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Treasury Notes

 Treasury Efforts to Protect and Support the Charitable Sector

By: Jennifer Fowler
4/28/2016

Last week, Treasury participated with other governments in the Financial Action Task Force (FATF)’s annual consultation with the global charitable sectorThe FATF is the international standard-setting body for anti-money laundering and counter terrorist financing (AML/CFT), and last week’s meeting was an important opportunity to engage with charities as the FATF works to update the FATF standard on protecting charities from terrorist abuse.

Treasury recognizes and strongly supports the essential role of charity in communities worldwide. For the past 15 years, Treasury has worked in the FATF and with partners here in the United States to promote safe charitable giving while protecting the charitable sector from terrorist abuse.

We take seriously recent concerns from the charitable sector about delayed transactions to intended recipients and claims of indiscriminate bank account closures, the former of which seem to be more prevalent. We are committed to ongoing dialogue with relevant stakeholders on these issues. 

Over the past eighteen months, Treasury has organized several meetings with the charitable sector to facilitate a dialogue on banks’ expectations. These sessions brought together representatives from charities, banks, financial supervisors, and the government to discuss the factors that banks consider related to charity accounts and that examiners use in their review of banks’ procedures. These discussions have also covered delays in financial transactions and banking access challenges. 

As we have conveyed at these meetings, Treasury does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations. However, charities delivering critical assistance in high-risk conflict zones have been, in some cases, exploited by terrorist organizations and their support networks.

And when banks have charities as accountholders, banks must identify and manage the risks associated with a charity’s transactions or accounts, just as they would for any customer. To assess the risk of a charity account, a bank should conduct adequate due diligence on the charity, including the geographic areas it serves, its funding criteria, and its internal controls and audits, as described in the “Bank Secrecy Act Anti-Money Laundering Examination Manual.” This Manual is used by bank examiners in their review of banks’ internal controls and procedures.

Treasury cannot direct any bank to open or maintain a particular account or relationship – such decisions must be made by banks themselves. Treasury expects banks to apply their due diligence obligations reasonably – not that they be infallible in doing so. As Acting Under Secretary Szubin previously said, “The United States has never advocated a standard of perfection. Such an environment would inhibit capital flows and financial access. It would promote neither efficiency nor transparency.” Instead, we ask that banks establish and maintain appropriate risk-based AML/CFT controls and compliance programs, which will enable them to appropriately manage their accounts, detect illicit transactions, and avoid enforcement actions. This view is consistent with the FATF international standards and guidance on preventing terrorist abuse of charities.

The FATF has focused on this sector for several years and has issued a review of the global terrorist risk faced by charities and related guidance on preventing terrorist abuse in the charitable sector. The FATF reports from June 2014 and June 2015 are representative of this.

Protecting the charitable sector from terrorist abuse using a risk-based approach and promoting access to financial services are complementary goals that we all share. Treasury appreciates the sustained dialogue with the charitable sector over the years and we look forward to continued engagement, like the FATF consultation last week, on this important issue.

For more information, please visit the Treasury web page on protecting charitable organizations.

Jennifer Fowler is the Deputy Assistant Secretary for Terrorist Financing at the Department of Treasury.

Posted in:  Terrorist Financing
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