The decision by the banking giant HSBC to withdraw services from the aid charity Islamic Relief hampered the charity’s efforts to provide tents for the victims of last year’s earthquakes in Nepal, the charity has said.
Islamic Relief warned that counter-terrorism legislation was creating confusion, deterring banks from offering services to charities and could cause beneficiaries to lose out after HSBC told the charity it would no longer offer it a bank account.
In 2014, the bank invited the charity to end the relationship, but when the charity declined HSBC took steps to do so itself at the end of the same year, it has now emerged.
The charity, which received £1.2m from the Department for International Development in 2014, said it was and remained "extremely surprised" by HSBC’s actions. Islamic Relief has been able to use accounts provided by other banks.
Imran Madden, UK director of the charity, said: "We were in discussions with HSBC during 2014 through which we learned that the bank felt it would be difficult to continue its banking relationship with us due to the nature of our work.
"We were told that HSBC needed to ‘manage the challenge’ posed by customers operating in ‘high-risk jurisdictions’ as a result of an obligation imposed on the bank in a deferred prosecution agreement with the US authorities in 2012 to avoid prosecution for money laundering and dealing with pariah states."
Madden said he was aware of similar action taken by HSBC in relation to other clients and believed it to be "generic risk-averse behaviour" rather than a specific issue with Islamic Relief.
"Islamic Relief shares concerns expressed across the charity sector and beyond that banks ‘de-risking’ their engagement with international humanitarian aid agencies in this way will end up either denying aid to those who need it in certain parts of the world or forcing NGOs to transfer funds in ways that are less transparent than bank transfers," he said. "The first of these would be plain immoral, the second unpalatable and counter-productive.
"We believe that the breadth and vagueness of counter-terrorism regulation has created a fog of uncertainty for both banks and charities that governments need to do more to help us navigate our way through."
A statement on the charity’s website said its work had been "hampered in some important ways by HSBC’s actions", after UK payments by Islamic Relief to other HSBC account holders had been held up for weeks or even months – including an urgent payment for tents for victims of the April 2015 earthquakes in Nepal.
It said a minority of donors banking with HSBC had had donations to the charity blocked.
The charity has since made alternative banking arrangements and said no other bank had withdrawn its services.
A spokesman for HSBC said that for reasons of privacy the bank was unable to confirm or deny whether a specific organisation was a customer.
"Although we can't always be specific about why we decide to close an account, a decision of this kind is never taken lightly and is never due to the customer's race or religion," he said.
"We will continue to work with the UK government and industry bodies to support the not-for-profit sector and to help charity customers manage risk in their operations."
A Charity Commission spokesman said the charity had "acted appropriately and responsibly" in reporting the issue promptly.
He said the commission would have "serious concerns if a charity were not able to operate because of a lack of banking services" but pointed out that the charity did have other bank accounts available to it.
A DfID spokeswoman said: "Any funding is subject to rigorous due-diligence checks, and we have strict auditing and monitoring controls in place to ensure all funding is used as it should be."