IBA Compliance Connection

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A 501(c)(5) organization applied to open a checking account with us. They provided an EIN but did not provide any other documentation for the organization. They apparently are affiliated with a separate 501(c)(3) organization and offered to provide that organization’s articles of incorporation and bylaws. What documentation should we obtain from the 501(c)(5) before opening the account?

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We recommend collecting your customary account opening documentation from the 501(c)(5) organization. We do not recommend accepting documentation from the 501(c)(3) organization.

Your bank should collect any documents prescribed by its policies and procedures when opening a non-profit entity account, which may include the 501(c)(5) organization’s articles of incorporation, bylaws, a corporate resolution authorizing the organization to open an account, a letter of exemption from the IRS, etc. For more guidance on performing due diligence for a nonprofit account, we recommend consulting the customer identification program (CIP) requirements and the FFIEC BSA/AML Examination Manual, which we link to below.

However, it is possible that the 501(c)(3) organization is acting as a fiscal sponsor for the 501(c)(5) organization (since it was claimed that the organizations are affiliated). For example, an organization may use a fiscal sponsor if it has not yet obtained a letter of determination granting its tax-exempt status from the IRS. If that is the case, you should obtain documentation of the fiscal sponsorship relationship, and the account should be treated as the 501(c)(3) organization’s account — meaning that your bank must obtain the necessary account opening documentation directly from the 501(c)(3) organization.

For resources related to our guidance, please see:

  • FinCEN Regulations, 31 CFR 1020.220(a)(2) (The CIP requirements include obtaining each business customer’s name, address and taxpayer identification number “prior to opening an account.”)
  • FFIEC BSA/AML Examination Manual, Business Entities (Domestic and Foreign) — Overview (For a business account, “required account opening information may include articles of incorporation, a corporate resolution by the directors authorizing the opening of the account, or the appointment of a person to act as a signatory for the entity on the account.”)
  • FFIEC BSA/AML Examination Manual, Non-Governmental Organizations and Charities — Overview (Additional due diligence for nonprofit accounts may include: “Purpose and objectives of their stated activities. Geographic locations served (including headquarters and operational areas). Organizational structure. Donor and volunteer base. Funding and disbursement criteria (including basic beneficiary information). Recordkeeping requirements. Its affiliation with other NGOs, governments, or groups. Internal controls and audits.”)
  • IRS Exempt Organizations Select Check (The IRS provides this online search tool for checking certain information about an exempt organization’s federal tax status and filings.)