BSA Due Diligence Requirements for Charities and Non-Profits

John Zasada, Compliance Consulting Director, Financial Institutions Group

On Nov. 19, 2020, the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) issued a joint fact sheet on how to apply customer due diligence (CDD) requirements to charities and non-profit organizations (NPOs). The agencies do not view charities and NPOs as presenting an unacceptably high risk of being used or exploited for money laundering, terrorist financing or sanctions violations. Yet, some charities have reported difficulty in accessing financial services.

Financial institutions should apply a risk-based approach and evaluate charities according to their particular characteristics to determine whether they can effectively mitigate the potential risk posed by each.  Banks and credit unions must adopt appropriate risk-based procedures for conducting CDD that enable banks to understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. There is no regulatory requirement nor is there a supervisory expectation, for banks and credit union to have unique, additional due diligence steps for charities or other NPOs. The joint fact sheet does not alter existing regulatory requirements and it does not establish new supervisory expectations.

For more information about BSA due diligence requirements, contact Doeren Mayhew’s regulatory compliance advisors.