This isn’t going to be the most thrilling article you’ve ever read. But it’s probably one of the most important you’ll read over the next few weeks. Here’s a summary, then we’ll explain the whole thing in the rest of the article:
A branch of the Department of the Treasury has a new rule. Any organization that opens a payment processing account must identify a “signer” or owner of that account. The owner’s identity must be verified with a social security number. This includes accounts opened by nonprofits.
This Sounds Serious — Explain It, Please!
It sounds serious (and it is!), but it’s not complicated.
There’s a branch of the United States Department of the Treasury called the “Financial Crimes Enforcement Network (FinCEN) bureau” that’s in charge of tracking crimes like money laundering, terrorist financing, and other financial crimes. They set many rules and requirements that help prevent things like fraud and other illegal activities — and they just passed a new law that affects all nonprofits.
What Is FiNCEN’s New Rule? And How Does It Affect Nonprofits?
FinCEN’s new rule has two parts:
- All financial institutions, including merchant processors, are required to identify a “responsible individual” for any account they open.
- The responsible individual’s identity must be verified with their birth date and social security number.
So, in the simplest language possible, merchant processors (including the ones we use at Qgiv!) are required to list a name, birth date, and social security number for the person responsible for the account.
So what does it mean for me?
If your nonprofit signs up with Qgiv, an independent merchant processor, or any other online fundraising platform, you’ll have to:
- Establish someone as the signer or “owner” of the account
- Provide a birth date and social security number for that person during the setup process
According to FinCEN, the person who provides this information must be “an individual with significant responsibility to control, manage, or direct the organization.” Practically, that means the signer must be a director-level staff member, executive team member, or board member.
You don’t have to provide that information for everyone who uses the account. All FinCEN requires is that the person responsible for the account has verified their identity. FinCEN stated in this .PDF that, even though nonprofits don’t legally have “ownership,” they do have individuals who “control responsibility” for the organization. That means nonprofits are required to follow this rule, too.
Why Is FinCEN Requiring This Information?
This rule establishes a safeguard that can help prevent fraudulent nonprofits, nonprofits that fund terrorist organizations, or nonprofits that launder money. Establishing an individual as a signer on a merchant account is a preventative measure passed by a body of people who want to prevent crimes.
What Does This Look Like in Action?
Great question. When you raise money online (or even on-site, if you’re using digital payment methods), you use a merchant processor to handle the transaction. That’s the entity that requires a birth date and social security number.
When you sign up with Qgiv, we’ll ask you for a birth date and social security number during the signup process. That information fulfills FinCEN’s requirements.
That information is only for identification purposes. We won’t use that information anywhere else.
New Rules Need to Be Presented to My Board. Is There Something I Can Show Them?
Yep! Here’s a statement from Todd Baylis, Qgiv’s President. We bolded the important parts for you:
Starting May 11, 2018, Qgiv as a Payment Facilitator and our underlying merchant acquirer, Vantiv/WorldPay, are required to collect the Date of Birth and Social Security Number of a controlling party of any organization we set up with a merchant processing account, in addition to the information we already collect (name, address, title, and email). The person, who will act as the signer on the account, will have to be “an individual with significant responsibility to control, manage, or direct the organization”, which practically means a Director level staff member, executive team member, or board member. While we are under a mandate to collect and store this information, we do not use it for any other purpose other than verifying the identity of the controlling individual, through our acquiring partner Vantiv/WorldPay and this information is protected through the same systems and security that we protect credit card information and the integrity of the Qgiv service.
Where Can I Find More Information?
More information on the regulation can be found in this document. Nonprofit organizations are specifically addressed in Question 23, and the full regulations are available within the above document.
Articles About Laws and Regulations are Very Boring.
We know. We’re sorry.