Guidance on fraud published by the Charity Commission

Third part of Protecting Charities from Harm is aimed at trustees and outlines the warning signs of financial crime

Charity Commission
Charity Commission

A guide to help charities avoid falling foul of scams perpetrated by its own staff or by funding applicants has been published by the Charity Commission.

The guidance, which is aimed at trustees, includes advice on spotting signs of fraud and information about reporting fraud to the commission and the police.

It also gives information on how trustees and managers can devise and implement action plans to deal with fraud.

The publication includes a number of case studies that cite examples of charity fraud. In one instance, a charity's treasurer opened a bank account for the organisation and used the cheques to obtain money for himself. The treasurer was charged with theft after the police were alerted by a trustee who became suspicious.

In another case, three members of a family committed a number of fraudulent acts against grant-making charities, which included applying for grants of up to £60,000 for "spurious projects" that were so vague it was difficult to check whether they had actually been implemented.

The guide also lists warning signs of possible money laundering, including:

- large unexpected donations from unknown individuals, organisations or other sources unknown to the trustees

- money being offered as a loan to the charity for a period of time, after which it is to be returned or sent elsewhere. Typically, the charity is allowed to retain the interest earned or some other small sum in return for agreeing to take part in the arrangement

- requests for assistance in recovering large sums of money where the charity is offered a percentage of the amount recovered. The charity might be asked to provide its bank account details or permit the donor to use its name or letterheads on the pretext that it is a necessary part of the recovery process.

The document is the third instalment in the regulator's Protecting Charities From Harm guide.

The first two parts of the publication covered charities and terrorism, and due diligence and monitoring.

The fourth instalment of the publication – which the commission expects to be published in May – will look at holding, transferring and receiving international funds.

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