Due Diligence Requirements for Services to Charities, Nonprofits

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Federal financial institution regulatory agencies, including the National Credit Union Administration (NCUA), issued a joint fact sheet this week clarifying that credit union compliance efforts to meet Bank Secrecy Act (BSA) due diligence requirements for customers that are charities and other nonprofit organizations should be based on the money laundering risks posed by the customer relationship.

The fact sheet highlights the importance of legitimate charities and nonprofit organizations having access to financial services and being able to transmit funds through legitimate and transparent channels, especially in the context of responding to the coronavirus.

It also clarifies that charities and nonprofit organizations as a whole do not present a uniform or unacceptably high risk of being used or exploited for money laundering, terrorist financing, or sanctions violations, and that banks and credit unions must develop risk profiles that are appropriate for the risks presented by each customer.

Additionally, it provides examples of customer information that may be useful to banks and credit unions in determining those risk profiles.

The fact sheet does not alter existing BSA/anti-money laundering legal or regulatory requirements or establish new supervisory expectations. It was developed by the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN), the NCUA, and the Office of the Comptroller of the Currency (OCC).

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