Two letters sent from 18 members of Congress on April 22, 2020, ask three of the nations largest banks and four federal regulators to answer a series of questions about nonprofit organizations’ financial access difficulties, also known as bank derisking.
The first letter, sent to the Chief Executive Officers of JPMorgan Chase, Bank of America and Wells Fargo, specifically asks about the particular difficulties faced by Muslim organizations, a practice the letter terms “banking while Muslim.” The letter urges the bankers to end biased practices in the industry, stating that “many individuals, entities, and types of activities are being inappropriately categorized as unbankable given their misperceived ‘high compliance risk.’ We have noticed these derisking practices disproportionately impact Muslim Americans and Muslim organizations and charities, despite the emphasis by U.S. regulators that such organizations should be be categorically treated as high risk.”
The letter notes that in addition to encouraging ethnic and religious discrimination, the current application of anti-money laundering and counter-terrorist financing regulations “risks weakening our broader national security and humanitarian objectives. U.S.-based charities, crowd-funding platforms, non-governmental organizations (NGOs), and non-profit organizations (NPOs) provide vital assistance to worthy causes both here in the U.S. and globally.” It draws attention to the current COVID-19 pandemic and the need for reliable banking channels to facilitate aid payment flows.
The 18 signatory members of Congress then ask the banks to answer a series of questions regarding its commitment to non-discrimination policies and its implementation of Treasury guidance.
Similarly, the letter to the U.S. Treasury Department, Securities and Exchange Commission, Federal Deposit Insurance Commission and Financial Crimes Enforcement Network describes the bank derisking problem as it affects NPOs, particularly Muslim organizations. This letter asks the regulators how it will create explicit guidance to financial services providers regarding NPO/charity clients that “Explicitly informs them that terrorist financing risk in the sector is the exception and not the norm to be applied across the board?” and “Helps ensure financial services providers engaging the charitable sector are not automatically assessed as carrying undue risk?”
Both letters explain that “organizations that make efforts to ensure transparency and demonstrate a comprehensive risk-based approach to combatting the financing of terrorism can be viewed as less risky and should not continue to be de-risked by banks. While the intention of current regulations may be to ensure institution-specific and overall financial system security, such efforts should not lead to the denial of secure and sustainable financial sector engagement for otherwise legitimate and well-intentioned actors in the financial community.”