Criminals try to use legitimate organisations, including charities, to facilitate their crimes. Every charity needs appropriate safeguards to make sure its resources cannot be misused for financial crime. Due diligence checks on your donors can help you to understand where your charity’s money is coming from.
This refers to the practical checks you make to confirm the identity, credentials and good standing of the individuals and organisations who give money to your charity. It is important to get to know your donors in this way because otherwise you cannot:
Anonymous or unsolicited donations
Be alert to any unusual or unsolicited donations from a source which cannot be identified or verified. Donations from unknown bodies or foreign locations in which the regulatory and legal frameworks are not as rigorous as the UK’s may also require closer attention.
Donations with special conditions
Special conditions can bring considerable risk. Consider carefully the wisdom and lawfulness of conditions that require your charity to act as a conduit for transferring money from one individual/organisation to another.
A number of other high-risk conditions are also commonly-found red flags.
About the donor
About the donation
Performing due diligence does not mean questioning every donation or gathering lots of personal details about every donor. The amount of due diligence depends on the risks involved, including the size and nature of the donation and whether it has any suspicious characteristics. Extra steps may also be needed for donations from outside the UK.
You are probably familiar with the source and typical characteristics of most donations you receive. The key to identifying suspicious ones is, therefore, to look for anomalies and peculiarities with regard to factors like timing, country of origin, amount and frequency.
These might include:
None of these are clear-cut evidence of fraud, but might point to the need for further investigation.
It is good practice to keep records of all suspicious donations. Include:
If you are unsure about the legitimacy of a donation it is perfectly acceptable to refuse it. You might also want to seek the advice and/or agreement of your regulator.
If you suspect fraud act promptly.
Building your fraud defences
For substantial donors
The Charity Commission for England and Wales has produced a range of resources covering this area as part of its compliance toolkit. See chapter two, ‘Due diligence, monitoring and verifying the end use of charitable funds’.
Preventing Charity Fraud contains resources to help charities prevent, detect and respond to fraud.
This helpsheet was kindly reviewed by Robert Browell and Lee Duddridge from Macmillan Cancer Support.
Published 2018. Last updated October 2021.
© Fraud Advisory Panel and Charity Commission for England and Wales, 2018, 2021. Fraud Advisory Panel and Charity Commission for England and Wales will not be liable for any reliance you place on the information in this material. You should seek independent advice.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.