Using the regulated financial sector
The UK’s charity regulators have issued an alert to request charities to use the regulated financial sector when they receive, hold, move or use money.
Trustees have a legal duty to protect charity’s funds and ensure that these funds are used for the purposes of the charity. The regulators’ alert explains that the UK banking system is regulated and therefore accepted to be a safe system in which to move funds internationally and transparently.
It is important that trustees can demonstrate audit trails to account for where their charity’s money is received from and where it ultimately goes to. A bank account in the charity’s name is the best way to manage and protect the charity’s money.
The alert, which was released on 28th February 2018, noted that if cash or other methods are used to transfer charity funds, it will be more difficult for trustees to demonstrate that they are complying with their legal duty to protect these funds. In such instances, the trustees must be able to validate their decision to move funds in this way and show that the risks involved in doing so have been appropriately managed.
However, even though placing charity funds in a bank account is undeniably the most practical way to safeguard money, it is not completely without its risks, and trustees should still be alert to the possibility of fraudulent activity in such circumstances.