Overcoming Banking Challenges: Essential Guidance for Charities

Recent data reveals that nearly half of UK charities are encountering significant problems with banking services. These issues range from difficulties in opening accounts to unexpected account closures, all of which can severely disrupt a charity’s operations.

By Caroline Webster – Charities and NFP Partner

The extent of the problem

A recent survey of about 2,500 trustees, conducted by the Charity Commission, highlights the scale of the banking problems faced by charities in the UK. The key findings include:

• 42% of Trustees surveyed said their charity had poor services in the last year.
• 32% had trouble updating their signatories or contact details
• 18% faced difficulty in opening accounts, particularly challenging for newly established charities that rely on quick access to banking services to start their operations.
• 15% found it difficult to comply with identity requirements
• 14% struggled to understand what the bank required.
• Some charities reported difficulties with online banking services, including issues with setting up accounts and accessing funds. This can be especially problematic for charities that operate primarily online or manage funds through digital platforms. This can leave charities without access to essential funds, disrupting their ability to carry out their charitable activities.

What are the risks for charities and NFPs?

The Charity Commission cites three key concerns for charities:

• Risks to the provision of charitable services, resulting from charities being unable to meet financial obligations, such as paying staff
• Unsafe banking and financial practices, for example the use of trustees’ personal bank accounts to meet financial obligations, a direct contravention of the Commission’s guidance
• Longer-term impact on morale of volunteer trustees – anecdotal evidence demonstrates some trustees have resigned over frustrations around disruptive banking services.

Reasons behind the banking challenges

There are several reasons why charities are facing these banking issues. Some of the key factors include:

• Increased regulation: Banks are subject to stringent regulations, including anti-money laundering (AML) and know-your-customer (KYC) rules. While these regulations are intended to prevent illegal activities, they can make it more difficult for charities to open and maintain bank accounts.
• Perceived risk: Charities, particularly those that operate internationally or in high-risk areas, may be viewed as higher-risk clients by banks. This can lead to increased scrutiny, delays, or even account closures.
• Limited banking options: The number of banks offering specialised charity accounts has decreased in recent years, leaving charities with fewer options. This lack of choice can make it harder for charities to find suitable banking services.

How charities can help themselves

These challenges can be overwhelming for charities, particularly smaller ones that lack dedicated financial staff. The UK government has provided useful guidance for charities, which can be accessed  here. This guidance offers practical steps to take when dealing with banks, including advice on how to approach banks, what documentation to prepare, and how to respond to banking challenges.

There are extra banking considerations for charities moving money abroad.

How UHY Ross Brooke can help charities and NFPs

At UHY Ross Brooke, we understand the unique challenges that charities face, including those related to banking. Our team of specialist accountants and auditors offer a range of services designed specifically for charities, including:

• Assistance in preparing the necessary documentation and advice on how to approach banks effectively.
• Audit and Assurance Services to ensure that your charity remains compliant with all regulatory requirements, helping to build trust with banks and other stakeholders.
• Strategic advice to help your charity grow and thrive.

Next steps

Don’t let banking challenges hold your charity back. Contact us for expert advice and support, or see our services tailored to the needs of your organisation.