Congressional efforts to update the Bank Secrecy Act could help nonprofit organizations (NPOs) that face increasingly urgent problems with transferring funds across borders. Four Senators have circulated a discussion draft ILLICIT CASH ACT that includes provisions to address “bank derisking,” including the impacts on NPOs. A July 11 letter from the Charity & Security Network to Senators Tom Cotton (R-AR), Doug Jones (D-AL), Mike Rounds (R-SD) and Mark Warner (D-VA) expresses support for provisions on derisking and makes recommendations to strengthen them. In particular, the letter urges the bill to require federal banking regulators to update and revise the Bank Examination Manual chapter on NPOs to bring it into line with the Financial Action Task Force’s 2016 update of its standard on anti-terrorist financing regulations for NPOs. The Bank Examination Manual does not incorporate the new standard’s risk-based, proportionate approach that is intended to prevent terrorist financing while not disrupting the activities of legitimate NPOs. (A related bill is awaiting action on the floor of the House of Representatives.)
Additional recommendations include:
Clarify that derisking can occur when banks close or limit services on single accounts, and does not just apply to entire categories of customers;
Expand the scope of the report on derisking in Sections 203 and 309 to address the drivers of derisking as well as the impacts. It notes that “While the effects of derisking are now established and well documented, the drivers of this trend have not been adequately studied.”
Require training on derisking for bank examiners (a provision already included in the House bill);
Include enabling language on bank customer due diligence that would allow financial institutions to rely on a centralized repository of information on NPOs.
The letter concludes by stating, “In updating the BSA, we encourage the Senators to take a comprehensive approach that establishes a framework based on a proportionate, risk-based approach that facilitates use of transparent and regulated financial channels while minimizing the risk of derisking.”