Improving access to financial services for non-profit organisations

Every few weeks, Nelleke Hoffs, Business & Human Rights Advisor with ABN AMRO, hears from non-profit organisations about payments that have been blocked or accounts that have been frozen. Non-profit organisations regularly feel the negative impact of stricter anti-money laundering and anti-terrorist financing legislation, leading to incomprehension and anger in the sector. These organisations do important work, often in poor countries. So why are banks getting in the way?

Corruption

Nelleke says she understands their concerns: “Some non-profit organisations have abandoned the valuable work they do because of increasing regulatory pressure. Obviously, that shouldn’t be happening. We feel it’s important that these organisations should be able to fulfil their social mission. Not to mention that financial inclusion is one of the pillars underpinning the social impact ABN AMRO aims to create. Fortunately, in by far the majority of cases, things run smoothly. But there’s no getting away from the fact that we do unintentionally make things harder for non-profit organisations because of the rules and regulations in force.”

For one thing, this is because non-profit organisations can be susceptible to misuse, often operating in poor countries where corruption is rife. They can be exploited as vehicles for financing terrorism. Collaborating with local partners can pose risks as well, since donations may inadvertently end up being allocated to organisations committing human rights violations.

Gatekeeper

In the fight against money laundering and terrorist financing, banks have been given the role of gatekeeper. This means non-profit organisations face greater scrutiny when opening a bank account: they are required to prove that things like good governance protocols are in place.

Non-profits don’t understand why their motives are being questioned, says Lia van Broekhoven, director and co-founder of Human Security Collective, a foundation that works on issues relating to security and trust in society. “Non-profits are committed to their principles and want to get up and running. It often comes as an unpleasant surprise to them that opening a bank account or transferring money can be so challenging.”

Carefully considered

Figures on the number of non-profit organisations adversely affected by this legislation are hard to come by. Some are prepared to put up with the occasional problem, while others cease operations altogether or pursue their mission under a different legal status. And then there are the countless non-profits that have painstakingly ensured all the necessary safeguards are in place to be able to work relatively disruption-free.

“Just because a non-profit can’t open a bank account doesn’t automatically mean they’ve been treated unfairly,” Nelleke explains. “The bank’s analysts don’t just rush into things. The decisions they make are carefully considered. A non-profit organisation may have a very noble mission, but may not have a clear picture of its partners on the ground or the risk its activities may entail. These organisations just haven’t asked themselves the right questions.”

Getting the word out

To avoid this scenario, ABN AMRO is investing extra to get the word out. A new page on the bank’s website offers all the information non-profit organisations need to fully prepare themselves. It explains the various risk elements the bank analyses, like independent governance, political activities and cash flow visibility.

Human Security Collective welcomes the bank’s initiative, says Lia: “Non-profit organisations do great work, but may not be familiar with the rules and regulations in force to help prevent money laundering and terrorist financing. Our mission is to explain this to them. I’m certainly not always thrilled about how banks operate, but we have an open, constructive relationship with ABN AMRO. We can see from the bank’s approach that there’s no question of bad faith.”

Human Security Collective aims to foster greater mutual understanding by organising round-table discussions between banks, regulators and non-profit organisations.

The role of supervisory authorities

However, Lia says this issue is about more than banks and non-profit organisations alone – legislators and regulators must also take responsibility: “If the government wants certain countries to receive humanitarian aid and human rights to be protected there, it has to put its money where its mouth is. The good news is we’re gradually seeing a shift in this direction on the part of supervisory authorities. For instance, a more flexible process for actors that are fully funded by the Dutch Ministry of Foreign Affairs is currently under consideration.”

Lia sees ABN AMRO’s web page as a “practical step that helps non-profit organisations anticipate more effectively”. There are never any guarantees, but that’s not what the bank is asking for, as Nelleke points out: “We’re not asking for zero risk, that would be impossible. It’s about organisations having the risks on their radar and taking mitigating actions. Once they’ve got all their ducks in a row, there won’t be any surprises when they open a bank account.”