Why Banks Are Cutting
▶ ▶ Banks are afraid to handle funds of charities operating in war zones ▶ ▶ “What we are seeing is a rational reaction to increased regulation”
Frances Guy was close to rolling out a program to feed hundreds of displaced people in war-torn Syria last year. Guy, the Middle East head of Christian Aid, had secured funds and found partners. But the charity’s bank, Standard Chartered, refused to transfer $50,000 to put the project in motion.
Christian Aid, sponsored by 41 churches in Britain and Ireland, is one of many organizations facing such restrictions. U.S. authorities have levied billions of dollars in fines against Standard Chartered, HSBC Holdings, and BNP Paribas for violating sanctions on pariah nations in recent years. As a result, the banks have stopped sending money to certain countries and have even closed accounts of customers who do aid work in perilous places. The Charity Finance Group, a trade association in London with 1,350 members, says 200 to 300 organizations have had their accounts canceled or endured long delays and rejections of money transfers.
Some American banks are refusing to make cash transfers for Oxfam, the global antipoverty organization set up in 1942 to relieve famine in Greece. This winter, Christian Aid said it planned to deliver blankets to displaced people in Iraq, but by the time the money came through, it was almost spring. “The unintended consequence here is that aid is being denied to people in desperate need of assistance,” says Guy, a former U.K. ambassador to Yemen and Lebanon.
Banks have also closed accounts for hundreds of money-transfer outfits that wire $582 billion a year in remittances from migrant workers to their families back home. Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board, has warned about the “financial abandonment” of entire countries.
The U.S. has shut charities for funding terrorism in the past decade. In 2009 five leaders of the Holy Land Foundation for Relief and Development, once the largest Muslim charity in the U.S., were imprisoned for funneling millions of dollars to Hamas, the Palestinian group designated a terrorist organization by the U.S. Department of State. In a pending case in New York, about 200 victims of terrorist attacks in Israel are suing Natwest, a unit of Royal Bank of Scotland Group, for providing banking services to a Palestinian charity linked to Hamas by the U.S. Department of the Treasury.
The Obama administration’s use of sanctions to punish Russia and Iran has triggered an explosion of new standards and regulations dictating what banks can and can’t do when serving clients. Banks are taking the safest course and simply shutting the accounts of customers who pose even the slightest risk. “What we are seeing is a rational reaction to increased