In a July 21 letter to the U.S. Departments of Treasury and State, the Charity & Security Network thanks the Treasury for publicly stating that banks need not be infallible in applying their due diligence obligations reasonably and that U.S. nonprofit organizations (NPOs) are not by definition high-risk banking customers. It also reiterates the NPOs request that these government agencies convene a multi-stakeholder dialogue aimed at solving the financial access problem.
The letter was in response to a May 13 joint letter from those agencies on financial access for U.S. nonprofit organizations (NPOs). The government’s May 13 joint letter to the Charity & Security Network was written in response to a February 25 sign-on letter from 58 NPOs asking these two government agencies for help in solving the derisking crisis.
The Charity & Security Network’s July 21 letter thanks Treasury for its public statement that U.S. NPOs are not by definition high-risk. It notes that the May 13 government letter emphasizes that “banks should take a risk-based approach to conducting due diligence on nonprofit customers. Importantly, it notes that ‘Treasury expects banks to apply their due diligence obligations reasonably – not that they be infallible in doing so…’ (emphasis added). As government, the private sector and nonprofit organizations adjust to the risk-based framework, it is crucial that Treasury convey the message that a risk-based approach is not a zero tolerance approach.”
At the same time, the July 21 letter expresses disappointment that Treasury and State did not respond to the NPOs request that they convene a dialogue on this issue among key stakeholders. “While we appreciate the informational meetings Treasury has sponsored on this topic to date, they were not designed to move the dialogue toward solutions and have not done so,” the letter states. “It is our hope that going forward, a solution-oriented stakeholder discussion will emerge and that both the Treasury and State Departments will participate wholeheartedly.”
Finally, the July 21 letter asks Treasury to update the Bank Examiners Manual section on NPOs, which refers to the entire sector as “high-risk.”
On April 28, Jennifer Fowler, Treasury’s deputy assistant secretary for terrorist financing, published a blog on the Treasury website regarding Treasury’s efforts to support the charitable sector. In it, she acknowledges the difficulties charities have faced in accessing financial services in the U.S. In it she states, “Treasury does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations. However, charities delivering critical assistance in high-conflict zones have been, in some cases, exploited by terrorist organization and their support networks.” She goes on to say that banks must manage the risks associated with charity customers, as they would for any customer, adding that Treasury expects banks to “apply their due diligence obligations reasonably.” While these statements were lauded by charities, it has gone largely un-heeded in the financial sector.
Treasury does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations. However, charities delivering critical assistance in high-risk conflict zones have been, in some cases, exploited by terrorist organizations and their support networks.
Read the July 21 letter to Treasury and State here.
Read Treasury and State’s May 13 letter to the Charity & Security Network here.
More about the February 25 sign-on letter can be found here.