Muslim charities say they are still having their bank accounts closed without warning or explanation and face difficulties opening an account despite the political backlash after Nigel Farage’s high-profile debanking.

It means charities face obstacles in carrying out their work, with some even being blocked from providing humanitarian aid and life-saving operations, according to a report from the Muslim Charities Forum (MCF).

It found 68% of Muslim charities reported difficulties opening bank accounts, 42% experienced a complete withdrawal of banking services and 42% also had significant challenges with transferring funds.

This delayed payments which damaged humanitarian work, the report said.

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Real-life harms were outlined by charities anonymously interviewed for the research.

One charity running a hospital in a conflict zone was not able to pay doctors and nurses for two months. Another supporting Syrian refugee children with cancer in Turkey had a payment delayed for a year, “severely” impacting the timely delivery of care to the children. A third received an eviction notice from a shelter because a payment had not arrived.

But even when debanking did not directly halt a project, it damaged 44% of respondent charities’ relationships with partners, they said. Delays in sending funds or having their account closed led to a breakdown in trust, the MCF added.

While anonymous, the report included testimony from charities.

Real-world harms

One told the report author of danger to staff when payments didn’t go through.

“Our charity was operating within an area in the Middle East, payments were getting held up by banks,” it said. “Because of these delays, local vendors would come to our field offices demanding payment at gunpoint, putting the lives of our workers at risk.”

While Muslim charities make up a small number of the UK charities sector, Muslims donate more than any other faith group, according to surveys.

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Having no bank account means charities are in breach of the law, the MCF said.

There is no legal recourse, however, for charities who have been debanked. In the UK there is no legal right to a bank account.

Charities have to defend themselves even if there’s no wrongdoing, often without knowing why an account is closed or a transaction hasn’t gone through, according to the report.

Why are Muslim charities being hit?

Five issues converged to make debanking a particular problem for Muslim charities, according to the MCF: alleged Islamophobia, “highly common” names of charity workers being on a terrorist list, risk-averse banking, operating in high-risk areas like Syria, and the challenges faced by charities more broadly – difficulty complying with or understanding banks’ due diligence requests.

“Evidence suggests that structural Islamophobia plays a role, with Muslim-led charities often unfairly targeted by banks for perceived risks without concrete evidence of wrongdoing,” the report, lead-authored and researched by Abdulsami Arjumand, said.

Among the recommendations laid out is for bank staff to undergo anti-racism training, to “improve decision-making” and “avoid stereotyping or perpetuating racial and Islamophobic biases”.

Banks are risk-averse in their operations and have been terminating and restricting relationships with clients perceived as posing a higher risk of money laundering or terrorist financing.

This has disproportionately affected charities, Mr Arjumand’s report said, particularly those working in or with Muslim communities.

Responding to the study, banking lobby group UK Finance said any decision to restrict access to or close an account, is only taken after careful consideration and based solely on the need to comply with regulatory obligations.

“We want the process of opening and managing a bank account to be as clear and straightforward as possible and welcome engagement from charity organisations,” said the body’s managing director of commercial finance David Raw.

“Having read this report, we have contacted the Muslim Charities Forum to discuss the issues they are facing, as this is an important part of enhancing services,” Mr Raw said.

“We have ongoing and regular engagement with the wider charity sector, humanitarian organisations, and regulators on access to banking matters. With their support, we recently launched a new guide for voluntary organisations to help with opening and managing bank accounts,” he added.

How can this still be happening after the Farage furore?

Unlike countries such as Belgium, France and Italy, there is no legal right to a bank account in the UK. Banks do not have to provide services to everyone who wants them.

The Muslim charities’ research echoes a point made by finance regulator the Financial Conduct Authority (FCA) in their investigation of debanking.

“An important question for policymakers is whether all individuals, businesses and organisations should have the right to an account, as is the case in some other countries,” it said in its September 2023 report on bank account access and closures.

The comments and report came after the highly publicised debanking of Reform leader Nigel Farage. His account with exclusive bank Coutts was closed after the lender deemed him a reputational risk and said he had alleged links to Russia.

“The time is also right for a debate on how we balance access to bank accounts with the threat of financial crime, as well as firms’ reasonable risk and commercial appetites,” the FCA said in their 2023 publication.

It pointed out that anti-discrimination measures in the payment accounts regulations don’t apply to charities and political parties.

After the debanking of Mr Farage the political reaction from the previous Conservative government was strong. It committed to bringing in “tougher rules to stamp out debanking”. No legislative changes were made.

The Treasury, however, told Sky News it was committed to new laws to prevent debanking.

“Banking services fulfil a vital role in the lives of millions of people and businesses across the UK, and the government is committed to bringing forward legislation to enhance customer protections in cases where their bank account is terminated by their provider,” a Treasury spokesperson said.

“Further details will be set out in due course.”

With the changes it’s understood customers will have to receive detailed and specific explanations when their account is closed and generally have more notice of closures.

But government stopped short of acceding to the MCF’s recommendation of establishing a legal right to a basic bank account for charities.

Methodology

Nineteen charities responded to the MCF’s call for survey participants, a response rate described as “low”, which demonstrates charities’ concerns about coming forward to talk about debanking.

Despite promises of strict anonymity, most charities feared the reputational damage of being associated with debanking, which the report said, can result in further banking difficulties.

As well as being carried out by the MCF, the research was supported by the University of Aberdeen.

Responding to the MCF report, the FCA said, “We know that some groups can face challenges accessing bank accounts. We recently set out clear expectations on account access and have been actively engaging with the sector to ensure that these are being met.”

“Smaller charities will benefit from the protections of the consumer duty. We continue to monitor data on account access.”