Leadership & Strategy
FinCEN gives banks 22 red flags for charity abuse and says most nonprofits are low risk
The October 30 notice asks banks to watch for sham charities, fraud and embezzlement. A few of its red flags also fit honest small charities, so records matter.
By The Editors · The Game of Giving
The Treasury Department's Financial Crimes Enforcement Network (FinCEN) on October 30 gave banks a list of 22 red flags for spotting charities and nonprofits used for terrorist financing, fraud or embezzlement, in a notice that also says most U.S. nonprofits are low risk.
FinCEN is the Treasury bureau that collects suspicious activity reports, or SARs: confidential filings banks make when a transaction looks like it may involve a crime. The notice, FIN-2026-NTC2, asks banks to mark related reports with the key term "FIN2026NPO." Treasury officials announced it in St. Cloud, Minnesota, together with an alert on overseas money transfers and the news that a defendant in the Feeding Our Future child-nutrition fraud had been sentenced to 30 years in prison, according to the department.
What does the notice say about nonprofits in general?
That the sector as a whole is not high risk. In the notice's words, "the vast majority of U.S.-based NPOs present a low risk of terrorist financing and other illicit activities." It tells banks to judge each organization on its own facts and to keep their safeguards in proportion, so they do not "unduly disrupt or discourage legitimate NPO activities."
It also sizes the field: about 1.96 million registered exempt organizations as of September 2026, roughly $617.2 billion in contributions in 2025 (a Giving USA estimate) and close to 10% of private-sector jobs. Its footnotes cite earlier Treasury actions, including one in August against what the department called violent far-left terrorist networks.
Which schemes is FinCEN describing?
Three kinds. In a sham charity, the people in charge use the group for an illicit purpose, such as funding a terrorist organization; the case studies are Treasury sanctions on charities linked to Hamas, the PFLP and the Muslim Brotherhood. In nonprofit fraud, operators advertise a cause, deliver little and keep the money, sometimes government money meant for meals, child care or homeless services. In embezzlement, a legitimate charity is the victim of an insider.
The embezzlement example is a contractor who ran the Commonwealth of Virginia Campaign, the giving program for state employees. Between January 2019 and August 2023 she took more than $1.5 million of the more than $5.3 million employees gave, the notice says. By our arithmetic, that is about 28 cents of every donated dollar.
Donors are targets too. The notice cites the FBI's Internet Crime Complaint Center, which received more than 4,500 complaints in 2024 about fake charities, crowdfunding and disaster appeals, with about $96 million in losses. Our calculation: at most about $21,000 lost per complaint.
Could an honest charity match a red flag?
Yes, and FinCEN says no single red flag proves wrongdoing. Its 22 flags fall into three groups: six about the organization and its people, eight about where money comes from and eight about how it is spent. Several describe ordinary volunteer-run groups. The table is our own reading of the list, paired with the record that answers each question.
| Red flag (shortened) | Why a legitimate group might match | Record to keep ready |
|---|---|---|
| P.O. box or home address, no website or an old one | Many small groups run from a volunteer's home | A one-page program summary and the latest Form 990 or 990-N |
| Not registered with the state charity regulator where required | State solicitation registration is easy to miss | Registration confirmation and renewal date |
| An established group opens a new account with different signers | Board turnover or a new treasurer | Board minutes approving the account and signers |
| A new group gets a burst of donations, as after a disaster | An emergency appeal that worked | The appeal and a record of spending |
| A U.S.-focused group sends large sums abroad | A partnership with an overseas organization | Grant agreements and partner reports |
| Few costs besides social media ads or vague consulting invoices | A young group focused on outreach | Contracts that name the work delivered |
What can a board do this month?
In our view, make the bank's questions easy to answer. The notice says banks may consider collecting general information about a nonprofit's donor base, funding sources, fundraising methods and affiliations, including foreign funding. Put those answers on one page. Check that your state registration is current, that your Form 990 matches what you tell the bank, and that board minutes record every change in who can sign. Filings get read closely once questions start, as the reporting on KEYS Empowers in Baltimore showed.
If a bank closes or restricts an account, ask for its reasons. The notice tells banks to read it alongside a 2025 executive order on fair banking, which says banking decisions should rest on individualized, objective and risk-based analysis.
General information for donors and nonprofit leaders, not legal or tax advice. How we report is set out in our editorial guide.
