Aid charities need to re-establish trust with banks, think tank says

A report by Demos says the banking sector is making it more difficult for charities working in risky locations to receive funds because of counter-terrorism legislation

The banking sector

International aid charities need to improve their professionalism to re-establish trust with the banking sector so banks’ de-risking activity stops denying services to the charities, according to a report from the think tank Demos.

It also says that banks should look beyond the profit motive, consider the "reputational return" involved in being seen to facilitate humanitarian work, and  increase dialogue between themselves and with the NGO sector.

The report, Uncharitable Behaviour, by Tom Keatinge, director of the Centre for Financial Crime & Security Studies, part of the Royal United Services Institute, says that stricter counter-terrorism legislation has meant that banks are increasingly likely to make it more difficult for charities working in risky overseas locations to receive, store and spend funds.

In his research, Keatinge came across several examples where charities found that overseas donations – sometimes totalling millions of pounds – had been delayed or blocked totally. He found that funds frequently had to be routed via third-party countries, incurring additional costs, and that the use of US dollars attracted extra scrutiny from US authorities, which meant that charities often transferred funds in Euros or pounds, even though this attracted extra costs.

The report, which was published last week, says that statements such as those from William Shawcross, chair of the Charity Commission, about the extent of the problem of terrorist abuse of charities, are unhelpful in building a good relationship between NGOs and banks.

However, Keatinge said he did not find any evidence of Islamophobia in the banking sector playing a part in the withdrawal of banking facilities from Muslim charities.

The report makes six recommendations, including that many international aid charities "improve their professionalism, communication, transparency and awareness of diligence and governance standards" – aided by sector umbrella bodies – in order to re-establish trust with the banks. It also suggests the establishment of "a form of ‘kite-marking’ that recognises strong governance standards in the NGO sector", and that smaller charities consider merging to reduce duplicated administration costs.

It recommends that banks "look beyond their innate profit motive and consider ‘reputational return’," meaning they recognise the benefit of being seen to aid humanitarian work, and should increase dialogue across their and the NGO sector.

Finally, the report says that the government should lead on addressing the problem. It concludes: "Providing financial access to the NGO sector should be rewarding for the banking community and beneficial to government. The current path benefits no one."

Keatinge said: "There is surprising consensus among all stakeholders on the challenges posed – what is lacking is leadership, on all sides, in resolving this issue."

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