Due Diligence and Screening for EU Grantmakers
For foundations and other grantmakers in the European Union funding organizations outside it, Paragon produces a documented record of each grantee: who it is, who controls it, and how it was screened. That record supports the grantmaker’s own sanctions obligations and the questions its bank and public funders ask before money moves. The grantmaker assigns the risk level and selects the services; Paragon can manage the document collection process with the grantee and reports to the grantmaker. Screening covers EU sanctions, including the EU terrorist list, alongside the UN, U.S. and UK lists, together with any national designations required by the grantmaker’s own Member State.
Regional context
What Shapes Grantee Due Diligence in the EU
No single EU rulebook governs grantee due diligence, but four pressures shape it across the EU.
Sanctions law. EU sanctions bind every foundation incorporated in a Member State, wherever its grants go. Making funds available, directly or indirectly, to or for the benefit of a listed person or entity is prohibited. A 2024 EU directive requires Member States to treat intentional breaches as criminal offenses; the deadline to transpose it was 20 May 2025, and the European Commission has opened proceedings against Member States that have not fully done so.
Banks. Under European Banking Authority guidelines in force since November 2023, banks should understand a nonprofit customer’s governance, funding, activities, beneficiaries and geography and, where it works in countries under EU or UN sanctions, obtain reasonable assurance that its activities fall within a humanitarian exemption or an authorized derogation. Foundations funding in higher-risk countries can find transfers delayed until they show how a grantee was vetted.
Public funders. Organizations re-granting EU or national development funds take on their funder’s conditions. EU external action grants extend sanctions checks to subcontractors and recipients of financial support to third parties. EU humanitarian grants require the same of partners and contractors, while people in need who receive aid must not be vetted. Some national development agencies also require partners to screen their own sub-grantees.
Proportionality. FATF Recommendation 8, revised in 2023, asks for “focused, proportionate and risk-based measures, without unduly disrupting or discouraging legitimate NPO activities.” Many European foundations also want to limit what they ask of grantees, which favors one well-documented review over repeated requests.
How national requirements differ. Each Member State adds its own layer, and the differences are substantive. Several, including Belgium, France and the Netherlands, can designate persons and entities nationally in addition to the EU lists. Spain’s anti-money laundering law requires foundations to keep records identifying those who give or receive funds; its implementing rules apply detailed donor and beneficiary records to higher-risk foundations and to transactions above EUR 1,000. Tax treatment also varies: several Member States extend tax relief only to gifts to approved bodies or to charities in the European Economic Area, which shapes how funds are routed. Paragon screens against the national designations required by the grantmaker’s Member State; tax and foundation-law questions remain with the grantmaker and its counsel.
Scope
What the screening covers
In the FATF’s 2023 Best Practices paper on nonprofits, vetting partners falls under partner relationships, one of four headings for a nonprofit’s own governance. Paragon’s reviews of a grantee’s governance, integrity, finances and sanctions exposure all serve that heading. In the two core services, Paragon works with each grantee directly. Anti-Terrorist Financing Screening (Tier 1) collects information on the organization, leadership, governing body, beneficial owners, controlling entities and declared banks. Higher-Risk Anti-Terrorist Financing Screening (Tier 2) adds national sanctions lists for the country of registration, adverse media for terrorism-related and financial-crime exposure, a review of the grantee’s partner, vendor and subgrantee policies, and bank-issued account status documentation where provided. The EU designations screened include the EU consolidated list of financial sanctions and the EU terrorist list, together with any national designations required by the grantmaker’s own Member State; screening extends to beneficial owners and controlling entities. The international lists include the United Nations, OFAC and UK lists. Each report includes an EU sanctions section for the grantee’s country of registration and countries of activity, noting where a regime contains a humanitarian exemption. Integrity Review (Tier 3) adds PEP and reputational adverse media screening and a review of governance, procurement and conflict-of-interest policies where corruption or governance concerns are present. Integrity Due Diligence (Tier 4) adds corroboration through official records, ownership mapping, and litigation and regulatory searches when a red flag needs further documentation. Politically Exposed Person Screening, the Financial Health & Controls Screen and no-contact validation are available where the grantmaker requires them.
The full overview below sets out what is common across the EU and what is national, pairs risk signals drawn from European Banking Authority guidance with the services that support each level, and sets out what each service includes, the lists screened and the scope of Paragon’s role.
“Focused, proportionate and risk-based measures”
Financial Action Task Force,Recommendation 8 (revised 2023)
Paragon’s Four-Tier Framework helps funders align vetting depth with risk.