Bank Account Closures & UK Muslim Charities

 

The Nigel Farage’s bank account closure with a bank for the rich has hit a nerve for the Government and the media. The calling of the banking leaders to Downing Street and the resignations of the Group CEO and its subsidiary Banks CEO shows this was no little crisis.

This whole saga as it played out questioned the role of banks in our lives and wider society.

I deal with banking issues regularly for my charity clients, large and small. I have seen many examples, good and bad, so it’s imperative to understand the role each plays to understand the real issues.

 

The Banks and their role in business and society

Banks are private businesses, set up to make money for their shareholders. They are not politically aligned (we think so). Yes, during the banking crisis of 2008, the Government stepped in and now owns 39% of the NatWest Group – this is rare and did not change the business objectives of the bank.

Banks are subject to stringent anti money laundering and government sanctions regime with hefty fines when it goes wrong. All designed to regulate the banking conduct to the government domestic and international needs hence international events and wars make this a constant changing environment for sanctions. The introduction of the Politically Expose Person (PEP) protocols to stop corruption by people misusing public office adds another dimension to banking responsibility and risk management.

Nigel Farage was picked up by his bank as a PEP but what made the story interesting is that after he made a subject access request, he found that his political views were also considered as a reputation risk for this niche bank and its niche clientele.

 

“The Nigel Farage story has shaken the very foundations of trust in the wider banking system”.

 

This has shaken the very foundations of trust in the wider banking system. Given the control banks have on individuals and entities, this very notion that banks consider political views when not obliged by regulations, becomes problematic.

 

So where do the Muslim charities in the UK fit into all of this?

 

 

The impact of 9/11 was a game changer for Muslim charities operating in the West. Muslim charities suddenly found themselves working in high-risk countries subject to sanctions or where sanctioned entities operated. The resulting sanctions regime instantly choked many international charity banking facilities without explanation.

No regard was given to any legal or illegal activity as the “perception” of the “ability” to breach sanctions started to dictate the banks risk management process and de-risking. The Muslim sector became guilty until proven otherwise. The International relief sector already had inherent risks of money laundering, aid diversion and fraud for banks to consider, for the Muslim charity sector, it became just that more challenging to convince banks in this new environment.

 

“As a result of de-risking of banks, many individuals unfairly paid the price and their associated charities despite having done nothing wrong or illegal”

 

Another dark side of this additional scrutiny by banks was the spotlight on Trustees. Their social media profile and historical news coverage on the web searches started to become a vital part of the bank’s due diligence. The banks started to de-risk charities based on unfounded risks and perceptions relating to trustees. Many individuals unfairly paid the price and their associated charities despite having done nothing wrong or illegal.

Despite this, the Muslim charities in UK generally responded positively. Charities improved their due diligence processes and vetting of partners and responding to banking queries. Many Muslim charities now use the same due diligence software to vet their partners and staff as the banks.

Despite the pressures since 9/11, the Muslim sector in UK has exponentially grown with talks of annual income reaching £1bn in UK. This could not have been possible without the partnership Muslim charities have with their banks. However, in transferring money abroad charities continue to face blocks and funds returning. In some instances, and surprisingly, banks have been trigger-happy in closing banking facilities without any explanation. Even charities with just UK operations also affected.

 

So, what should be done, a question I am often asked. My response:

 

1. Financial Standards must not only be improved, but they should also be exhibited.

The Muslim community bruised by constant unfair and malicious media headlines, at times feels as if the whole world is against them. So, when a bank asks legitimate questions, some wrongly see this as an attack on their faith, creating an “us and them” narrative. This approach risks undermining real issues relating to good governance, compliance systems, proper due diligence, and effective audit trails for “end use of funds”.

 

“Muslim sector should confidently and boldly market and exhibit the progress made in addressing compliance and governance issues”

 

Muslim sector should confidently and boldly market and exhibit the progress made in addressing compliance and governance issues. Muslim organisations should sign up to a standard that works for banks and helps to demonstrate good financial governance.

Sometimes the race to raise monies creates pressure to look good before donors with emotional marketing material in the year-end financial statements, ignoring the needs of other key stakeholders like banks.

Muslim charities like all charities should learn from the mainstream charities that practice good governance. Often such charities, in their annual audited financial statements, will discuss their governance or when it fails against their actions plans and risk management extensively. They do this to assure their stakeholders that they understand the risks relevant to them and how they mitigate these risks.

 

2. Effective or meaningful third-party check or oversight over the banks decision to close an account.

When a charity finds itself with a bank closure notice, it finds limited alternative options for new banking facilities. This has a devastating impact on the vital and often life and dignity saving work charities deliver.

 

“There is no effective or meaningful third-party check or oversight over the banks decision to close an account”

 

There is no process to ensure the decision was fair and risk driven. It becomes easy for the banks to close an account instead of spending resources to manage their risks by requesting and assessing relevant information to satisfy themselves.

Charities should lobby the Government and the Charity Commission to address this gap in the system on the back of Nigel Farage’s high-profile case. The banking sector should be subject to detail regulations and guidelines that are shared with the wider public and charities so that all know what is expected of them.

Standard complaints to the Financial Ombudsman Service does not address this issue, given the urgent and devastating impact on bank closures.

 

3. Covid crisis caused the banks to prioritise businesses over charities.

The Covid crisis placed a significant burden on banks for opening bank accounts for businesses as Government grants were restricted to having a bank account. As it transpired many in their thousands did not. To address this need, mainstream banks prioritised businesses over charities.

 

“Some high Street banks stopped opening charity bank accounts or gave extraordinary long processing times”

 

As a result, some high Street banks stopped opening charity bank accounts or gave extraordinary long processing times. Muslim charities were hit the hardest as requirements for that additional bit of scrutiny meant it was no longer commercially viable to entertain them. This is unacceptable as the same banks have been making huge profits.

The Government should make it mandatory on banks to address the requirements of the charity sector as part of their business, so it is not ignored or undermined for commercial reasons- there is no better corporate social responsibility than this for the banks.

Muslim Charities play a vital role in addressing the needs of the most vulnerable, often stepping in when governments fail. This vital service is not possible without the banks facilitating this.

It’s time real issues are discussed and resolved on both sides for betterment of mankind, society, and country. It is in the Government and wider society’s interest to do so and the sector should lobby on this basis.

Nobody wins with the blame game on both sides ignoring the real issues.

 

Author:

Nasir Rafiq BA, FCA is the Managing Partner of Dua Governance Chartered Accountants, an ICAEW firm specialising in charity financial governance and internal audit.

Nasir works and deals with a large portfolio of Muslim charities in UK and has been advising them with their banking issues, working with many high street banks.

Nasir has directed treasury functions in large UK Muslim charities with operations worldwide.

Email: info@duagovernance.com

The Power and Art of Mediation

In the past two decades, I have been involved with many high profile mediation’s. This has become a key feature in many of my past and present engagements.

 

Be it, disputes between trustees, disputes between employee and trustees, issues with regulators or between family business partners. Each time, I came in when all options have been exhausted and there is a stalemate, risk of self-destruction or Charity Commission intervention.

 

With Allah’s blessing, I have always prevailed and have been able to resolve the matter amicably. My suggested solutions and plans achieved satisfaction by all parties and a “win win” solution for all with a clear way forward, Allhumdulillah.

 

Although the outcomes were satisfying, the journey to it was often bumpy with lots of grit, patience, and sacrifice involved.

 

My approach to mediation is not conventional. Often the traditional culture forces the disputing parties to accept each other’s demands. Emotions and Islam is used to exploit each parties guilt and force corporation on moral grounds. This seldom results in long term and lasting solutions.

 

My approach is far, from it.

Mediation should be about justice, fair judgement and agreeing on what is right and fair, in the context of the overall objectives of the organisation and its expected destination.
 

For me, mediation is about justice, fair judgement and agreeing on what is right and fair, in the context of the overall objectives of the organisation and its expected destination.

 

This should not be about personal wins. Mediation or compromise should be about both parties winning, not the strong overcoming the weak which is often seen in traditional mediation.

 

In each mediation, I employ the following same principles:

 

Mediation requires a SMART overall objective

 

I determine the overall SMART objective. Something, I can visualize and touch. Something that makes both parties stronger and win. This is the utmost important part of any mediation. Weak or no objectives, results in outcomes that are weak and at times unfair.

 

Empathy is the ingredient to success

 

I place myself in each parties’ shoes and explore the pressure points. Having empathy is the key ingredient for building trust. Empathy should be the starting point for any mediation.

One must see wood from the trees

 

Once the pressure points are identified, I iron them out against the overall objective. It is at this stage; I separate out the noise and the wood from the trees.

 

Baggage needs offloading

 

People carry baggage that they need help with offloading

 

People carry baggage that they need help with offloading. Sacrifices and compromises must always be for a bigger objective and cause.

 

I make an effort to identify and offload this baggage which is often built up over a longer period based on personal experiences and perceptions. Often brushed under the carpet and ignored – never dealt with and it becomes the monster that stops common sense to prevail.

 

Once I am left with the genuine concerns and risks, I build bespoke solutions, based on my professional judgments and experiences – Again, against the overall objectives of the mediation.

 

Closure needs work

 

The mediation is then “closed” by all parties agreeing to “my solution”. By this time, I have earned the trust, strong emotions are ironed out and the focus for both parties is on the “win win” solution. The details are agreed and then signed off.

 

All the above is accompanied and peppered with hard work, difficult discussions, listening, patience, moments of quiet meditations and a hard resolve from me with no compromise.

 

Mediation is most relevant at the top

 

People in positions of responsibility often end up carrying lot of baggage – this builds up over time, much depends on them being able to work effectively with each other. This is not always possible, and this inability of being able to work together often risks bringing the whole building down with years of “building” and “achievements” to a dramatic loss.

 

This is where mediation then becomes that tool that can put the train back on its track.

 

Mediation is not about making people love and hug each other – its about achieving objectives and making sure the train gets to its destination.

 

Mediation is not about making people love and hug each other – its about achieving objectives and making sure the train gets to its destination.

 

End –

 

Author: Nasir Rafiq is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

He is the Managing Partner of Dua Governance, a Charity Governance specialist accountancy firm.

 

Nasir has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Email: info@duagovernance.com

Important Lessons from Strawberry Picking

Strawberry picking is a fun day out for all ages. This outdoor activity has it all, sweet fresh berries, a walking exercise and a family fun activity of picking various fruits from their plants.

 

In this innocent activity, one can also “pick” many lessons for individuals and organisations. As I walked through the various fruit lines, I started to pick many of these lessons and came across the following four valuable lessons:

 

Lesson 1: Sweet fruits are on branches that hang down

 

Branches full of fruit are the ones that hang down with the weight of their fruits. This is also true in real life. Individuals that are humble and flexible are the ones that attract people and affection like that branch full of fruits.

Individuals and leaders that are arrogant and inflexible tend to find themselves like those branches pointing in the air with no fruit – nobody likes them or entertains them. Its not the branch that matters but the fruit on it – In real life we forget this.

It’s not the person but the personality and personal conduct matters.

It’s not the person but the personality and personal conduct matters – both define qualities the person and make it so that people benefit.

 

Lesson 2: Size, colour, and design does not matter

 

Many strawberry farms, also grow many other berries as well. From strawberries to raspberries and blueberries. Each berry is different in size, colour, plant, and taste. When ripe and juicy each of them energises the taste buds and gives immense pleasure.

 

The key word here is “ripe” and “ready to eat”.

In real life we focus too much on size, colour, ethnicity, and political affiliations, like the farm the world is full of variety – what should matter is maximising the ability and impact of individuals and organisations.

 

When ready the fruit will taste the best on their own plant – it’s wrong to expect the blueberry to grow and taste good on a strawberry plant or vice versa.

Like plants, individuals are at their best in their own environment and identity – this should be respected, celebrated, and protected for them to “ripe” and excel.

Like plants, individuals are at their best in their own environment and identity – this should be respected, celebrated, and protected for them to “ripe” and excel in all walks of life and organisations. Where this is ignored, it’s the organisations and leaders that lose out from the potential talent and resource those individuals could have offered.

 

Lesson 3: It’s the picking that dictates the quality of the basket

 

The fun in strawberry picking comes with holding the basket and picking the fruit into it. The thousands of plants have thousands of fruits hanging on them at different stages of their life, some ripe and some not as ready. They hang in groups and on different branches. Depending on their position on the plant and branch – they can taste different, sweet, or bitter.

 

It is how and when they are picked determines, the quality of the fruit in the basket. A farm full of fruit that looks unripe may still generate a basket with ripe and colourful tasting fruit. This requires effort and time for the picker to dig deep in finding the ripe fruit.

 

Organisations that have good quality staff have impeccable recruitment practices – they reach out and plan carefully to find and retain the right talent. These organisations then stand out and achieve their objectives – It is then the basket of fruit gives the right pleasure and visuals.

Those that go on a “picking” spree influenced by numbers and digits (nothing more) tend to end up with the wrong mix of fruits in their basket.

Those that go on a “picking” spree influenced by numbers and digits (nothing more) tend to end up with the wrong mix of fruits in their basket. The basket will eventually cost them at the counter and the fruit will be of no use, leaving a bitter taste. I see this often in organisations, especially charities.

 

Lesson 4: Season and gardening make the difference

 

As we are walking out of the farm, we came across some berries out of season – their plants were fruitless and resembled wild bushes with no use.

 

We were so wrong.

 

Given the right season, care and effort the farmers will put into them, they are to taste better than the sweet berries in season we were tasting today.

 

In real life, the same mistake is made with individuals and organisations. We are trigger happy to right them off not realising that we may be meeting them in the wrong season or all they require is care and effort to blossom.

Instead of waiting for the right season or investing in care and training, we judge them and leave them with wrong labels. Hence losing out from the ability and impact they could have shown.

 

Like sweets berries, individuals and organisations require the right environment, care, training, mentoring and guidance to grow and bear fruits for many to enjoy.

End –

 

Author: Nasir Rafiq is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

He is the Managing Partner of Dua Governance, a Charity Governance specialist accountancy firm.

 

Nasir has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Email: info@duagovernance.com Website: www.duagovernance.com

 

Charity Leaders: Why personal conduct matters

The charity sector represents public benefit. Leaders of charity offices often preside over limited resources in the context of the job required of them. They also take decisions on donor funds and their decisions can have a far-reaching impact on the people that work in charities and / or the beneficiaries.

 

Staff may be asked to sacrifice for the greater good, for beneficiaries sometimes this can be a matter of life and death or economic survival.

 

Charity leaders must be able to lead an effective team; their success depends on it.

Charity leaders must be able to lead an effective team; their success depends on it. In doing so leaders often have to take difficult decisions to bring the best out of them. The team must be able to trust and respect the leader. Leaders can train future leaders only when their followers can see them as role models and mentors.

 

In this context the personal conduct of a leader especially in the charity matters. It becomes the difference between success and failure. A leader may move mountains, people and followers will forget that – however the conduct on how those mountains were moved is what becomes the legacy of that leader.

 

It’s the personal conduct that touches people and followers and becomes part of the human memory and emotional history of the leader.

Below are some common leadership characteristics and conducts that I have experienced in the charity sector that are proven to make a difference:

 

Trust requires building

 

People and followers must be able to trust their leader. It is only through the trusting, it becomes easier for the people, followers and teams to sacrifice and backdown at their personal cost. Trust is created by being able to follow through on promises without compromise. Trust must be earned and does not automatically come with positions – The leader can build it or break it.

 

Trust must be earned and does not automatically come with positions – The leader can build it or break it.

Trust is built by being transparent in public and private communications. Consultations promote trust especially when the followers / team members know that they will be consulted – this builds trust within the team. Trust grows in humility by accepting mistakes when they are made, and all leaders make them. All this requires consistency and patience by the leader.

 

Fairness come what may

 

Leaders enjoy powers entrusted to them over those that follow them. How they use these powers for the greater good of the office they represent identifies their conduct.

 

Those leaders that don’t compromise on fairness tend to be more powerful and effective than those that compromise to benefit family, friends, or personal business interests – A leader may have favorites on a personal level – this must not skew the balance of fairness in the organisation.

Nepotism eats personal conduct like termites eating wood

Nepotism eats personal conduct like termites eating wood. One the face of it the wood has structure, the termites eat it from within. The wood sound then becomes hollow when tapped, just like the leaders that constantly compromise on principles over nepotism. When these leaders are tested, their teams abandon them over their hollow rhetoric.

 

Being fair and more importantly the perception of being fair (as important) is a crucial conduct that effective leaders often display. This requires the leader to stick to policy and process and become a role model in doing so.

 

Justice is not for the weak

 

Humans are not angels – they make mistakes or do wrong. Teams and followers are not immune from it. An effective leader when confronted with wrong, deals with it. As not dealing with it promotes it, grows it, spreads it – there is always a limit on how much dust can be swept under the carpet. Whenever (and it will) the carpet is removed, all is laid bare, and it is then reflected on the conduct of the leader.

 

Justice has its value when it can be felt and seen. This sets the standards and creates an environment where mistakes and wrongs are less made and discouraged. It becomes the moral compass for leaders and their followers / teams – with this compass they cannot go astray.

 

Being just becomes the moral compass for leaders and their followers / teams – with this compass they cannot go astray.

 

The good practice that is practiced

 

Leaders that tend to take personal conduct seriously, often lead organisations with:

  • effective HR and operational policy and processes that are followed,

  • good and consistent performance management processes,

  • effective organisational structures that achieve good quality consultation and accountability,

  • fair and effective recruitment policy and processes – the right person the right job,

  • a skillful rotating board that appoints the leader on merit and holds the leader accountable.

 

End –

 

Author: Nasir Rafiq is former Interim Finance & Corporate Services Director of Islamic Relief Worldwide (2016-2019). He has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Nasir is the Managing Partner of Dua Governance Chartered Accountants and Business Advisors. A firm specialising in the charity sector.

 

He is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

Email: info@duagovernance.com

Lets take a risk

Things can go wrong in many of the most well run organisations. As humans this shows our imperfections and limitations.

In modern times and especially in the West as management sciences developed, “how to manage risks” became one of the main tools for planning and good governance in organisations. This is why some of the best governed organisations have the best “risk management” in place.

One thing is clear taking risk is not an issue, many successful businesses, organisations and people took risks that brought them success they then enjoyed. Its how this risk was managed helped to keep their heads above the water and avoid the real and present circling sharks.

Another important aspect of risk management is that all risks cannot necessarily be managed to a point where they cant materialise. Even when they are best managed, they can still occur. Only difference being that good management of them means, the organisation is better placed to weather the storm when it comes. This may not be the case without managing them.

 

Trained in Big 4 accountancy firms in risk management, I had the opportunity to audit risk management in local government, housing associations, central government agencies and education sector. After leaving the Big 4, I moved to a FTSE giant where as a senior Internal auditor, I reviewed risk registers of EMEA region countries and led risk workshops of complex large businesses, such as the North Sea business. As I now work in the charity sector, strengthening good governance in organisations, disseminating my professional learning, I am pleased to see many INGOs recognising the need to manage risks. Be it very much behind the government and corporate sector for various reasons, they try to punch above their weight. In dealing with risk management in the charity sector, especially the INGO sector, I have the following observations:

Where do risks come from

I too often see a misunderstanding of “relevant” risks. Organisations too often led by academics and theory or with the desire of simply copying “others” often fall in this trap.

Identifying risk becomes, a tick box exercise and most of the time risks end up outwardly looking, ignoring the internal and external needs of organisations.

 

Risks become very much focused on weaknesses and threats, ignoring strengths and opportunities. As I mentioned above sometimes organisations need to be bold to succeed. This may require taking risks.

Every organisation like humans can be different from each other. How the organisation was formed, the recruitment, HR practices, type of CEO and trustees, ethos, stakeholders, business relationships, contracts and brands, can make organisations unique. The associated risks should reflect this. The controlling of risks

In risk registers, I see listing of controls against risks and then a sense of content from organisations that the box is ticked and risk is managed. This is not risk management instead this can turn into a false sense of security. The process of matching risks with controls requires a robust assessment of the controls. This should lead to identifying gaps with meaningful action plans.

An effective risk management process leads to more work, more strengthening, more investment, more focus and more hunger to succeed. This cannot be just a tick box. The INGO sector has a long way to go. Being able to manage risks, can mean a difference of life and death, a full belly or an empty belly for the beneficiaries of INGOs.

 

The funds raised can travel further in meeting objectives that the most vulnerable depend on. In all this, my work with INGOs continues. Nasir Rafiq is a financial governance expert and the founding director of Dua Governance Chartered Accountants, specialising in the charity sector and internal audit.