Fighting Cybercrime & Nonprofit Fundraising Fraud

Cybercrime in the nonprofit sector is on the rise, with criminals heavily targeting charities as well as their supporters and beneficiaries. Unfortunately, cybercrimes against the nonprofit sector have expanded beyond the usual phishing, ransomware, identity theft, etc. Today, nonprofits are also facing the growing problem of fundraising fraud.

According to the Internal Revenue Service (IRS), nonprofit organizations lose an estimated 5% of annual revenue due to fundraising fraud. In addition to the financial loss, fundraising fraud can cause significant harm to charities and donors and damage their reputation and credibility – which can lead to a loss of trust from their supporters.

By riding on the coattails of established organizations, fundraising fraud works by deceiving individuals into giving money and/or their personal information to a charity or a nonprofit, taking advantage of the organization’s good name.

Fundraising fraud generally takes one of three forms:

·         Individuals posing as members of an organization for the purpose of soliciting donations — without ever intending to forward funds to the designated charity.

·         Employees or volunteers who steal donations.

·         Third-party fundraising agents acting on behalf of an organization who keep some or all of the donations they have been contracted to raise.

Fundraising fraud is difficult to detect right away, and by the time criminal activity is realized, it’s often too late. In many cases, a charity isn’t aware of fraudulent activity until a donor makes inquiries about whether their funds have been received. In addition, standard audits don’t always pick up on a crime, because most accountants typically look at donations as a whole and don’t necessarily analyze each individual transaction. 

IRS joins international efforts to fighting fundraising fraud

Cybercrimes have become so widespread that Nov. 27 to Dec. 1 has been designated Charity Fraud Awareness Week. During this time, charities, regulators, agencies, law enforcement personnel and other not-for-profit stakeholders around the globe will work together to raise awareness about fraud and cybercrime affecting nonprofit organizations. Efforts include discussions regarding the latest fraud activities and best practices. It also includes a newly created fraud advisory panel that provides organizations with helpful information.

The IRS urges nonprofit organizations’ managers, trustees, staff and volunteers to consider taking advantage of this valuable resource as well as individuals who provide professional advisory services to nonprofits. To learn more about this worldwide event and how the not-for-profit clients and charitable organizations that you insure can use these resources to prevent, detect and respond to fraud, visit the Preventing Charity Fraud website.

About Charity First

The incredible services that nonprofits provide come with unique and complex risks that are part of their everyday work in serving the elderly, children and other vulnerable populations. It’s why Charity First is committed to providing our retail partners across the country with best-in-class underwriting, consistent and responsive service, and risk management services that include comprehensive cybersecurity coverage that can be customized to meet the individual needs of their nonprofit clients.

To learn more about our cyber coverage or other products, please contact us at 800-352-2761 or