De-risking’s negative impact on charities

International aid charities are vulnerable to banks’ de-risking strategies according to a report from the think-tank, Demos.

It recommends that charities should adopt a more professional approach to managing financial flows while banks should contemplate the ‘reputational returns’ associated with providing services to charities before refusing services.

Blocked donations
The report, Uncharitable Behaviour, by director of the Centre for Financial Crime and Security Studies (CFCSS), Tom Keatinge, cites several cases of charities finding that overseas donations, sometimes totaling millions of US dollars, had been delayed or blocked totally.

The report recommends that banks should look beyond profits, and consider the benefits of being associated with charities that facilitate humanitarian work.

Banks should also foster dialogue between themselves and the NGO sector, suggests Keatinge.

US-dollar flows
The report identified particular problems with flows of US-dollar denominated funds due to high levels of scrutiny by the US authorities.

It also found that some funds frequently had to be routed via third-party countries, while charities sometimes transferred funds in Euros or pounds, even though this attracted extra costs compared with US dollar transfers.

The report says banks’ de-risking decisions take place behind closed doors, and the possible negative consequences of this de-risking have so far been left unexplored.

The report, Uncharitable Behaviour can be found here:

Categories: Trade Based Financial crimes News

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