Money transfers

(De)risky business? International development and the banking sector

International NGOs must be ready to deliver projects in some of the most complex environments on earth, often places with extremely distressed economies and financial services sectors.

In international development transactions, money is often moving from the Global North into vastly more complex Global South recipient markets. INGOs are faced with the challenge of needing to deliver for the communities they support, sometimes at extreme pace, whilst maintaining the rigorous anti-money laundering and anti-financial crime processes that their donors and public sector partners increasingly expect as they transfer funds.

How is this feat achieved? Quite simply it is through openness, transparency, quality systems and tight collaboration with banking partners.

As Crown Agents Bank’s Head of Financial Crime and Money Laundering Reporting Officer (MLRO), me and my team are at the forefront of helping our international development and humanitarian sector clients. We ensure, when they transfer funds to project offices in-country or recipient communities, that they can trust that this is happening safely and with all the required insights into the recipients and origins of those funds.

The international development sector is different from other client groups that the financial services sector deals with. In a way, international development actors mirror financial services organisations, in that we both receive and disburse funds. However, there is one key difference – risk appetite.

Where, broadly speaking, the financial services sector seeks to de-risk itself as far as possible, a phenomenon observed in the recent trend for international banks to leave more complex regions, the development sector is fundamentally bound to environments with distressed economies. International development actors don’t run from problematic environments, they actively go to where the challenges are. Whether a live humanitarian crisis environment or a region which has been distressed for some time, there is usually less supervision and meaningful governance of the banking sector.

Supporting delivery: lessons learned working with banking partners

This session aims to explore some of these challenges, promoting an open discussion around solutions that organisations have found with the aim of ultimately unpacking the complexities, allowing everyone to collectively learn from our shared experience.

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As such, NGOs are often deemed inherently high risk by regulators and financial service providers. However, such a status should not immediately be a cause for worry. With the right levels of controls and governance, organisations can identify challenges and can meaningfully reduce this inherent risk.
Beyond the inherent risks that emerge from the kind of work the international development sector does and where it does it, that can be mitigated, we often encounter real residual risk in the form of international sanctions. NGOs operate in regions where the state may have failed or the government itself may be a rogue actor, here is where sanctions screening processes will be deployed by your banking partner.

The good news is, in many cases, NGOs delivering humanitarian aid are exempted from international sanctions. But even with exemptions you still have to navigate transactions to sanctioned markets with tact – ensuring you have solid record keeping, processes and controls in place, making sure that you are always meeting your obligations.

For lots of banks in our sector, the complexity and risks attached to NGO activity makes it easier to simply say no, and derisk from the sector entirely. Even if they do provide support to NGO clients, in large financial services organisations, supporting wide ranges of client groups, products and services, you are less likely to find a structure where the staffing and controls have been designed specifically to support NGO transactions. In smaller, more specialised entities, like my own, it is easier for us to build systems and approaches with NGOs in mind.

Practically, what does this mean? For the client we always aim to make the experience of working with us as smooth and pain-free as possible, with processes whirring away in the background, allowing our NGO clients to get on with the vital work at hand. My team and I will be engaged in a range of processes and checks to make sure transactions are safe, including know your customer (KYC) processes, ID verification, sanctions screening and more-often-than-not enhanced due diligence (EDD).

The depth of the EDD processes depends on the organisation and the expected recipient and destination of a payment. We will explore the origin of the funds being moved, the operating model of the NGO, its local partners and the connections between them. The depth of analysis is shaped by the parties we are working with and the modality of the aid delivery. Will always work openly and collaboratively with our partners, and if there are gaps in the information we need, we will work them to fill them and to build processes together to improve future activities.

The new UK offence of Failure to Prevent Fraud will likely require us to become even more focussed on how the funds we are moving will be disbursed when they reach their destination, especially with our NGO partners increasingly exploring mobile payments and card solutions in hard-to-reach markets, particularly as part of Cash-Voucher-Assistance (CVA). However, tech innovations in delivery also cause innovations in processes that help us better track and understand NGO payments, such as new biometric identification products.

All in all, underneath every payment or FX transaction made by NGOs, there is a raft of activity going on behind the scenes to keep NGOs and their partners safe. But like the swan swimming gracefully across a pond, the client rarely sees the paddling feet beneath the water. I’m really looking forward to joining the Bond community for the Supporting delivery: lessons learned working with banking partners event to take away some of the mystery, share insights and explore how the sector can collaborate with its banking partners more effectively.


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