Overview

In December 2023, seven people in the UK were jailed for running a sophisticated scam that diverted hundreds of thousands of pounds meant for charities. This group collected around £500,000, but shockingly, less than 10% went to the intended charities; most of the money was kept for personal use.

Initially, several charities supported the group's efforts, but without written agreements or official authorizations, the group exploited this lack of oversight. They traveled across the country, collecting donations in buckets outside supermarkets. They convinced many store managers to allow this by falsely claiming permission from head offices. When challenged, they intimidated employees with threats of reporting them or going to the media.

Compliance Insight

1. Establishing Proper Agreements: A common issue is the lack of detailed agreements between charities and fundraisers. Even when agreements exist, they often lack critical details to ensure proper fund distribution. For example, one of our clients in Australia struggled to retrieve two million dollars because their agreement lacked specifics on marketing expenses, service fees, fund distribution timelines, and authorized signatures. Clear and comprehensive agreements are crucial to avoid such issues.

2. Avoiding Verbal Agreements: Verbal agreements, especially within close-knit groups, can lead to misunderstandings and exploitation. All fundraising arrangements should be documented in writing to ensure accountability and transparency.

3. Ensuring Proper Licensing: Fundraising Partner organizations must be registered and have the proper licenses to carry out fundraising activities. This ensures they operate legally and are subject to regulatory oversight.

4. Directing Donations to Charity Accounts: If individuals are fundraising on behalf of a charity, all donations must be linked directly to the charity's bank account. This prevents misappropriation of funds and ensures donations reach their intended destination. Charities must make a clear statement on this matter on their website.

5. Regulating Cash Donations: Cash donations, especially bucket collections, are high-risk for misconduct. Charities should not allow cash collections on their behalf without proper licenses and should follow best practices for handling such donations. For guidelines on cash collections, refer to the Fundraising Regulator's guidance.

   
   
   
   
   
   

By implementing these compliance measures, charities can protect themselves from fraud and ensure that donations collected on their behalf are properly delivered to them.