Banks have been accused of putting lives at risk by shutting down accounts belonging to charities without warning.
Lenders have been subject to more stringent rules introduced after a string of scandals and now face stiff penalties if they do not have adequate measures in place to prevent financial crimes such as money laundering.
There is no suggestion that any charities who have had their accounts suspended are guilty of wrongdoing. Instead, cautious banks have increasingly closed accounts of organisations with links to countries deemed high risk. Many charities have links to countries in the developing world, raising red flags in banks’ risk procedures.
HSBC suspended the accounts of a medical research institute, which aims to improve treatments in poor countries, threatening the charity’s future, the Observer reported.
“Our account has been indefinitely suspended because one of our board members is from Egypt, and we make money transfers to this and other countries deemed high risk,” a spokesperson for the charity told the newspaper.
“As a small charity this will likely force us into administration.” HSBC has since reinstated the account after press reports of the closed account.
Last year, the Financial Conduct Authority found that small charities were among those at greatest threat of losing banking services as banks continue to shed any customers. The moves could put lives at risk, the FCA found.
“We are not talking here about the freedom to give money directly to known terrorists, but the ability to distribute aid money using local systems which may inevitably pass through areas controlled by terrorists,” the FCA's report read.
“We are also talking about maintaining aid flows to areas where the recipients may resort, out of desperation, to aggressive measures against aid staff.”
A spokesperson for HSBC said: “We aspire to set the industry standard for knowing our customers and detecting, deterring and protecting against financial crime,” says HSBC.
“This includes asking existing customers to provide additional information about themselves and the intended nature of their business with HSBC. Where a customer doesn’t supply all of the information, HSBC may be forced to restrict their services. A decision of this kind is never taken lightly and we will continue to work with the government and industry bodies to support the not-for-profit sector and to help charity customers manage risk in their operations."
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