Charities and Fraud

 

There has been a recent increase in fraudulent scams aimed at charities, which is a huge worry when charities are struggling for money in the current economic climate.

 

A Recent scam

 

This involved large donations being offered by way of a credit/bank card on the condition that 50% was subsequently forwarded on to a specified charity, which the fraudster would provide the bank details for. The cards with which the donations are being made are stolen, and the bank account details that are provided for the 50% transfer are for the fraudsters personal bank account.

 

When the card issuer then identifies that the credit/bank card was compromised it recalls the full amount from the charity. The charity is liable for the full sum. The charity has also unwittingly been involved in money laundering.

 

Obviously the loss of a large amount of cash could be catastrophic for a charity.

 

How can trustees protect their charity from this abuse?

 

The best way to protect a charity from any form of financial abuse is to have good governance and strong financial controls. To avoid falling prey to these particular scams, trustees should also make sure they carry out proper due diligence on those individuals and organisations that give money to, receive money from, or work closely with their charity. This forms part of trustees’ legal duties to protect their charity’s assets and is referred to as the ‘Know your principles.’

 

How can trustees identify suspicious donations?

 

The key to identifying suspect donations is to look out for exceptional features, such as:

 

– unusually large amounts,

– conditions or complex banking and transfer arrangements,

– a donation which in reality is some kind of loan

 

What do trustees need to do if they identify a suspect donation?

 

Trustees should report a suspicious donation to Action Fraud and/or other appropriate authorities. They should also report this to the Charity Commission under the ‘reporting serious incidents regime’ as soon as they become aware of it.

 

For further guidance on Charities and fraud visit the

 

Alternatively if you have any questions arising from this article, or any other queries relating to this article, please do not hesitate to contact me on 01539 729727 or email [email protected]

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