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Errata Sheet (March 2017)
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The scope and prevalence of challenges that U.S.-based nonprofits face in accessing financial services are far more vast than previously understood, according to a comprehensive report released today by the Charity & Security Network.
Two-thirds of U.S.-based nonprofit organizations (NPOs) working abroad are facing problems accessing financial services, the report finds. These include delays in wire transfers, requests for unusual additional documentation, increased fees, account closures and account refusals.
The report, Financial Access for U.S. Nonprofits, is based on the first-ever empirical study of the global phenomenon known as “derisking,” as it relates to U.S.-based NPOs. Derisking refers to financial institutions terminating or restricting business relationships to avoid rather than manage risk. The report also reflects information from a number of focus group sessions and interviews with stakeholders over the last year. It outlines and analyses the scope, frequency, and prevalence of various financial access problems, including account refusals and closures, delayed wire transfers, unusual additional documentation requests and fee increases.
Among the major findings:
- 2/3 of all U.S. nonprofits that work abroad are having financial access difficulties
- Delays in wire transfers, which can last up to several months, are the most common problem, affecting 37% of nonprofits
- 15% of nonprofits report having these problems constantly or regularly
- One-third of NPOs have experienced fee increases, and 26% have faced additional, unusual documentation requests
- Transfers to all parts of the globe are impacted; the problem is not limited to conflict zones or fragile and failing states
- NPOs, categorically treated as high-risk, are sometimes forced to move money through less transparent, traceable, and safe channels as a result of delays in wire transfers and requests for additional documentation. When money cannot be transmitted in a timely manner, 42% of nonprofits report that they carry cash.
“The details here are frankly disturbing. We are undermining the networks that support development and that hold the world together. Most policymakers in Washington have no idea how bad this is,” said Brian Atwood, Senior Fellow, Watson Institute for International and Public Affairs, Brown University, and former Director of the U.S. Agency for International Development.
These challenges have made it difficult for nonprofits to access the financial services necessary to provide life-saving aid to people in global hot spots where the need is greatest. For example, one NPO was prevented from sending immediate relief to the persecuted Rohingya minority in Myanmar, in the midst of a dire humanitarian crisis. Timely transmittal of those funds might have saved lives, the charity’s director explained. In another case, two clinics for Syrian refugees, one in Saida and another Akkar, were forced to close because they could not get funds to the clinics.
Because nonprofits contribute to peace and security around the world, “finding a solution to the problem should be a priority for the U.S. government,” said Kay Guinane, director of the Charity & Security Network.
Regulators are tasked with ensuring the safety and security of the banking system,” explained Scott Paul, senior humanitarian policy advisor at Oxfam America. “In doing so, they impose steep penalties for undercompliance but none for overcompliance.”
Download the Executive Summary
View a webcast of the Feb. 7, 2017 report launch event at the Center for Strategic and International Studies
Download individual report chapters:
Introduction and Chapter 1 – Methodology
Chapter 2 – The Context for NPO Financial Access Problems
Chapter 3 – Derisking: Complications and Consequences
Chapter 4 – Survey Results and Data Analysis *
Chapter 5 – Regulators and Policymakers
Chapter 6 – Financial Institutions
Chapter 7 – Nonprofit Organizations
Chapter 9 – Options and Recommendations – and Concluding Thoughts
* Please see Errata Sheet (March 2017), linked above and here.
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