Accountants in England and Wales demand action to improve 'crisis' in banking services for charities

Monday, 22 April 2024
Urgent action is needed to deal with the banking challenges faced by charities in their day-to-day operations, according to the Institute of Chartered Accountants in England and Wales (ICAEW).

The list of charities' concerns includes difficulty in opening accounts with appropriate internal controls such as dual payment authorisation; accounts being frozen or closed without warning, usually due to identification issues; inadequate customer service; high charges and lengthy delays in implementing new mandates.

'We hear regularly that charities, particularly smaller and unincorporated ones, are facing a myriad of obstacles with their banking needs' said the ICAEW. The banking problems facing charities are so widespread that ICAEW has been prompted to raise the difficulties reported by members with the charity regulators, UK Finance and the Financial Conduct Authority, it said.

Part of the problem is due to charities' widespread use of volunteer trustees and treasurers, which banks often fail to take into consideration, says the ICAEW. Sometimes banks ask for proof of address and ID from multiple volunteer trustees who are not in the same place all the time. If the information is not forthcoming the charity's account is closed without notice, citing compliance risk as a significant concern. The ICAEW added that typical bank forms are not designed for charities and fail to include comment fields that would allow trustees the opportunity to explain why none of the given options apply, one example being that banks regularly ask charities who their beneficial owners are.

However, according to a recent report from the All-Party Parliamentary Group on Fair Business Banking, the banks' behaviour could be to some extent driven by their attitude to risk and the threat to charities from financial crime. The result is that charities are subjected to increased due diligence from banks, particularly where the charity operates internationally and needs to transfer money abroad, sometimes to areas of political unrest and conflict. This is unlikely to change in the short term, said the ICAEW, which recommends that charities are 'proactive in their banking relationship'.

The Charities Commission for England and Wales came to similar conclusions in early findings from a survey published in March 2024. It said at the time that it was 'shocked but not surprised by the figures, which offer undeniable evidence of the extent and impact of the appalling service charities receive from some banks'.


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