Supervision and Regulation Letters

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SR 20-26:

Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-profit Organizations

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551

DIVISION OF
SUPERVISION AND REGULATION

SR 20-26
November 19, 2020

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK

SUBJECT:

Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-profit Organizations

Applicability:  This guidance applies to all financial institutions supervised by the Federal Reserve that are subject to the Bank Secrecy Act.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the Agencies) are issuing this joint fact sheet to provide clarity to banks1 on how to apply a risk-based approach to charities and other nonprofit organizations (NPOs) consistent with the customer due diligence (CDD) requirements contained in FinCEN's 2016 CDD Final Rule.2, 3

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.4 Although some charities and other NPOs have been misused to facilitate ML/TF or sanctions evasion, the Agencies recognize that the vast majority of charities and other NPOs comply with the law and properly support only charitable and humanitarian causes.

Like all bank accounts, those held by charity and NPO customers are subject to BSA/AML regulatory requirements, including CDD. Consistent with a risk-based approach, the level and type of CDD should be appropriate for the risks presented by each customer. There is no regulatory requirement in the CDD rule, nor is there a supervisory expectation, for banks to have unique, additional due diligence steps for charities or other NPO customers.

Banks that operate in compliance with applicable laws, properly manage customer relationships, and effectively mitigate risks by implementing controls commensurate with those risks are neither prohibited nor discouraged from providing banking services to charities and other NPOs. The Agencies are issuing this joint fact sheet to reaffirm that the level of ML/TF risk associated with charities and other NPOs varies; these bank customers do not present a uniform or unacceptably high ML/TF risk.

Federal Reserve Banks are asked to distribute this letter to the supervised institutions in their districts and to appropriate supervisory staff. In addition, supervised organizations may send questions via the Board's public website.5

signed by
Michael S. Gibson
Director
Division of
Supervision and Regulation

Attachments:
Notes:
  1. Under the Bank Secrecy Act, the term "bank" is defined in 31 CFR 1010.100(d) and includes each agent, agency, branch, or office within the United States of banks, savings associations, credit unions, and foreign banks.  Return to text.
  2. Customer Due Diligence Requirements for Financial Institutions, 81 FR 29398 (May 2016); see also 31 CFR Parts 1010, 1020, 1023, 1024, and 1026.  Return to text.
  3. See November 19th, 2020, Board press release at:  https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201119b.htm.  Return to text.
  4. See, National Terrorist Financing Risk Assessment, 2018, p. 23.  Return to text.
  5. See, http://www.federalreserve.gov/apps/contactus/feedback.aspx.  Return to text.
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Last Update: November 19, 2020