Decision

Charity Inquiry: Afghan Poverty Relief

Published 20 May 2021

This decision was withdrawn on 22 May 2023

This Inquiry has been archived as it is over 2 years old.

Applies to England and Wales

The charity

Afghan Poverty Relief (‘the charity’) was registered on 21 May 2004. It was governed by a declaration of trust dated 9 October 2003 that was amended by a supplemental deed on 27 April 2004. The charity was dissolved on 6 May 2021 and removed from the Register of Charities on 13 May 2021 because it ceased to exist.

The charity’s objects were ‘the relief of poverty sickness and distress, the advancement of education, the preservation and protection of good health and such other charitable purposes according to the laws of England and Wales as the trustees in their absolute discretion think fit’.

Since its registration in 2004, the charity’s stated activities included water provision, orphan support, food distribution, microfinance initiatives, and community buildings.

Issues under investigation

On 8 March 2011 the Metropolitan Police (‘the Police’), shared information with the charity Commission (‘the Commission’) under section 54 of the Charities Act 2011 (‘the Act’) ^{[footnote 1]}. The Police’s investigation into two of the charity’s then trustees indicated that the charity’s funds were not being used for their intended charitable purpose. As a result of their concerns the Police obtained a civil restraint order under the Proceeds of Crime Act 2002 (‘POCA’) for several bank accounts, including accounts held in the name of the charity. This POCA order remained in place until 25 July 2014.

On 2 November 2011 two of the charity’s (then) trustees, Mr Syed Hajnajafi (Trustee A) and Ms Akila Kassam (Trustee B), who were also married to each other, were arrested for a number of offences. Both were charged with theft in May 2013; Trustee B was also charged with four counts of fraud for making false or misleading representations to the Commission relating to annual return submissions made in respect of the charity. In April 2014, Trustee A was found guilty of one count of theft and Trustee B was found guilty of four counts of fraud and one count of theft. Both were sentenced in May 2014; Trustee A was sentenced to 5 years imprisonment and Trustee B to 3 years imprisonment. As a result of their convictions, both Trustees A and B were automatically disqualified from trusteeship under section 178 of the Act ^{[footnote 2]}.

On 10 February 2011, the Commission opened a statutory inquiry (‘the Inquiry’) into the charity in accordance with section 46 of the Act. On 16 February 2011, the Inquiry exercised the Commission’s power under section 76(3)(f) of the Act to restrict Trustees A and/or B from entering into certain transactions without the Commission’s prior consent – see regulatory action taken for further information.

At the time of the Police’s investigation, there were a total of four trustees. The Police’s investigation did not involve the charity’s other two trustees.

Scope of the Inquiry

The Commission’s Inquiry was opened in relation to the alleged misappropriation of charity funds and concerns about the governance, administration and overall management of the charity. Specifically, the Inquiry sought to investigate:

• transactions between and authorised by Trustee A and Trustee B and the charity
• the administration, governance and management of the charity by the trustees, with specific regard to charitable funds being used for significant private advantage
• the financial controls and management of the charity
• whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law
• whether the charity is established as a charity and is operating for the public benefit

Following the conclusion of criminal proceedings against Trustees A and B, the Inquiry exercised the Commission’s power under section 76(3)(g) of the Act to appoint Pesh Framjee of Crowe Clark Whitehill LLP (now Crowe UK) as interim manager (‘the IM’), to the exclusion of the charity’s other trustees. Further information regarding the work of the IM can be found under the heading Interim Manager appointment.

Findings

The Inquiry found that the charity had been mismanaged and that this contributed to and/or facilitated its abuse for criminal purposes by Trustees A and B. This resulted in a significant financial loss ^{[footnote 3]} to the charity which prevented its income being applied on activities which furthered its charitable purposes for public benefit.

Analysis of the charity’s bank accounts, and some personal and business accounts of Trustees A and B, showed cash withdrawals from the charity’s bank accounts and subsequent deposits into Trustee A and B’s personal and business accounts. Between August 2007 and January 2011 £254,310 was withdrawn in cash from the charity’s account and £215,810 was paid in cash into personal and business accounts belonging to Trustees A and B. During the criminal trial the Judge commented:

this was a sophisticated scheme that evolved with numerous bogus receipts written down to pretend that monies of the charity had gone out to Afghanistan for the relief of poverty when the money had been stolen in cash by you … substantial sums of money would be withdrawn from the charity, taken in cash and then one or both of you would travel the short distance to a bank 100-200 yards away often within just a few minutes and that money would be placed in a personal account.

On 30 January 2012 Trustee A was stopped by Police at London’s St Pancras Station. He was found to have 17,230 Euros in cash which he stated was money that had been collected by him for the charity. These funds were seized by the Police under POCA and subject to a cash detention order. In addition to the funds seized, Trustee A held a cash receipt book in the name of the charity which recorded that 18,085 Euros had been collected from named donors between 20 November 2011 and 13 January 2012. This fundraising activity took place after the arrest of Trustees A and B and the POCA restraint order was obtained but before the Commission’s Order, restricting Trustees A and/or B from engaging in any fundraising activities without the Commission’s prior consent. The funds seized by the Police were subsequently deposited into one of the bank accounts of the charity, all of which were subject to the restraint order. There was a discrepancy of over 800 euros between the cash held by Trustee A on 30 January 2012 and the amount recorded in the cash book. The Inquiry found that this was further evidence of misconduct and/or mismanagement on the part of the trustees, particularly Trustee A, to maintain and preserve accounting records and demonstrate that the charity’s funds were used solely on activities which furthered its charitable purposes.

The charity’s trustees failed to keep adequate records in relation to the operation of the charity. The Inquiry examined the charity’s financial books and records that were made available to it, and of the bank statements it had obtained using its powers under the Act. For the period 20 February 2012 – 14 September 2012, many of the charity’s receipts and records were undated. The Inquiry found that it was not possible to reconcile the donations recorded as having been received by the charity and corresponding deposits into the charity’s bank accounts.

The charity’s other two trustees deferred to Trustees A and B. Trustees have joint and several responsibility for the protection of their charity’s funds and compliance with their fiduciary and statutory duties. Trustee duties are active duties, where certain tasks and responsibilities are delegated to a trustee(s), their co-trustees must hold them to account.

All of the charity’s trustees failed to comply with various provisions of the charity’s Trust Deed, including but not limited to provisions relating to trustees not to benefit financially from the charity, conflicts of interest and the submission of accounts and other statutory returns to the Commission in conformity with the Act.

Trustee A failed to comply with the Commission’s section 76(3)(f) order in July 2012. The Inquiry became aware that Trustee A had accepted a cash donation from a member of the public; this was prohibited by the Commission’s order unless prior consent was obtained. The charity’s other trustees confirmed that they were unaware of this donation until informed of it by the Inquiry. They subsequently confirmed that the donation had not been banked and Trustee A stated the funds had been used to pay expenses of charity employees. The trustees could not demonstrate that the funds received were appropriately applied.

Trustee A committed further misconduct and/or mismanagement by breaching the Commission’s Order.

Conclusions

The charity was mismanaged by its trustees and intentionally abused by Trustees A and B to facilitate their criminal conduct. In addition to the criminal abuse of the charity, there were several other instances proving misconduct and/or mismanagement in its administration by all of the charity’s trustees as referenced in this report.

Regulatory Action Taken

The Inquiry exercised the Commission’s information gathering powers on various occasions to obtain information about the charity to include copies of bank statements and other financial records.

On 16 February 2012, the Commission made an Order under section 76(3)(f) of the Act to restrict certain transactions that Trustees A and/or B could enter into without the prior consent of the Commission. The Commission’s Order prohibited Trustees A and/or B from ‘appealing for, collecting, soliciting or otherwise raising money or other property, either directly or indirectly in the name of or on behalf of the charity’. As the Police had obtained a POCA restraint order in respect of the charity’s bank accounts it was not considered necessary for the Inquiry to exercise the Commission’s powers in respect of these accounts at that time. In July 2014, the POCA restraint order was discharged and on 25 July 2014, the Inquiry exercised the Commission’s power under section 76(3)(d) of the Act to ‘freeze’ the charity’s bank account in order to protect its property. The Commission’s order under section 76(3)(d) of the Act prohibited the bank with which the charity’s accounts were held from parting with any property held without prior approval of the Commission.

On 4 July 2013, both Trustee A and B were suspended under 76(3)(a) of the Act by Order of the Commission. The Commission also issued notice of its intention to remove Trustee A under section 79 of the Act. Trustee A subsequently made representations to the Commission in respect of his proposed removal; consideration of these representations was placed on hold pending the outcome of the criminal trial. As Trustee A and B were both found guilty of dishonesty offences, they were automatically disqualified from trusteeship and consequently, by virtue of the charity’s Declaration of Trust, ceased to hold the office of trustee of the charity. Trustee A, by virtue of the length of their sentence is disqualified from ever acting as a charity trustee, trustee for a charity and/or holding a senior management position in any charity in England and Wales. Trustee B will remain disqualified from being a charity trustee, trustee for a charity and/or holding a senior management position in any charity in England and Wales until their conviction becomes spent in accordance with the Rehabilitation of Offenders Act 1974.

The Commission supported the Police’s criminal investigation and the subsequent prosecution by providing witness statements and giving evidence during the criminal trial. Following the trial, the Police initiated confiscation proceedings under POCA to recover funds stolen from the charity. The Commission made representations to the Police and the Court that any funds recovered from Trustees A and/or B be returned to the charity by way of compensation. The Commission appointed the Interim Manager (‘IM’) on 26 September 2014 to assume the responsibilities and duties of charity trustee and to, amongst other duties, represent the charity during confiscation proceedings. The court issued confiscation orders against Trustees A and B for £532,925.53; between 2016-2017 payments of £457,134.99 were made to the charity in accordance with these orders.

Interim Manager Appointment

The IM was appointed by order under section 76(3)(g) of the Act on 26 September 2014. The appointment was made public on 3 October 2014.

The scope of the IM’s appointment included:

1. Identifying and assessing the assets and liabilities of the charity in the UK and Afghanistan
2. Compile and submit the charity’s accounts for financial years 2011 to date
3. Represent the charity during confiscation proceedings, including establishing arrangements for the application of any funds that may be recovered as part of the confiscation process
4. Assess the possibility of the future operation of the charity and either restore suitable management and administration arrangements to the charity or dissolve the charity in accordance with its governing document

The IM identified that there was a property in Ghazni, Afghanistan which had been set up by funds provided by the charity. After carrying out the necessary checks including arranging visits to the property the IM, collaborating with other relevant charities, considered various options for the charity and for continuing support of the children it supports.

The IM assessed that the charity was not viable and resolved to identify another charity with similar objects to continue support the running of the orphanage. An international NGO that has been working in Ghazni Province for more than 30 years and has currently more than 300 staff across Afghanistan, working within the fields of dialogue and conflict transformation, education, health, food security, natural resource management and disaster risk reduction was identified.

Between June 2020 and April 2021, all of the charity’s remaining assets were transferred to the operating NGO to be applied under a MOU that supports the charity’s purposes.

The IM was discharged on 13 May 2021. The cost of the IM’s appointment (September 2014 – May 2021) were met out of the charity’s funds and totalled £71,865.33 (plus VAT).

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the inquiry of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report but is included because of their wider applicability and interest to the charity sector.

Every charity needs an effective trustee body which has control over the administration of the charity and acts as a whole, especially because all trustees are equal in responsibility. Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up.

charity trustees must comply with Orders and Direction of the Commission. In some circumstances it may be a criminal offence (or contempt of court) for a charity or a trustee to not comply with an order or direction of the Commission.

The abuse of charities for unlawful purposes is absolutely unacceptable. In instances where the Commission uncovers or has evidence to suggest that a civil or criminal offence may have been committed we will share this information, through our statutory gateway, with the police and other law enforcement agencies.

When working internationally, charities often operate through local partners rather than establishing their own delivery infrastructure in their country or region of operation. Working through or with a local partner can be an effective way of delivering significant benefits direct to a local community. It does not, however, shift or alleviate responsibility for ensuring the proper application of the charity’s funds by the local partner. That responsibility always remains with the charity trustees, forming part of their duties and responsibilities under charity law. The need to implement risk strategies therefore remains critical.

1. In March 2012 the Charities Act 1993 and Charities Act 2006 were consolidated into the Charities Act 2011. When the Inquiry was opened the Charities Act 1993 was in effect, however, for ease we have referred to the relevant provisions under the Charities Act 2011 in the report ↩

2. Section 178 of the Act disqualifies individuals from acting as charity trustees in a number of cases, one of which is where the individual has been convicted of any offence involving dishonesty or deception. Trustee A will not be able to act as a trustee in the future, unless he obtains a waiver from disqualification from the Commission or the Courts, owing to the length of his conviction meaning that it will never become spent. Trustee B’s conviction will become spent 7 years after the end of the sentence under the Rehabilitation of Offenders Act 1974; her disqualification from trusteeship will apply for this period. ↩

3. Funds lost to the charity as a result of Trustees A and B’s actions were recovered as part of Confiscation proceedings under Part 2 of POCA – see regulatory action taken and Interim Manager appointment for further information. ↩