EDD reviews for NGOs & NPOs (not high-risk)

[mdesso]

We have recently had a member ask that we poll the membership regarding practices for conducting periodic EDD reviews for NGOs and NPOs, for customers that are not risk rated high-risk.

Specifically, do bank/credit unions conduct reviews of these customers similar to those performed for high-risk accounts? Alternatively, do you rely on your Transaction Monitoring Systems to alert you to account anomalies through its alerts for these customers, or do you only perform enhanced due diligence when an NGO/NPO is risk-rated as high-risk? At our bank, we routinely review all NGOs and NPOs periodically as requested by our regulators in 2019. However, I am curious to know if other banks are taking similar actions as I think I may be able to rely on our Transaction Monitoring System.

[mdesso]

From Melanie Prickett at The First National Bank of Elmer:

The level and type of due diligence should be appropriate for the risks presented by each customer, including charities and other nonprofit organizations. There is no supervisory expectation for banks to have unique, additional due diligence steps for charities or other nonprofit organization customers. There were bulletins/joint releases back in 2020/2021 reminding examiners that the U.S. government does not view the charitable sector as presenting a uniform or unacceptably high risk of being used or exploited for ML/TF or sanctions violations: Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations

We apply a risk-based approach and evaluate charities according to characteristics using a KYC Form to develop a risk profile, and when deemed higher risk, additional information is gathered using a NPOs & Charities Questionnaire to enhance the risk profile. We established specific guidelines/criteria in determining whether NPOs are high-risk at account opening and ongoing. All accounts [including NPOs] are subject to routine transaction monitoring. Should high-risk factors come up at account opening or from routine monitoring, they would be subject to annual EDD Reviews. This has worked for our Bank’s risk profile; no findings have resulted from our approach.

Hope this helps!

[LynnJames]

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[Jennifer Cliber Smith]

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