Report: Tighter Banking Regulations Putting Squeeze on UK Charities Working in Conflict Zones

By Kevin McCandless | May 17, 2017 | 2:43 AM EDT

Chatham House, the Royal Institute of International Affairs (Photo: Chatham House)

London ( – British charities are reporting a squeeze on their work in strife-torn regions of the world amid tighter counter-terror regulations and sanctions, as the banks whose services they use become increasingly wary of the risk.

Although the phenomenon of financial institutions withdrawing from conflict areas is not new, a recent paper by the London-based think tank Chatham House found that humanitarian groups are feeling the ripple effect more and more.

Studies by international bodies have said the reasons for the global trend by banks are complex, but it’s generally agreed they include much tighter counter-terrorism regulations and a decreased appetite for risk since the financial crash of 2008.

Last October the World Bank warned that the more volatile regions of the globe could be completely cut off from regulated financial services if the process known as “de-risking” continues.

In Britain, the Chatham House paper describes a situation in which some non-governmental organizations (NGOs) working abroad have seen their accounts closed, while others have been flooded with paperwork as banks seek to comply with international sanctions against terrorist groups or governments such as Syria’s Assad regime.

It was recently reported that Upendo UK, the British arm of a charity that helps homeless children in Kenya, had its bank account suddenly closed in February, although it was later restored.

In what the Chatham House paper described as a “war of attrition” even mundane tasks like opening a standard bank account have sometimes become a struggle.

In turn, this has led to lengthy delays in transferring money abroad to fund aid work, and programs have sometimes being drastically scaled back or shut down.

One representative of an NGO quoted anonymously in the paper said his group had fewer than 75 banking compliance requests a year prior to 2014, but in 2015, these soared to more than 600.

The Financial Action Task Force, the worldwide body that deals with the integrity of the international banking system, has warned that NGOs are particularly vulnerable for misuse by terrorists – although it officially dropped that recommendation last year..

William Shawcross, chairman of Britain’s Charity Commission, told the Daily Telegraph early this year that although Islamist extremism is not the most constant threat faced by charities, it is “the most potential dangerous threat.”

Banks also face risks as they navigate complicated U.S. and European Union sanctions against countries, organizations and individuals.

Most dollar-dominated transactions pass through American banks at some point, which mean they come under the jurisdiction of the U.S. Treasury’s Office of Foreign Assets Control (OFAC).

As the Chatham House paper notes, failure to comply with American laws can lead to huge fines, loss of U.S. banking licenses, and being designated as a primary money laundering concern.

The paper, which was based on a series of face-to-face interviews as well as other research, said that British NGOs generally accept the need for regulation, but say it has become disproportionate.

Charities have been forced to spend tens of thousands of dollars to hire extra staff and to seek legal advice to deal with the banking regulations.

Even with euro-based transactions, banks have reportedly asked at times for OFAC approval. Permission to send equipment to Syria such as computers and other items normally prohibited for export by the U.S. government has taken more than three months to obtain.

The Chatham House paper was co-authored by Florence Keen and Tom Keatinge, both at the Royal United Services Institute for Defense and Security Studies.

Keen said Tuesday bigger NGOs can handle the added costs but smaller ones were being harmed by having to do all of the “extra things that they weren’t doing before.”

The paper urged NGOs to engage with their banks – where they weren’t already doing so – to show how they have raised their operating standards, and also to educate them on the humanitarian nature of their work.

It also urged the British government to take leadership in this area, particularly as it has committed to providing hundreds of millions of pounds in additional aid to Syria and the surrounding regions by 2020 – and much of that aid will be channeled through British NGOs.

Andrew O’Brien, head of policy and engagement at the Charity Finance Group – which has more than 1,350 charities as members – said the British government was gradually getting better at helping NGOs, but that the improvement was “a slow, slow process.”