Banks are increasingly being required to shore up government agendas in tackling money laundering and countering terrorism financing. However, the measures imposed by banks often have unintended consequences. And non profit organisations (NPOs) have been among those who have borne the brunt of this de-risking drive by banks. The creation and implementation of anti-money laundering and counter-terror financing legislation has impacted not only financial access by NPOs, leading to constrained civil society space, but also financial inclusion goals, with many of the world’s marginalised now not able to access banking facilities.
These reports/news items underline some of the issues in greater detail:
Ben Hayes, Lia van Broekhoven and Vanja Skoric write about 'De-risking and non-profits: how do you solve a problem that no-one wants to take responsibility for?' (openDemocracy, 11 July 2017). They analyse the problem and discuss possible solutions, including decisive action by the G20 to assess the impact, legitimacy and effectiveness of the whole system of international rules designed to combat money laundering and terrorist financing.
The World Bank and the Association of Certified Anti-Money Laundering Specialists (ACAMS) held a second roundtable in January 2017 to to help promote the access of humanitarian organisations to financial services and to discuss practical measures in terms of improving relations between NPOs and financial institutions; improving the regulatory and policy climate for financial access for NPOs; and building coalitions for sharing information and best practice. The report is here. This earlier (2016) report by the World Bank and ACAMS also reflects the findings of multiple stakeholders (regulatory and law enforcement officials, financial institutions, NPOs, IOs, government, academics, and policymakers) on de-risking.
The Charity & Security Network report on Financial Access for U.S. Nonprofits is the first ever empirical study on the de-risking phenomenon as it relates to nonprofits in the US. Financial access difficulties faced by nonprofits include delays in wire transfers, requests for unusual additional documentation, increased fees, account closures and account refusals. Among the major findings: • Two-thirds of all US nonprofits that work abroad are having financial access difficulties • Delays in wire transfers, which can last up to several months, are the most common problem, affecting 37% of nonprofits • 15% of nonprofits report having these problems constantly or regularly • One-third of NPOs have experienced fee increases, and 26% have faced additional, unusual documentation requests • Transfers to all parts of the globe are impacted; the problem is not limited to conflict zones or fragile and failing states • NPOs, categorically treated as high-risk, are sometimes forced to move money through less transparent, traceable, and safe channels as a result of delays in wire transfers and requests for additional documentation. When money cannot be transmitted in a timely manner, 42% of nonprofits report that they carry cash.
A report by the International Human Rights Clinic at Duke University School of Law and the Women Peacemakers Program in the Hague analyses how countering terrorism financing rules impact women’s rights organising, women’s rights organisations, and gender equality, including through de-risking. Read the report, Tightening the Purse Strings: What Countering Terrorism Financing Costs Gender Equality and Security, here.
A research report by the Financial Conduct Authority, London, looks at ´evidence of the reasons underpinning derisking, the nature, scale and impact of those activities and the extent to which AML/CFT considerations are part of these reasons´, Drivers & Impacts of Derisking, Artingstall, D., Dove, N., Howell, J., and Levi, M. (2016) London: Financial Conduct Authority.
A report in The Guardian examines how bank de-risking is cutting off lifelines to Somalia.
A BBC Radio 4 programme (July 2015) by Peter Oborne and Anna Meisel reveals how the decision was made in 2014 by international banking giant HSBC to suddenly close the bank accounts of several prominent British Muslims. The entire programme is available here. For a synopsis, see here.
Towards a more intelligent and intelligence-led bank de-risking, a 2015 report by Tom Keatinge on 'Identifying foreign terrorist fighters: The Role of Public-Private Partnership, Information Sharing and Financial Intelligence'.
Uncharitable Behaviour: Counter-terrorist regulation restricts charity banking worldwide, a 2014 report by Tom Keatinge for Demos.
Understanding Bank De-risking and its Effects on Financial Inclusion, a 2015 report by the Global Center on Cooperative Security.
Also, this blog, written by Transparency International and Global Witness in 2014, discusses the results of banks mis-applying global FATF rules to the detriment of financial inclusion goals .
And this blog by Charity & Security Network discusses how de-risking hurts charities and increases the risk of laundering.