FINANCIAL ACCESS

Recommendations

Info

Improve Implementation of the Risk-based Approach FATF has updated its risk-based approach to make it proportionate and ensure that it does not negatively impact the work of legitimate NPOs. This framework is focused on effectiveness, and is relatively new. In particular, the notion of residual risk acceptance, inherent in the riskbased approach, is not always reflected in current rules or enforcement policies. As the FATF noted in its 2016 mutual evaluation of the U.S., terrorist financing and sanctions violations “are strict liability offenses.” There is an inherent tension between strict liability and a risk-based approach that appears to contribute to narrowing financial access for NPOs. Steps to improve implementation of the risk-based approach include: • Counter the outdated portrayal of NPOs as “particularly vulnerable” to terrorist abuse by incorporating the FATF’s revised Recommendation 8’s risk-based, proportionate approach into relevant rules and guidance, such as the Bank Examination Manual. • Develop clear guidance and standards to reduce guesswork and compliance costs so that they outline what information is required to ensure legal compliance by both banks and NPOs. • Promote transparency, information sharing and proportionality to recalibrate risk perception so that fear of harsh penalties for inadvertent violations does not drive FI risk assessment. Give credit for measures taken in good faith. • Create incentives to encourage appropriate risk management so that FIs will not avoid NPOs as customers. Explore Alternatives to the Formal Banking System In cases where formal financial transfers remain problematic, U.S. and international organizations could identify appropriate informal payment channels that NPOs can utilize to help lessen reliance on carrying cash. Alternative methods of moving funds, such as Bitcoin and other virtual currencies, mobile money, and new electronic payment systems, should be explored. Impractical Options The findings in this report are likely to generate other ideas for increasing financial access for nonprofits that merit further consideration. At the same time, however, some ideas have been proposed which, upon examination, were found to be unworkable for a variety of reasons. Others have been attempted without success. This report suggests that government sponsored “white lists” of approved NPOs, appeals to FI social responsibility programs, or NPO-focused efforts to build relationships with local bank managers are either unlikely to effectively address the NPOs’ financial access difficulties or have the potential to create additional problems. EXECUTIVE SUMMARY xi
Additional Research While this report provides important new information on the impact the global trend of bank “derisking” has on the nonprofit sector, suggestions for additional research on questions raised by this report are provided. Concluding Thoughts A new way of looking at financial access is necessary to confront the growing crisis of financial access for NPOs. It is not a choice between financial integrity and financial inclusion; indeed they are complementary, not contradictory goals. As U.S. Treasury Secretary Jack Lew noted, these efforts should not be antithetical, "This is not a conflict of interest, it is a need to bring together two parallel interests." The convergence of interests of all stakeholders—U.S. policymakers and regulators, financial institutions, and nonprofits—in finding solutions to the financial access problems NPOs are encountering, provides the basis for a win-win proposition. EXECUTIVE SUMMARY xii
Page 1 and 2: FINANCIAL ACCESS for U.S. NONPROFIT
Page 3 and 4: ABOUT THE CHARITY AND SECURITY NETW
Page 6 and 7: List of Figures and Tables Figures
Page 8 and 9: Acknowledgements The study benefite
Page 10 and 11: EXECUTIVE SUMMARY In response to th
Page 12 and 13: The scope of the problem, which aff
Page 14 and 15: The U.S. government process to addr
Page 18 and 19: INTRODUCTION On September 8, 2000,
Page 20 and 21: have delayed or denied financial tr
Page 22 and 23: Second, this report is focused sole
Page 24 and 25: Most NPOs that claim tax-exempt sta
Page 26 and 27: Chapter 2 THE CONTEXT FOR NPO FINAN
Page 28 and 29: The Risk-Based Approach Although th
Page 30 and 31: FATF TREATMENT OF NPOs 38 In Octobe
Page 32 and 33: in compliance activities. Extensive
Page 34 and 35: Regulatory Authorities for Financia
Page 36 and 37: NPOs AND DUE DILIGENCE Robust due-d
Page 38 and 39: As was previously mentioned, obtain
Page 40 and 41: Chapter 3 DERISKING: COMPLICATIONS
Page 42 and 43: While FIs do not discuss issues rel
Page 44 and 45: Geographic Derisking Derisking also
Page 46 and 47: Security Consequences of Derisking
Page 48 and 49: account or electronic instrument to
Page 50 and 51: “…it is not surprising that som
Page 52 and 53: to the entire sector as “high-ris
Page 54 and 55: There are 8,665 such groups, based
Page 56 and 57: Table 4: Frequency of Financial Acc
Page 58 and 59: NPOs Are Paying Higher Fees for Ban
Page 60 and 61: Wire Transfers Destined for All Par
Page 62 and 63: Figure 9: U.S. Government Funding b
Page 64 and 65: An insufficient number of survey re
Page 66 and 67:
Turn the proportions of NPOs servin
Page 68 and 69:
SECTION THREE PERSPECTIVES OF PRIMA
Page 70 and 71:
The undertone of skepticism as to w
Page 72 and 73:
Moreover, U.S. government officials
Page 74 and 75:
Acknowledgement of Derisking and Re
Page 76 and 77:
Engagement with NPO Sector As NPOs
Page 78 and 79:
Some interviewees commented that th
Page 80 and 81:
was designed as a regime to help la
Page 82 and 83:
Numerous FIs emphasized that, “Th
Page 84 and 85:
Response to U.S. Government Efforts
Page 86 and 87:
Several FIs shared their suggestion
Page 88 and 89:
NPOs also consistently complain abo
Page 90 and 91:
Chapter 7 NONPROFIT ORGANIZATIONS "
Page 92 and 93:
NPOs Support AML/CFT Policies but A
Page 94 and 95:
Unfamiliarity with NPO Business Mod
Page 96 and 97:
Table 9: Transparency Standards and
Page 98 and 99:
Delays in Fund Transfers Some NPOs
Page 100 and 101:
Excessive Information Requests Info
Page 102 and 103:
Problems Opening Foreign Accounts W
Page 104 and 105:
workarounds to problems of access t
Page 106 and 107:
The Thomson Reuters Foundation cond
Page 108 and 109:
SECTION FOUR OBSERVATIONS & RECOMME
Page 110 and 111:
Implementation of the Risk-Based Ap
Page 112 and 113:
The U.S. government process to addr
Page 114 and 115:
RECOMMENDATIONS Launch a Solutions-
Page 116 and 117:
NGO SOURCE: A MODEL THAT COULD BE A
Page 118 and 119:
Improve Implementation of the Risk-
Page 120 and 121:
Other Options In cases in which for
Page 122 and 123:
• Further research should examine
Page 124 and 125:
APPENDIX A BIBLIOGRAPHY Books • E
Page 126 and 127:
• Long, Paige. “Banks say take-
Page 128 and 129:
• FATF. “Best Practices Paper:
Page 130 and 131:
The Urban Institute Center on Nonpr
Page 132 and 133:
• Financial Crimes Enforcement Ne
Page 134 and 135:
Web Resources • Charity & Securit
Page 136 and 137:
Given the difficulty [your organiza
Page 138 and 139:
34. Can you estimate for us the num
Page 140:
South Asia Afghanistan, Bangladesh,
show all

FINANCIAL ACCESS

Create successful ePaper yourself

Delete template?

Save as template?