The Four-Tier Framework
Aligning grantmaking oversight with real-world risk
Paragon’s Four-Tier Risk-Based Due Diligence Framework (the Four-Tier Framework) is a structured methodology that aligns the depth of cross-border due diligence with identified risk indicators, applying proportionate escalation to support defensible grantmaking decisions across diverse regulatory and operating contexts. Each tier corresponds to the funder’s assessment of the grantee’s risk profile and the nature of the proposed activity. Funders begin with a baseline anti-terrorist financing screen (Tier 1) and advance to higher tiers only when specific risk factors emerge.
Each tier builds on the prior level, progressing from baseline sanctions and terrorism screening to enhanced national sanctions checks, adverse media and PEP screening, policy and governance review, and, where warranted, evidence-based integrity due diligence using authoritative sources. This structure supports proportionate escalation, applying deeper corroboration only when risk indicators justify it while keeping baseline reviews efficient.
For U.S.-based grantmakers, the framework is designed to complement IRS procedures such as Expenditure Responsibility and Equivalency Determination, without substituting for legal or tax advice. For funders operating outside the United States, the same proportionate logic and escalation principles apply, consistent with due diligence expectations across the OECD, European Union, United Kingdom, Canada, Switzerland, Australia, and other international jurisdictions. Together, these approaches support consistent, proportionate due diligence across diverse regulatory and operating environments, helping funders direct philanthropic capital to credible, transparent, and mission-aligned partners worldwide.
Risk Factors in
International Grantmaking
Risk-based due diligence is essential to cross-border grantmaking, helping funders tailor their review to the situation while supporting compliance and mission alignment.
The Four Tiers
Tier 1 establishes the baseline for risk-based due diligence in cross-border grantmaking through global sanctions and terrorism screening. Tier 1 begins with core information collected from the grantee, including legal and alternate names, jurisdictions of operation, nonprofit registration details, date of establishment, disclosures of controlling entities, identification of key persons (for example, key employees, board members, and founders), and disclosed financial institutions and intermediaries. The grantee, disclosed key persons, and disclosed controlling entities are screened against major global sanctions and terrorism lists (including OFAC, UN, EU, and UK). Disclosed financial institutions, and where provided, intermediary or routing banks identified in wire instructions, are screened against applicable sanctions lists and FinCEN Section 311 special measures.
Tier 2 applies enhanced sanctions and adverse media screening, alongside a focused review of anti-terrorism controls (including vendor and subcontractor selection practices), when specific risk indicators suggest that Tier 1 screening may be insufficient. Escalation to Tier 2 may be appropriate when Tier 1 indicates elevated jurisdictional risk (sanctions program exposure, FATF grey/black list status, or documented terrorist group operational presence, or when the grant structure is higher risk (e.g., unusually large or complex grants, first-time relationships, regranting or sub-award structures). Tier 2 expands the scope of review by adding national sanctions checks across the screened population, including the organization, key persons, disclosed controlling entities, disclosed beneficial owners, and disclosed financial institutions and routing banks (where provided), which may be flagged by in-country authorities but not always captured on global lists. This step is especially important in higher-risk geographies, where local enforcement actions may provide early warning of emerging risk. Tier 2 also adds adverse media screening for the organization, and review of anti-terrorism policies and vendor and subcontractor selection practices.
Tier 3 expands due diligence to address integrity, governance, reputational, and geographic risk factors that can materially affect a funder’s confidence in a grantee and the integrity of the grant. Based on Tier 2 findings, escalation to Tier 3 is recommended where indicators suggest heightened integrity or reputational risk, including, as applicable, credible adverse media, political exposure, governance weaknesses, significant dependence on third parties (for core delivery or payment flows), and/or adverse integrity disclosures. Tier 3 adds adverse media and PEP screening for key persons, incorporates registry-style verification using secondary-source corporate data with limited coverage, screens disclosed controlling entities for adverse media, and screens financial institutions and payment routing channels for adverse media while assessing state ownership or political affiliation exposure. Tier 3 also identifies and screens top vendors, intermediaries, and disclosed subcontractors at the name level against sanctions, PEP, and adverse media, and applies country or region risk triggers to support proportionate escalation decisions.
Tier 4 is our most rigorous, evidence-based review, designed for higher-stakes grants where clients want a well-documented, independently corroborated understanding of key facts, supported by registry, regulatory, and litigation checks. Tier 4 builds on the screening and policy review conducted in earlier tiers by adding independent corroboration of key facts using authoritative sources, including full registry analysis of the grantee, beneficial ownership and control mapping, and litigation or regulatory checks, with regulatory or court-record checks for key persons where warranted. Tier 4 also verifies the integrity of the broader grant ecosystem by validating material financial institutions and payment routes, and by conducting registry, regulatory, and ownership checks for key vendors, intermediaries, and subcontractors, with additional route restrictions and registry-backed counterparty verification in elevated-risk geographies. Tier 4 includes quarterly monitoring across registry and regulatory sources to maintain an up-to-date evidentiary record.
How the Four-Tier Framework Applies Proportionate Review
The table below illustrates how Paragon’s Four-Tier Framework scales review in a structured and proportionate manner as risk increases. Each successive tier builds on the prior level, expanding the scope, depth, and rigor of screening across organizational identity, control and ownership, risk signals, financial channels, downstream partners, and ongoing monitoring. The framework is designed to help grantmakers apply the appropriate level of diligence to the specific risk context: establishing a defined baseline at Tier 1, adding jurisdiction-specific and reputational scrutiny at Tier 2, broadening integrity and governance analysis at Tier 3, and applying rigorous integrity due diligence at Tier 4, including public record regulatory and litigation checks (and court-record searches for key persons where warranted), when heightened or complex risks warrant escalation.
Proven Track Record
Founded in 2012, Paragon has facilitated the vetting of thousands of grantees across more than 100 countries, including higher-risk jurisdictions identified by FATF, the OECD, and Transparency International. Our analyst-led process delivers practical cross-border due diligence and risk screening that evaluates mission alignment, governance, financial controls, sanctions and watchlist exposure, and country risk to help protect funder reputation. We provide structured, defensible documentation to support board oversight and strengthen crossborder giving.