On November 19, 2020, the Agencies issued a Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations (Joint Statement). The intent of the Joint Statement was to provide clarity to financial institutions in determining how to handle charities and other non-profit organizations (NPOs) from a customer due diligence (CDD) perspective. As a result of the 2016 CDD Final Rule, some charities reported difficulty obtaining and maintaining banking services, so this Joint Statement provides a little more clarity on what exactly the expectations are.
It is important to note that the new guidance does not change any requirements under the Bank Secrecy Act.
“the U.S. government does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of being used or exploited for money laundering, terrorist financing (ML/TF), or sanctions violations.”
There are of course risks that need to be evaluated, but they vary depending upon the circumstances surrounding the individual NPO. This statement is also consistent with the general theme that banks should mitigate and manage their relationships as opposed to closing accounts to avoid risk in general.
In general, financial institutions are required to apply a risk-based approach to CDD and develop risk profiles for all their customers, including NPOs. Depending upon the facts and circumstances for each individual relationship, NPOs should be evaluated for their particular ML/TF risk and the CDD should be modified as appropriate. Numerous factors can impact the risk associated with an NPO and the guidance provides a list of things to take into account when assessing the risk. The Joint Statement includes a listing of customer information that could be useful in establishing the customer risk profile as well as resources for evaluating specific organizations.
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Published
2020/12/14