In comments submitted in response to regulatory proposals on anti-money laundering (AML) effectiveness and on fair access to financial services, Charity & Security Network (C&SN) has highlighted bank derisking of nonprofit organizations (NPOs), its impact on the delivery of vital aid and other programming, outside attacks on NPOs and the role of disinformation.

In both comment submissions, C&SN emphasized that regulations have not kept pace with the dramatic shift in the perception of NPO risk for terrorist financing over the past two decades:

“As governments’ understanding of the sector has evolved, that progress has not been reflected in NPOs’ ability to access the financial services necessary to carry out their vital programming. Instead, the global phenomenon known as “derisking” has become, for most NPOs operating abroad, a significant hurdle and for many, an existential crisis. Although there are likely multiple drivers of the derisking crisis, the failure of the regulatory structure to keep pace with the evolving understanding of the sector isan important factor.”

In November 2020, FC&SN submitted comments to the Financial Crimes Enforcement Network on its Advance Notice of Proposed Rulemaking on AML Effectiveness. In this letter, C&SN noted, “Any discussion of anti-money laundering (AML) effectiveness must include a discussion of derisking, the practice by financial institutions of avoiding rather than managing risk, which has affected numerous sectors.” The comment letter explained that the rise of disinformation, which finds its way into negative media searches and data aggregator compliance services, both used by banks, has helped drive the derisking of NPOs. The letter also encouraged FinCEN to highlight strategic AML priorities “in a way that places an equal emphasis on both
the reasons for accepting and the reasons for declining certain relationships and services.”

In its comment letter to the Office of the Comptroller of the Currency’s (OCC) proposed rule on Fair Access to Financial Services, C&SN in December outlined many of the same points, and also asked the OCC to require transparency in bank derisking decisions.

C&SN will follow these rulemakings and report on any relevant developments.