Philanthropy is not without its power imbalance at the hands of the banking sector. It is an ideal that is championed and revered in the west, rooted in values of compassion, community support and the belief that we with resources bear a responsibility to uplift the less fortunate. Those who work in this field are highly regarded, and yet, they who account for a notable majority of charitable efforts are also the ones who suffer disproportionately when it comes to de-banking and de-risking.
Frozen accounts, sudden closures without clear explanations, and an inability to access essential financial services – these are just some of the barriers that severely impede the ability of many Muslim charities to deliver aid and support to those in desperate need.
As highlighted in the latest Muslim Charities Forum (MCF) report – the Landscape of Debanking Within Muslim Charities and Its Impact on Charitable Activities – whilst similar battles and hurdles plague many in the charity sector, counter-terrorism legislation has had a uniquely profound and pointed impact on Muslim organisations.
Systemic problem
Banks in the UK have a systemic problem when it comes to the issue of de-risking.
This practice involves banks limiting or severing relationships with clients or sectors perceived as high-risk to avoid potential financial or reputational harm. However, in application, it has disproportionately impacted Muslim-led charities in the UK.
Banks often associate risk with the regions these charities serve, such as conflict zones or politically sensitive areas, and the perceived likelihood of links to money laundering or terrorism. Examples include the Occupied Palestinian Territories, Syria, and Pakistan. As expressed in the report, two-fifths of Muslim charities reported experiencing account closures – a stark indication of how risk-averse policies can lead to financial exclusion.
A clear pattern has emerged in the treatment of Muslim-led charities: suspicion is placed, accounts are closed, concrete evidence, largely, ungiven. Placing Muslim-led organisations in the high-risk category has led to profound challenges for both the charities themselves and the vulnerable communities they aim to serve and who are heavily reliant on these services.
There is a very real human cost to this practice: in one example, a charity aiding Syrian refugee children with cancer in Turkey faced over a year’s delay in transferring funds because the payment reference included the term “Syrian refugees”. This delay not only caused frustration and administrative strain, it critically disrupted the delivery of life-saving medical care, housing and food for children in urgent need. Do banks in the UK remain wilfully ignorant of the real-life impacts of their actions or is due diligence in this regard not their prerogative?
Right to a bank account
Droit au compte is a legal provision in France that allows any individual or legal entity residing in the country, including non-profit organisations, to access basic banking services. It is the foundational right to a bank account. Established in July 1998, it simplifies the process for organisations to establish necessary banking relationships, manage funds and receive donations.
In addition, if a charity’s account opening request is denied, the bank must provide a written refusal to be presented to the Banque de France. The charity will then be assigned a bank, which is required to open their account. Ultimately, by guaranteeing access to basic banking services, charities are able to maintain operational stability and can direct their resources where they are needed.
Consumer duty standards are key legislative measures that banks in the UK must adhere to, yet compared to our European counterparts, it is clear that we are sorely lacking in this regard. Without the safety net that the right to a bank account offers, charities are the ones who bear the weight of the true cost of de-banking.
Operational paralysis
There can be no question, regulatory frameworks surrounding anti-money laundering and counter-terrorist financing are essential for the financial safety of banks and organisations alike. But for the charities, these classifications — as they exist in their current states — result in operational paralysis. Staff must spend excessive time navigating compliance processes, responding to intrusive inquiries and attempting to reopen accounts, thereby diverting resources away from their core humanitarian mission.
Smaller charities are particularly disadvantaged, as they lack the financial or legal resources to contest these decisions. Moreover, the communities relying on aid suffer immediate consequences: delays in food, shelter and medical supplies can mean the difference between life and death; especially in conflict zones or disaster-affected regions. These examples illustrate how the blunt application of risk assessments not only undermines the ability of charities to function but also amplifies the suffering of those most in need.
The MCF report offers actionable solutions to address these challenges, advocating for a redefinition of risk in banking practices. It emphasises the need for:
- Greater collaboration between government, banks and charities to develop sustainable frameworks.
- Bank investment in staff training to understand the unique operational structures of charities, ensure transparency in decision-making and perform more nuanced due diligence.
- Governments to introduce policies guaranteeing access to basic banking services for charities and provide clearer regulatory guidance to mitigate perceived risks.
Charities, in turn, must strengthen their compliance capabilities and engage in collective advocacy to push for systemic reform. This multi-pronged approach acknowledges that fostering collaboration, rather than exclusion, is the most effective way to tackle the financial barriers undermining the humanitarian sector.
Fairer banking practices like an organisation’s right to a bank account, as well as transparent decision-making from financial providers, can mean the difference between life and death for those who rely on charities. The human cost of de-banking must not persist in being disregarded or undermined.
One thing is clear: while limited regulatory change has been made, the onus has been for far too long on charities themselves to navigate these adversities. This cannot be allowed to continue.
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