Suspect donations – advice for charities

As with any other organisation, charities must be cautious of falling victim to fraudsters. If your charity is defrauded, you could face both financial losses and also reputational damage.

The National Crime Agency (NCA) has issued repeated warnings on various types of advance fee fraud.

“Advance fee fraud is when fraudsters target victims to make advance or upfront payments for goods, services and/or financial gains that do not materialise”.

A version of this type of fraud targets charities. The scam involves a fraudster informing a charity that they will be donating a large sum of money on the condition that the charity sends half of the donation on to another specified charity. That payment is in fact to the personal bank account of the fraudster or an accomplice.

For example, the fraudster will offer the charity £100,000 on the condition that it sends £50,000 to another specified charity in another country. When the charity agrees, the fraudster makes a payment to the charity using a cloned or stolen credit card. The charity keeps £50,000 of the donation and sends the remaining £50,000 to the other specified ‘charity’s’ bank account. When the credit card issuer identifies that the credit card was compromised, the full amount is recalled from the charity. The charity is liable for the full £100,000, as well as the £50,000 forwarded on which will incur significant financial losses for the organisation. The charity has also unwittingly been involved in money laundering.

If your charity’s income is over £25,000, there is a legal requirement that you must confirm in your annual return that you’ve reported any serious incidents to the charity commission.