A Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations (NPOs) published November 19, 2020, marks the first time that the banking agencies have acknowledged the internal due diligence performed by NPOs.
The Fact Sheet, issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the National Credit Union Administration and the Office of the Comptroller of the Currency, points out that NPOs are subject to “internal controls required by donors and others.” The Fact Sheet also suggests that banks could find it useful to collect general information about donors and beneficiaries. This point is significant, as banks often ask NPOs to submit information about individual donors or the final recipients of humanitarian aid, which runs contrary to the groups’ principles.
Although the Customer Due Diligence Rule (81 FR 29398 (May 2016); 31 CFR Parts 1010, 1020, 1023, 1024, and 1026) does not require collection of specific information, the Fact Sheet lists several information items that may be useful for banks in determining the ML/ TF risk profile of charities and other NPO customers, including:
- 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.
Following the release of the Fact Sheet, Charity & Security Network sent feedback to the agencies outlining its continuing concerns.