A series of case studies on the implications of bank de-risking for humanitarian non-governmental organizations in four contexts revealed a number of common themes and recommendations. These are set out in a policy brief, Counter-terrorism, bank de-risking and humanitarian response: a path forward.
As the brief explains, although preventing the flow of funds to terrorist groups is a laudable goal, these policies have had "far-reaching and unintended consequences, including for the ability of humanitarian organisations to reach people in need, particularly in areas under the control of proscribed groups. Banks have closed the accounts of humanitarian organizations, and their transactions have been delayed or blocked. This has forced these groups to find other ways of moving money for time-sensitive programming, forcing "increasing volumes of funds through informal channels, including hawala money transfer networks."
The four case studies examined the impact of de-risking on humanitarian groups working in the occupied Palestinian territory, Somalia, Syria and Yemen. The policy brief's authors - Stuart Gordon of the London School of Economics and Political Science, Sherine El Taraboulsi-McCarthy of the Humanitarian Policy Group at the Overseas Development Institute - found five common aspects in the studies:
1. Counterterrorism laws and policies have created "an environment where security is prioritised over the humanitarian imperative." This means that local organizations have been denied access to humanitarian and development funds and has created a chilling effect among NGOs. In Somalia, NGOs reported that their transactions were delayed or frozen without explanation, with these delays lasting as much as 20 times longer than normal. One group faced delays that lasted three years.
2. Muslim charities, or those with Muslim names, have faced the greatest obstacles, even though non-Muslim agencies are increasingly forced to rely on Muslim charities to deliver assistance in places such as Afghanistan, Somalia, Syria and Yemen. Syrian NGOs based in Turkey reported widespread de-banking by Turkish banks as well as blockages in money transfers from abroad, "particularly when the Syrian organisation used 'Syria" or 'Sham' (referencing Damascus and its environs) in their title." The authors note, "Only when they changed their name and logo, removing any indication that this was an Islamic or Syrian organisation .... were they able to obtain banking services again."
3. Global counterterrorism measures have been adopted locally in a number of countries in the Middle East, resulting in a narrowing of regional philanthropic practices and, in turn, limited the availability of funds for local organizations. In Kuwait, several domestic banks have"preemptively severed links with some charities and foreign exchange houses to avoid perceptions of risk that could prompt global banks to cut relations with them."
4. Reputational harm to NGOs, donors and local banks seriously increases the chances of bank de-risking. According to one focus group participant in Palestine, being denied a transaction by an international bank "renders them suspect and puts them at risk of not being awarded grants by donors." Donors are responding to de-risking by selecting regions and groups that present as little reputational risk as possible. Certain forms of assistance, such as cash programming, has been severely limited because it is viewed as risky in light of counterterrorism policies, although it is viewed as a positive development in humanitarian terms.
5. Bank de-risking is contributing to war economies and the expansion of informal and potentially corrupt channels for financial access and the transfer of funds. In Yemen, the problem has created a black market trade in food and fuel and the expansion of other transfer routes that rely on potentially corrupt money brokers. An aid worker in Somalia claimed that 70% of the population used mobile money, which is not regulated.
In addition, the authors make several recommendations to bankers, regulators, NGOs and civil society, donors and international humanitarian organizations, in order to pave a path towards a proportionate risk-based approach. These includes agreement on a due diligence code of conduct for NGOs, specifying the type of information that banks need and what constitutes "sufficient" information; placing hawala banking channels on a clearer regulatory basis in conditions where it is the only way of moving money; and a concerted advocacy efforts by groups and foundations from the global North and South to make a case for regulating the sector in a proportional manner "that does not render vulnerable populations even more so."