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The Charity and Security Network monitors U.S. and foreign government activities and a wide range of news sources to identify developments in national security policy that impact civil society and nonprofit organizations. We collect and disseminate relevant information on our website, via our Twitter and Facebook accounts, and through our biweekly email newsletter, which contains links to a variety of news articles. To read the most recent issues of our email newsletter or to subscribe, click here

Our staff also creates news pieces on events and developments of particular interest to our members that are not covered in other news outlets. Those stories can be found below, in revese chronological order. 

Opportunity to Comment on SARS and CTR Regulations

Date: 
February 12, 2018
Author: 

The U.S. Treasury Department is soliciting input on continuing its suspicious activity (SARS) and currency transaction reporting (CTR) requirements without change for another three years.

In two Federal Register notices (83 FR 5829 and 83 FR 5828) February 9, the Financial Crimes Enforcement Network (FinCEN) published notices and requests for comment on these two regulatory programs under the Bank Secrecy Act (BSA).

The BSA authorizes the U.S. Treasury to require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters, or in the conduct of intelligence or counter-intelligence activities to protect against international terrorism, and to implement counter-money laundering programs and compliance procedures. This authority is delegated to FinCEN. The information collected under these regulations assist federal, state and local law enforcement, as well as regulatory authorities, in the identification, investigation and prosecution of money laundering and other matters.

FinCEN plans to renew the existing regulations without change. However, organizations and individuals have the opportunity to comment on this plan by April 10, 2018. Instructions for submitting comments can be found at www.regulations.gov. For the SARS notice, refer to Docket Number FINCEN-2017-0011 and OMB Control Numbers 1506-0001 and 1506-0029. For the CTR notice, refer to Docket Number FINCEN-2017-0012 and OMB Control Number 1506-0004. 

New "No Assistance for Assad Act" Has Protections for Humanitarian Assistance

Date: 
February 7, 2018

On Dec. 19, 2017 leadership in the House Foreign Affairs Committee proposed HR 4681, the “No Assistance for Assad Act,” that would bar U.S. government funded reconstruction assistance to Assad-controlled areas of Syria unless the President certifies that specific conditions are met. The bill exempts humanitarian assistance (with some conditions) and projects sponsored by local communities. It would apply from fiscal years 2018-2022.

Foreign Agent Registration Bill Advances in House on Split Vote: Could Affect Nonprofit Cross-Border Programs

Date: 
February 7, 2018

Congress has responded to concerns about foreign influence in U.S. elections by introducing several bills to amend the Foreign Agent Registration Act (FARA), an obscure law requiring registration and disclosure by those acting “for or on behalf of” foreign governments and entities. (Background on FARA here.) On Jan. 17, 2018 the Judiciary Committee in the House of Representatives approved HR 4170 on a split vote, over-riding Democrats’ calls for a hearing and rejecting several amendments intended to address constitutional concerns. The International Center on Not for Profit Law (ICNL) has said that left unchanged, the current vague definition of a “foreign agent” in the law could lead to politically motivated enforcement and intrusive registration and reporting requirements.

Senate Hearing Hits on Derisking, Risk-Based Approach

Date: 
January 11, 2018

In a January 9 Senate Banking committee hearing, both legislators and witnesses touched on the importance of a risk-based approach (RBA) in the federal anti-money laundering and counter-terrorist financing regime. 

While the hearing, Combating Money Laundering and Other Forms of Illicit Finance: Opportunities to Reform and Strengthen BSA Enforcement, mostly focused on information sharing and beneficial ownership, there was much discussion of getting regulators to support the RBA, particularly in regard to bank examinations. The Charity & Security Network has consistently promoted the need for a RBA in combating terror financing, and cited lack of adherence to it as a factor in the global bank derisking crisis that has adversely impacted nonprofit organizations (NPOs). 

In a discussion of greater information sharing as a tool to enhance ALM/CFT programming, Heather Lowe, legal counsel and director of government affairs for Global Financial Integrity, noted that it "needs to be done with some appropriate safeguards, especially where it may result in somebody being delayed banking services." She argued that anyone in such a situation needs "an opportunity to disprove whatever information has been collected on them and give them access if they do have legitimate business." Reliance on misinformation in determining risk has also been cited as a factor in bank derisking of NPOs, and those impacted by this trend have asserted the need to correct any perceived problems or deficiencies. 

Greg Baer, president of the Clearing House Association, introduced discussion of the RBA in his opening remarks: "An effective approach should be risk-based," he said. "Unfortunately, banks have been pushed away from risk-based approaches because their performance is graded not by law enforcement .... but by bank examiners, who do not track how the intelligence is actually used," Baer explained. He noted that this has lead to bank derisking, dropping clients perceived as high risk rather than managing the risks, which undermines development and financial inclusion goals. 

Lowe noted that financial institutions are generally attempting to implement the RBA, but have been stymied by bank examiners who are "not open to the risk-based approach that financial institutions have put in place. They're checking the boxes." Dennis Lormel, president and CEO of DML Associates and the former chief of the FBI's financial crimes program, echoed this assertion when he said, "Regulators now put an emphasis on check boxes. Getting important information from banks to law enforcement has gotten contorted because of perceived concerns of regulators Targeted monitoring is better."

Lowe surmised that bank examiners are reluctant to endorse a RBA because it is more work "when you have a totally risk-based system and can't use one-size-fits-all," adding," That shift needs to happen, and it will be a big one." 

Hill Hearings Focus on Updating Banking Laws: Impact on NPOs TBD

Date: 
December 12, 2017

Both the House of Representatives and Senate held hearings in late November on proposed legislation to update the 50-year-old Bank Secrecy Act (BSA), which is the primary law setting out anti-money laundering and counter terrorist financing (AML/CFT) rules for banks.  While the bills in each house vary, statements in the hearings echoed the same theme: the world has changed substantially since the BSA was updated in 2001 and gaps and strains in the AML/CFT system need to be addressed.  However, neither bill addresses the negative impacts of bank “derisking” (dropping accounts or limiting services) on nonprofit organizations (NPOs) or financial inclusion goals. The contradiction between the strict liability for violations in the current AML/CFT regime and the need for a proportionate, risk-based approach, cited by the Financial Action Task Force in 2016, was also not discussed. The move the update the BSA and related AML/CFT laws presents both opportunities and challenges for NPOs in 2018. The legislation and testimony is summarized below. 

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