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.
Scroll the table sideways to compare tiers. The criterion column stays in place.
| Criterion | Tier 1 | Tier 2 | Tier 3 | Tier 4 |
|---|---|---|---|---|
| Anti-Terrorist Financing Screening (ATFS) | Higher Risk Anti-Terrorist Financing Screening (ATFS-HR) | Integrity Review (IR) | Integrity Due Diligence (IDD) | |
| Escalation Triggers | ||||
| Escalation Triggers | Tier 1 → Tier 2: Elevated jurisdiction risk (sanctions program exposure, FATF listing, or documented terrorist group operational presence) and/or grant complexity (large/complex grants, first-time relationships, regranting/sub-awards). | Tier 2 → Tier 3: Additional integrity or reputational risk indicators (credible adverse media, political exposure indicators, governance gaps, material third-party reliance, or adverse integrity disclosures). | Tier 3 → Tier 4: Material subnational risk (state/provincial/municipal) and/or the need for independent corroboration (registry-backed verification, ownership/control mapping, litigation/regulatory checks). | |
| Primary Organization Checks | ||||
| Organization screening | Screen the organization and its alternate names against global sanctions/terrorism lists (OFAC SDN and SSI and OFAC-related lists, EU, UN, UK HM Treasury, U.S. Terrorist Exclusion List, FBI, Interpol, and FinCEN Section 311). | Local/national sanctions lists (country of primary registration) and adverse media screening (AMS) for the organization. | Same as Tier 2. | Same as Tier 3. |
| Persons with operational authority, board & founders | Screen these individuals against global sanctions/terrorism lists. | Local/national sanctions lists. | Adverse media and PEP screening. | Regulatory/court checks for these individuals. |
| Registry verification | Review certificate of registration. | Same as Tier 1. | Registry-style verification with Dow Jones corporate data (secondary source, limited coverage). | Full registry analysis via LexisNexis (official filings, ownership mapping, litigation/regulatory checks). |
| Beneficial ownership | Review disclosed beneficial ownership; screen against sanctions & FinCEN. | Local/national sanctions lists. | PEP and adverse media screening of beneficial owners. | Verify/expand Beneficial Ownership; ownership charts, litigation/regulatory actions. |
| Governance & internal controls | Not included at this tier | Review the grantee’s anti-terrorism controls for selecting and overseeing downstream partners. | Expanded review of governance framework, procurement controls, conflicts of interest, and accountability mechanisms. | Control testing and validation of governance and oversight mechanisms. |
| Funding Profile & Major Institutional Funders | Not included at this tier | Not included at this tier | Review public disclosure of major institutional funders. | Optional screening of major disclosed funders if material or government-linked. |
| Regulatory actions / court records | Not included at this tier | Not included at this tier | Not included at this tier | Litigation, enforcement, and regulatory filings. |
| Control Relationships | ||||
| Controlling entities | Review disclosed government control, institutional affiliation, or oversight relationships; screen disclosed controlling entities against global sanctions and FinCEN lists. | Local/national sanctions lists; Identify government control or state affiliation indicators to inform potential escalation. | Adverse media screening of disclosed controlling entities. | Independent reconstruction and validation of control structures across registry and regulatory sources, including litigation and enforcement review, to identify discrepancies or undeclared influence. |
| Financial Channels | ||||
| Financial institutions | Sanctions and FinCEN screening of disclosed financial institutions. | Local/national sanctions lists (in addition to Tier 1 sanctions and FinCEN screening). | Adverse media screening; Assess state ownership or political affiliation exposure. | Registry/regulatory checks; ownership mapping; enforcement actions. |
| Payments routing | Sanctions and FinCEN screening of beneficiary and routing banks. | Local/national sanctions lists (in addition to Tier 1 sanctions and FinCEN screening). | Adverse media screening of beneficiary and routing banks; assess correspondent and state-ownership exposure. | Registry/regulatory verification; ownership/control mapping; enforcement actions. |
| Downstream Partners | ||||
| Vendors & intermediaries | Not included at this tier | Review vendor and subcontractor selection policies. | Identify and screen top vendors/intermediaries against sanctions, PEP, AMS. | Registry checks, litigation/regulatory actions, UBO mapping for vendors/intermediaries. |
| Subcontractors | Not included at this tier | Review subcontractor selection policies. | Identify top subcontractors if disclosed; screen names against sanctions, PEP, AMS. | Registry checks, litigation/regulatory actions, UBO mapping for subcontractors. |
| Subgrantees | Not included at this tier | Review subgrantee selection policies (if relevant); note: subgrantees must be screened separately. | Same as Tier 2. | Same as Tier 3. |
| Geographic Risk | ||||
| Geography | Flag OFAC country-based sanctions program exposure (and applicable General Licenses), FATF grey/black list status, and documented terrorist group operational presence (U.S. Department of State Country Reports on Terrorism), and record Basel AML Index and Corruption Perceptions Index scores as published, for the country of primary registration and each reported country of activity. | Same as Tier 1, recorded as published; escalation decisions rest with the client. | Apply subnational (state/provincial/municipal) geographic risk triggers, building on Tier 2, to inform escalation decisions in high-risk regions. | Same as Tier 3. |
| Monitoring | ||||
| Optional Add-On; Additional fee applies | Quarterly global sanctions/terrorism re-screening of the grantee organization and Tier 1–screened individuals/entities. | Quarterly expanded sanctions re-screening of Tier 2–screened entities (including identified financial institutions, if applicable), plus adverse media re-screening of the organization. | Quarterly PEP plus adverse media re-screening of Tier 3–screened individuals and controlling/connected entities | Same as Tier 3. |
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.