An amendment introduced to the National Defense Authorization Act on June 26, 2020 would create a path towards greater financial inclusion for nonprofit organizations (NPOs).
The bipartisan language, drafted by the staff of Senators Sherrod Brown (D-OH) and Mike Crapo (R-ID) as a compromise based on the ILLICIT CASH Act, which was introduced in the Senate earlier this year, contains three sections that would address the practice known as bank derisking as it relates to charities.
Section 5204 of the amendment would require Treasury, in consultation with other agencies and stakeholders, to undertake a formal review of the financial institution (FI) reporting requirements and proposed changes to reduce any “unnecessarily burdensome regulatory requirements…” This would include a study of the most appropriate ways to promote financial inclusion and address the adverse consequences of FIs derisking charities and other entities, among other items.
Section 5213 includes Findings and Sense of Congress language noting the lifesaving activities conducted by nonprofits around the globe and the impact of derisking on those activities. This section would require the U.S. Government Accountability Office to conduct a study and submit a report on the effect of anti-money laundering and countering the financing of terrorism (AML/CFT) requirements on various entities including charities and identifying options for minimizing the negative effects of AML/CFT requirements. It would also require Treasury, in consultation with regulators and stakeholders, to undertake a formal review of the FI reporting requirements and propose changes to them to reduce any unnecessarily burdensome requirements. That review would have to consider any adverse consequences of FIs derisking various sectors, including charities, the reasons why FIs are derisking, the most appropriate ways to promote financial inclusion, and any formal or informal feedback provided by examiners that may have led to derisking.
Importantly, this section of the amendment would require Treasury to develop a strategy to reduce derisking and its adverse consequences.
Finally, Section 5306 would require bank examiners to attend annual training on “de-risking and the effect of de-risking on the provision of financial services.”