The Charity Commission has opened a statutory inquiry into a poverty relief charity due to its “high-risk” methods of transferring and spending its funds.
Announced today, the commission is investigating the Iraqi Welfare Association, a charity registered in 1996 that offers welfare support services and aims to relieve poverty among the Iraqi community in the UK.
As part of the inquiry, the commission is also assessing possible unmanaged conflicts of interest; failures to file accounts on time; failures to adhere to the charity’s governing document, and allegations that the charity may be acting outside of the purposes that it was registered with.
Hawala system
The regulator previously engaged with the charity to assess how it was managing risks associated with working in Iraq, which is deemed a “high-risk” country by the Foreign, Commonwealth and Development Office.
Its engagement continued due to the charity’s failure to submit accounts for four consecutive years – 2019, 2020, 2021 and 2022 – on time. Its most recent accounts for the financial year ending 2023 were submitted on time.
The statutory inquiry has been opened after the regulator found that the charity was transferring funds overseas using a Hawala system.
Hawala systems are an informal method of transferring money without any physical money actually moving; they are thought to date back to ancient India, and follow Islamic traditions, although their use is not limited to Muslims.
Additional concerns over loss or misuse of funds
The regulator also found that the charity’s director was using his personal bank account to make payments on behalf of the charity, posing a risk of possible loss or misuse of funds.
Additionally, the inquiry will investigate potential conflicts of interest regarding decisions around salary payments and a contract with a connected private company.
The commission has said that it may extend the scope of its inquiry if any additional regulatory issues arise, with a report to be published following the conclusion of the investigation.
According to the commission’s website, the charity has now submitted all of its previously outstanding accounts and most recently reported an income of £793,000 and expenditure of £810,000 in the year to July 2023.
Its income has fluctuated in recent years from a low of £360,000 in 2019-20 to a high of £1.19m in 2021-22.
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