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De-banking: can charities prevent bank account closures?

How has being ‘de-banked’ grown to be such a major risk for charities? What can charity financial professionals do to safeguard their organisations from it? And is there hope on the horizon? Sam Burne James has (some) of the answers…

padlock on computer keyboard. Words on note read your account is closed


“Can you just confirm – who is your charity’s biggest shareholder?” It’s not the sort of question a charity leader might expect to hear, less still from a supplier whose services are vital to its day-to-day operations.

And yet increasing numbers of charities report fielding such questions from their banks. There are growing concerns, including those highlighted in recent data from the Charity Commission for England and Wales (CCEW), that banks provide poor service, have little understanding of the charity sector, and are liable to close down accounts with next to no notice whatsoever.

One director at a UK-based charity supporting conflict-hit communities in the Middle East has told CFG that avoiding ‘de-banking’ had been a challenge throughout their decade in the role at the charity – sometimes more intense and sometimes less intense, with the ebb and flow of global politics.

The charity's finance leader, who preferred not to be named, explained that a bank whose services they had been happy with “one day just said ‘sorry, goodbye’, closed us down and sent our money back to us the next day.”

On another occasion, “it got to the point where we were really thinking we might no longer be able to operate”, they recall. And reflecting on the subsequent search for a new provider, they said: “It did seem like some banks just saw our name [which contains an area particularly affected by conflict] and thought ‘it’s not worth the bother’.”

It’s much the same for Sharon Martin, Chief Financial Officer at international wildlife conservation charity The Born Free Foundation, who says that the risk of de-banking “certainly gives me some sleepless nights”, not least during a recent annual compliance check with its main bank – this was expected to take up to six weeks, but dragged on for more than six months.

Martin says she is “really grateful” that the charity is large enough to have a “very helpful” relationship manager who supported the charity during this process, but adds: “It does make me worry for those smaller charities who might not have one.”

Martin had a similarly frustrating experience during the same process with the provider of a secondary bank account – several months into the process, they were told their account would be closed, with no warning or rationale given. That bank also, she remembers, demonstrated significant inflexibility in the frustrating process of trying to digitally verify the identity of a trustee resident outside of the UK.

Another recent woe concerned an overseas payment. Despite already successfully paying the same beneficiary not long previously, a remittance was returned minus two sets of foreign exchange fees – for converting money into local currency, and then back into pounds before its return journey. The bank had decided it did not satisfy their compliance checks. “This failed transaction cost the charity £1,500,” Martin sighs.

“Speaking to other charities, all these stories aren’t uncommon,” Martin adds.

Sharon Martin and Jonathan Orchard headshots

Sharon Martin, The Born Free Foundation and Jonathan Orchard, Sayer Vincent


Widespread misunderstanding

“Probably about once a week, banks ask us as auditors to confirm who the beneficial owners or majority shareholders are of a charity client, or another question that doesn’t really make sense,” reflects Jonathan Orchard, a partner at Sayer Vincent.

“These basic misunderstandings of what charities are can spiral. If a charity is unable to provide a straightforward answer to these automated emails and can’t speak to someone to explain why – and we all know how difficult it can be to get through to a real human being with some businesses – it sets off compliance alarm bells, and one thing leads to another quite quickly.”

This certainly doesn’t just affect charities with overseas activities. In February, a small children’s charity told BBC News of the “devastating” effect of having its accounts frozen. Cumbria Deaf Association’s CEO and chair were forced to meet operational costs out of their own pockets over recent months after being de-banked – just one example of where trustees and staff take on personal risk by finding work-arounds when managing money.

The Battle of Britain Memorial Trust took a similar hit in February, a case generating publicity partly through Nigel Farage, who had himself been controversially de-banked in 2023.

It doesn’t stop there. A recent report by the All-Party Parliamentary Group on Fair Business Banking warns of a ‘blanket de-risking of customer portfolios’, and this risk is one shared by non-profits in many other parts of the world.

You may well ask yourself; how did we get here?

Sara Elizabeth Dill, a partner at law firm Anethum Global, has been working in sanctions for more than a decade. Sara explains: “Increasingly, countries like the US and the UK are not just imposing but really actively enforcing sanctions, so banks are reluctant to have business relationships with any entities that might have ties to sanctioned individuals or groups,” she explains.

“Especially in the US, the potential criminal ramifications are severe for someone senior in the bank, including jail time or fines for violations,” she says, noting that banks are also wary of the risk of civil lawsuits.

“The potential for civil or criminal liability is what makes the banks so risk averse but, frankly, in a lot of respects they really have gone too far with it,” Dill adds. “There certainly needs to be a reform of sanctions regimes, and both government and private sector are calling for improvements and changes.”

The global nature of the banking sector means that that nervousness around overseas flows of money spills over into domestic matters.

On top of this, adds Orchard from Sayer Vincent: “What’s happening here in the UK is to do with day-to-day compliance, plus a lack of understanding of how charities operate and what they are, and then increased automation and the removal of people from the process, all coming together to just make it very easy for knee-jerk de-bankings to happen.”


Banking on solutions

“Understanding the needs of each sector will help us to think about both preventing de-banking and finding new solutions and ways of doing business,” comments Dr Clare Mills, Director of Policy and Communications, CFG.

“Charities often don’t understand what actions – or inactions – are likely to trigger the specific steps to de-banking. Likewise, banks don’t understand charity governance, charity structures or the realities of day-to-day operations, for example operating with no paid staff.

“Along with other sector partners, we’re working to bring about greater understanding and share practical information to both sectors, but this is only one part of the picture. The way banks do business within the regulatory framework is also part of it."

So how should charities react to this risk? Awareness itself is an important first step. No charity should assume that they are so respectable, or that their banking relationship is so strong, that they can’t be affected.

“The sad thing is that a lot of charities who are affected by de-risking, didn’t even realise the possibility until they were affected by it,” says Dill.

Alongside other interviewees, Dill agreed that having good due diligence processes and frameworks is important to reducing the potential for de-risking. There is a need for more guidance and training for charities and smaller entities in this area, she adds.

But, Dill adds, it is hard to provide a “general playbook” for avoiding it, given how unique each case is, and that it can have such innocuous roots. “Sometimes problems crop up just because a trustee was born in a particular country,” she explains.

“Speed is really important,” says Martin. “Respond as quickly as you can to anything the bank asks you. Give them as much information as possible when they’re asking you for things, and seek clarity about why they’re asking it, just in case they have misunderstood how your charity operates and is structured.

“And no matter how much of an admin nightmare it can be, absolutely do keep your bank mandate and internet banking access up-to-date for staff changes.”

Our aforementioned anonymous finance director adds: “If you’ve got a relationship manager, make efforts to maintain a good relationship with them. So make sure to check in with them if you’ve not spoken for a while. I get invited to a few things at the bank because of that relationship, and I absolutely make sure I turn up.”

He also suggests – and other interviewees make the same point – that you should consider abandoning financial monogamy. “As a charity we have a treasury policy of having a back-up bank in every regime. That means giving the back-up bank enough business to keep them interested, so it’s a bit of a balance, but we do simply have to assume that someone could just close us down without any warning.”

In addition, this charity keeps banking as a standing item on the action log for the charity’s finance and operations committee, to ensure the issue remains front of mind.

Given the difficulties experienced with a range of mainstream providers, should charities look to sector specialist banks as their primary or reserve provider? Potentially, our interviewees agree – and CAF Bank tells CFG that it saw a 30% rise in account openings in its last financial year – but with a caveat that as smaller operators, they may not offer the same range of services.

Headshots of Sara Dill and Neil Poynton

Sara Dill, Anethum Global and Neil Poynton, CAF Bank

Give and take

Tempting though it might be, simply bemoaning banks’ behaviour isn’t a way forward. “You should try to understand where the banks are coming from, too. They’re a tightly regulated sector, and they’re not trying to make it difficult for charities, even if it can feel that way,” says Jonathan Orchard.

He points out that one recent domestic de-banking story appears to have come about because a charity converted to Charitable Incorporated Organisation (CIO) status without letting their bank know. “A simple mistake, and one the sector should learn from,” he comments.

“All too often the problems appear to stem from a lack of understanding on either side,” comments Neil Poynton, Director of Charities, Products and Development at CAF Bank.

“That can be that banks that do not fully understand the nuances of different voluntary organisations and therefore request information that is not appropriate, or that voluntary organisations do not understand the rationale behind the bank’s requests. In many cases, it can be as simple as misunderstanding terminology.”

Poynton goes on to say that “continued dialogue and improved communication” between the two sectors is also key for solutions to the problem as a whole, and not just its individual flashpoints. It is in that spirit that the banking and voluntary sectors have in recent months been working together on a Voluntary Organisation Banking Guide, led by UK Finance.

A spokesperson for UK Finance - the trade body for the UK’s major banks - tells CFG that the guide is due to launch in June 2024, and comments: “This detailed guidance is designed to help charities get the best out of the financial services sector.”

The spokesperson also says that its member banks “continue to review and enhance the services they offer charities”, and comments: “The market is competitive and there are a variety of different service propositions to choose from.”

UK Finance's new guide will be relevant reading for any charity considering its banking relationships. But the spokesperson’s comment about it helping charities to “get the best out of” the banking sector might be taken to suggest that banks place the onus on charities to preserve the supplier-buyer relationship, rather than an intention to partner or adapt.

Certainly, Poynton from CAF Bank says that “upskilling bank staff to truly understand the complexities of the third sector” would be one “important” step the sector should take, among others. One interviewee suggested that banks ought to make more use of charity regulators' registers, to ensure they retain up-to-date information.

“CFG understands the level to which banks are highly regulated and scrutinised. We also recognise that current de-banking trends emanate ultimately from legislation designed to remove potential risks to society, be it fraud or terrorist finance. Absolutely no one wants funds to end up in the hands of the wrong people.

“But the banking sector cannot fail to recognise that, in some cases, it is going too far in the application of those rules, or at other times is using blunt tools and technologies where person to person engagement is vital,” adds Mills.

“Ultimately, we need new, big-picture thinking. For example, how can banks and regulation be more proportionate? Should financial regulators and charity regulators work more closely together? Should the right to at least a basic bank account, which currently only exists for individuals, be extended to charities?

“We believe new approaches and solutions can be found but all relevant parties must continue meaningful, open dialogue. We’ve certainly made a start by getting around the table. We now hope that that work will translate into increased understanding and good, long-term solutions.”

These questions won’t get answered quickly, of course. Meanwhile, charity finance leaders must continue or expand their efforts to safeguard their banking relationships. After all, you wouldn’t want your ‘shareholders’ to get worried.

Survey: can we bank on the banks?

As part of the Civil Society Group, CFG is conducting a survey on your organisation's experience of banking. Your insights will help us to advocate for better banking services for charitable organisations. Please complete our survey by 15 May.

Concerns or thoughts?

If you're concerned about de-banking or have questions about the issues raised in this article, email CFG's policy team or follow us on LinkedIn where we'll be providing more insights and policy news in the coming months.


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