A year ago (July 2023) we wrote about the avalanche of issues our charity clients have experience setting up and operating bank accounts, including when we help them to set up or incorporate (almost always the most difficult step has been setting up bank accounts).

Since then there has been a steady stream of stories in the sector press about banking difficulties experiences by charities and CICs, in some cases causing charities/CICs to close because they have not been able to raise funds without a bank account.

In November 2023, the Charity Commission and its sister regulators in Scotland and Northern Ireland, with the support of HMRC, wrote and open letter to the CEOs of UK Banks calling for them to make banking for charities more user friendly. The Commission’s 2024 annual trustee sector survey showed that 42% of trustees experienced poor banking services in the last 12 months and highlighted a range of specific concerns.

Key difficulties faced by charities when dealing with banks include:

• Lack of understanding of charities, particularly the processes for incorporating an unincorporated charity or conversion of a CIC to a charity.

• Onerous due diligence checks on Trustees, including the need for in-person ID checks (way more so than for personal accounts which can be opened online with digital ID checks).

• An aversion to Trustees living overseas (even a direct refusal to allow this), which is a problem for international societies, for example.

• Having accounts closed or suspended suddenly for long periods of time with little or no notice.

• A reduction in bespoke banking services and online banking that is not designed to match the way charities operate.

• Poor customer service and administrative delays (months or even years), including processing paperwork in multiple stages often requiring additional documentation and repeat ID checks (because long delays mean previous checks are out of date).

It almost feels like most banks don’t want charities’ business, particularly small charities. Most challenger banks don’t even offer banking services for charities (particularly because most funders require dual signatory bank accounts). And yet, not having a bank account can be the difference between life and death for charities because most funders will not give grants unless they have the right kind of bank account and having bank account is an essential safeguard against fraud and financial mismanagement.

Some relief appears to be on the way. This week (July 2024) the Charity Commission has issued new guidance to help charities navigate banking issues and avoid difficulties (while continuing to press for more action). This goes alongside a new Voluntary Organisation Banking Guide issued by UK Finance.

It remains to be seen how much of a difference these publications will make; they still seem to place the onus on charities to “get it right” rather than adapting systems to meet charities’ legitimate needs. Therefore, the tips we set out in our blog a year ago, still feel very relevant:

• Shop around to find a bank that give you confidence and consider a bank that specialises in banking for charities. They at least understand charities and the processes involved and want your business because, in some cases, they only offer banking services for charities. That said, we have clients who have had poor experiences with even these banks and most have much more limited functionality than high street banks (e.g. not offering integration with accounting software).

• Make sure to find out early what your preferred bank needs from you to open an account, particularly what ID and other documentation they need for Trustees. if you feel like the person you spoke to isn’t confident about what is needed, call again and speak to someone else. In any case, asking two, three or four times is advisable because they often give different answers each time. Make sure they speak to their central charities team to get chapter and verse. This way there’s a reasonable chance you can have all the required documents ready when you need them.

• If your preferred bank is likely to take a long time, consider opening an account with a specialist bank for charities (even if it doesn’t given you everything you want) so you at least have an account. Then you have more time to open the account you really want.

• Start with a small number of Trustees and appoint more after you have opened your bank account.

In the end, most of the troubles we have seen stem from incompetence, ignorance or lack of interest from bank staff and there’s not a lot you can do to prepare for that, but at least you can try!

To find out more about how we can help with setting up and incorporating charities or charity governance more generally, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.