Amid suspected Islamophobia, the Muslim charities group called for bank staff to go through anti-racism training for account closures and halted payment reasons. The Labour government’s commitment is to change the law to enhance consumer protections.
According to Muslim charities, their accounts are being closed without warning or explanation, and they also experience difficulty opening an account despite the political kickback after Nigel Farage’s high-profile debanking. The charities acknowledged the challenges they face in discharging their duties, with some even being blocked from providing humanitarian aid and life-saving operations.
Banking barriers continue to disrupt charitable work
68% of Muslim charities reported difficulties opening bank accounts, 42% experienced a complete withdrawal of banking services, and 42% had significant challenges transferring funds. According to a report, this delayed payment created a devastating ripple effect that damaged humanitarian work.
Real-life harm is one of the highlights of charities anonymously interviewed for the research. In a conflict zone, one charity running a hospital was financially constrained and couldn’t pay doctors and nurses for two months.Â
Another supporting Syrian refugee children with cancer in Turkey had a delayed payment for a year, negatively impacting the timely delivery of care to the children. A third one received an eviction notice from a shelter due to payment delays.
Even when debanking did not directly stop a project, it damaged 44% of respondent charities’ relationships with partners, they said. The MCF added that delays in sending funds or closing their accounts led to a trust breakdown.
One told the report author of danger to staff when payments failed.
“Our charity was operating within an area in the Middle East, payments were getting held up by banks, and because of these delays, local vendors would come to our field offices demanding payment at gunpoint, putting the lives of our workers at risk.”
Muslim charities make up a small number of the U.K. charities sector. Still, surveys show they donate more than any other faith group; with no bank accounts, charities are in breach of the law, the MCF said.
Islamophobia and financial risk: The hidden drivers behind debanking
Debanking is a significant challenge for Muslim charities, and these issues sum it up. Alleged Islamophobia, prevalent names of charity workers being on a terrorist list, risk-averse banking, operating in high-risk areas like Syria, difficulty complying with or understanding banks’ due diligence requests MCF reports.
“Evidence suggests that structural Islamophobia played a role, with Muslim-led charities often unfairly targeted by banks for perceived risks without concrete evidence of wrongdoing. Among the recommendations laid out is for bank staff to undergo anti-racism training, to improve decision-making and avoid stereotyping or perpetuating racial and Islamophobic biases”. Reported by Abdulsami Arjumand.
He further spoke of how banks try to avoid the risks of cutting off ties with customers they assume are involved in either money laundering or funding illegal activities. According to him, the charities have been severely affected by the ones working in or with Muslim communities.
The banking lobby group U.K. Finance responded that any decision to restrict access to or close an account is only taken after careful consideration and is based solely on the need to comply with regulatory obligations.
The Body’s Managing Director of Commercial Finance, David Raw, spoke about how they want opening and managing a bank account to be as clear and straightforward as possible and welcome engagement from charity organizations. After reading the report, the Muslim Charities Forum has been contacted to discuss the issues they face, as this is an integral part of enhancing services.
He additionally spoke of their ongoing and regular engagement with the wider charity sector, humanitarian organizations, and regulators on access to banking matters. He acknowledged their support for the recent launch of a new guide for voluntary organizations to help open and manage bank accounts.
Impact on Muslim charities: Real-life consequences
Unlike Belgium, France, and Italy, there is no legal right to a bank account in the U.K. Banks do not have to provide services to everyone who wants them. The Muslim charities’ research reiterates a point made by the Finance Regulator, the Financial Conduct Authority (FCA), in their investigation of debanking.
For policymakers, an important question is whether all individuals, businesses, and organizations should have the right to an account, as in some other countries. This was stated in its September 2023 bank account access and closures report.
The comments and report came after Reform Leader Nigel Farage was debanked. His account with exclusive bank Coutts was closed after the lender deemed him a reputational risk and said he had alleged links to Russia.
In its 2023 publication, the FCA said the time is right for a debate on balancing access to bank accounts with the threat of financial crime and firms’ reasonable risk and commercial appetites. It pointed out that anti-discrimination in payment account regulations does not apply to charities and political parties.
After Mr Farage’s debanking, the previous Conservative government’s political reaction was intense. It committed to introducing more rigid rules to stamp out debanking, but no legislative changes were made, the Treasury spoke of its commitment to new laws to prevent debanking.
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The path forward
A Treasury spokesman reported that banking services are vital to millions of people and businesses across the U.K. The government is committed to introducing legislation to enhance customer protection in cases where their provider terminates their bank account, and further details will be provided later.
With the changes, it’s understood that customers will have to receive detailed and specific explanations when their accounts are closed and generally have more time for closure notice. The Muslim charities’ ongoing debanking crisis indicates an urgent need for reform.Â
With the UK government’s expression of a commitment to consumer protection tightening, charities still struggle with access to banking services. The MCF’s report highlights that urgent legislative changes are needed to ensure charities continue their essential and worthy cause without fear of discrimination or unjust closures.
Many Muslim charities may be forced to cease operations, depriving vulnerable communities of critical support without these reforms. Nineteen charities responded to the MCF’s call for survey participants, a low response rate, demonstrating charities’ concerns about coming forward to talk about debanking.
Even with the promises of utmost confidentiality being maintained, most charities feared the reputational damage associated with debanking, which the report said could result in further banking difficulties. The University of Aberdeen supported the research.
Responding to the MCF report, the FCA said, “We know that some groups can face challenges accessing bank accounts, we recently set out clear expectations on account access and have been actively engaging with the sector to ensure that these are being met. Smaller charities will benefit from the protections of the consumer duty, we continue to monitor data on account access.”