Charity Blames Anti-Terror Regulations for Bank’s Refusal of Services

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Date: 
November 13, 2012

A UK-based charity says counterterrorism regulations are to blame for a Swiss bank closing its account and blocking its supporters from making charitable donations during the summer of 2012.  Islamic Relief (IR), one of the UK’s largest charitable non-governmental organizations (NGO), says it received at least 50 complaints from people trying to contribute during Eid al-Adha (also called Feast of the Sacrifice) but whose donations were rejected by UBS. Despite a brief statement from the bank that offered no explanation, IR believes that international anti-terror finance measures are being used by banks to deny services to humanitarian organizations working in areas deemed “high-risk” by financial institutions.   UBS’ action is similar to the decision made by Minnesota-area banks in late 2011 that severely reduced the amount of money Somali-Americans could send to family living in the Horn of Africa.

Haroun Atallah, finance and services director of Islamic Relief Worldwide, provided a detailed account to civilsociety.co.uk about the closure of the charity’s account:

“The charity had opened an account with the bank in July this year with the intention of using it for donations from high net worth individuals. But by August the charity hadn't yet activated it and was then contacted to advise the account would be closed down. At that time, Atallah said, Islamic Relief did not think it was being targeted. But when it was advised in September by UBS customers that their donations to the charity had been blocked by the bank, Islamic Relief realized it had been black-listed. Islamic Relief was offered no explanation by UBS for the blocks. Despite writing to the managing director of the Swiss bank, only a "bland response" advising the action was in line with UBS policy was received.”

"The regulators have introduced these rules to fight terror but they are not having the desired effect," Atallah said at a meeting of charity regulators that included representatives from the UK Charity Commission and the Internal Revenue Services (IRS) from the U.S. at the British House of Lords on Nov. 7.

Atallah explained how banks like UBS are curtailing services to charities that work in areas considered to be risky out of fear of governments sanctions under broad anti-terror finance rules and international monetary regulating bodies like the Financial Action task Force (FATF).  These regimes, Hatallah says, have a strong influence on banking policy that lead to some banks "going over the top in their reaction.”  It is not clear how much this problem disproportionately impacts Muslim charities.

"The impact we see on the ground in Islamic Relief is that, like UBS, they were fined, they upped their risk assessment criteria, and we got caught in that,” Attallah said. “When they raise the standards, I can’t speculate exactly why we appear as a higher risk than other organizations, but it means we have become a higher risk. And from their [the banks'] point of view, 'we can get rid of this risk by stopping work with these people'."

"Charities like us were put in a situation where you had to explain yourself at every juncture, way beyond what any other charity had to do,” he added.

The creation and enforcement of these rules after 9/11, Atallah said, has made reliable financial services difficult to obtain for many charities working in the Middle East, leading many to shut down, leaving their beneficiaries without recourse. In one example, he said a Persian Gulf charity that had been supporting nearly 6,000 people was forced to close after its accounts were suspended. "Those people will survive," Atallah said, "But they will not be able to go to school, and they will be much poorer.”