How Illicit Finance Controls Can Make It Harder for Nonprofits to Serve the World’s Neediest - and What to Do about It

A growing number of humanitarian aid organizations are having trouble finding banks willing to work with them. Notably, many humanitarian organizations working in Syria and Yemen report having difficulties with payments. In some cases, nonprofit organizations (NPOs) have been denied bank accounts or have had their existing accounts closed. More frequently, they have had their transaction delayed. Unable to rely on the formal banking system, some NPOs have resorted to transporting cash or turning to money transfer operators. Banks’ aversion to working with NPOs may stem from the fear of facilitating illicit finance, terrorist financing and sanctions violations. Policymakers should consider expanding the use of humanitarian exemptions. Banks may adopt sector specializations, so that they have dedicated staff who understand how NPOs operate. A standardized customer due diligence template tailored to NPOs would be useful for establishing mutual expectations. Another solution would be tracking aid transfers on a permissioned blockchain network that would give banks greater confidence and lead to easier access to finance.