For charities delivering services overseas or working with overseas partners, it is critical to be able to move money swiftly and securely across borders. Yet for many charities, this seemingly straightforward task has become increasingly difficult. From derisking by banks to regulatory scrutiny and logistical barriers, the challenges of international banking are continually growing.
It is true that international transactions are inherently more complex than domestic ones, often involving multiple financial institutions, each with their own regulations and processes. There are other considerations too, such as the impact of exchange rates and a weak or non-existent local banking system. The task for charities is to navigate this landscape without compromising on regulatory compliance or the needs of beneficiaries on the ground.
The impact of derisking
A recent major obstacle has been the widespread trend of derisking among financial institutions. In response to tightened anti-money laundering and counter-terrorist financing regulations, some banks are becoming increasingly reluctant to support transactions or maintain accounts linked to higher-risk jurisdictions, especially conflict-affected or sanctioned countries.
This has resulted in account closures, payment delays, and increased scrutiny for legitimate humanitarian and development work. In extreme cases, charities have been forced to use informal channels to transfer funds, heightening the risk of fraud, loss or reputational damage.
Even with traditional banking routes, compliance check delays and payment holds can cause challenges, especially in emergency response settings where time is of the essence.
Charity Commission expectations
The Charity Commission recognises the challenges faced, and its guidance is clear: trustees must take reasonable steps to ensure that funds reach the intended beneficiaries and are used for the intended purposes.
Before entering into any financial arrangements, charities should conduct thorough due diligence on their overseas partners, including verifying their credentials, assessing their financial stability, and understanding the local regulatory environment.
Detailed records of all transactions must be kept, including the purpose, amount, and recipient of each transfer, which ensures transparency and facilitates compliance.
Robust internal control systems are essential for preventing fraud and ensuring the proper use of funds, including segregation of duties over payments. Checks should be in place to ensure funds have reached the intended beneficiary.
The regulatory environment is constantly evolving, and charities must stay informed about changes impacting their operations, including keeping up to date with guidance from the commission and other relevant bodies.
Charities must also be mindful of sanction regimes and reporting obligations, which may apply even where the charity is not operating directly in a sanctioned region.
Practical pitfalls
I have seen many charities have problems with currency conversion, fluctuating exchange rates, and unclear international banking fees, all of which can erode the value of funds which are ultimately used to support beneficiaries. A payment can arrive at its destination substantially reduced or delayed by days due to intermediary bank processes.
In regions with a weak or unstable financial infrastructure, some charities utilise money transfer methods outside of the conventional banking system. However, this requires a careful balance between operational efficiency and financial oversight. Charities should not enter such arrangements without a clear assessment of the risks and without having carefully balanced the risks with the operational needs (eg the need for speed in a disaster response scenario).
Stay focused on the risks
While flexibility is needed in challenging environments, trustees remain ultimately accountable for the proper use of charitable funds. Charities moving money overseas must have a clear assessment of the risks, and develop appropriate plans to mitigate these, whilst ensuring that funds can be made available to support those most in need.
For cross-border operations, charities need a clear and resilient policy which considers the risks they face. It is important to revisit policies regularly as the charity’s work and context develops. However, a policy alone is not enough. Staff and trustees must stay informed about regulatory changes and the Charity Commission’s guidance.
Steve Harper is partner and head of social purpose at HaysMac
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