A combination of US counter-terrorist financing law and international sanctions set the stage for humanitarian aid delivery challenges in Syria. On top of that, the largest Syrian banks are sanctioned by the various countries, including the US, and the banking system outside of government control has collapsed. The countries bordering Syria (Turkey, Lebanon and Jordan) present additional challenges in the form of regulatory requirements and financial systems. All of this has created "a complex environment for aid agencies wishing to move funds for humanitarian purposes into the country, or through neighbouring states supporting regional humanitarian efforts," according to a new report from the Humanitarian Policy Group at the Overseas Development Institute and The Humanitarian Forum, The impact of bank de-risking on the humanitarian response to the Syrian Crisis.
This environment has made it difficult for aid groups to to pay local staff and suppliers and run their programs, and has increased their costs, the report states. Among the 60 organizations interviewed for this report:
- as much as one-third of donor funds were held at any one time between correspondent and recipient banks for between four and six months;
- all but six NGOs had to reorganize programming priorities to focus on the least-contentious areas and projects less vulnerable to bank obstruction.
The authors conclude that bank derisking has reduced the cash available to the NGO community at any given point by at least 35% and that these funds remain unavailable for between three and five months longer than was historically the case. To alleviate these problems, the authors recommend the following:
- Banks agree a due diligence code of conduct on the types of information that are routinely required, and what constitutes ‘sufficient’ information. Banks make this code of conduct available.
- Donors agree to be more flexible with the currencies used in transactions.
- A mechanism for agreeing a list (operated by NGOs) of acceptable organizations from which NGOs can purchase supplies and commodities, and with which they can conduct financial transactions.
- An agreed code of conduct between banks and NGOs on what constitutes sufficient compliance and transparency in terms of systems and recordkeeping, and the exceptions that are possible in the most dire circumstances.
- An international humanitarian financial clearing system to supplement the work of correspondent banks.
- Putting hawala banking channels on a clearer regulatory basis in conditions where they are the only viable means of moving money into areas of significant humanitarian need.
- Donors recognize the higher overhead costs associated with operating in Syria and increase their coverage of these costs for local NGOs.