the importance of ensuring their access to banking services, while at the same time protecting our national security, keeping our citizens safe from harm, and safeguarding our financial system.”

Read the joint fact-sheet here

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