Following the invasion of Ukraine by Russia, compliance focus has been (understandably) dominated by the way in which the UK and other countries have responded through the use of sanctions. This has also shone a spotlight on many other areas of anti-corruption compliance including money laundering, bribery and modern slavery and human trafficking.
In this briefing, we take a closer look at anti-corruption compliance and its key role in charity governance.
Whilst charities who operate internationally, especially in higher risk jurisdictions, may be familiar with sanctions regimes and anti-corruption compliance, the recent opening of statutory inquiries by the Charity Commission for England and Wales (‘the Commission’) into the Genesis Philanthropy Group and The Kantor Foundation are a reminder that anti-corruption compliance is an essential element of charity governance.
The outcome of the Genesis Philanthropy Group inquiry is awaited, but it concerns the fact that three out of four founding trustees are listed as “designated persons” on the UK Consolidated Sanctions List through the Russia (Sanctions) (EU Exit) Regulations 2019. The charity’s bank accounts have been frozen and the Commission has unequivocally stated that individuals subject to financial sanctions under the UK regime cannot discharge their duties as charity trustees (as they cannot manage funds). The charity reported the designation of the individuals to the Commission at two points: designation by the EU of two trustees; and the UK designation.
The same situation applies to the Kantor Foundation following the sanctions levied against Dr Viatcheslav Kantor. In this situation, however, the charity trustee is a corporate body (Kantor Trustees), and the sanctioned individual a director of that entity.
Whilst the sanctions against individuals and entities linked to Russia and Belarus have brought a renewed focus on the importance of understanding the sanctions regime, the UK has various sanctions in force and so charities should check The Office of Financial Sanctions Implementation’s (OFSI) website for the updated position. Charities are reminded that non-compliance with sanctions can lead to liability unless the charity can rely on a licence from OFSI or a legal exemption.
Charities working internationally also need to consider other sanctions which might impact on their activities, for example, sanctions imposed by the United States. Sanctions regimes are complex and trustees have a legal duty to safeguard the assets of their charity. Advice should be sought from OFSI (or international equivalents) or legal representatives where in doubt.
Organisations are also taking a view as to whether, for reputational purposes, they sever relationships even though sanctions have not been imposed. Charities considering their options will need to fully appraise the risks (financial and otherwise) before taking action.
General compliance considerations
Trustees have a legal duty to safeguard the assets of their charity (which includes reputation). This means that trustees must ensure they have in place adequate procedures to assess and manage corruption risk. This includes:
- assessing potential or anticipated risks of breaching sanctions;
- assessing money laundering risks;
- assessing the risk of bribery;
- procedures for dealing with donations from unidentifiable sources;
- procedures for refusing donations; and
- understanding any “politically exposed persons” involved with the charity and assessing controls regarding appropriate scrutiny.
Charities should have in place internal guidance (by way of policy and procedure) to deal with matters such as those listed above. Such guidance should also detail procedure around reporting matters to the Commission under the Reporting Serious Incidents Regime to ensure that adequate audit trails are maintained in relation to all decisions made around accepting or refusing funds.
Sector-specific charities will also need to consider industry codes, for example, donations from pharmaceutical companies and medical technology companies should comply with The Association of the British Pharmaceutical Industry Code and Association of British HealthTech Industries Code respectively.
A further area of compliance for charities to understand relates to the requirements around the Modern Slavery Act 2015 (MSA), the government’s consultation response and increasing requests for policies and procedures relating to modern slavery. Some charities will find themselves caught by the provisions of the MSA and already produce a modern slavery statement, whereas many others produce voluntary statements. Regardless of a charity’s position vis-à-vis the MSA, renewed focus on modern slavery and human trafficking will mean that charities will want to consider:
- their supply chains and understanding the risks of modern slavery occurring;
- partnerships with charitable and non-charitable organisations and their commitments to eradicating modern slavery and human trafficking;
- whether they are currently commissioned by public sector organisations or plan to bid for public procurements; and
- their policy stance to modern slavery and human trafficking as well as procurement and contracting processes for suppliers of goods, services and workforce to the charity.
How we can help
Our experts can assist charities with any queries on compliance and duties. We can:
- assist with the design of procurement processes, including concerns around high risks of modern slavery and/or corruption
- provide training around the public procurement regime
- provide training on the current anti-corruption regimes (including sanctions, bribery and modern slavery) and best practice
- assist with the design of compliance frameworks, due diligence, policy and procedure and systems and controls
- assist with modern slavery statements (mandatory and voluntary)
- assist with contractual documents and standard contract provisions proportionate to risks
For charities who supply goods and/or services to the NHS, the following update may be of interest.