The Charity, the Grant and the Controlled Territory
A UK-registered charity wants to send £250k to fund a mobile medical clinic operating in a region controlled by a designated armed group. The implementing partner is a local NGO not itself designated, but the region is subject to territorial sanctions, and the only practical banking route runs through a bank in the controlling authority's area. The charity's trustees are divided: one argues that humanitarian activity is exempt; another notes the charity has never applied for a licence. The partner has provided a project budget, a list of staff, and a letter of support from local authorities that the charity cannot independently verify. The funds would be transferred in three tranches over six months. The charity's bank has asked for details of the end use before processing the first tranche.
1. Is the charity's activity exempt from sanctions? What is the correct legal route?
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Not automatically exempt. Humanitarian activity is often licensable and, in some regimes, covered by specific humanitarian carve-outs or general licences - but these are conditional and jurisdiction-specific. A trustee's assertion that 'humanitarian activity is exempt' is not a legal basis to transfer funds.
Correct route:
- Identify the applicable regime and its humanitarian provisions - determine whether a general licence, exemption, or specific licence applies to medical/humanitarian support in that territory.
- Apply for a specific licence if no general licence covers the activity, describing the project, partner, budget and payment route.
- Screen the partner and staff against relevant lists; a non-designated partner can still be controlled by or acting on behalf of a designated group.
- Do not transfer before authorisation - the bank's request is a control point, not an obstacle to work around.
Key point: the existence of a legitimate humanitarian purpose does not remove the prohibition; it creates a route to authorisation.
2. What due diligence concerns arise from the partner, the banking route and the tranche structure, and how should the charity proceed?
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Due diligence concerns:
- Unverifiable letter of support from local authorities in a controlled area - could indicate partner entanglement with the controlling authority; cannot be relied on.
- Banking route through the controlling authority's area - high risk of funds being diverted or of the bank itself being connected to the designated group.
- Tranche structure - three payments over six months reduces visibility and can look like structuring; each tranche is a separate transfer requiring scrutiny.
- Staff list - must be screened; staff may include or be directed by designated persons.
How to proceed:
- Enhanced due diligence on the partner: governance, ownership, prior audits, independent references, site verification where feasible.
- Seek an alternative banking route that avoids the controlled area if possible.
- Apply for a licence covering the full project and payment plan, with monitoring and reporting conditions.
- Build in milestone-based disbursement with independent verification and audit rights.
- Document trustee decisions, the licence basis, and monitored end use. If the partner cannot be verified, do not proceed.