Roundtables to address de-risking: lessons learned

NPOs often encounter barriers to accessing financial services due a combination of stringent anti-money laundering and counter-terrorist financing regulations and the perception by banks of nonprofits as being high-risk and low-profit. These regulations, while designed to prevent illicit activities, have resulted in NPO’s being de-risked, in other words it means their accounts being closed, facing issues opening bank accounts and facing delays and cancellation of transfers. These severely impact the operational space of civil society organizations and has far reaching societal implications.

Based on interviews with Lia van Broekhoven and Thalia Malmberg of Human Security Collective, this article discusses the structure, participation, process, and decision making of Roundtables and outline some of the lessons learned from the Roundtable in the Netherlands and other countries for a “best practice” on how financial institutions can work with non-profit organizations to prevent derisking.

Roadmap for Financial Institutions and NPOs

Some best practices for roundtables and discussions include:

1. creating a framework document to safeguard institutional memory;
2. ensuring a mix of stakeholders and different representatives;
3. facilitating greater openness and confidentiality given the sensitivity of issues discussed;
4. managing expectations;
5. institutionalizing and sustaining dialogue for future progress.

For a more detailed roadmap, the Norwegian Refuge Council created a guide for tri-sector groups addressing the impact of derisking. The guide encourages NGOs and governments to work with a variety of private and public sector entities, including financial institutions, financial technology (fintech), and medical institutions. Moreover, the guide encourages national stakeholder dialogues to work together to share best practices, use one another to build capacity and resources, and create a common platform to share research and events.

In addition to Roundtable discussion where stakeholders convene to discuss best practices for working together, Lia van Broekhoven had additional advice for financial institutions working with non-profits. First, financial institutions should ensure that compliance officers are trained to understand non-profit organizations and how they work because many non-profits are derisked in the onboarding stage of opening an account with a financial institution. Compliance officers often require specialized training to understand why non-profits do not pose a risk to the financial institution. Second, financial institutions should work across many departments to understand what derisking means and how it can impact a non-profit organization in the long term. Third, financial institutions should consider how derisking non-profit organizations could work against ESG goals. Because many NPOs serve as the link to implement business and human rights policies, derisking NPOs could sever this tie and limit the organization’s impact. Understanding how financial institutions impact NPOs and provide financial access could be a topic addressed in Annual Reports as a part of ESG initiatives. Finally, financial institutions should understand that NPOs are neutral risks and ensure that financial institutions are using a risk neutral standard when determining whether a NPO should have financial access

Lessons from the Netherlands

In 2017, the Netherlands held the first Dutch Roundtable on Financial Access for NPOs. The first Roundtable was co-convened by Dutch NPO Human Security Collective, the Ministry of Finance, Ministry of Foreign Affairs, and the Dutch Banking Association (NVB) with the goal to consider issues regarding bank derisking and its impact on NPOs’ access to financial services.

One successful feature of the Dutch Roundtable is that non-profit organizations are included in the planning and agenda-setting of this meeting.  Moreover, the government stakeholders must also be a part of the meeting but generally are career civil servants working to implement policy moving postings every two to three years. Allowing NPOs to set the agenda and avoiding high level civil servants or elected officials prevents the Roundtables from becoming overly politicized meetings and instead allows government stakeholders, NPOs, and financial institutions to work together to understand one another. One downside of working with civil servants (at least in the Netherlands) is that there is quite a high level of turn-over at the Ministries, so that requires a lot of re-investment on the side of NPOs in maintaining those relationships and getting the buy-in of the new staff.

Thanks to the Dutch Roundtable, the Dutch Banking Association (“NVB”), a non-profit association linking banks and the public through dialogue, in consultation with the bank supervisor De Nederlandse Bank (DNB) and the Ministry of Finance, published the Sector Baselines for NPOs. The NVB encourages financial institutions and NPOs to use proportionate risk-awareness. The NVB lists risk reducing and risk increasing descriptions for eight factors: governance, transparency, reputation, funding, geographies, transactions, objectives, and industry associations. The NVB provides use cases and examples for how financial institutions should respond to various scenarios. The NVB also encourages financial institution to seek additional information only when it is needed to mitigate perceived risk to strike a balance between financial inclusion and preventing money laundering and terrorist financing.  This Sector Baseline is currently being rolled out at the various banks and the NVB will be monitoring its implementation and effectiveness in combatting de-risking.

The CBF, Dutch fundraising regulator, created a Charity Overview Map to assist NPOs to understand what financial institutions should consider when conducting due diligence.[6] Some recommendations include considering whether an NPO has a relationship with a politically exposed person or activities that the bank considers risky, including peace building, reconciliation, disarmament, or humanitarian aid. Banks are increasingly alert regarding organizations that operate on a religious basis.  Providing NPOs with clear and accessible information is one way that banks can support financial inclusion. 

Financial institutions are also stepping up to the plate to include NPOs in the financial system. For example, ABN AMRO, a Dutch bank, includes information on its website for NPOs to prepare themselves as clients explaining how the bank considers various elements of risk including NPO governance, political activities, and cash flow visibility. ABN AMRO’s practical steps in preparing and including NPOs as a client should be a roadmap for other financial institutions to follow.

Lessons from Other Countries

In response to humanitarian groups and a call to action beginning in 2017, the French government has led a tripartite dialogue between banks, the government including the Ministry of Finance and the Ministry of Foreign Affairs, and NPOs. As a result, France also began working with the National Bank, other banks and NPOs to address impact of FATF standards. Still, financial institutions have been reluctant to address NPOs’ concerns related to financial access. Dialogue between French banks and NPOs stalled when in December of 2021 the French Ministry for Europe and Foreign Affaires issued screening guidelines that required all individuals and legal persons who receive funds through international solidarity projects financed by French institutional donors to verify that its donors where not on international or national sanctions lists; the Conseil d’Etat later repealed this screening guideline in 2023.

A tri-sector dialogue process on addressing bank de-risking of NPOs has been set up in Nigeria. NPO Coalition Member Spaces for Change convened a conference with banks and civil society early in 2024 to examine how AML/CFT policies and measures enforced by banks impact non-profit organizations (NPOs) in Nigeria. Following on from this meeting and the recommendations that emerged from it, Spaces for Change have set up a tri-sector dialogue process in Nigeria. To date, about 20 banks, NPOs and banking industry regulators have signed on to being a part of this multi-stakeholder working group on charities to discuss the effective operationalization of the risk-based approach when it comes to NPOs so that both financial integrity and financial inclusion objectives are met. 

Since 2014, the United Kingdom Trisector Working Group established by the Ministry of Home Affairs address how counterterrorism regulations impact NPOs linking the government, NPOs, and financial institutions. The Working Group uses different workstreams, including research and innovation, legislative guidance, operational guidance, and communication, to organize itself and meet its goals. A set of non-binding principles encouraging collaboration underpin the work done by the group.

In 2019, the Swiss government, ACAMS, the European Union, and the IHEID created the Syria Risk Compliance Dialogue to address the impact of international sanctions on humanitarian actors. The German Ministry of Finance and VENRO, a humanitarian organization made up of NPOs, is exploring the possibility of a stakeholder dialogue. In Sweden, NPOs informed HSC about their interest in developing a dialogue with the Swedish International Development Cooperation Agency and other NPOs regarding the transfer of humanitarian funds to Syria.

In 2017, the United States, the World Bank, and the Association of Certified Anti-Money Laundering Specialists (ACAMS) organized a Stakeholder Dialogue on Derisking that included stakeholders from the government, international organizations, NPOs, and financial institutions.The results of this roundtable included standardized list of information that banks require to conduct due diligence on NPO clients; additional research on the challenges that NPOs face to financial access; and an exploration of technology to lower the costs of compliance in providing banking services to NPOs. The Stakeholder Dialogue also set out to clarify the regulatory requirements and risk guidance through the revision of the BSA/AML Examination Manual to implement FATF Recommendation 8.

Important Resources: 

[1] Erica Moret, The Developing Role of National Tri-Sector Groups in Addressing Financial Sector Derisking, Norwegian Refugee Council (2024) https://www.nrc.no/globalassets/pdf/reports/national-tri-sector-groups/the-developing-role-of-national-tri-sector-working-groups-in-addressing-financial-sector-derisking.pdf 
[2] Sector Industry Baseline Not-for -Profit Organizations, Dutch Bank. Assoc. (2023) hscollective.org/assets/nvb-sector-standard-not-for-profit-organisations-npo-_eng.pdf (last visited Feb. 11, 2024). 
[3] Spaces for Change Report: https://fatfplatform.org/assets/BANKS-AND-CIVIL-SOCIETY-updated-april-29-10am_240430_071039.pdf
[4] Charity Overview Map, CBF https://cbf.nl/media/pages/relevante-documenten/overzichtskaart-goede-doelen-controles-bank/1defbfe821-1685620516/overzichtskaart-goede-doelen-pdf.pdf 
[5] Lia van Broekhoven & Sangeeta Goswami, Can Stakeholder Dialogues Help Solve Financial Access Restrictions Faced by Non-Profit Organizations That Stem from Countering Terrorism Financing Standards and International Sanctions?103 (916-917) Int. Rev. Red Cross 717, 732 (2022).
[6] Coordination Sud, Screening Guidelines for International Aid Repealed by the French Supreme Court.
[7] Lia van Broekhoven & Sangeeta Goswami, Can Stakeholder Dialogues Help Solve Financial Access Restrictions Faced by Non-Profit Organizations That Stem from Countering Terrorism Financing Standards and International Sanctions?103 (916-917) Int. Rev. Red Cross 717, 732 (2022).
[7] Sue Eckert, Counterterrorism Sanctions and Financial Access Challenges: Course Corrections to Safeguard Humanitarian Action, 103 (916-917) Int. Rev. Red Cross 415, 437 (2021).