Attempts to help charities deprived of bank services

Banks are fearful that their charity clients' work overseas will breach anti-terror laws, writes Sam Burne James

Protests against account closures
Protests against account closures

In recent months there has been growing awareness of the difficulties posed to charities by banks "de-risking". Some aid organisations that work in difficult overseas locations or war zones have found their banks are closing some clients' accounts because they are frightened that the clients will inadvertently breach anti-terror legislation, leaving the banks in hot water.

The issue was picked up by the Joint Committee on the Draft Protection of Charities Bill, whose report in February went beyond its narrow remit and urged the government to address an issue it said presented "a real risk of a chilling effect on UK NGOs' activities overseas at a time when their efforts are possibly more critical than ever". It suggested adopting a statutory provision similar to those already in place in Australia and New Zealand.

In December, the think tank Demos shone a light on the same issue in its report Uncharitable Behaviour. A week after the joint committee's report, another think tank, the Overseas Development Institute, published UK Humanitarian Aid in the Age of Counterterrorism: perceptions and reality. The Charity Finance Group has since released a briefing on the matter.

For several years, the theoretical conflict between anti-terror legislation and aid work has been acknowledged as a potential issue. Recent evidence suggests the problem is growing and the search for solutions is on. Different people suggest different remedies, but most agree there is no silver bullet.

Demos said that international aid charities should work with sector umbrella bodies to improve their operations and re-establish trust with banks. The CFG made similar suggestions, and asked banks to understand their clients better and give better warnings to those under scrutiny. The ODI asked for more guidance from HM Treasury, and the Charities Aid Foundation has suggested that the Charity Commission should lead the creation of new guidance that mirrors guidance already available for the commercial sector.

A spokesman for HM Treasury says it is concerned that an increasing number of charities are losing bank accounts, but says: "The difficulties that charities are facing are predominately driven by global forces in the wider banking sector; domestic legislation would not provide a solution." The UK government, the spokesman says, is leading the development of new international guidance by the Financial Action Task Force, although there is frustration at the slow progress of this international, inter-governmental body.

The international dimension is key: some argue that the real balance of power lies with the US and that banks' real fear is breaking US laws. A 2013 document by the British Bankers' Association, the Disasters Emergency Committee and the law firm Freshfields Bruckhaus Deringer, said: "Many banks headquartered in the UK have also implemented internal policies requiring compliance with US sanctions."

A spokesman for the US Department of the Treasury says it has done "a lot of work in this area"; but its over-arching guidance does not fully clarify the matter for charities. Its document Anti-terrorist Financing Guidelines: Voluntary Best Practices for US-based Charities says that failure to adhere to these guidelines is not in itself a violation of the law, and nor does adherence in itself constitute a legal defence against civil or criminal liability.

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