Donor Screening Process – The Resilient Way To Secure Charity

Financial wrongdoings like money laundering and terror finance are the main crimes of complexity in the charity world, which is an issue of concern to international watchdogs. Fraudsters give the money they have earned through illicit means to non-profit organizations. Due to less strict AML regulations for NPOs, these charity organizations mix it with money that the charity has donated legally. Then the mixed money is shared with an imaginary entity to make it legally in documentation.

The Charity Commission UK reported that they lost almost £8.6 million in charity funds in 2021. In America, over 1.5 million non-profit entities have registered. This large number increases the chance of identity theft and financial fraud. The Financial Action Task Force sees charities at higher risk of becoming easy tools for laundering illegally obtained cash or funding terrorism. International organizations suggest charity entities implement strong donor screening systems to ensure donations reach their intended causes.

These issues have raised a high alert and serious need to conduct proper donor wealth screening to ensure that they are not linked with groups, institutions, or jurisdictions containing higher threats of money laundering & terrorist financing activities.

Confused about the Donor Screening Process and how it operates? Stay connected with us, because we’ll cover all your questions regarding donor wealth screening and AML regulatory compliance efforts.

What Is The Concept Of Donor Screening?

The donor search wealth screening is a way of assessing the risks that come with accepting donations to ensure that none of the funds came from illegal activity and none of them is used to finance terrorism.  This includes identifying the donor, tackling any global warnings and sanctions against any terrorist acts and even taking into consideration politically corrupt individuals. The goal hereby is first to verify that there is no possibility of accidental money laundering or terror financing by the organizations.

Uncover the Largest Donation Fund Scam in the USA

The “We Build the Wall” scam fund in which innocent people lost their money is one of the recent charity fund case scams. In April 2023, federal prosecutors charged Steve Bannon, a former advisor to the President of the United States Donald Trump, and three other persons for fraudulently misappropriating donors’ funds in a crowd-funded endeavor to raise money for the construction of a wall along the United States-Mexico border. The campaign that generated more than $25 million in all available funds pledged to send all the donations straight to construction projects. Nevertheless, the indictment informed that the organizers spent substantial amounts of the funds on their personal needs; one of them was payments to Bannon while another was paid to an organizer Brian Kolfage.

The case showed the importance of donor due diligence and wealth screening to reduce the dangers of sharing funds without proper evaluation in crowdfunding.

Let’s move ahead and read how this donor screening process can identify any criminal conduct.

Donor Screening Process: The Way To Tackle Charity Frauds

AML Donor Screening Process is an established procedure followed by financial institutions, the nonprofit sector, and charities to identify and evaluate whether the risks associated with the donors pose a potential threat to the organization. This is the most significant process for philanthropic organizations since they help to avoid using illicit funds for the rest of the world, by;

• Donor Identification

The initial phase involves highlighting a donor followed by a collection of possible data like name, address, and contact. In the case of bigger donations, additional data verification may be necessary, for example, about the profession, the way of money procurement, and the purpose of the contribution.

• Risk Assessment

The Organization evaluates the donor risk in terms of various factors including the geographic location, any possible political association of the donor, and an existing line of communication of the donor with potentially risky organizations or activities.

• Enhanced Due Diligence

For donors initially identified as high-risk, advanced verification rules are applied before undertaking a decision. Such measures may necessitate the need for more elaborate due diligence, including checking more thoroughly the source of the donated funds and obtaining other information, focused on the donor’s financial history and their reputation.

• Screening Against Sanctions Lists and Watchlists

This stage involves the analysis of the donor information database in comparison with sanctions lists, watch lists, and structures of Politically Exposed Persons which exist to ensure that all the regulatory requirements are satisfied and to identify any potential red flags.

• Monitoring & Reporting

Now monitoring of transactions is being done to spot any fraudulent actions. If the organization finds out about any harmful activities, it has to define it as suspicious and report those incidents to the relevant authorities by the concurrence of local laws.

• Record Keeping

Complete logs on all the elements of the donor search wealth screening such as the refund authorizations, the donor’s information as well as the risk assessments are kept as stipulated by law for a particular period.

So, we can say that the Donor Screening Process not only reduces the chance of misappropriation of funds meant for charity but also promotes the implementation of laws and regulations.

To wind the conversation, the donor electronic wealth screening process is a critical part of AML compliance efforts that plays the role of verifying donors, analyzing their risk factors, and reporting following the continuous monitoring of transactions to detect any suspicious behaviours. Any charity organization can mitigate these money laundering risks by utilizing efficient donor wealth screening solutions.