Charity’s misconduct over cash couriering sees trustee banned
16 Mar 2020
A Charity Commission investigation has found the former trustees of the charity ANO responsible for misconduct and ‘reckless’ in accounting for its cash, and one former trustee has been disqualified
16 Mar 2020
The charitable objects of ANO, which was set up in 2013, are to relieve suffering via financial provision and medical aid in Leicestershire, Bangladesh, Indonesia, Malawi and Turkey.
In 2016 a then trustee of the charity was stopped at Manchester Airport carrying £19,300 in cash, most of which they said was for ‘purchasing aid’ in Turkey for the benefit of Syrian refugees. The funds were seized by the police.
The regulator’s subsequent engagement with the charity found another incident of cash couriering, a practice discouraged by the Commission due to the risks associated with it.
Other concerns identified at the time included funds being transferred to the personal bank accounts of trustees and employees, and a failure to declare money in excess of €10,000 when leaving the EU.
The Commission opened an inquiry in April 2017, which found the charity’s due diligence, risk assessment and monitoring of how funds were applied and accounted for was inadequate.
For example, a project run by the charity, which was operating on the Turkish/Syrian border was planned without acceptable due diligence on the partner organisation or sufficient risk assessment for the trustee travelling to a high-risk area.
The inquiry found that ANO relied on a single due diligence report, which had been created by another registered charity at least two years prior.
ANO obtained this report from a third-party company, and not directly from the charity which created it.
The former trustees stated they had contacted other registered charities known to work with the Turkish partner as a form of reference, but no supporting documentation was provided.
Due diligence on another of the charity’s partners, in Somalia, was similarly inadequate as was the monitoring of a project with that partner which distributed £6,000 in cash directly to beneficiaries.
The project in Somalia relied on videos and photographs of individuals receiving sums of cash, but without sufficient information on how this was spent, who received money or how beneficiaries were identified.
The Somali partner was a company established by an individual known to one of ANO’s trustees and who had helped to establish the charity in 2013.
There was no needs assessment provided to the inquiry as part of the accompanying paperwork, as the Commission would have expected to see for this type of activity.
The Commission also found ANO had been poorly managed over a number of years. One trustee was responsible for much of its work overseas.
The former trustees failed to demonstrate they had followed their own policies or procedures on due diligence or monitoring end use of funds.
One former trustee received a wage from the charity between November 2016 and January 2017, in breach of the governing document. Once identified by the Commission this amount was paid back.
The trustees, at different times, did not manage conflicts of interest and/or loyalty adequately, for example a van was purchased from a company which one of the then trustees had an interest in, but this was not declared or managed in accordance with charity law.
The relationship between the charity and a private business of one of the then trustees was not transparent and not properly managed by the trustees at that time.
The charity was heavily reliant upon cash transactions for its day to day business. The inquiry found that in excess of £100,000 was transferred from the charity’s bank accounts to that of trustees, employees and volunteers between March 2015 and April 2017.
The Commission said the trustees had, for some time, been transferring charitable funds to the bank accounts of trustees, employees and volunteers which were then withdrawn in cash and taken to money transfer companies and transferred to the charity’s partners overseas.
The inquiry was able to account for all of the funds transferred to personal accounts after considerable effort reviewing documentation, with the report stating that ANO’s financial records were ‘convoluted and difficult to decipher’.
The inquiry reviewed statements from the charity’s two bank accounts for the period March 2015 to July 2017 and two PayPal accounts for the period October 2018 to March 2019. There were numerous transactions, particularly cash withdrawals and transfers to personal accounts that were without obvious explanation.
The inquiry issued multiple directions to the former trustees to obtain sufficient information to assess that these were for legitimate charitable activities, and that charitable funds could be accounted for.
The charity’s funds could be accounted it but the Commission said it remains unanswered if all the funds were expended on exclusively charitable activities due to inadequate monitoring of end use of funds.
The Commission sought to understand the financial relationship between the charity and a personal business of the longest-serving trustee. The business advertised its services on the charity’s website, social media and on printed leaflets.
There was a verbal agreement ANO would receive all of the business’s profits, as a donation, in exchange for the advertising estimated at between £20 and £60 per month. However, the lack of accounting records made this impossible to confirm.
Overall, the conduct of the former trustees fell below the behaviours and standards expected of trustees which placed the charity and its assets at risk.
Tim Hopkins, assistant director of investigations, monitoring and enforcement at the Charity Commission, said: ‘Our inquiry found that the former trustees were reckless with charity funds.
‘Former trustees failed to carry out adequate due diligence on overseas operations and partners, operating in high-risk areas without adequate risk assessment, and cash couriering, a practice discouraged by the Commission.
‘The reckless conduct of one former trustee warranted further action and they have rightly been disqualified.
‘The charity now has a new trustee board who are working with the Commission to improve governance and financial management at the charity. The Commission will continue to monitor its progress and compliance with an order directing certain actions be taken.’
The Commission disqualified a former trustee of the charity from acting as a trustee of all charities in England and Wales and from senior management functions for a period of three years. This decision was challenged at tribunal, but upheld.