The impact of national and international counter-terror finance efforts on the work of NGOs has received marked attention in recent months. BBC Radio 4's File on 4 produced a comprehensive analysis of the effect of this legislation on donors operating in Syria; global standard-setter the Financial Action Task Force (FATF) published the results of its year-long typology study in its controversially entitled Risk of Terrorist Abuse in Non-profit Organisations; and Chairman of the UK Charity Commission William Shawcross has drawn regular attention to 'the risk of donors' money leaking out to support terrorism.'
But perhaps the most important and balanced assessment came with the recent publication by David Anderson QC, the UK's Independent Reviewer of Terrorism Legislation, of his annual review of the use of The Terrorism Act 2000, Etc. In December 2013 he indicated that he had been alerted to 'the actual or perceived constraints placed by counter-terrorism laws...on the activities of NGOs' and that he intended to look further at this matter. True to his word, his latest report provides a further assessment of these challenges, and whilst he expresses no opinion on whether the concerns raised by NGOs are justified, he does draw attention to the damage legal uncertainty can do to the operations of NGOs. In particular, the report highlights the 'acute concerns within the charitable sector regarding banks withdrawing or curtailing services to NGOs, resulting in delays or obstacles to the transfer of funds' and recommends dialogue between international NGOs and policy makers, including the Home Office and HM Treasury.
The statements by David Anderson are supported by the growing collection of evidence that users of the banking system that service 'high risk' communities or countries are losing 'Financial Access' as a result of the apparent de-risking process being implemented by banks. This de-risking process can be traced to the increasing imposition of significant fines by global regulators, in particular from the US but affecting banks around the world, as a result of perceived breaches of counter-illicit finance regulations, in particular counter-terror finance guidelines and sanctions designations. Given that the UK is a leading financial centre, home to a wide range of diaspora, and a significant 'exporter' of NGO aid and remittance finance to high risk geographies, UK banks are particularly vulnerable, and thus sensitive to these risks. For example, during summer 2013, Barclays provoked a storm of protest when it served account closure notices to over 200 high-risk clients (primarily remittance companies).
At the heart of these closures is the desire of banks to rid themselves of any business that might possibly expose them to fines and sanctions for contravening this increasingly tough global regulatory stance towards the facilitation (purposeful or otherwise) of illicit finance, in particular in security-related areas such as breaches of sanctions and the financing of terrorism.
Over the past twelve months, a number of high-profile figures have alluded to the desirability of striking a workable balance between regulation and the practical requirements of providing banking services. Alongside David Anderson, the Archbishop of Canterbury has called for banks to provide 'good banking,' questioning not only what is 'legal' but also what is 'right,' and Sir Richard Lambert's Banking Standards Review has called on banks to develop a culture aimed at winning back public trust, highlights the 'absence of any sense of duty to the [banking] customer,' and is seeking to encourage a debate about the role of banks in society.
Yet despite these bon mots much of the debate in this field is dominated by three key, apparently incontrovertible, beliefs. Global counter-terror finance guidelines are unchallengeable and generally implemented blindly by authorities and banks through fear of local or international sanction; NGOs are 'particularly vulnerable' to abuse and should thus be treated as high-risk clients by those that provide them with financial services; and, NGOs are not especially profitable clients for banks.
The result is that the 'risk v's reward' analysis conducted by banks removes any incentive for them to provide banking services to NGOs. The perceived high-risk nature of the business these clients undertake, supported by the interpretation of counter-illicit finance regulation, provides the necessary reason to reduce or withdraw services and close accounts.
Whilst maintaining strict controls over financial flows is an important element of the global counter-terrorism effort, the unintended consequences of these measures are generally ignored. This situation will not change unless banks reframe their decision-making criteria away from one dominated by profitability, to one that includes a suitable element of doing what is 'right'. The Financial Access issues that NGOs face are problems that can be removed by banks and Government collaborating to exhibit leadership and engaging in dialogue with NGOs in order to make the 'right' decisions. For too long, banks and Government have placed ownership of this issue on each other thus avoiding addressing the challenge. David Anderson is right, urgent dialogue is required if loss of Financial Access is not to lead to a continued withdrawal of NGO activity in areas where it is desperately needed.