The financial dilemma of INGOs in Syria
International NGOs, and their banks, desperately seek solutions to a financial dilemma that will allow them to implement the principles of humanitarian aid in war torn countries such as Syria.
Since the beginning of December 2020 #DanishRefugeeCouncil (DRC), started reducing its activities in Syria. 135 national and international employees have been made redundant. More might follow if DRC cannot find a solution to its liquidity crisis which began when DRCs principle bank, #DanskeBank, deemed that it cannot find trustworthy correspondent banks to complete transactions to this particular portfolio.
Since July 2020 the bank has not transferred money to the Syria office and DRC was only able to implement half of its planned projects. Most of which are EU funded. Due to this impasse with Danskebank, DRC is now moving its global portfolio and is looking for a new principle bank. This will not be an easy endeavour given that almost all European banks are exposed to same dilemma.
Sanctions expert at the Association of Certified Anti-Money Laundering Specialists, #ACAMS, Dr. Justine Walker, highlights that the relationship between banks and their NGO customers has fundamentally changed in recent years. While previously there was some freedom of movement for transactions into high-risk countries, today banks stringently follow the regulations. The fear of breaching regulations and the associated repercussions from regulators is too high. Herein, however, lies the problem as #EU regulations and member state regulators do not offer banks a large enough comfort zone to deal with their humanitarian clients.
Although exemptions for transactions relating to humanitarian or medicinal goods do exist. In practice these are academic at best. The World Health Organisation (WHO) reports that the humanitarian exemptions are inconsistent and lead to delays for the delivery of lifesaving medicines. The additional administrative efforts and costs incurred often act as a deterrent as not all suppliers are willing take on the additional administrative burden required. To obtain such exemptions NGOs, suppliers and the associated banks must provide regulators with a detailed due-diligence assessment that proves that no degree of association with an entity on a sanctions list exists.
Providing this burden of proof in a context such as #Syria however is almost impossible, given the economic omnipresence of the State. If, for example, an NGO requires petrol for its fleet of vehicles or wheat for a food distribution program there is often no way to by State owned companies, almost all of which are listed as sanctioned entities.
Additionally, conducting the required due-diligence assessment can bring existential dangers to the analysts themselves. Dr. Justine Walker explains that "asking too many questions about ultimate ownership can lead to dangerous, life threatening, situations" as many of the larger private sector companies are owned by the ruling elite, or their families, also classified as sanctioned entities. Dr. Walker carries on to explain that „these sanctions are there for host of reasons, and one those reasons is that sanctioned entities exploit the [humanitarian] sector".
To provide principle and correspondence bank with some room to maneuver the EU recently began issuing "comfort/reference letters" for funds designated to their NGOs in Syria. These however are not to be confused with humanitarian exceptions as they only provide cover for the EU portion of a projects funding. As humanitarian projects are often funded by multiple donors this often leads to complications in the implementation stage as not all donors can provide bone fide "comfort letters". In practice this means that only part of the funding is transferred and projects often fall short of their objectives.
The declining number of correspondent banks, coupled with the prohibition of European banks to open new corresponding bank accounts in Syria add another layer of complication to formally transfer money to Syria.
Ultimately this raises uncomfortable questions regarding how much of the 197 million Euros that the #EU annually provides to its 40 partner organisations are transferred to Syria for project implementation.
The Danish Refugee Council expects they will be able to continue their work in Syria until March 2021, after which the operations may have to be substantially reduced if no solutions are found. How this will impact the humanitarian response in Syria as it is still unclear as nobody has been found to fill the vacuum DRC leaves. In a country where 11 million persons are in some form dependent on #Humanitarianaid, this can have catastrophic results.