Menu Home

FinCEN and the banking agencies clarify Due Diligence for charities and non-profits

FinCEN and Federal Banking Agencies Clarify BSA Due Diligence Expectations for Charities and Non-Profit Customers

Immediate Release

WASHINGTON—In coordination with the Federal Banking Agencies, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) today issued a joint fact sheet to provide clarity to banks on how to apply a risk-based approach to charities and other non-profit organizations (NPOs).

The joint fact sheet highlights the importance of ensuring that legitimate charities have access to financial services and can transmit funds through legitimate and transparent channels, especially during the current COVID-19 pandemic.  Also, the joint fact sheet reminds banks to apply a risk-based approach to customer due diligence (CDD) requirements when developing the risk profiles of charities and other non-profit customers.  The fact sheet reaffirms that the application of a risk-based approach is consistent with existing CDD and other Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance requirements. 

More broadly, the U.S. government does not view the charitable sector as presenting a uniform or unacceptably high risk of being used or exploited for money laundering, terrorist financing, or evasion of sanctions.  This perspective is in line with the standards of the Financial Action Task Force (FATF), which is the AML/countering the financing of terrorism (CFT) and proliferation international standard setting body, with whose standards 205 countries around the world have agreed to comply.  Although some charities and other NPOs have been misused to facilitate terrorist financing, the U.S. government recognizes that most charities and other NPOs fully comply with the law and properly support only charitable and humanitarian causes.  This is consistent with the findings included in the 2020 National Strategy for Combatting Terrorist and other Illicit Financing (https://home.treasury.gov/system/files/136/National-Strategy-to-Counter-Illicit-Financev2.pdf) and the 2018 National Terrorist Financing Risk Assessment (https://home.treasury.gov/system/files/136/2018ntfra_12182018.pdf), published by the Treasury Department in February 2020 and December 2018, respectively. Further, given the current COVID-19 pandemic, the U.S. Treasury Department has also committed to ensuring the international flow of humanitarian aid continues through legitimate and transparent channels.  See https://home.treasury.gov/news/press-releases/sm969 

“The U.S. Department of the Treasury recognizes the important role played by the charitable sector, especially during the COVID-19 pandemic, as it supports communities and provides life-saving assistance,” said Deputy Secretary of the Treasury Justin G. Muzinich.

FinCEN Director Kenneth A. Blanco noted, “FinCEN appreciates the critical role of those charities and NPOs who are on the front lines of the COVID-19 pandemic.  FinCEN demonstrates in this communication our joint resolve and the importance of ensuring their access to banking services, while at the same time protecting our national security, keeping our citizens safe from harm, and safeguarding our financial system.” 

The U.S. Department of the Treasury is committed to working with the private sector, including financial institutions and non-profit organizations, to provide guidance and clarification on AML/CFT and sanctions obligations relevant to the charitable sector.  

The fact sheet does not alter existing BSA/AML legal or regulatory requirements or establish new supervisory expectations.  It was developed with the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency.


From the Fact Sheet:

Charities and other NPOs are subject to federal and state reporting requirements and regulatory oversight. For example, charities report specific information annually on IRS Form 990 regarding their stated mission, programs, finances (including non-cash contributions), donors, activities, and funds sent and used abroad.1Many NPOs also adhere to voluntary self-regulatory standards
and controls to improve individual governance, management, and operational practice, in addition to internal controls required by donors and others. Although the CDD rule does not require the collection of this specific information, the following customer information may be useful for banks in determining the ML/ TF risk profile of charities and other NPO customers:
• 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.

Links:

FinCEN Press Release

Fact Sheet

Categories: Anti-Money Laundering CDD Rule Due Diligence FinCEN Updates Guidance

eric9to5

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: