Financial Access Overview

In recent years, access to financial services has become increasingly difficult for civil society organizations that must conduct international financial transactions in order to operate overseas where their work is needed most. Financial institutions may delay, or refuse to make, transfers between organizations. Sometimes, nonprofit organizations (NPOs) are turned away as customers or have their accounts closed.

Nonprofits in Search of Financial Access: Real Problems, Potential Solutions

Event Date: 
May 11, 2017

Thursday, May 11, 2017

View the webinar recording

Nonprofits around the world are having difficulty accessing banking services. U.S. and other countries’ financial regulations, rooted in a comprehensive counter-terror finance regime, and the ever-shifting political landscape set the stage for financial institutions around the globe to continually re-evaluate their risk profiles. As a result, accounts are closed or never opened, wire transfers are delayed and correspondent banking relationships are severed. This, in turn, impacts vital humanitarian aid, development, peacebuilding, human rights, and other programming. 

Two recent reports examine the scope and impacts of this problem. Financial Access for U.S. Nonprofits, by the Charity & Security Network, provides the first empirical data on the issue and sets out a series of recommendations. Tightening the Purse Strings, by the Women Peacemakers Program and Duke Law International Human Rights Clinic, looks at the effects of counter-terrorism finance measures on gender equality and security. 

Senate Hearings Stress Value of International Aid, Highlight Nonprofit Banking Woes

Date: 
May 10, 2017

Two Senate committee hearings in early May highlighted the importance of philanthropy and international aid, as well as the challenges faced by nonprofits in accessing banking services to finance that aid. 

On May 3, the Senate Foreign Relations Subcommittee on Multilateral, International Development, Multilateral Institutions, and International Economic, Energy and Environmental Policy held a hearing on "Global Philanthropy and Remittances and International Development." Speakers included InterAction CEO Sam Worthington and leaders in global philanthropy. Worthington described ways the U.S. government could improve partnerships with nongovernmental organizations (NGOs), including recognizing NGOs as donors, and leveraging private actors to give NGOs a diplomatic space in which to operate. He noted that 70 percent of international development response in Nigeria, Yemen, Somalia and South Sudan is performed by NGOs. 

Worthington also advocated for de-banking regulations, explaining that banks implement de-risking measures that legitimately reduce the improper management of funds, but also increase the challenges for NGOs and households to transfer money internationally. Responsible NGOs should bot be categorized as high-risk by financial institutions, he said. 

At the same hearing, Una Osili, professor of economics and director of research for The Lilly Family School of Philanthropy at Indiana University, said that cross-border philanthropy is subject to stricter oversight to reduce the risk of funds falling into the hands of terrorist organizations, but that these same regulations and reporting requirements constrict the ability of philanthropic actors to address global challenges. 

A May 4 hearing in the Senate Foreign Relations committee focused on "International Development: Value Added through Private Sector Engagement," with a panel of speakers from companies such as MasterCard, Coco-Cola and Starbucks. At the hearing, Sen. Ben Cardin (D-MD) called foreign aid critical to promoting the power of democracy and the importance of human rights, creating a world that is safer for the U.S. Former Rep. Jim Kolbe (R-AZ), honorary co-chair of Modernizing Foreign Assistance Network, likewise noted that foreign assistance is critical to combating terror, aiding failed states and continuing improvements made in developing countries. 

Listen to the May 3 subcommittee hearing. 

Listen to the May 4 committee hearing. 

UK Study Addresses Conflict between Humanitarian, Counterterrorism Goals

A new study from Chatham House and the Royal United Services Institute in the UK finds that humanitarian objectives are often stymied by counterterrorism laws designed to prevent assistance or funds going to non-state armed groups. Humanitarian Action and Non-state Armed Groups: The UK Regulatory Environment asserts that to resolve this conflict, the UK government needs to adopt a clear, unified approach to reconciling its humanitarian and counterterrorism priorities. 

The report also addresses the global phenomenon of bank de-risking and its impact on humanitarian aid organizations. The report authors urge the UK government to move proactively to counter this trend and to engage in international dialogue aimed at finding solutions. 

Read more

UK Study Seeks Reconciliation of Humanitarian, Counterterrorism Goals

Date: 
May 11, 2017

A new study from Chatham House and the Royal United Services Institute in the UK finds that humanitarian objectives are often stymied by counterterrorism laws designed to prevent assistance or funds going to non-state armed groups. Humanitarian Action and Non-state Armed Groups: The UK Regulatory Environment asserts that to resolve this conflict, the UK government needs to adopt a clear, unified approach to reconciling its humanitarian and counterterrorism priorities. 

The report finds that the licensing system under sanctions regimes is opaque and ineffective, recommending that the UK government seek humanitarian exemptions, as well as simplify and expedite its domestic licensing system. It also notes that although the government cites prosecutorial discretion in asserting that there is no need for additional guidance around potential criminal penalties for incidental payments to listed groups, "prosecutorial discretion is insufficient comfort for humanitarian actors anxious to avoid breaking the law and the wide offences have a 'chilling effect'." 

Two UK government has dismissed recommendations to explore the possibility of introducing exceptions to counterterrorism legislation for humanitarian activities. It argues that legislative change would create a loophole open to exploitation. The Chatham House study recommends that this option should be explored further, with consideration of foreign laws and international instruments. 

The report also addresses the global phenomenon of bank de-risking and its impact on humanitarian aid organizations. The report authors urge the UK government to move proactively to counter this trend and to engage in international dialogue aimed at finding solutions. 

Read the full report

Counterterror Rules Impact Gender Equality

Although they're not alone in shouldering the weight of the counter-terror financing legal environment, "the specific profile of women's rights organizing and organizations has meant that they experience these rules in a number of adverse and often gender-specific ways," according to a new report from Women Peacemakers Program and the International Human Rights Clinic at Duke University Law School, Tightening the Purse Strings: What Countering Terrorism Financing Costs Gender Equality and Security.

While 87% of the report's survey respondents said their work involved countering terrorism and/or violent extremism, 90% said that counterterrorism measures had an adverse impact on their work, and the report notes that counter-terror financing regimes have exacerbated this. Ultimately, these measures have dictated how, where and sometimes if women's rights organizations can undertake their core work. 

Read the full report here

Report: Uncharitable Behavior and Banks That Drop Nonprofit Customers

January 14, 2015

A new study by UK financial expert Tom Keatinge examines the problems UK charities are experiencing with access to financial services for their international operations. U.S. charities face the same kinds of barriers, and a similar study is needed on the problems they face. The Press Release from Demos, which published the study, said the report:

- Reveals challenges NGOs face in securing and transferring funds due to the counter-terrorism regulation fears of banks

- Calls on banks, charities, and government bodies to improve dialogue on resulting financial restrictions and impact on charitable activity

- Critical aid struggling to reach conflict zones such as Syria

The full text of the study can be found here.

Two-Thirds of U.S. Nonprofits Have Financial Access Difficulties

Date: 
February 1, 2017

View a PDF of this press release

 

Washington, February 7, 2017 –Two-thirds of U.S.-based nonprofit organizations (NPOs) working abroad are facing problems accessing financial services, according to a comprehensive report released today by the Charity & Security Network. 

The report, Financial Access for U.S. Nonprofits, is based on the first-ever empirical study of the global phenomenon known as “derisking,” as it relates to U.S.-based NPOs. Derisking refers to financial institutions terminating or restricting business relationships to avoid rather than manage risk. The report also reflects information from numerous focus group sessions and interviews with stakeholders over the last year. It outlines and analyzes the scope, frequency, and prevalence of various financial access problems, including delayed wire transfers, account refusals and closures, and unusual additional documentation requests. The report also provides recommendations to address these challenges. Author Sue E. Eckert of the Center for New American Security noted, “At a time of unprecedented need in regions of conflict, humanitarian crises, and natural disaster, American charities’ efforts to save lives and prevent the further erosion of democracy and human rights are being stymied unnecessarily. The data are clear: there is a serious and systemic problem that must be addressed.”

Webcast Available

 Financial Access
 for Nonprofits

 

Did you miss our February 7 report launch at CSIS? You can now view the webcast of both the panel discussion and the Q&A.
 
 
Speakers included:

Sue Eckert, Adjunct Senior Fellow, Center for a New American Security; and Adjunct Professor of Law, Case Western Reserve Law School

Emile van der does de Willebois, Global Lead, Financial Market Integrity & Asset Recovery, World Bank Group

Michael Pisa, Policy Fellow, Center for Global Development  

Scott Paul, Senior Humanitarian Policy Advisory, Oxfam America

Moderated by:

Shannon N. Green. Senior Fellow and Director, Human Rights Initiative, CSIS

Webcast available here

 

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