Donor screening is an important part of any fund collection effort in a non-profit organization. As organizations live on gifts, they have to ensure the legitimacy of donors. This is of particular importance due to regulation compliance and to safeguard the risk to one’s mission. Through a careful process of screening donors, it allows nonprofit organizations to trust their donors, hence assuring them of continuous funding.
This protects the donors to some degree. Nobody wants to unwittingly serve any cause or group that is out of his support. The donor screening tools help organizations to get closer to the major potential donors through their techniques of donor wealth screening. This leads to strong relationships and beliefs between fundraisers and donors. This assures all donors that the donations will most definitely find their way. Screening the donors has its benefits to the two factors involved, the non-profit organizations looking for finance and the donors.
This article points out the steps that are necessary to be followed and the compliance issues in performing an effective donor screening.
Applicable Compliance Regulations
There are different laws regulating the non-profits in protecting the donors in line with compliance. This includes Anti-Money Laundering (AML) provisions and other background checks that may come up with the required criminal checks. Over 95% of large charities check donors against government sanctions lists, where the donations of certain categories of persons are restricted. Similar to employee background checks for small business, donor background screening helps organizations verify identities, prevent fraud, and maintain compliance with regulatory standards. Many organizations also ask what does background check include, as it can range from identity verification and criminal record searches to checks against international sanctions lists. The use of wealth screening tools will help such organizations to stay compliant with such regulations and also reduce liabilities by ensuring that an electronic background check of the donor is performed.
Design a Donor Screening Policy
That’s where it becomes important to codify the process and protect the organization by clearly spelling out in a donor screening policy what type of donor would need heightened screening, for example, those with potential political influence, or with large planned gifts over $25,000. To be more specific, it indicates what methods of donor search wealth screening will be applied: electronic databases or third-party research services. Finally, then, the policy will indicate how screening results, including the suspicious findings, will be reviewed and addressed.
Screening Methods and Tools
There is a whole new spectrum of affordable or free best wealth screening services available, many offered by organizations conducting free online sanctions list searches and law-enforcement database checks. But those checks cover only the most basic red flags. There are more serious electronic wealth screening services that give a deeper background into identities and past legal issues from as low as $5 to $10 per donor. For bigger ones, it is advisable to use an automated internal donors’ database with an ongoing monitoring capability. In this case, one will need on average an investment of $15,000 – 25,000.
Setting Screening Criteria and Red Flags
It is necessary to establish which of the donor’s traits become triggers for additional due diligence. This would include the location of residence in a high-risk country, making an immediate large gift of over $100,000, or discovering adverse legal or media risks from in-depth wealth screenings. The criteria need a revisit in an environment full of threats. Sensitize screeners to red flags rather than declining donations and balance donor privacy with compliance needs.
New Donors’ Screening
When a new donor first shows an interest in donating, it is very important to do timely initiation of the first screening. Staff may screen the name of the donor through several electronic wealth screening tools, which will have access to public records and databases about any flags.
A simple profile of the donor may be created if there is no major problem at the first checkpoint with all the contact details, amounts donated, and the purpose of the donation. However, if a new donor is offering to give $25,000 or more, non-profits should go further and run checks through third-party experts. Such third-party experts should carry out an even more thorough research process into the donor’s wealth.
Periodic Screening of Existing Donors
The non-profits verify with donors who make further donations in the future. Where the risk is less, checks can extend to three years. However, for more extensive business or foundation donors with more complex dealings, it would be better to undertake checks every one to two years. These could involve conducting an annual internal audit of the screening files of major donors, including the first 50 major donors to ensure accuracy.
Ensuring Oversight
The conduct of these regular checks, such as annual reviews of some donor screening files at random, will help in identifying any weaknesses or oversights. The leader also ensures that the wealth screening vendors receive continuous training in screening rules and signs that would keep their skills always updated. They also ensure that any exception to standard screening techniques is approved. Those processes are to continue to be improved based on testing, feedback, and changes in rules to make the oversight of the screening the best it can be.
