More than 300 UK-based charities have had their bank accounts closed in the last two years, according to a Reuters report1. The charities claim that they are being unfairly targeted by banks that are trying to comply with strict anti-money laundering regulations.
The regulations, which were introduced in 2017, require banks to carry out due diligence checks on their customers, especially those who operate in high-risk sectors or countries. The aim is to prevent the flow of illicit funds and combat terrorism financing.
However, some charities say that the banks are overreacting and applying a “one size fits all” approach that does not take into account the nature and scale of their work. They argue that they are already subject to rigorous oversight by the Charity Commission and other regulators, and that they have robust policies and procedures to ensure the proper use of their funds.
The bank account closures have caused significant disruption and distress for the affected charities, many of which work with vulnerable and marginalised communities around the world. Some have had to suspend or cancel their projects, while others have struggled to access alternative banking services.
The government has acknowledged the problem and has launched a working group to explore how to improve access to banking for charities. The group, which includes representatives from the banking sector, the Charity Commission, the Treasury and the Foreign Office, is expected to report its findings by the end of the year.
The Charity Finance Group, a membership organisation that represents over 1,400 charities, has welcomed the initiative and has called for a “proportionate and risk-based” approach from banks. It has also urged charities to be proactive and transparent in their dealings with banks, and to provide evidence of their governance and compliance standards.
The banking sector has defended its actions and has said that it is committed to supporting charities. It has also pointed out that it faces heavy fines and sanctions if it fails to comply with the anti-money laundering regulations.
The issue of bank account closures is not unique to the UK. According to a global survey by the Charity & Security Network, a US-based advocacy group, 37% of non-governmental organisations reported having difficulty accessing banking services in 2019. The survey also found that 15% of respondents had experienced account closures or terminations.
The survey attributed the problem to a phenomenon known as “de-risking”, which refers to the practice of banks withdrawing from or limiting their exposure to certain customers or markets that are deemed too risky or costly. The survey said that de-risking was driven by a combination of factors, including regulatory pressure, reputational risk, profitability concerns and lack of understanding of the charity sector.
The Charity & Security Network has called for a global dialogue between banks, regulators and charities to address the issue of de-risking and to find solutions that balance security and humanitarian needs. It has also recommended that charities adopt best practices such as conducting regular risk assessments, documenting their financial transactions and engaging with their banks on a regular basis.
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Source: Using Microsoft's Co-pilot, (powered by ChatGPT4) I asked it to "Write an article, with a interesting headline, on whether UK Banks are intentionally discouraging Charity accounts due to the costs to the Banks of carrying out the required money laundering checks". The text and post title above is what it created. I made some minor formatting changes and added the pictureWrtie an article, with a interesting headline, on whether UK Banks are intentionally discouraging Charity accounts due to the costs to the Banks of carrying out the required money laundering checks
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