G Off Charities

regulation,” says Lanier Saperstein, a partner in New York at Dorsey & Whitney, a law firm that represents major banks. In 2012 the U.S. Department of Justice filed a criminal charge against Standard Chartered for illegally moving millions of dollars through the financial system on behalf of sanctioned Iranian, Sudanese, and Libyan entities. Standard Chartered has paid almost $1 billion to settle cases brought by the federal government and New York state. HSBC took a $1.9 billion hit in 2012 after it was charged with permitting Mexican drug traffickers to launder hundreds of millions of dollars through its accounts and violating sanctions laws.

The British firms now operate under deferred-prosecution agreements, which means they could lose their

U.S. banking licenses if they repeat their offenses or fail to upgrade internal controls adequately. Spokesmen for HSBC and Standard Chartered declined to comment.

The U.S. Treasury acknowledges that closing the accounts of clean organizations is a problem. It’s now advising lenders in Latin America and the Caribbean on how to comply with anti-money-laundering and sanctions rules. The department’s senior officials are also assuring U.S. and foreign banks that the authorities won’t penalize them for innocent mistakes. “We know that financial institutions, like human beings in general, are not infallible,” Adam Szubin, Treasury’s acting undersecretary for terrorism and financial intelligence, said in a speech to the American Bankers Association in November.

On a March afternoon in London, two former U.K. government ministers testified before a parliamentary committee. Clare Short and Andrew Mitchell, both former secretaries of state for international development, described a recent fact-finding trip to Turkey’s border with Syria. They were impressed by the scale of the humanitarian effort—islamic Relief has delivered £143 million ($207 million) in aid to 6.5 million Syrian refugees since the outbreak of war. But Short and Mitchell were outraged that banks repeatedly delayed the arrival of money earmarked for charities operating in the region.

Islamic Relief has cooperated with the United Nations and the West over the past 32 years. Still, HSBC closed the charity’s bank account at the end of 2014 after a monthslong review. The charity sought to reassure the bank that it was doing everything possible to ensure none of its partners in the Middle East violated money-laundering and terrorist-financing rules. But with the charity sending aid into a country torn apart by years of civil war, there was no way it could promise that none of its funds would end up in the wrong hands. “You can’t get cast-iron guarantees in a war zone,” Islamic Relief U.K. Director Imran Madden says.

For the field-kitchen project, Guy assured Standard Chartered that Christian Aid would track the

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