A non-profit client recently contacted me to share the good news that a major donor was prepared to donate a substantial amount to help address political instability issues in an African nation. After congratulating them, I had to spend a bit of time helping them understand that this good news came with an important due diligence burden. Not only do they need to make sure that the recipient entity abroad is a legitimate organization, but they also need to do their best to ensure that it is not a front for terrorism or money laundering. Beyond that, the American non-profit needs to understand the context of the foreign recipient, especially if the purpose is to help with political instability. That topic may sound altruistic on its face, but it may be that the entity is on one side or the other of a civil war and a donation from an American entity could be politically sensitive. Charitable organizations have been used in the past to move money and that has both reputational and legal risks for an American non-profit.
The same risks exist in reverse, where the American non-profit needs to vet a foreign donor to understand the source of its funding. One effective means of conducting this type of due diligence is to hire an outside party that is skilled in the practice, that not only engages relevant capabilities but also ensures that the findings are reported via an objective third party and are not viewed in the context of their value to the US entity.
The US Department of the Treasury states: “Charities provide essential services, comfort, and hope to those in need around the world. Unfortunately, terrorists have exploited the charitable sector to raise and move funds, provide logistical support, encourage terrorist recruitment, or otherwise support terrorist organizations and operations. This abuse threatens to undermine donor confidence and jeopardizes the integrity of the charitable sector, whose services are indispensable to the world community.” The website they have established on this topic has a number of useful resources that American non-profits might consider: https://www.treasury.gov/resource-center/terrorist-illicit-finance/Pages/protecting-index.aspx