Receiving overseas donations? Working internationally? OFSI guidance for charities relating to their compliance with financial sanctions regimes.
We have recently advised one of our charity clients in relation to the receipt of a donation which originated from a financial sanctioned individual, and thought this would be of interest to other charities who receive overseas donations or who otherwise work internationally.
What are financial sanctions?
Financial sanctions are restrictions placed on designated persons (being individuals or entities the subject of sanctions), such as freezing financial assets, as well as wider restrictions on investment and financial services.
The global nature of the work undertaken by many charities means it is important to be aware of the wide-reaching scope of the UK financial sanctions regime. This means that:
- all individuals and organisations who are within or undertake activities within the UK must comply with UK financial sanctions; and
- all UK nationals and organisations established under UK law must also comply with UK financial sanctions, irrespective of where their activities take place.
In addition, financial sanctions imposed by other governments may also impact a charity's ability to operate where: (i) their operations are within that government's jurisdiction; (ii) goods originate from that country (if exporting goods); or (iii) the charity is dealing in that country's currency. So charities also need to be aware of the financial sanctions regimes of other jurisdictions that might be relevant to them.
Compliance
Charities must comply with financial sanctions (as well as charity law and regulation). It is a criminal offence to breach financial sanctions (which includes receiving money, goods or economic resources from, or sending these to – an individual or organisation subject to financial sanctions). This would include charities receiving donations from individuals or organisations subject to financial sanctions. However, charities can:
- rely on exceptions in the law which permit certain activities. Note that activity is not necessarily permitted just because it is for a charitable or humanitarian purpose; and
- apply to the Office of Financial Sanctions Implementation (OFSI) for a licence to work with or through a sanctioned individual or organisation. Note that the terms of an OFSI licence can impose significantly onerous conditions on the beneficiary of the licence, to which it must comply. So charities may want to consider whether obtaining a highly conditional licence to receive a relatively small donation that originates from a sanctioned individual is worth it.
Due Diligence
Managing these risks places significant onus on the due diligence to be undertaken by charities in respect of the individuals or organisations from high risk countries they are receiving donations from, or otherwise working with. The due diligence should include obtaining a strong understanding of the sanctions regulations in place in the relevant jurisdiction and their relevant obligations.
And, of course, trustees must consider their general charity law decision making duties, as well as the Charity Commission's regulatory guidance, when resolving whether or not it is in the charity's best interests to accept or reject a donation from a sanctioned individual or entity. Charity Commission guidance relating to this can be found here: Guidance: Accepting, refusing and returning donations to your charity.
The OFSI Guidance referred to below sets out the suggested parameters of a compliance programme which charities might deploy as part of their donor due diligence processes. This includes routinely checking the UK Sanctions List, and the OFSI Consolidated List. Charity Commission guidance relating to donor due diligence can be found here: Compliance toolkit: Protecting charities from harm Chapter 2: Due diligence, monitoring and verifying the end use of charitable funds.
OFSI guidance
OFSI has, working closely with the Charity Commission, produced guidance for charities relating to their compliance with financial sanctions. This can be found here: Financial sanctions guidance for charities and non-governmental organisations (NGOs).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
