The criminals are always in search of finding a loophole in the security protocols of an organization. Identity thieves, money launderers, terrorist financiers, fraudsters, etc use these organizations to transfer their funds from one country to another. Many such cases surfaced in the past few years and it is high time the non-profit organizations should verify the background of their stakeholders to eliminate the risk of exploitation of these institutions.
Some Anti Money Laundering (AML) regimes require non-profit organizations as well to practice necessary AML compliance protocols like AML screening and identity verification of their stakeholders. Online AML screening solutions and identity verification solutions help non-profit organizations in thorough compliance and risk management.
What are the frauds that target non-profit organizations?
Non-profit organizations often don’t pay heed towards the need for rigid AML compliance and fraud prevention. Below are some major fraud and risks that make it inevitable for non-profit organizations to screen their stakeholders.
Financial fraud is very common in non-profit organizations, but they remain unnoticed due to the goodwill cover of these organizations. For example, St. Ambrose Catholic Parish in Brunswick, Ohio, lost $1.75 million to a BEC fraud. A fraudster contacted the church administration and demanded the payment for the recent renovation work. The church didn’t notice anything suspicious and sent the funds to a bank account that belonged to the fraudster.
The church didn’t identify the loss unless they received a payment reminder from the original contractor. In case the church practiced identity verification on the person making such requests, it could have identified the fraud at the very first stage.
Terrorist financing through NGOs
Terrorist financing is an organized crime. Terrorists have a well-developed and well-organized community around the globe. Individuals belonging to the terrorist groups connect with NGOs and portray as needy people. Once they have the funds they use them to finance their terrorist activities.
The organizations operating in high-risk regions are exposed to this risk more than the organizations working in other countries. That is why FATF requires the regulatory bodies to regulate the non-profit organizations as well as per the FATF Counter Financial Terrorism (CFT) recommendations. The NGOs involved in overseas services are required to practice caution in delivering services to the people in high-risk regions.
So, it a productive practice to screen the people who are gaining benefits from a non-profit organization. It will reduce the exploitation of non-profit organizations in financial crimes like terrorist financing.
Acting as the members of good work
Often criminals act as agents of good work and take the funds or services illegally to execute their crimes. In this case, the funds, services, and logistics destined for needy people are exploited to harm humanity. The NGOs often face the wrath of human rights activists due to their involvement in these cases.
Internal and external contributors
Terrorist groups get their people recruited inside a non-profit organization and get their hands on funds, logistics, etc of the organization. The people inside the organizations are often bribed by criminals to get funds or other benefits.
Outside contributors (donors) are also a threat to non-profit organizations because they work jointly with the insiders to get their donated funds to their partners in other states. This staging helps them in terrorist financing and money laundering as well.
To wrap up, non-profit organizations are developed to help humanity in hard times and to improve their living. But unfortunately, criminals have identified a loophole in the infrastructure of these organizations as well. Non-profit organizations are exploited by financial criminals, and fraudsters to gain illegitimate benefits. Running a quick identity verification and AML screening on the stakeholders of an NGO could eliminate the risk of onboarding criminals and fraudsters.
The AML screening solution identifies a money launderer/terrorist financier within seconds by screening his credentials against global watchlists, sanction lists, and PEP lists. Delivery seamless and quick results along with economic prices make it the best option to practice seamless risk management. Running manual verifications is not feasible, especially when it comes to organizations that deliver benefits at a global level. Online AML Software and identity proofing of the stakeholders is the key to frictionless fraud prevention.