Overseas Cash Couriers

Both the Charity Commission and Counter Terror Police have recently issued warnings to remind the charity sector of the dangers of using overseas cash couriers and have again advised against using them altogether unless there is an exceptional need to do so. The Regulator has stated that cash ‘continued to be a high risk for terrorist financing and money laundering’, with it continuing to see cases ‘involving cash seizures from individuals who have indicated that they are carrying cash on behalf of a charity for charitable purposes.’

There have been numerous cases of late, involving the seizure of charitable cash by police and border patrol officers, following recent changes to the laws around carrying cash.  Cash of £10,000 or more must be declared to UK customs before it leaves the UK. This is not £10,000 per individual, but £10,000 per group that is travelling. Failure to adhere to these regulations results in a £5,000 fine and potential confiscation of the cash being transported as well. Any such fines and seizures must be reported to the Charity Commission, through their serious incident reporting procedures, at the earliest opportunity. This responsibility falls upon the charity trustees. This must also then be adequately disclosed within the charity’s financial statements.

If proven to be legitimate funds, charities will potentially be able to secure the return of any seized cash. However, the Charity Commission have warned that this can take a significant amount of time, cost, and inconvenience, which may not just impact upon the short-term cashflow position of the charity but could also lead to potential reputational damage in the eyes of the wider sector and the public.

From an audit perspective carrying significant sums of cash is very high risk, mainly due to there being a lack of regulations around its use and so there is less assurance about reliability. Often we see a lack of sufficient record-keeping, which makes it very difficult for trustees and management to prove that funds have been used entirely for the charitable purposes for which they were intended.

Charities can take out insurance to cover them for the potential of any funds to go missing whilst in transit, but it’s important that if doing so they check the small print, to fully understand what they are and, just as importantly, are not covered for. This is whilst also ensuring continued adherence to the local rules and regulations governing the country in which the money is being transported.

The Regulator acknowledges that there is a need for charities which work internationally to move money across borders. Rather than taking the risk of using cash couriers, charities should use regulated banking systems, to minimise the potential risks to their charitable funds, and it will also ensure completeness of the audit trail. Additional administrative costs are not an adequate excuse for failing to use regulated banking systems, as the threats posed by using cash couriers far exceed the administrative costs.

There may be instances whereby cash couriers must be used by the charity. In such circumstances it is essential that proper due diligence is carried out. As a minimum this should include:

• Having a written agreement in place with the agent, clearly setting out the agreed terms and conditions, with the relevant currencies disclosed.
• Written details on the process of delivering the funds, who the funds will be paid too, and how much will be paid over.
• Ensuring consideration and compliance with any local legal requirements that may exist when taking cash into the destination country.

Nevertheless, should regulated bank systems be available and the Management and/or the Trustees still make the decision to go ahead with the use of cash courier, then there must be detailed transparent evidence to clarify the rationale behind such channels being made use of, as well as evidencing the above stated risk management processes that were implemented. The failure to conduct and document such considerations opens the trustees up to the potential for the Charity Commission to deduce that they have acted without reasonable care, committing misconduct and/or mismanagement of the Charity.

The Charity Commission offer specific guidance to assist charities with these processes, which can be found here.

This guidance also includes the following useful tools that charities can complete and adopt:

• Using intermediaries – risk management checklist
• Physical cash transfers – checklist of key controls
• Cash courier agreement form
• Cash payments record form

In a world where we regularly hear that “Cash is King”, charities must ensure they have the necessary financial controls and procedures in place to ensure they protect their funds from risk.

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