Aid charities working in high-risk areas should take more steps to improve relationships with banks to prevent “de-risking” activities, according to a Charity Finance Group (CFG) report published yesterday.
The Briefing: Impact of banks’ de-risking on not-for-profit organisations report said charities are losing services due to “disproportionate actions" by increasingly risk-averse banks.
The report recommends that charities consider which banks have “good operational links” and then “build a good relationship with the bank” through regular meetings.
Charities should also “provide details of programmes” to their bank and “be clear on the purpose of transactions", the report said.
Common problems reported by aid charities working in high-risk areas include international transfers being delayed or denied, funds being frozen, bank accounts closed and donations blocked, resulting in “a material impact on the ability of charities to carry out vital humanitarian work”.
According to CFG, banking problems have forced some charities to “close down key partnerships”, “stop or shrink programmes in certain areas”, or find alternative “high risk methods to transfer funds which could benefit proscribed organisations and regimes”.
But the report said while charities have taken “some steps” to improve relationships with banks, “most had not proactively taken steps to improve these relationships – particularly small and medium sized organisations”.
As a result, aid charities were sending “large amounts of staff time” chasing balances or having to change banks, leading to a knock-on impact on their humanitarian activities, it said.
'Long term problem'
“This creates a long term problem for governments around the world,” said CFG. “Effective and timely delivered aid and support can help to prevent future geopolitical instability. However without the appropriate financial facilities being available, charities may be unable to carry out their work where it is most needed.
“Given the global nature of the counter-terrorism legal and regulatory landscape, it is important that governments and regulators begin a sustained international conversation about counter-terrorism legislation...It’s in everyone’s interests that legitimate charitable activities are not impeded through disproportionate de-risking,” it said.
Caron Bradshaw, chief executive of CFG, said: “The impact of banks de-risking on charities in the face of growing regulatory pressure has been well documented and our work adds to the growing evidence base. We need action on this so that charities are able to continue their important work, particularly in providing critical humanitarian assistance.
“It is clear that this is not an issue that can be tackled by any one country, and we need to begin an international conversation on how we can develop consistent rules and approaches to protect access for charities to necessary financial services.”
