Charity fraud, also known as a donation scam, is the act of using deception to obtain money from people who believe they are donating to a charity. Often, individuals or groups will present false information claiming to be a charity or associated with one, and then ask potential donors for contributions to this non-existent charity. Charity fraud encompasses not only fictitious charities but also deceptive business practices. These deceitful acts by businesses may involve accepting donations without using the funds for their intended purposes or soliciting funds under false pretenses of need.
There are controls and laws governing charities and businesses that accept donations. The Internal Revenue Service [4] (IRS) has regulations that can be found on its website.
The United States Federal Bureau of Investigation (FBI) provides online information about avoiding charity fraud, such as fraudulent schemes that emerge in the wake of natural disasters, claiming to be providing disaster relief. The Internet Crime Complaint Center maintains a list of guidelines [5] to avoid charity fraud when making a donation.
To ensure transparency, legitimacy, and adherence to legal requirements, many organizations, including grantmakers, donors, and regulatory bodies, utilize compliance and verification tools to evaluate nonprofit organizations. These tools often rely on official data sources such as the IRS, the Office of Foreign Assets Control (OFAC), and other government registries to verify nonprofit status, tax-exempt eligibility, and potential sanction risks.
Some commonly used APIs and tools for U.S nonprofit verification and compliance include: