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An easier way to screen charities

Episode
/
August 4, 2022

Criminals are constantly seeking new organizations through which to launder money, and frequently target not-for-profits and charities. Consequently, you must identify registered and vetted charities as part of the know your customer (KYC) and anti-money laundering (AML) compliance process. Doing so has become easier now that Moody’s Analytics Orbis includes local lists of registered and vetted charities.

 

Charities and not-for-profits present a red flag for financial institutions (FIs) during anti-money laundering (AML) and know your customer (KYC) compliance. Many of them do much good work under very challenging circumstances, and operate entirely within the law. The Financial Action Task Force recognizes the “vital importance of the [non-profit organization] community in providing charitable services around the world.” However, certain aspects of not-for-profit organizations make them a tempting prospect for criminal organizations including drug traffickers and terrorists – as governments have realized.

Why charities are vulnerable

Charities are cash-intensive. They have a constant and complex flow of money in and out, often across many jurisdictions, and donations can be anonymous. A charity could be setup to launder money through anonymous donations, large or small. Anonymous donations could also be made to a legitimate charity on the condition that they are used for a criminal purpose – for example, an enterprise linked to politically exposed persons (PEPs) or in a jurisdiction subject to sanctions.

 

The social purpose embedded in charities can also make them vulnerable. Many charities operate in jurisdictions experiencing war, corruption, and crime. These jurisdictions are likely to be subject to sanctions, may have fewer controls, and be more vulnerable to criminal takeover.

 

Although regulations across the world vary, charities generally have less oversight and are subject to fewer regulations than businesses. They also benefit from unconscious goodwill. It can be hard to question an organization that seems to be helping people who would suffer in its absence.

 

Regulators recognize the importance of transparency in charity accounts, and require details of who is involved with the charity, who it deals with, and who finances it. For example, EU legislation requires entities incorporate in EU members to hold information on their ultimate beneficial owners.

 

In Australia, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 obliges a non-profit entity to report any designated service it uses or provides to the country’s anti-money laundering and counter-terrorism financing regulator. Charities in Australia must also complete the Australian Charities and Not-for-profits Commission (ACNC) Charity Register. This register contains details about a charity, its programs, its finances, and the names of the people involved in its operation. It also records any action that the ACNC has taken against a charity for not complying with certain obligations.

All the data in one place

Accessing information like this is has not always been simple. FIs have been forced to manually screen and compare lists of registered charities with existing data: a time-consuming process vulnerable to human error. Now this data is in Moody’s Analytics Orbis, alongside all the other data an FI needs to carry out effective AML and KYC screening.

 

The Orbis database has information on more than 425 million companies. You can define a threshold for beneficial ownership, filter results by jurisdiction, decipher circular and indirect ownership, and quickly assess a group linked to PEPs and sanctions. A searched name is matched with consideration given to variables including linguistic culture, spelling alternatives and word order, resulting in fewer false positives and more relevant screening results. More than 15 years of analyst decisions underpin the AI-enabled model, which can be trained to consistently replicate an organization’s decision-making.

 

Having the ability to identify both bad actors and those who are compliant is crucial for FIs seeking to apply a risk-based approach and ensure that regulatory requirements are met. The new information in Orbis enables you to undertake AML and KYC procedures with  much more efficiency, saving time and freeing up resources in the fight against global organized crime.

 

To find out more about how Orbis could streamline your AML and KYC procedures, please contact us to schedule a demo.

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