Despite billions of pounds spent on counter-terror efforts, terrorism remains a fact of modern-day life. Private companies play a critical role in our efforts to prevent terrorism. Banks are required to identify, track and tackle illicit finance, including money laundering and terrorist financing. Yet often, the measures imposed by banks in meeting these obligations can have unintended consequences, and they can impact on the innocent as much as on the guilty.
Following in the wake of accusations of charities being used to channel funds to Islamic State and other military groups, users of the banking system deemed to be ‘high risk’ have found it ever harder to receive, send and store their money. In the worst cases, charities have had their bank accounts closed, losing financial access, without evidence of wrongdoing. At the heart of these closures is the desire of banks to ‘de-risk’: to rid themselves of business that might expose them to sanctions in relation to the financing of terrorism. These decisions take place behind closed doors, and the possible negative consequences of this de-risking have so far been left unexplored.
Based on the author’s three years of research in this field, including three dozen interviews with banks, government officials and NGOs, this report sheds light on the rationale for account closures that have taken place recently and identifies the sources of banks’ decision making. The report recommends how each of these actors can work together to reverse a damaging trend, which is at best counterproductive and at worst creates, rather than reduces, security risks as money flows through informal channels instead of official ones. The report argues that banks need to look beyond their innate profit motive and take into consideration the ‘reputational return’ from working with NGOs to find solutions to these challenges.