Both international and local regulatory bodies are faced with this challenge to fight complicated crimes like money laundering and terror financing especially when regulations around these crimes keep on changing. Apart from dynamic changes in regulations, criminals are also pacing themselves with emerging technology thus such illegitimate ways to conceal the sources of money are becoming hard to be detected.
Unlike financial institutions, healthcare and NGO’s are some of the most prominent industries lacking clear AML regulations thus resultantly implementation of AML screening processes are also low within these industries.
Imagine a donor approaching you to make some contribution to a well being fund. Devoid of AML screening process your business can onboard them along with the monetary contribution they have to make only to find out later that you have been misleadingly becoming part of a bigger crime system and your business has been used to launder money without being caught.
The adverse consequences of getting fined are far more worse and costly than simply investing in AML compliance screening software that can help you fight such crimes and sophisticated techniques with ease and accuracy.
This blog will talk about the importance and dire need of AML compliance in the niche of donor processing, and top 5 strategies to master donor wealth screening.
Statistical standing of Loss without AML donor screening
As quoted “ 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.”
Thus, the need and urgency for devising AML regulations to conduct proper and detailed donor wealth screening services has become undeniable to ensure your business never partners with groups and institutions residing in high risk jurisdictions, carrying higher risk of money laundering and corruption.
Do You Know What Donor Screening Process Must Entail?
Why are there risks involved in donor screening? The core purpose of donor screening is to assess the eligibility of the donor to donate either money or any other stuff related to a particular business.
Screening the donor wealth and background helps the businesses in identifying any underlying risks, global sanctions, watch lists or adverse media related to the targeted subject.
By taking into consideration the results yielded from authentic donor databases, the goal of the donor screening process can be achieved – that is to screen and decide there is no possibility of accidental money laundering or terror financing by the organizations.
Take Lesson From the Biggest Donor Fraud to Exist in USA
This case talks about the “We Build the Wall” case. “One of the most recent charity fund frauds involved the loss of money to innocent parties. Federal prosecutors filed charges against Steve Bannon, a former advisor to US President Donald Trump, and three other individuals in April 2023 for fraudulently misusing contributors’ funds in a crowdsourcing project to raise capital for building a wall between the US and Mexico. All proceeds from the campaign, which raised over $25 million, were promised to go directly towards building projects. However, the indictment revealed that the organizers utilized a sizable portion of the proceeds for their own purposes, including payments to Bannon and organizer Brian Kolfage.”
Having that said, it’s high time to know what algorithm to deploy in the donor screening process. Let’s talk about 5 must haves of the donor search wealth screening process an
Top 5 Must- Haves of Efficient Donor Screening Process
Quite rightfully said, “ donor screening process in a complete set of procedures as mandated by regulatory authorities for the nonprofit sector, and charities to screen and evaluate whether the risks associated with the dono pose a potential threat to the organization.” This is the most vital process for philanthropic organizations as they are the most trustified places for public wealth to be used for positive purposes.
Here are top ways to perform efficient screening
- Donor screening
The process begins by gathering identifiable information about donors including name DOB or simple image to facilitate biometric matching. The process involves screening the name via an authentic database to evaluate if the potential donor is part of bigger criminal networks or has a poor reputation in response to adverse media or sanctions data available against their name.
- Risk Evaluation
The second step might involve evaluating the risk the potential donor might pose with the risk appetite of the business. If the risk level is quite low and falls within the tolerable risk appetite, the client can be onboarded with ongoing monitoring set up against their name.
- Enhanced Due Diligence
When the surface level screening fails to originate the desired results, enhanced due diligence can be performed for subjects surpassing set risk appetite for more elaborate research into checking the source of the donated funds and obtaining other information, focused on the donor’s financial history and their reputation.
- Ongoing Monitoring
Risks can emerge at any stage of the business dealing. Ongoing monitoring helps detect such changes in risk status of the client base and keep a consistent eye out for suspicious incidents to ensure timely reporting to relevant authorities by the concurrence of local laws.
- Complete Record Keeping
Maintaining a complete record of all the customer journeys with your business can help trace back any donor wealth screening stages where gaps exist and strategies can be devised to deal with fighting financial crimes in a better way.
What Else to Know?
Conclusively, the donor wealth screening vendors are becoming unavoidable. Try searching for your potential donor and make informed decisions!
