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New research report on bank de-risking

ECNL and the Human Security Collective (HSC) published a new research report on bank de-risking and how the issues of financial access – inordinate delays in cash transfers, onerous due-diligence requirements, inability to open bank accounts and arbitrary closure of bank accounts – affects civil society organizations (CSOs). The focus on access to financial services for CSOs is important as there is an estimated 10 million CSOs worldwide: if CSOs were a country, it would be the 5th largest economy in the world.    (Source:John Hopkins University, Center for Civil Society Studies)

De-risking and country contexts

The report focuses on broader de-risking policy and regulatory drivers as well as practical experiences of relevant stakeholders, and reviews experiences of Mexico, Brazil and Ireland. ECNL and HSC found that CSOs in these countries were:

  • Spending more time getting transactions processed or having difficulty becoming a bank client;
  • Unaware of systemic drivers behind decisions by banks (including on closing down accounts);
  • Impacted more based on size, so smaller organizations more affected than larger ones, with no remedy available;
  • Not able to cope with banks’ extended due diligence requirements, if they were smaller organizations ;
  • Seeing an increase in workload for their financial staff, varying from 35 per cent to 100 per cent compared to five years ago;
  • All being tainted with the same brush as a consequence of the bad behavior of a few;
  • Seeking/finding their own solutions for problems and issues with their bank (one-off, and not systemic).

De-risking at the intersection of frameworks for development, security and regulation

These financial access issues have a negative impact on a broad range of agendas, including the implementation of the UN Sustainable Development Goals, the financial inclusion agenda and civic freedoms in general. They also negatively affect the Countering/Preventing Violent Extremism (C/PVE) agenda, as smaller community-based organizations impacted by financial exclusion are crucial in the preventing radicalization that might lead to violent extremism. Finally, they create new terrorism-financing risks due to pushing money transactions underground.

Recommendations

The report will be presented to a broader audience in June and ECNL will seek to address this priority issue at international, regional and national levels through multi-stakeholder dialogues. Among recommendations, the report includes a call for:

  • more nuanced guidance for CSOs on compliance requirements as well as for the banks on CSO-specific work and risks;
  • exploring technological solutions, which could help lower the costs of compliance and safe payment alternatives (i.e. through dedicated charity banks).

Read the report here: Understanding the Drivers of De-Risking and the Impact on Civil Society Organizations

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