U.S. nonprofits must now comply with AML regulations that require verifying partner organizations, grantees, and key stakeholders. This article explores how NGOs can implement efficient KYB workflows that support transparency and risk management – without compromising mission alignment or donor confidence.
The Financial Action Task Force (FATF) and the U.S. Department of the Treasury have flagged the misuse of charitable organizations as a financial crime risk, prompting increased expectations for due diligence and transparency.
AML Expectations for U.S. NGOs in 2025
Although not all nonprofits fall under Bank Secrecy Act (BSA) obligations, those that:
- Partner with foreign NGOs
- Disburse grants or funds abroad
- Receive high-risk donations or funding
- Operate in or near sanctioned jurisdictions
…are expected to implement stronger controls for:
- Beneficial ownership checks of partners and grantees
- Screening for PEPs, sanctions, and adverse media
- Documentation of financial flows and governance structures
Many large donors and financial institutions now require NGOs to demonstrate AML and KYB compliance as part of their funding eligibility or banking relationships.
Key Challenges for Nonprofits
1. Mission vs. Compliance Tension
Nonprofits often fear that intrusive checks could alienate partners or deter grassroots engagement.
2. Resource Constraints
Lean teams and limited budgets make enterprise-grade compliance tools impractical.
3. Complex Partnership Networks
Sub-grantees and foreign affiliates may operate with different legal, cultural, or documentation norms.
4. Donor and Reputational Risk
Failure to vet grantees properly could result in diverted funds, scandal, or funding suspension.
How iComply Supports KYB for Nonprofits
iComply offers a configurable KYB solution tailored to the needs of donor-driven and mission-aligned organizations.
1. Entity Verification for Partners and Grantees
- Validate EINs, incorporation status, and legal representatives
- Confirm banking and operational legitimacy
- Request and review key documentation (bylaws, governance structures, etc.)
2. UBO Discovery and Risk Screening
- Identify the real owners or controllers of partner organizations
- Screen individuals and entities against OFAC and international sanctions lists
- Flag politically exposed persons and adverse media links
3. Low-Friction Onboarding
- Send white-labeled onboarding requests to partners and affiliates
- Guide users through structured KYB flows without requiring technical expertise
- Preserve relationship integrity with customizable language and guidance
4. Risk-Based Review and Recordkeeping
- Automate risk scoring and escalation rules
- Maintain audit-ready logs of verification outcomes and partner engagements
- Export data for funders, auditors, or internal governance reviews
Case Insight: Global Health NGO Based in DC
A U.S.-based nonprofit distributing grants in Latin America implemented iComply’s KYB workflows for vetting sub-recipients. In less than 8 weeks:
- Verified over 40 active partners
- Flagged 2 entities with incomplete governance disclosure
- Met due diligence standards required by a new multilateral funder
What to Expect in 2025
- Funder-Led KYB Standards: Multilaterals and private foundations will increasingly expect NGOs to vet grantees with audit-ready procedures
- BSA and IRS Alignment: Expanded clarity on nonprofit AML responsibilities may emerge from the U.S. Treasury or IRS
- Reputation Risk Enforcement: Media and donor scrutiny will intensify around due diligence failures
Take Action
Nonprofits must build AML resilience without compromising their mission. KYB automation offers a path to greater transparency, donor confidence, and regulatory alignment.
Connect with iComply to learn how we help NGOs and nonprofits build trust through streamlined, values-aligned compliance.
