Decision

Charity Inquiry: Human Aid UK

Published 7 October 2021

This decision was withdrawn on 9 October 2023

This report has been withdrawn in line with our policy as it is over 2 years old.

Applies to England and Wales

The charity

Human Aid UK (‘the Charity’) was entered onto the register of charities (‘the Register’) on 17 September 2010. It is governed by memorandum and articles of association incorporated on 19 April 2020 as amended by special resolution dated 7 August 2010.

The Charity’s objects include advancing the Islamic religion, advancing education, and promoting religious harmony.

The Charity’s primary activity is to provide aid to those persons affected by war and conflict overseas.

The Charity’s entry can be found on the register of charities.

The trustees’ dates in office

Some of the conduct examined by the Inquiry spans a number of years, during which there were numerous trustees in post. The following sets out the trustees who were in office for the relevant period of time:

• trustee A from 9 May 2010 to 3 December 2016 and 18 February 2019 to present
• trustee B from 18 February 2019 to 25 May 2019 and 10 December 2019 to present
• trustee C from 3 September 2011 to 1 May 2018
• trustee D from 3 December 2016 to 29 September 2020
• trustee E from 2 March 2017 to 3 October 2020
• trustee F from 18 February 2019 to 8 May 2019
• trustee G from 19 March 2019 to 8 May 2019
• trustee H from 19 March 2019 to 8 May 2019

Background and issues under investigation

The Charity Commission for England and Wales (‘the Commission’) opened a statutory inquiry, under section 46 of the Charities Act 2011 (‘the 2011 Act’) into the Charity on 2 August 2019 (‘the Inquiry’). The Commission announced the opening of the Inquiry on 23 September 2019.

The scope of the Inquiry was to consider:

• the administration, governance, and management of the charity by the trustees, including adherence to policies and procedures, use of partners, and monitoring and verification of overseas expenditure; and
• whether the trustees had complied with and fulfilled their duties and responsibilities as trustees under both charity law and the law as it applies to the Charity and its administration

There has been a history of regulatory engagement with the Charity and it was subject to an earlier statutory inquiry in 2014 due to concerns regarding its governance and finances. That inquiry was closed on 3 March 2017 and a statement of the results of that inquiry was published on 3 March 2017.

On 9 July 2019 individuals acting on behalf of the Charity were stopped by officers of the Metropolitan Police Service (‘the Police’) at London Heathrow Airport and were collectively found to be in possession of approximately $9,774 and £9,200 in cash. These individuals included the Charity’s UK Director of Operations (‘the Director of Operations’) and two volunteers.

The individuals told the Police that the funds belonged to the Charity and were intended for use in Gaza. However, the individuals were unable to account for the provenance of the funds and could not provide a clear explanation as to how the funds were intended to be transferred to Gaza, or to whom. The Director of Operations told the Police that they had contacted the Commission the day previously and had been verbally advised against cash couriering. When asked by the Police why the Director of Operations nevertheless went ahead with cash couriering, the Director of Operations did not provide an answer.

Due to the individuals’ failure to properly account for the cash, the cash was seized by the Police under section 294 of the Proceeds of Crime Act 2002 (‘POCA’). On 11 July 2019, the Police successfully applied to Westminster Magistrates Court for the cash to be detained for an initial period of six months. The detention application, which was granted under section 295 of POCA, was not contested by the Charity. This is despite the trustees informing the Inquiry that the Charity had instructed lawyers to attend the application hearing. Before the hearing the Charity was provided with the opportunity to prove the provenance of the funds for them to be released, but they did not do so. The seizure of the Charity’s funds was a matter for the Police and the courts. The Commission’s role as charity regulator is to oversee charity trustees’ compliance with charity law duties, the law in general and trustee responsibilities.

The seizure and subsequent detention of these funds raised serious regulatory concerns with the Commission. This was of particular concern as the Commission had provided advice and guidance to the Charity several times previously in relation to cash couriering. The Charity was also aware of the Commission’s published regulatory alert which sets out the associated risks regarding cash couriering and the extent of documentation that would be required to facilitate such actions.

At the time of the cash seizure the Commission was engaging with the Charity in relation to concerns regarding the financial management and governance of the Charity. This followed information having been shared with the Commission, by the Police, specifically in relation to concerns surrounding the Charity’s due diligence and monitoring of partners and individuals of concern – both in the UK and internationally.

On 8 July 2019, the Commission carried out a books and records inspection (the ‘Inspection’) at the Charity’s premises. It is to be noted that during the Inspection no mention was made by the Charity’s representatives of the trip that was planned for the following day or the intention for individuals to cash courier charitable funds to Gaza.

On 10 July 2019, the Director of Operations submitted a serious incident report (‘SIR’) to the Commission on behalf of the Charity. In this report, the Director of Operations stated that the cash seized was intended for the aid and logistical costs in relation to a delegation to Gaza facilitated by a separate organisation. The Director of Operations also explained that the Charity was able to prove the provenance of the funds. However, it is not clear why the Charity did not contest the seizure or otherwise provide this information to the Police prior to the matter being heard by the courts.

As part of the decision to open the Inquiry, the Commission took into consideration the cash seizure, the concerns in relation to the financial management and governance of the Charity and concerns in relation to due diligence of partners.

Findings

The administration, governance and management of the Charity by the trustees, including adherence to policies and procedures, use of partners, and monitoring and verification of overseas expenditure

The Inquiry found that the Charity was not properly managed or administered by the trustees as they were at the relevant times.

Whilst the Commission acknowledges that there have been changes amongst the trustee board of the Charity since the opening of the 2014 inquiry, nevertheless all trustees should be aware of their overarching duties and responsibilities including under charity law. The Commission has a reasonable expectation that any new trustees to a charity would familiarise themselves with and commit to following any regulatory advice and guidance previously given to that charity.

Cash couriering

The decision to allow cash couriering to take place, without the proper documentation to show their provenance including the failure to brief the Charity’s staff sufficiently on their intended use, is evidence of misconduct and/or mismanagement in the administration of the Charity.

This finding is compounded by the fact that the Commission has previously engaged with the Charity on this issue and has published regulatory advice and guidance on the use of cash couriering.

The Inquiry is critical of the Charity’s failure to mention, during the Commission’s Inspection on 8 July 2019, that there was an intention to travel to Gaza the following day with charitable funds in cash. This is despite the Director of Operations being present at the Charity’s premises during the Inspection along with one of the Charity’s current trustees.

In the Charity’s SIR dated 10 July 2019, the Director of Operations stated that the cash was intended for the aid and logistical costs of a delegation to Gaza facilitated by a separate organisation. It is therefore of serious concern to the Commission that the individuals who were carrying the cash (which included the Director of Operations) were unable to provide an explanation to the Police and as a result the cash was seized.

Furthermore, in October 2019 the Police informed the Inquiry that there had been a lack of engagement on the part of the Charity and its representatives to respond to the Police’s enquiries as part of the POCA investigation. In February 2020, the Police provided a further update to the Inquiry. Again, the Charity had failed to engage with the Police and did not provide evidence of the origins of the cash and its intended use. This resulted in the Police obtaining a further detention period from the courts. In response to this, the trustees told the Inquiry that the Charity was not to blame for the Police having to seek an extension to further detain the funds. Conversely, the trustees explained that it was others not connected to the Charity (i.e., financial institutions) who were holding up the investigation. In support of this the trustees provided the Inquiry with a copy of an email from the Police, dated 31 December 2019. The Inquiry considered this email and noted that the Police were conducting enquiries with outside bodies not connected to the Charity. However, the Police’s email also confirmed that its enquires with the Charity were still ongoing and that interviews with those from the Charity would be carried out in due course. Overall, the Inquiry takes the view that it is reasonable to conclude that had the Charity acted earlier to engage with the POCA investigation, the need to further detain the funds may not have been necessary.

Ultimately the funds were returned to the Charity, by the Police, in May 2020, ten months after they were initially seized and subsequently detained. Whilst the funds were not forfeited, which is positive, the Charity was without these funds for some time and as a result they could not be expended for the purposes that they were raised. In addition, the Charity has had to devote charitable resources to defend this matter, including legal fees. Whilst the Commission accepts that it was necessary to expend resource in this way so as to secure the return of the funds, the Commission considers that this could have been avoided if the Charity had not engaged in cash couriering or had otherwise provided the necessary supporting documentation for the provenance of the funds to the Police and the courts sooner.

The decision to allow funds to be cash couriered without proper documentation of the provenance of the funds, a failure to brief the Charity’s staff, the Charity’s lack of engagement with the Police’s enquiries, and failure to take steps to release the seized cash is both irresponsible and reckless and evidence of misconduct and/or mismanagement in the administration of the Charity on the part of trustees A, B, D and E.

The failure to follow the Commission’s advice and guidance (published and that provided during previous engagement) is further evidence of misconduct and/or mismanagement in the administration of the Charity.

The Commission acknowledges that in media articles published in May 2020, trustee A, who was described as the ‘Chair’ of the Charity, is quoted as saying that the Charity worked hard to retrieve the seized funds back. However, the fact that this took ten months to resolve is a criticism of the way the Charity and its staff conducted itself at the time.

Due diligence, monitoring and verification of overseas partners

The Charity had a partnership with a Turkey based non-profit organisation (‘the NPO’), which implemented the Charity’s humanitarian relief projects in Turkey and Syria. The Charity’s partnership with the NPO commenced in August 2017 and ended in February 2019.

The Commission was already in regulatory engagement with the Charity prior to the opening of the Inquiry with regards to its relationship with the NPO. This engagement included examining the Charity’s due diligence of the NPO and the monitoring and verification of the Charity’s funds sent to it. The Commission’s concerns in relation to the NPO followed a disclosure to the Commission, from the Police (in April 2019), which stated in its assessment the NPO was being used to provide support to Al Qa’ida aligned individuals in Syria. Al Qa’ida is a proscribed terrorist organisation by virtue of the Terrorism Act 2000 and is subject to domestic and international sanctions. The concerns about the NPO were also brought to the Charity’s attention in January 2019, at which point the trustees took action to cease and then terminate their relationship with the NPO. Having been made aware of these concerns, the Commission saw no evidence that the Charity’s relationship with the NPO continued beyond when the Charity was first made aware of the concerns.

In September 2019 the trustees provided answers to questions to the Inquiry, in response to a direction made under section 47 of the 2011 Act, relating to the Charity’s former partnership with the NPO.

The information provided to the Inquiry by the trustees showed that between February 2018 and July 2018 a total of £246,934.90 of the Charity’s funds were transferred to the NPO via bank-to-bank transfer. The trustees confirmed to the Inquiry that various supporting documentation in relation to the expenditure of the £246,934.90 by the NPO had not been provided to the Charity or was otherwise unavailable to the Charity. The Commission notes in the trustees’ response to the legal direction that, owing to a changeover in trustees and personnel at the Charity, that some records could not be located. The trustees’ failure to obtain supporting documentation, maintain records, and being unable to account for or verify the end use of charitable funds, is evidence of misconduct and/or mismanagement in the administration of the Charity.

The Inquiry is critical of the then trustees’ decision to continue to fund the NPO whilst documentation had not been provided in respect of previous transfers made. In May 2018, the Charity made a payment to the NPO in the sum of £83,380 for various projects. Despite requests from the Charity for outstanding monitoring documentation to be submitted, none were forthcoming from the NPO. However, the Charity continued to provide funding and aid to the NPO in respect of other projects. It is the Inquiry’s view that these are not the actions of a trustee board acting prudently and is further evidence of misconduct and/or mismanagement on the part of trustees D and E.

In addition to the bank transfers, the trustees told the Inquiry that in July 2018 representatives of the Charity had withdrawn £10,000 in cash of which £8,000 was couriered to Turkey and given to the NPO. Documentation and records relating to how the cash was applied was either incomplete or otherwise missing. As set out above, the trustees explained that the absence of records in this regard was owing to a changeover in trustees and personnel at the Charity.

The Inquiry is of the view that the then trustees had a serious disregard for, and/or lack of understanding of, the importance of proper financial controls, record keeping and accountability in respect of the Charity’s overseas expenditure as evident from the absence of records to evidence and monitor how the Charity’s funds were applied by the NPO partner. The culpability here is further compounded by the fact that despite requests from the Charity for outstanding monitoring documentation to be submitted by the NPO, which was not forthcoming, the Charity continued to provide funding and/or aid to the NPO regardless. This includes four aid containers being sent to the NPO with an estimated value of £77,689.06 at a time when the Charity was chasing up outstanding records in relation to the payment of £83,380 in May 2018.

In failing to keep adequate accounting records (in relation to purported overseas expenditure) the trustees at the relevant times were in breach of their legal obligations under the Companies Act 2006. This is misconduct and/or mismanagement in the administration of the Charity by its trustees at that time.

The Inquiry also considers that the Charity’s due diligence and controls in relation to another of its partners, a Bangladeshi based organisation, could have been more robust, particularly as the Inquiry identified media reporting regarding action taken against this entity by the Bangladeshi authorities prior to the Charity sending funds to it. Consequently, these funds were ‘frozen’ for a period of time whilst the Bangladeshi authorities investigated the matter.

During the course of the Inquiry, the Commission notes that the current trustees have reiterated their desire and efforts to address any deficiencies in the Charity’s administration and to make improvements where possible. Assurances were provided during the Inquiry that improvements had been made and that policies and controls were being followed and adhered to. To test this, during the latter stages of the Inquiry, the Inquiry sampled records held by the Charity relating to several projects that the Charity has funded since the Inquiry was opened. A full list of projects was provided by the Charity and the Inquiry selected a sample of these and inspected the accompanying records.

Following its review of the documentation provided by the Charity’s trustees, the Inquiry was satisfied that the sample of projects reviewed did not need to be expanded. The Inquiry’s review of the project documentation, which was limited to the sample selected, considered that there were a number of actions that the trustees could take to enhance the Charity’s existing policies and processes relating to due diligence and monitoring.

The Inquiry resolved to address this matter through the provision of regulatory advice and guidance pursuant to section 15(2) of the 2011 Act.

Whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under both charity law and the law as it applies to the charity and its administration

The Inquiry found that there was evidence of misconduct and/or mismanagement in the Charity’s administration by its trustees at the relevant times where the conduct referred to above took place. There was evidence of poor management of, and lack of records of due diligence in relation to and monitoring of, the Charity’s partners. There were failings relating to the trustees’ financial management and overall governance of the Charity. As a result, the Inquiry found that at the relevant times trustees A, B, C, D and E had not complied with or fulfilled their duties and responsibilities as trustees under charity law.

However, the Inquiry noted that following the Commission’s intervention, which includes the opening of the Inquiry, the trustees took a number of positive steps to address the failures and weaknesses in the Charity’s governance.

The Charity’s current trustees (trustees A and B) have informed the Commission that they will consider and act upon any advice and guidance from the Commission so as to further improve the Charity’s administration and management.

Conclusions

The Commission concluded that there was misconduct and/or mismanagement in the Charity’s administration on the part of trustees A to E.

As set out above, since the Commission’s intervention in 2019 there have been improvements in the Charity’s governance and the trustees have shown a willingness to take on board the regulatory advice and guidance provided by the Commission.

Regulatory Action Taken

During the Inquiry the Commission liaised closely with the Police in relation to the cash seizure and detention, and the NPO of concern. Information was exchanged between the Commission and Police via the statutory gateway under sections 54 and 56 of the 2011 Act.

The Inquiry exercised the Commission’s regulatory powers under sections 47 of the 2011 Act on multiple occasions to obtain further information and copy documents, including from the trustees and the Charity’s banking providers.

The Inquiry provided the Charity’s trustees with regulatory advice and guidance pursuant to section 15(2) of the 2011 Act.

On 2 August 2019, the Inquiry made an Order under section 76(3)(f) of the 2011 Act which restricted the trustees from transferring the Charity’s’ funds outside of the UK without the prior authorisation of the Commission. A further order under section 76(3)(f) was made on 11 September 2019 which restricted the trustees from transferring or applying any of the Charity’s funds or property in Turkey and/or Syria without the prior consent of the Commission.

On 28 July 2020, the Inquiry made Orders under section 377(6) of the 2011 Act to discharge the Orders previously made under section 76(3)(f) of the 2011 Act.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the Inquiry 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.

Charities working internationally

Many charities are based in the UK and send money to projects, charities, not for profit organisations and direct to beneficiaries in other countries - these charities carry out invaluable work, in challenging circumstances, often helping the neediest in society.

Trustees of such charities may need to take additional steps to ensure that charitable funds are properly used and reach intended beneficiaries. In some cases, the risks will be significantly higher. Sometimes these risks arise because the charity is not on the ground to check funds have been spent properly, requiring trustees to consider carefully what specific due diligence and monitoring steps they need to undertake. These steps may be more time-intensive than for other charities.

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.

Cash couriering and moving funds

Charity trustees are legally responsible for ensuring the charity’s money is used properly for legitimate charitable purposes and safeguarded from loss. Trustees must always act to protect charity property. Ensuring strong financial management procedures and proper internal controls, and applying a common-sense approach, will help trustees meet their duties. They also need to promote the transparency and accountability of their charity, particularly as regards its finances, which is so important for public trust and confidence in charities. The Commission’s position in respect of cash couriering is clear – The Commission strongly advises charities against the use of cash couriering as a method to transfer charitable funds due to the risks involved. These are set out in the Commission’s regulatory alert on the use of cash couriers published in February 2017.

In most cases charities should use the regulated banking sector when transferring charitable funds. It is difficult to see, where regulated banking services are available, how trustees could show they discharged their legal duties if they do not use the regulated banking sector in order to secure the charity’s funds.

Application of charitable funds

Trustees have a legal duty to ensure that their charity’s funds are applied solely and reasonably in furtherance of its objects. Therefore, in order to show that they are complying with their legal duties, trustees must keep records and an adequate audit trail to show that the charity’s money has been properly spent on furthering the charity’s purposes for the public benefit.

Governance

Trustees are representatives of the charity they govern or the charitable funds they are responsible for, in the charity sector. Trustees must be aware of and act in accordance with their legal duties. The conduct of trustees can be a key driver of public trust and confidence in the charity sector. When the conduct of trustees falls below the standards expected there can be damage to the reputation of individual trustees, the charity and possibly the wider charity sector.