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Nonprofits at Great Risk Without Due Diligence

Posted On   date22/08/2017

Nonprofits at Great Risk Without Due Diligence

Nonprofits are a fast-growing sector around the world. According to the National Center for Charitable Statistics, in the U.S. alone there are more than 1.5 million registered nonprofit organizations. This number includes public charities, private foundations, and other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues.

A large number of these organizations depends on donations to be able to operate, but finding funds is becoming more complicated, especially when considering that money cannot be accepted from just about anyone these days. (Remember the Clinton Foundation anyone?)  Nonprofits are at a greater risk for being used to commit money laundering and other illegal activities, which is why being extremely cautious is a must. Charitable organizations need to know how to verify a company or individual who wants to donate money to their cause if they want to stay out of trouble.

A Mexican children’s foundation is a clear example of this. Mexican legendary soccer star Rafael Marquez was recently sanctioned by the U.S. Treasury Department for alleged ties to a drug trafficking organization. Marquez is also the founder of a charity organization that provides food, educational and sports programs to more than one thousand low-income kids. According to the investigation, Marquez’s foundation has allegedly received funds from drug trafficking over the years in an attempt to launder money. However, Marquez denies having any links to drug traffickers.

Professional due diligence investigations are critical to the success of a charitable organization, so that donations and donors are verified, to protect the reputation and survival of the entity.

At this point, whether the accusations are true or not, the foundation has already had serious reputation damage, and it is very likely that other corporate and individual donors and sponsors will back off. The head of the foundation will have to face the legal consequences if there is evidence to prove his involvement with drug traffickers, but the worst part will be for the innocents.

If the foundation is closed, more than a thousand kids will stop receiving help, and people who worked for the foundation will lose their jobs. A charity organization today cannot simply declare that it ignores where the donations are coming from. Nonprofits, as any other organization, need to have clear international due diligence policies in place by professional investigators to mitigate their risks.

Without proper verification, charities can be used to raise and move funds that provide support to crime or fraud. This abuse threatens to undermine donor confidence and jeopardizes the integrity of the whole charitable sector, whose services and contribution to the global economy are indispensable. Global organizations like the Financial Action Task Force are leading the way in the combat of money laundering and the financing of terrorism, but every nonprofit must do their part.

If you are part of a nonprofit organization, make sure you follow the recommendations of the FATF and that you implement the necessary measures to avoid being used by criminals. International background checks and due diligence investigations are important tools to ensure the security of your organization and to protect it from misuse and abuse.  Contact us today for a free quote.

C. Wright
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