Humanitarian Coalition Aid Foundation received funds from fraudulent US hedge fund

Charity Commission investigation finds no evidence of charitable activity

The Charity Commission has warned trustees to make sure their charities are not being used as vehicles for money laundering after an inquiry found that an inactive charity received $151m (£91m) from a fraudulent US hedge fund.

The Humanitarian Coalition Aid Foundation was established in 2002. Its website claimed it was engaged in Aids relief and water safety projects, but the commission found no evidence of any charitable activities or income except what had been donated by its own trustees.

The commission's inquiry report says that in 2005 the regulator discovered that $151m had been paid into an account in the charity's name under the reference "Bayou Securities". The charity's bank returned the money amid concerns about its origin.

Bayou Securities was part of a hedge fund whose owner had pleaded guilty in the US courts of conspiracy and fraud in relation to the fund. The fund had siphoned investor money through various banks around the world before returning it to the US.

The commission opened a formal inquiry in July 2006 after the charity refused its requests for a meeting. The inquiry, which ran until April 2008, discovered that only two of the charity's trustees had known about the arrangement with Bayou, which was set up after an approach from its owner.

The charity was promised a share of the interest from the money while it was in the account, but the owner of Bayou retained sole control of the account and legal ownership of the funds. The interest was paid to the owner of Bayou when the funds were returned by the charity's bank.

But the regulator was highly critical of the two responsible trustees for failing to investigate where the funds had come from, take appropriate professional advice or properly consider whether the arrangement was in the charity's best interests.

It also criticised one of the trustees, Stephen Hickok, for authorising a Swiss intermediary to arrange similar schemes whereby the charity would gain the interest from short-term deposits of very large amounts of money.

The inquiry and the publication of the report were both delayed by investigations by other bodies in both the US and UK. The two trustees told the commission that they had not been "questioned, interviewed or charged with any activity whatsoever related to fraud or money laundering".

The regulator concluded it would not be proportionate to take any action other than to remove the charity from the register on the basis that it was not operating.


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