Non Profit Banking : Issues and Challenges Schuyler Francine joined America’s Christian Credit Union in June of 2019 to help them “Reach, Serve & Teach” ministries with their cash management needs. Prior to ACCU he served with ECCU for 18 years. After graduating from Wheaton College Schuyler spent over two years serving with Operation Mobilization in the Indian Subcontinent. He later worked with the Orange County Probation Department, the Billy Graham Center at Wheaton College (Institute for Prison Ministries), Promise Keepers and Bill Glass Ministries before joining ECCU in 2001 and ACCU in 2019. He has spent the bulk of his financial services career find banking solutions for large and small ministries scattered literally across the globe. Douglas Carp has enjoyed a successful career in Corporate FX for the last 30 years. Starting his career on the buy side as a trader for a number of multinational Fortune companies, Douglas transitioned to the sell side, working at two large Commercial Banks as Head of FX Sales for M&T Bank and Head of Corporate FX Sales for American Express Bank. More recently, Douglas has spent the last 12 years working for the industry leading corporate FX brokers; AFEX, Cambridge Global Payments and Moneycorp. Doug developed a strong appreciation for the not-for-profit sector further to being appointed Global Treasurer for World Vision International, where he witnessed first-hand, the difficulty that faith-based missions have in obtaining reliable guidance and competitive pricing on international currency transfers. Since then, Doug has focused on providing best-in-class service to NGOs and faith-based Presenters organizations, allowing them to more cost effectively fund international projects and ultimately support those less fortunate. • Financial Institution’s (FIs)Perspective • Ministry Models • Methods of Moving Funds to International Field • Future Trends – Where are Payments Headed? • Foreign Exchange (FX) • Blockchain • Cryptocurrencies (time permitting) What we are NOT covering… • Income tax issues for missionaries (Dave Cram, yesterday, 3:30 (website: American Citizens Abroad)) • Accounting issues related to movement of funds (Greg Capin and Frank Jakosz, today, 3:30) • Legal concerns (Dan Busby and John Wylie, Saturday, 9:30) • International grant making (Ted Batson and Matt Sheers, yesterday, 3:30) Objectives Why Does My Financial Institution Demand So Much Information?! Compliance, compliance, compliance, risk, risk, risk • All FIs and Money Service Providers are under increased scrutiny to understand and enforce laws and regulations Understand that some of what ministries want, especially when moving funds to high-risk countries, things like anonymity or shielding source of funds and especially use of funds, are the same things that nefarious individuals and criminal or terrorist organizations seek. Most FIs will be more cautious with or outright adverse to higher-risk activity. Account closures. Bottom Line for FIs: they want to understand…. • Source of Funds – who are your donors, especially larger donors or foreign Financial donors, other sources (foundations, grants, etc) Institution • Use of Funds – what is the purpose of the spending, how and by whom, ongoing or not? Perspective *PSA – Please don’t mention things like “smuggling” on your website, annual reports or promo material Beneficial Owner: Effective May 2018 – ALL FIs • FinCEN (Financial Crimes Enforcement Network) and Customer Due Diligence (CDD) • The CDD Rule, which amends Bank Secrecy Act regulations, aims to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains. The CDD Rule clarifies and strengthens customer due diligence requirements for U.S. banks, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities. The CDD Rule requires these covered financial institutions to identify and verify the identity of the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts. • The CDD Rule has four core requirements. It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to: 1. Identify and verify the identity of customers 2. Identify and verify the identity of the beneficial owners of companies opening accounts 3. Understand the nature and purpose of customer relationships to develop customer risk profiles FI’s 4. Conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information Perspective Beneficial Owner: Effective May 2018 – ALL FIs – Cont’ FIs will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity. https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule https://www.fincen.gov/sites/default/files/2018- 04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf FI’s Perspective Suspicious Activity Reports (SAR) • Under the BSA, FIs are required to identify higher risk persons, organizations and activities and to monitor such persons, entities and activities • They are to report any activities deemed suspicious on a SAR • Due to the confidential nature of SARs, a bank cannot disclose when or if a SAR is filed • Enhanced due diligence by FIs is required for non-US persons (Credit: Mark Jones, Non-Profit Treasury Solutions) FI’s Perspective Historical Perspective 1 Corinthians 16:1-4 Now concerning the collection for the saints: as I directed the churches of Galatia, so you also are to do. On the first day of every week, each of you is to put something aside and store it up, as he may prosper, so that there will be no collecting when I come. And when I arrive, I will send those whom you accredit by letter to carry your gift to Jerusalem. If it seems advisable that I should go also, they will accompany me. 2 Corinthians 8: 1-3, 16-21 V 1-3 We want you to know, brothers, about the grace of God that has been given among the churches of Macedonia, for in a severe test of affliction, their abundance of joy and their extreme poverty have overflowed in a wealth of generosity on their part. For they gave according to their means, as I can testify, and beyond their means…. V 16-21 But thanks be to God, who put into the heart of Titus the same earnest care I have for you. For he not only accepted our appeal, but being himself very earnest he is going to you of his own accord. With him we are sending the brother who is famous among all the churches for his preaching of the gospel. And not only that, but he has been appointed by the churches to travel with us as we carry out this act of grace that is being ministered by us, for the glory of the Lord himself and to show our good will. We take this course so that no one should blame us about this generous gift that is being administered by us, for we aim at what is honorable not only in the Lord’s sight but also in the sight of man. Funding Carrying Cash on Your Person Models Funds Disbursed (ACH) Directly to Missionary’s Account • Including (sometimes) both project and personal funds • Missionary responsible to access • Missionary responsible to disburse if necessary • ATMs • Wire to local currency account Pros/Cons • Pros - Convenience for the sending agency as they are somewhat relieved of the financial management of the details • Cons – Mixing of project funds with personal funds which presents accounting and potential tax implications for individuals. • Cons – FIs don’t like this kind of activity and may shut it down, more the case for the missionary’s personal bank account, especially if they are responsible for distribution to foreign nationals, etc…. Add in High Risk Funding Countries and you will have lots of questions around activity Observations/Thoughts? Models Mixed – Funds Direct to Missionary, Other Payments Direct to Foreign Vendors or Foreign Individuals (Associates, Foreign Workers) • Separates “project” funds vs “personal/support/salary” funds • Requires vetting of foreign entities and individuals • Challenges in disbursement of fund to foreign nationals • Costly – mainly wires • Sensitive – if USD going into their local account • Difficulty in Non-US Persons obtaining US accounts Question: How many organizations have a need for Non-US Persons to obtain personal USD accounts? • Non-US Persons on US corporate accounts? Funding • Non-US Persons be allowed use of corporate Debit or Credit cards? Models Note: Some agencies looking at Blue Marble’s Global Payroll services. Field/Affiliate Offices Payroll/personal support disbursed directly to missionary Centralized • Funds disbursed to USD field/regional accounts – sometimes maintained at same FI as the Agency • Fields access funds as deem best for their situations Decentralized • Funds disbursed to Foreign Entity to either USD accounts (ACH) or foreign based accounts (wires) • Foreign offices are related or affiliates and responsible for their own disbursement • Methods vary significantly depending upon country, continents and high/low risk regions • Internal banks – some (not many) have a type of internal Funding banking system – legacy of former limited options Models Primary method of disbursement is ACH, International Wires and FX Transport of Cash Carried Outside the US Bank Secrecy Act (BSA) - The Currency and Foreign Transactions Reporting Act requires US FIs to assist US government agencies to detect and prevent money laundering • Currency Transaction Reports (CTR) • Suspicious Activity Report (SAR) FIs are required to document and keep record of any cash purchases of monetary instruments in the amounts of $3,000 to $10,000 FIs are required to complete CTR for any currency transaction of $10,000 or larger Methods - Cash Transport of Cash Carried Outside the US – Cont’ FIs are required to complete CTR for any currency transaction of $10,000 or larger - What constitutes “Negotiable Monetary Instruments” for currency reporting requirements? • According to U.S.