In the past, U.S. and foreign regulators have expressed the view that “the flow of funds both into and out of [non-governmental organizations] can be complex, making them susceptible to abuse by money launderers and terrorists.” In that context, the joint fact sheet provides welcome clarification that the U.S. government does not generally view the charitable sector as presenting unique AML, terrorist financing, or sanctions risks and that access to financial services is critical for charities to achieve their important missions, particularly during the COVID-19 pandemic.
To that end, the joint fact sheet outlines considerations to assist banks in evaluating a charitable customer’s risk profile and conducting appropriate risk-based CDD. These considerations are:
- The purpose, nature, activities, and programs of the organization;
- The geographic locations served, particularly if these locations include high-risk areas where terrorist groups are active;
- The organization’s structure, including key individuals and internal controls;
- The organization’s incorporation, registration, tax-exempt status, and reporting with regulatory authorities;
- Voluntary participation in self-regulatory programs to enhance governance, management, and operational practices;
- Financial statements, audits, and any self-assessment activities;
- General information about the donor base and funding sources;
- General information about beneficiaries and criteria for disbursing funds; and
- Affiliations with other organizations, governments, or groups.
The joint fact sheet reminds banks that charities report specific information annually on IRS Form 990, which may provide useful information with respect to these considerations.
The joint fact sheet, which as informal guidance does not formally alter existing BSA/AML requirements or supervisory expectations, concludes by affirming that charities and non-profit organizations provide vital services and that banks should apply a risk-based approach to these organizations, consistent with existing CDD and other BSA/AML requirements.