Nonprofits Operating Abroad: Five Key Compliance Strategies

4 min

With the current state of the world and heightened scrutiny of the nonprofit sector, it is critical that nongovernmental organizations (NGOs) with international reach routinely assess the effectiveness of their trade sanctions controls and compliance measures. Sanctions and export controls exist to protect national security, foreign policy and economic interests of the United States. They are key areas of legal compliance for NGOs, especially those interacting within countries affected by modern-day conflict, cyber threats, corruption, terrorism, and human rights abuses. Taking risk-based and dynamic precautions around new and continued activities is a best practice for managing and dealing with the additional compliance obligations that accompany engaging in activities abroad.

Despite the best of intentions in advancing their missions, NGOs that host conferences and programs outside of the United States or that have foreign offices, chapters, staff, or consultants, often are unaware of, or may not fully consider, the multidisciplinary array of compliance best practices and requirements. These include restrictions based on U.S. law, as well as those based on the laws of foreign countries in which activities are conducted.

Commonly seen activities of NGOs that can implicate trade compliance include:

  • Establishing and maintaining overseas memberships and chapters
  • Collaborating with foreign organizations or foreign institutions
  • International travel by staff or volunteers for organizational business
  • Hosting or attending conferences with non-U.S. participants, whether within or outside of the United States
  • Offering educational materials, including academic journals, services, and programs
  • Shipping items outside of the United States or importing items from a sanctioned country
  • Providing funds or grants to non-U.S. individuals or entities
  • Accepting payments for a customer or for a member's benefit from a third party

Because of the substantial penalties and reputational risk that attach to noncompliance, NGOs should ensure that their compliance programs are appropriately resourced and designed to be effective. There are various measures that U.S. nonprofits can take to strengthen their controls:

  1. Assessing Legal Presence: What is the best (and permitted) legal form for your activities in particular countries? Are you operating without proper legal authority? Are employment approaches consistent with obligations under U.S. and foreign employment and tax law requirements? Are your donors able to obtain tax relief for their contributions? What structural checks and balances around financial assets are in place? How much local autonomy is required or desired? What may work in one country may not be viable in another.
  2. Know Your Customer/Partner: Conducting thorough due diligence reviews for any party that you are considering dealing with is vital. This includes employing regular screening of personnel, members, conference participants, and transactional parties against U.S. sanctions and restricted parties lists, whether a financial transaction is involved or not. Screening must be prioritized with appropriate resources and at a frequency commensurate with potential risks. NGOs should have clear requirements for the elements to be assessed, determining when additional diligence is needed and re-screening existing relationships.
  3. Developing Written Policies and Procedures: Standardized practices should guide an NGO's foreign activities based on its known risk factors, its risk tolerance, and best practices in the sector. Effective compliance programs are memorialized and contain clear records of activities. Policies should include a clear management commitment, internal controls, testing and auditing, and training for key personnel.
  4. Conduct Regular Training, Monitor Development, and Encourage Internal Reporting: Personnel involved in operating and managing overseas touchpoints should be regularly trained to ensure they are familiar with "spotting red flags" and your organization's obligations and encouraged to bring concerns forward. Being able to detect warning signs of potential sanctions or exports controls violations is important. Sanctions and export controls are constantly changing, and NGOs must keep up with the latest developments.
  5. Proactively Manage Apparent Violations: Upon becoming aware of potential violations, stopping the conduct in question and undertaking a thorough inquiry are vital. Considering whether to voluntarily disclose the apparent violations in a timely manner in order to seek penalty mitigation for self-reporting is a key step. Seeking and retaining U.S. and in-country legal counsel with experience helping nonprofits navigate international compliance is also a must.

For assistance with better understanding the complex and ever-changing legal frameworks relevant to your NGO's activities, please contact the authors for guidance.