We are reviewing our account-opening document requirements, and I'm interested in best practices/ what other financial institutions are doing regarding non-profit organizations wanting to open accounts.

1) Do you require proof of non-profit status?

2) If so, what do you accept as the proof? Do you have special concerns and/or additional requirements when the organization is unincorporated, or is an assembly for mutual benefit and therefore not tax-exempt for IRS purposes?

I come from a heavy compliance background outside of banking. My best read of the BSA/AML manual is that we are instructed to "do enough," but I don't have a sense of what that would be. Non-profit status has been abused for fraudulent (and terrorist) purposes often enough that I want to be sure we're protecting ourselves from risk.

I'd be grateful to hear how you all are handling non-profits.

We made a policy decision not to bank NGOs that do business internationally, so my experience with NGOs is with local entities only.

Our state website tells us that they are a Non Profit and we ask the customer for their IRS letter.

We also ask for brochures and website information to get a better picture of their operations. Depending how well we know the signers, their size, their purpose, etc., dictates how indepth we go after that.

Hope that helps you.

That's exactly the kind of information I'm hoping for, MagicCity, thank you so much!

Edit - I should add - our current poliices include incorporated nonprofits (so checking the secretary of state for the relevant state is helpful there) but also for unincorporated nonprofits.

I'm not convinced we want to pursue these relationships, but if we do, I'd like us to have very clear documents. I'm leaning toward the only acceptable proofs of nonprofit status for these to be 1) IRS determination letter, 2) state board of franchise/taxation letter, 3) letter from sponsoring community foundation or other large documented organization (and I'm not sure about option #3).

What would be an example of an unincorporated nonprofit?

Like MagicCity, I work in the fraud capital of the US where "charities" pop up almost daily. Unfortunately, we see a lot that are not legitimate. The state web site here is a big help. You may also find this IRS site helpful for helping to screen charities.

http://www.irs.gov/charities/article/0,,id=249767,00.html

Great link I was unaware of, thanks Retread!

One of my examiners gave me this site. http://www.melissadata.com/Lookups/np.asp

Our new accounts people pull from there to verify.

Here's how the California Sec'ty of State's form describes them: "any lodge, order, beneficial association, fraternal or beneficial society, historical, military, or veterans
organization, labor union, foundation, or federation, or any other society, organization, or association, or degree, branch,
subordinate lodge, or auxiliary thereof" that is not incorporated. Unincorporated NGOs can't get federal tax-exempt status, but can get state tax-exempt status in many locations. They might be framed as parent-techer organizations, or music clubs, or shared-affiliation groups, or religious organizations.

Some NGOs like to stay unincorporated because it allows for a very informal structure and frees them from a lot of reporting and oversight requirements(great fraud environment, right?) If they want to receive tax-deductible gifts thay can do so through a fiscal sponsor.

Retread and (not as)NewBSA, thanks for those links!

"Some NGOs like to stay unincorporated because it allows for a very informal structure and frees them from a lot of reporting and oversight requirements"

It sure does. At many banks it "frees" them from the privilege of maintaining an account at the bank.

We focus on providing banking services specifically tailored for nonprofit organizations. When it comes to opening a nonprofit bank account, there are some additional checks that require a bit more attention compared to a regular business account. While requesting the Tax exemption determination letter is a standard procedure, it is often accessible to the public. However, one of the most effective checks I've come across is asking for the board's resolution approving the applicant as a banking signatory for the organization. Once you have obtained this resolution, it is crucial to perform the usual Know Your Business (KYB), Know Your Customer (KYC), and Anti-Money Laundering (AML) checks on the designated signatory.

In most cases, the "designated signatory" is not your bank's customer; the organization is.

Thank you for your valuable perspective. You're entirely correct in stating that the organization, in its entirety, is the primary customer. However, when we refer to the 'designated signatory,' we're discussing the individual who has been authorized by the organization to manage its banking affairs.

The Know Your Customer and Anti-Money Laundering checks we perform on the designated signatory are an integral part of our risk management procedures. This doesn't mean we view the signatory as a separate customer, but rather as a representative of the customer. These checks ensure we have a complete understanding of the customer's profile, and that all transactions are conducted responsibly.

I appreciate your insight and look forward to further discussion on this topic.

I trust that your thorough due diligence does not include a credit check on the "authorized signatories" unless you have written documentation that they authorized it.