Chariot Compliance Explained

Everything you need to know about Chariot’s industry-leading compliance program and how it works for nonprofits and “payers”, such as Donor Advised Funds.

Chariot has spent the past year developing and implementing a state-of-the-art compliance program to raise the bar on compliance for the nonprofit industry. 

We have now instituted a uniform compliance standard for nonprofits on Chariot that is required to access any features on the platform (DAFpay, Disbursements*, and more to come soon!). Details include:

• What compliance means on Chariot.

• How we built our compliance program.

• Why this is such a critical resource for “payers” (like DAFs) and nonprofits alike. 

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An in-depth look at our Security, Data Privacy and Compliance practices that allow donors to engage in more efficient generosity with Chariot, while knowing their data is protected. 

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What Compliance means on Chariot

As a facilitator of DAF giving and grant payments at scale, it is critical for Chariot to have a compliance program that meets the highest bar in the industry. 

There is significant risk involved with sending grant payments to nonprofit organizations. With AI, it’s easier than ever to falsify documents, impersonate individuals and misdirect funds. That’s why on Chariot, we practice 3 levels of advanced diligence in our Compliance Verification, to ensure the right person, with the right authority, at the right organization receives funds safely.

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How we built our Compliance Program

Organizational Eligibility

We conduct a compliance review on an organization’s EIN to determine if they have an eligible “Nonprofit Code” and are in “Good Standing” with the IRS. This includes a review of 6 databases that are all refreshed in Chariot’s proprietary system on a daily or weekly basis. If an organization does not pass the initial verification screening, we request additional documentation to evaluate eligibility under common exceptions - such as religious organizations.

The Problem with Validating Pointers

The core principle that underlies our compliance is verifying identity - that the right person with the right authority is behind the Chariot account assigned to an organization’s EIN. 

Other solutions rely on validation of pointers - i.e., having users supply bank account information and verifying that the account and routing number’s “owner” matches an organization’s name. 

The validation of pointers approach is high risk because the options are: 

• Not holistic. 

• Only as strong as its weakest link (like bank consortium data).

• Fraud-prone (using voided bank statements).  

It’s also difficult to maintain because nonprofits frequently change their banking details, causing pointers to become outdated and requiring regular revalidation. This “Leaky Bucket Problem” results in ongoing costs as pointers need to be revalidated. What’s worse is that this all work that every grantmaker is doing independently, replicating efforts across the industry. 

The Problem with Validating Pointers

We leverage trusted sources to verify the underlying identity of an organization and its officers. We i) reference tools like the IRS Exempt Organizations Business Master File as a source of truth, ii) partner with top-tier personal identity verification providers to complete checks, and iii) go through a rigorous  information-gathering process when verifications are escalated. Our process results in: 

• Reduced Risk: Chariot uses IRS data to obtain verified business and officer information, validated through leading identity providers. This approach targets identity verification directly, mitigating common fraud methods.

• Stability: Once identity is verified, Chariot provides a single place where organizations can securely receive donation payments. Those organizations can separately update their connected operating accounts when needed within their Chariot account.

Why this is such a critical resource for “payers” (like DAFs) and nonprofits alike.

There are increasingly effective ways to exploit risk exposure in the nonprofit payment ecosystem. Some of the most frequent tactics attempted today include: 

• Impersonation: A fraudster contacts a DAF provider pretending to be someone from your organization. With just enough public information—like an EIN and a mailing address—they can convincingly request a change of address, contact details or bank information.

• Falsification: Con artists enroll your organization in digital payment systems without your knowledge. They then submit forged or doctored bank statements to "verify" an account they control as being affiliated with your nonprofit.

• Interception: Scammers steal mail—often from unsecured mailboxes—and engage in “check washing,” a method of altering legitimate checks to redirect funds.

When these things happen, payers waste time, operational effort and money trying to rectify lost or missing gifts, and nonprofits have critical funds lost or delayed. Donors lose faith in the efficacy of their donation method if they can’t trust that their funds will get to their intended organization swiftly and securely. 

With the rapid advancements in AI, these risks will be exacerbated, and the nonprofit sector will look for more secure and reliable solutions to such a critical element of the ecosystem: payments. 

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Who is leading this effort for Chariot

Jess Clarke, J.D., is Chariot’s Head of Legal & Compliance, leading all aspects of our internal compliance program and banking partner relationship. She is a Stanford Law graduate, bringing nearly a decade of corporate & financial transaction legal experience. She began her career with Davis Polk & Wardell LLP, a leading global law firm.

She works closely with Chariot’s Chief Operating Officer & Co-Founder, Aaron Kahane, to enforce our compliance program across all aspects of Chariot’s operations. The Chariot compliance program was built with guidance and support from FS Vector, the top fintech compliance firm. The program was also developed in consultation with our banking partner, Column N.A., Member FDIC, to meet the stringent requirements of our banking relationship. Column N.A. is a nationally-chartered bank with an annualized transaction volume exceeding $1 trillion.

More details on Chariot’s compliance program can be found here, and more details on the process for nonprofits to submit their compliance verification can be found here.

*Chariot is a financial technology company, not a bank. Chariot Deposit Accounts are a Demand Deposit Account through our banking services partner, Column, N.A., Member FDIC. Deposits in Chariot Deposit Accounts are eligible for FDIC insurance up to $250,000 per depositor, for each insurable capacity in which the account is held.