Overview

NGO XYZ based in a high-risk jurisdiction for corruption, launched a crowdfunding campaign on a global crowdfunding platform. The campaign aimed to raise funds to build a new facility for a local orphanage. Despite being under a year old and having little to no visible information or presence, the organization quickly achieved its fundraising goal. The campaign attracted significant donations, particularly from other high-risk jurisdictions, and the NGO provided all the required documents to the crowdfunding platform.

Compliance Insights

Enhanced Due Diligence:

Crowdfunding platforms should establish robust customer acceptance and identification processes based on country risk. This ensures that the risk posed by the country is within its risk appetite, which will help to mitigate potential financial crime risks.

Implement enhanced due diligence (EDD) procedures for NGOs based in high-risk jurisdictions. This includes verifying the organization's registration, examining its governance structure, and conducting background checks on its key personnel.

Verification of Documentation: 

Platforms should rigorously verify all documents submitted by the NGO, including proof of the project and financial statements. This helps ensure that the documents are authentic and that the funds are used for legitimate purposes.

Monitoring and Reporting: Continuous monitoring of the NGO's fundraising activities and financial transactions is essential. Unusual patterns should trigger further investigation and reporting to relevant authorities if necessary.

Investigation of Significant Donations: Implement a robust monitoring and control system to investigate significant donations. Consider factors such as amount, location, and donation patterns to detect and prevent suspicious activities.

Transparency and Accountability: Encourage NGOs to maintain a high level of transparency by regularly updating their progress, sharing financial reports, and demonstrating accountability. This can help build trust and ensure the proper use of funds.