International fund transfer policy 'could leave charities vulnerable to abuse'

Counter-terrorism legislation on finance has made it more difficult for UK charities to transfer funds to countries including South Sudan, according to the Charity Finance Group

Charities reported difficulties sending money to South Sudan
Charities reported difficulties sending money to South Sudan

International efforts to prevent funds being transferred to support terrorist activities overseas could force charities to use "untraceable" methods which would make them more vulnerable to extremist abuse, the Charity Finance Group has warned.

In a written submission to the Home Affairs Select Committee’s inquiry into counter-terrorism, the CFG says that counter-terrorism legislation on finance and sanctions regimes have made it increasingly difficult for UK charities to transfer funds through formal banking channels to overseas operations. "If action is not taken, this problem risks destabilising wider counter-terrorism efforts," it says.

"If charities are unable to use formal banking channels, they will increasingly turn to untraceable, informal means to transfer funds – for example by transferring large amounts of cash over borders – making them more vulnerable to abuse by terrorists."

The submission says that there is an increasingly risk-averse approach from banks in the light of counter-terrorist legislation, which is made worse by the fact that many charities operate in high-risk regions.

This approach has resulted in problems for charities, particularly Muslim organisations, such as delayed payments and difficulties for charities in keeping accounts open, the CFG submission says. 

One charity said that it had problems sending money to South Sudan, which is not subject to any sanctions, because the payment instruction contained the word Sudan, which is "an example of a relatively simple mistake having a significant impact", the submission says.

It also says that some Muslim charities have reported that their donors have been warned against donating by their banks.

"These worrying reports, that banks are taking on regulatory functions and presenting an obstacle to charities’ donor support, need to be taken seriously," it says.

The CFG calls on the government to take action to support banks in applying proportionate risk-management processes to such activities.

"We would like to see government lobby globally for an international version of the US Office of Foreign Assests Control of licence, which charities could quote to allow safe passage of funds for humanitarian purposes anywhere in the world," it says.

The submission says there is a clear incentive for government to support the aid and development work that charities carry out because this work helps stabilise regions and therefore prevents the growth of terrorism.

A spokesman for the Cabinet Office declined to comment before the committee produced its report on the inquiry.

- The story was corrected on 12 December 2013 to clarify that the CFG is talking about international efforts to prevent terrorist abuse of charities rather than the UK government.

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