Banks for International NGOs Perspectives from Save the Children International

Transcription

1 Banks for International NGOs Perspectives from

2 Selecting your banking partners Avoid having just one domestic bank to service your financial and banking needs. Having two or three banks will: Spread your credit risk (do you have a credit risk policy?) Allow you to cherry-pick the cheapest and/or most efficient services to satisfy your financial and operational needs Enable you to benchmark bank costs between banks (make them compete!) When selecting an overseas bank, financial stability is the most important criteria. Other factors that should be considered: services and cost e.g. fees charged by the bank access to cash location of the bank and proximity to the country office reputation of the bank in the local community banks used by other NGOs or partner organisations (references)

3 Regulatory environment for international banks New York State s Department of Financial Services News releases 20/05/2015 Barclays To Pay $2.4 Billion, Terminate Employees For Conspiring To Manipulate Spot FX Trading Market 23/04/2015 Deutsche Bank to Pay $2.5 Billion, Terminate and Ban Individual Employees, Install Independent Monitor for Interest Rate Manipulation 12/03/2015 Commerzbank to pay $1.45 Billion, Terminate Employees, Install Independent Monitor for Banking Law Violations 30/06/2014 BNP Paribas To Pay $8.9 Billion, Including $2.24 Billion To NYDFS, Terminate Senior Executives, Restrict U.S. Dollar Clearing Operations For Violations Of Law

4 Banks: Aren t NGOs safe with OFAC licensing..? OFAC wording regarding sanction exemptions for humanitarian assistance support of the following not-for-profit activities: Activities to support humanitarian projects to meet basic human needs in XXXX, including, but not limited to, drought relief, assistance to refugees, internally displaced persons, and conflict victims, food and medicine distribution, and the provision of health services; Activities to support democracy building in XXXX, including, but not limited to, citizen participation, government accountability, and civil society development projects; Activities to support education in XXXX, including, but not limited to, combating illiteracy, increasing access to education, and assisting education reform projects;

5 Banks: Know your customer (KYC) checks It s not just about sanctions. Much of banking compliance revolves around Know your customer checks. But in order for banks to know their customer, they need to know who their customer s customer And so on Who are NGOs customers? Millions of beneficiaries without formal ID? Thousands of unregistered local partners? Thousands of unregistered local suppliers? Local cash agents? These NGO customers do not give banks confidence. So banks conduct extended due diligence on many NGOs and their payments; costing banks time and money. So banks think: NGOs = High risk/low profit

6 Can NGOs nurture a good banking relationship? NGO s must work hard with banks to build confidence in their business relationship in order to secure and maintain long-term banking services. This may mean: Developing enhanced due diligence checks with your bank(s) Requesting bank payment pre-approval checks prior to instructions being submitted (to sanctioned or sensitive countries/entities) Providing information regarding programming goals (a compelling story!), costs and funding flows Having a full understanding of the bank s regulatory requirements Discussing future business opportunities for the business relationship (if applicable!)

7 Banks extended due diligence Here are some typical questions from a bank s extended due diligence questionnaire: Who in your organisation is responsible for approval and implementation of internal compliance and AML, Terrorist Financing, Economic Sanctions and Anti Bribery and Corruption ("Financial Crime") procedures? Do you have a documented Financial Crime policy? How are colleagues trained in relation to financial crime? Do you have a dedicated internal audit team? What due diligence do you undertake on private donations? Is this triggered for example, by the size of the donation, or the donor? Do any goods you export contain any US origin parts, software or elements? If so, how do you identify and monitor this? How do you stay informed of UK, EU, OFAC or UN sanctions changes?

8 and were there are no banks In countries without a functioning banking system, INGOs must rely on informal systems to make payment to partners, suppliers and individuals. This usually means payment via a money service provider or agent (e.g. Hawala). Such transactions are subject to far weaker controls, exposing INGOs to increased risk of fraud, money laundering and terrorist financing Screening processes can ensure agents and recipient are not designated, but any diversion of funds to criminal or terrorist groups during the transaction chain is beyond the remitter s control Controls can be strengthened by demanding sound operational safeguards within the contractual terms of MSP agreements Government donors must become more accountable for risks associated with transferring cash outside the conventional banking system. INGO s should be more confident and better equipped to propose the inclusion of these operating challenges and solutions within proposals and signed agreements