The Regulatory Context for Cross-Border Philanthropy

For grantmakers, a global perspective on regulation is increasingly relevant regardless of where they are legally domiciled. International standards, enforcement practices, and banking-sector controls now shape cross-border giving in ways that extend beyond any single jurisdiction, influencing how grants are structured, reviewed, and executed worldwide. Even funders operating primarily within one national framework are affected by global compliance norms through correspondent banking requirements, intermediary relationships, shared due diligence expectations, and reputational risk considerations. Understanding how these systems intersect enables grantmakers to anticipate constraints, align internal policies with external expectations, and engage more effectively with partners across borders.

Cross-border philanthropy operates within a dense and continually evolving regulatory landscape shaped by global standards, national legal frameworks, and sector-specific expectations. Grantmakers engaged in international activity navigate overlapping obligations related to anti-money laundering and counter-terrorism financing, sanctions compliance, tax law, governance, and transparency, often across multiple jurisdictions simultaneously. These requirements have become increasingly risk-based, data-driven, and enforcement-oriented, elevating the importance of effective due diligence and ongoing oversight.

This article examines how global standards are shaping what “responsible” international giving looks like in practice. It focuses on the United States, the European Union, the United Kingdom, Canada, Switzerland, and Australia, jurisdictions that serve as home bases for many active cross-border grantmakers. The analysis highlights points of convergence and divergence across their regulatory frameworks, the influence of global standard-setters such as the Financial Action Task Force (FATF), and the practical implications for funders operating in an increasingly scrutinized international environment.

Global Standards: The Role of FATF

At the core of the international regulatory environment lies the Financial Action Task Force (FATF), whose 40 Recommendations underpin most AML/CTF (anti-money laundering and counter-terrorism financing) frameworks globally. Since 1989, these recommendations have shaped the development of national laws, emphasizing due diligence practices, beneficial ownership transparency, heightened scrutiny for higher-risk activities, and compliance with international sanctions regimes. As of 2025, FATF maintains both a “grey list” of countries under monitoring and a “black list” for jurisdictions such as North Korea, Iran, and Myanmar, where systemic deficiencies continue to present elevated financial crime risk. In practice, these standards are frequently implemented through banks and other financial institutions, which apply their own risk thresholds and controls and function as de facto compliance gatekeepers for cross-border philanthropy.

Expectations for philanthropy under FATF are more nuanced than is sometimes assumed. Recommendation 8 acknowledges that nonprofit organizations can be misused for terrorism financing, while explicitly calling for focused, proportionate, and risk-based measures rather than blanket restrictions on the sector. The standard emphasizes that only those NPOs that fall within the FATF definition and present elevated terrorism financing risk should be subject to enhanced oversight, and that controls should not unduly disrupt or discourage legitimate charitable activity. For grantmakers, this framework supports a risk-based approach in which due diligence, monitoring, and documentation are calibrated to the specific risk profile of the grant, geography, delivery channel, and partner organization, rather than applied as one-size-fits-all compliance.

United States: Dual Paths and Deep Scrutiny

In the United States, cross-border grantmaking by private foundations and donor-advised funds (DAFs) generally operates through a two-track system. When granting directly to foreign organizations, foundations typically rely on either Equivalency Determination (ED) or Expenditure Responsibility (ER) to ensure that grants are treated as qualifying distributions rather than taxable expenditures. ED is a good-faith process in which a qualified tax practitioner reviews a foreign grantee’s governing documents, financial information, and public support data to determine whether the organization is equivalent to a U.S. public charity under sections 501(c)(3) and 509(a), a conclusion that rests on documentation similar to that required of U.S. public charities. When ED is not obtained, foundations instead exercise ER by conducting an appropriate pre-grant inquiry, entering into a written grant agreement restricting funds to specified charitable purposes, requiring periodic narrative and expenditure reports, and reporting the grant and its oversight on Form 990-PF.

Sanctions compliance under the Office of Foreign Assets Control (OFAC) rests on effective screening and internal controls. Civil penalties may be imposed even when violations are unintentional, while substantially heavier fines and, in serious cases, criminal charges apply when violations are knowing or particularly egregious. In practice, grantmakers screen counterparties and key principals against relevant United States sanctions lists and, where appropriate, international sanctions lists, and document how potential matches are reviewed, resolved, or escalated.

Grantmakers also address Foreign Corrupt Practices Act (FCPA) risk, particularly where grantee leadership or counterparties include government-linked officials. This typically involves assessing for politically exposed persons (PEPs) within governance and senior management as part of broader anti-bribery controls and efforts to identify corruption vulnerabilities.

In parallel, the Financial Crimes Enforcement Network’s (FinCEN) beneficial ownership regimes, which require many legal entities within the financial system to identify or report individuals who own or control 25 percent or more of an entity, as well as those exercising substantial control, have increased expectations for transparency. In response, many foundations apply comparable standards in their due diligence on intermediaries and more complex grant structures.

Canada: Rising Accountability and Integration

Canadian philanthropy is shaped by FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), which together establish broad AML/CTF standards, even though only certain types of entities and activities are classified as reporting entities. In practice, most Canadian grantmaking charities are not treated as full reporting entities under the PCMLTFA, but their activities and use of intermediaries can still bring them within FINTRAC’s scope, prompting alignment with broader AML/CTF expectations that shape Canada’s financial system. Beyond banks and formal financial actors, these rules increasingly affect donation intermediaries and, under certain conditions, charities handling significant international flows, cash-intensive activity, or operations in higher-risk jurisdictions. Canadian grantmakers are also subject to Canada Revenue Agency (CRA) governance requirements, including documentation to demonstrate “direction and control,” satisfy the “own activities” test, advance recognized charitable purposes, and maintain clear boundaries between permissible charitable activity and prohibited political advocacy. Where cross-border grants involve U.S. donors, the Canada–U.S. Tax Treaty can require parallel documentation to satisfy both countries’ revenue authorities and coordinated tax treatment across jurisdictions.

The European Union: Convergence and Complexity

The European Union is undergoing a period of regulatory consolidation, with the Sixth Anti-Money Laundering Directive (6AMLD) and an associated Anti-Money Laundering Regulation (AMLR) establishing more standardized rules across all 27 member states and, in the case of the AMLR, a directly applicable single rulebook for obliged entities. These reforms introduce harmonized predicate offenses, corporate liability for AML/CTF violations, expanded beneficial ownership transparency at a 25 percent threshold, with lower thresholds possible in higher-risk sectors, and enhanced bank and securities registries. The European Anti-Money Laundering Authority (AMLA), operational since 2025 and moving toward direct supervision of a limited number of high-risk, cross-border financial groups, is intended to coordinate enforcement and promote more consistent supervisory practice across member states. Nonprofits in the EU are not uniformly classified as “obliged entities,” but banks and cross-border funders increasingly expect documentation and practices comparable to those applied in the financial sector. The General Data Protection Regulation (GDPR) governs personal data processed through compliance activities, from PEP screening to beneficiary vetting, requiring a lawful basis, data minimization, and transparency regarding how due diligence information is collected, stored, and used.

Despite EU efforts to harmonize, variations persist in how member states define comparability for public-benefit status and donor deductibility, particularly when assessing whether foreign organizations qualify for domestic tax relief. As a result, foundations often compile and maintain detailed documentation to demonstrate that foreign grantees would be recognized as public-benefit entities under home-state law, or structure giving through designated intermediaries and cross-border vehicles that already meet local recognition requirements.

The UK: Post-Brexit Oversight and Charity Law

Since Brexit, the United Kingdom has maintained practical alignment with European and FATF principles while asserting its own sovereign framework through four principal charity regulators: the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator (OSCR), the Charity Commission for Northern Ireland, and HMRC. UK charitable law places a strong emphasis on due diligence for international grants, requiring grantmakers to demonstrate a clear advance of charitable purpose and maintain financial and governance controls sufficient to ensure proper use of funds and manage sanctions and terrorism-financing risks. Advisory materials and recent Charity Commission reports emphasize documented pre-grant inquiries, formal written agreements, proportionate risk assessment, ongoing monitoring, clear record-keeping, and robust conflict-of-interest management as part of trustees’ duty to safeguard charitable assets. Serious failures in these areas may result in administrative enforcement by charity regulators and, in more severe cases, criminal investigation and prosecution.

Switzerland: Minimal State, Maximum Peer Governance

Switzerland operates under a comparatively flexible regulatory model that places significant emphasis on self-governance. The Swiss Foundation Code, a set of best-practice guidelines developed and periodically updated by sector peers, emphasizes independence, transparency, professionalism, and accountability within grantmaking foundations. There is no single centralized supervisory authority; instead, charitable foundations are overseen by cantonal authorities or, where they operate nationally or internationally, by the federal supervisory authority, resulting in considerable variation across the country. Amendments enacted in 2024 expanded founders’ ability to adapt and modify foundations, simplifying certain charter changes and reinforcing Switzerland’s relatively permissive legal environment for philanthropy. At the same time, global banking partners and international counterparts increasingly expect Swiss entities to align their due diligence, know-your-customer, and beneficial ownership practices with standards emerging from the EU, the United States, and FATF.

Australia: National Integration and Compliance

Australia’s approach is characterized by the integration of charity registration, reporting, and AML/CTF oversight through the Australian Charities and Not-for-profits Commission (ACNC) and AUSTRAC. The ACNC Register serves as a public resource for verifying a charity’s status, governance, and key financial information, while charities that operate or send funds overseas are also subject to the ACNC’s External Conduct Standards, which outline baseline expectations for risk assessment, partner due diligence, and control of resources. AUSTRAC, as the AML/CTF regulator, requires charities and other not-for-profits that provide designated services or handle higher-risk international flows to implement risk-based compliance programs, document beneficial ownership, and escalate review and documentation as risks or transaction volumes increase. Together, these frameworks contribute to a relatively standardized national compliance environment and facilitate alignment with global AML/CTF and sanctions regimes.

Areas of Convergence and Difference

Across these six jurisdictions, regulatory expectations are converging around a common core: risk-based screening for AML/CTF concerns, increasingly standardized beneficial ownership transparency, and rigorous sanctions compliance anchored in FATF-inspired norms. Most now treat a 25 percent ownership or control threshold as a baseline for identifying beneficial owners, while encouraging deeper inquiry in higher-risk sectors or structures, and all expect grantmakers to document how screening and monitoring decisions reflect the underlying risk profile of the grant, partner, and geography. Compliance is not one-size-fits-all. The amount, complexity, delivery channel, and sector, as well as political and security conditions in the target country, all shape how far diligence and oversight should go in practice.

Meaningful divergences remain. The design, accessibility, and reliability of beneficial ownership registries vary widely, as do the legal tests for recognizing foreign public-benefit entities and extending tax relief to international gifts. Enforcement cultures also differ, with some authorities emphasizing cooperative supervision and others relying more heavily on punitive investigation, public enforcement actions, and banking-sector de-risking that can impede international giving. Over time, these dynamics can influence funding patterns, encouraging grantmakers to rely on established intermediaries and highly documented partners, while creating higher barriers for smaller, informal, or less institutionally mature organizations seeking support. For institutional grantmakers, this mix of convergence and divergence underscores the need to anchor policies in global standards while maintaining agile, jurisdiction-specific compliance playbooks and seeking local legal or tax advice when rules are ambiguous or shifting.

Sector and Regulatory Trends

As regulatory technology advances, compliance tools, including multi-source sanctions screening, AI-powered adverse media alerts, and transaction monitoring, are becoming more widely used across the philanthropic sector, alongside rising expectations for explainability, documentation, and system governance. Even where grantmaking activity is legally permissible, financial institutions and payment platforms may apply additional risk thresholds, creating a practical distinction between regulatory compliance and what is operationally bankable in cross-border contexts. Regulators are increasingly examining not only whether records exist, but whether oversight and monitoring protocols scale appropriately with risk and are resourced in proportion to the size, complexity, and geographic footprint of the grantmaker. In the European Union, as AMLA expands its supervisory role, and in North America, as U.S. and Canadian authorities intensify beneficial ownership and sanctions enforcement, compliance functions are placing greater emphasis on ongoing professional development and peer engagement. At the same time, philanthropic organizations operating internationally are expected to remain attentive to the implications of cryptocurrency, digital assets, and emerging payment mechanisms, which are being incorporated into global AML/CTF frameworks and subject to evolving requirements for KYC, monitoring, and information-sharing.

Implications for International Grantmaking

International grantmaking in 2026 is both more standardized and more complex than in previous decades. In most jurisdictions, philanthropic organizations operate primarily as rule-takers within AML/CTF and sanctions frameworks designed for the financial system, with limited direct influence over the pace or direction of regulatory change. Across geographies, FATF-driven rules function as a common reference point, while local law and regulatory priorities ensure that effective compliance continues to require jurisdiction-specific attention and ongoing adaptation. Many grantmakers respond by investing in continuous learning, maintaining comprehensive documentation, engaging legal and compliance expertise, and participating in peer networks to manage evolving risks and expectations. While the compliance burden remains significant, the continued development of sector-specific practices, digital transparency, and risk-based approaches is reshaping how international philanthropy is governed and delivered.

Disclaimer: Paragon Philanthropy does not provide legal, tax, or accounting advice. The information provided in this article is for general informational purposes only and should not be relied upon as a substitute for professional advice. Readers are encouraged to consult their own legal counsel or tax advisors regarding questions specific to compliance, grantmaking, or cross-border giving.