Suspect donations

The Charity Commission, the independent regulator of charities in England and Wales, has issued an alert to warn charities about accepting suspicious donations.

The Serious Organised Crime Agency has informed the Commission that a number of charities have been unwittingly involved in a donation scam using fraudulently obtained credit cards.

The scam involves a fraudster informing a charity that they will be donating a large sum of money on the condition that the charity sends half of the donation onto another specified charity that is in fact the personal bank account of the fraudster.

For example, the fraudster will offer the charity £100,000 on the condition that it sends £50,000 to another specified charity in another country. When the charity agrees, the payment to the charity of £100,000 is made using a compromised or stolen credit card. The charity keeps £50,000 of the donation and sends the remaining £50,000 to the other specified charity's bank account. However, it is in fact the fraudster's personal account. The card issuer identifies that the credit card was compromised and recalls the full amount of £100,000 from the charity. The charity has unwittingly been involved in money laundering.

One way of identifying fake or suspicious donations is to look out for unusual features, such as unusually large amounts, conditions or complex banking and transfer arrangements, or a donation which in reality is some kind of loan. Unsolicited donations might be suspect if charity trustees are unable to satisfy themselves about the credentials of the people involved, or the circumstances of the donation or loan.

Most charities have very good relationships with their donors. However, charities can be abused by fraudsters posing as genuine donors. The Commission is urging charities to be vigilant, carry out due diligence, check donations and implement robust financial controls to help protect the charity from abuse.

The Commission has issued an alert for charities with further information and advice about how to identify and protect against similar incidents, including looking out for:

• unusual or substantial one-off donations or a series of smaller donations or interest-free loans from sources that cannot be identified or checked by the charity
• where a charity is asked to act as a conduit for the passing of a donation to a second body which may or may not be another charity
• if conditions attached to a donation mean that the charity would merely be a vehicle for transferring funds from one individual or organisation to another without the trustees being able to satisfy themselves that they have been properly used
• where a charity is told it can keep a donation for a certain period of time, perhaps with the attraction of being able to keep any interest earned whilst holding the money, but the principal sum is to be returned at the end of a specified, short, period
• where donations are made in a foreign currency, and again unusual conditions are attached to their use, e.g. including a requirement that the original sum is to be returned to the donor in a different currency
• where donations are conditional on particular individuals or organisations being used to do work for the charity where the trustees have concerns about those individuals or organisations
• where a charity is asked to provide services or benefits on favorable terms to the donor or a person nominated by the donor

If charities have concerns about a suspicious donation, they should report this to Action Fraud, whose contact details can be found at www.actionfraud.police.uk, and the police. Charity trustees should also report serious incidents to the Commission as soon as they suspect them and this includes when a large donation is received from an unknown source by email at RSI@charitycommission.gsi.gov.uk.

The full alert, alongside relevant guidance for trustees about how to protect their charities, is available at www.charitycommission.gov.uk/our-regulatory-work/how-we-regulate-charities/alerts-and-warnings/be-aware-of-suspect-donations-%E2%80%93-advice-for-charities.