Under existing U.S. regulations, "there is no general requirement for U.S. depository institutions to conduct due diligence on a [foreign financial institution]'s customers," according to a August 30 fact sheet issued by the U.S.
A federal lawsuit alleging alleging bank "derisking" of charity accounts based on Arab ethnicity was unsuccessful, as the jury found in favor of the bank. Life for Relief and Development v. Bank of America, NA, was tried in August 2016 in federal district court in Detroit.
A new blog published by our colleagues at United Muslim Relief outlines the impact that bank de-risking is having on humanitarian aid delivery. In "Humanitarian Aid Threatened by Bank De-Risking," the authors explain that many banks avoid liability under federal counter-terrorism financing regulations by dropping any client doing work in areas deemed "high risk." This practice "hinders and endangers the work of disaster relief organizations and other NPOs," the article states.
Many organizations have struggled to maintain their work in conflict-ridden areas "because financial institutions have closed their accounts with little to no warning and, oftentimes, cancel transactions that are time-sensitive," the article explains. While banks undergo a risk-benefit calculation to determine whether to retain an account, the human lives at risk are not considered.
Read the full blog here.
A March 30 article in the Wall Street Journal has brought renewed attention to the problem of bank de-risking of charities. "Cautious Banks Hinder Charity Financing," by Rob Barry and Rachel Louise Ensign, is drawn from information provided by the Charity & Security Network and interviews with several C&SN members.
The crackdown on terrorism financing "has been a challenge for humanitarian agencies trying to deliver aid in conflict areas even though they are often exempt from sanctions," the article states. The problem is particularly frustrating because banks do not give an explanation for closing an account, and there is no opportunity to appeal the decision. Some charities have had multiple account closures over the past several years.
A companion article published the same day, "Losing Count: U.S. Terror Rules Drive Money Underground," focuses on the movement of funds to less-regulated channels as a result of de-risking.
A third article, "The Unintended Consequence of Closing High-Risk Accounts," was published April 2. The article mentions our February sign-on letter and our upcoming study on the scope of the de-risking problem.
Read our blog here.
Fifty-eight nonprofit organizations (NPOs) from around the world, including umbrella groups with more than 300 member organizations, have sent a letter asking the U.S. Departments of Treasury and State to convene a multi-stakeholder dialogue as part of a broader effort to ensure that registered, law-abiding NPOs are able to access the global financial system. The signatories to this letter represent more than $8.3 billion annually in humanitarian aid and services to the world’s most needy.
Read the letter here.
February 25, 2016
The Honorable Jacob J. Lew
Secretary, Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
The Honorable John F. Kerry
Secretary of State
320 21st St NW
Washington, DC 20451
On February 25, 2016, 58 nonprofit organizations (NPOs), including umbrella groups with more than 300 member organizations, sent a letter to the U.S. Departments of Treasury and State asking them to convene a multi-stakeholder dialogue as part of a broader effort to ensure that registered, law-abiding NPOs are able to access the global financial system.