Official Report: Minutes of Evidence

The Deputy Chairperson (Ms Forsythe): I welcome Denise Copeland, who is the Northern Ireland Council for Voluntary Action's (NICVA) governance and charity advice manager. We are delighted to have you here and thanks again to NICVA for hosting us today; we have had a great event. I invite you to make some opening remarks.

Ms Denise Copeland (Northern Ireland Council for Voluntary Action): Thank you very much, Chair and members, and good afternoon. NICVA is grateful to the Committee for the opportunity to provide a briefing on the banking issues that the voluntary and community organisations have been facing. For over two years, NICVA has been working with other representatives of the voluntary and community sector and charity regulators across the UK as part of the Civil Society Group on charity banking issues to highlight the issues that charities and other not-for-profit organisations are experiencing with their bank accounts.

The issues started to emerge during COVID, when many of the banks stopped offering bank accounts to new organisations. While some, although not all, of the high street banks are now offering a bank account for charities and voluntary organisations, the wait time to get the account opened is unreasonable and can take up to three months or even longer. Over the past few years, many organisations with existing bank accounts have experienced issues with trying to maintain their bank account.

The issues that NICVA, along with the Rural Community Network, has gathered and which you can see from the charity banking survey can be summarised as follows: bank accounts being frozen and, in some cases, closed; dual authorisation not always being provided, even though charity regulators encourage charities to have that in place as a step to mitigate fraud; bank not accepting the charity's governing document, especially older trust deeds; banks not communicating what the issues are with the digital uploads that the charities are trying to upload using their processes and bank call centre staff not being able to tell what the issues are; trustees needing to attend a branch in person for ID verification; the bank not sending letters to the current signatories of the account; banks losing the information — the ID verification that trustees had travelled to the bank to give; all trustees, not just the signatories, having to provide personal information, with some banks; banks charging monthly fees for providing the account; and difficulty in opening a bank account on the high street.

There are some causes for that. We believe that bank closures and a move to digital have resulted in a lack of client-facing bank staff who have knowledge of the voluntary sector legal structures. Having to update the business bank profile digitally has caused issues as the bank uses language that is unfamiliar or inappropriate for charities. Some digital processes are not user-friendly; for example, not explaining why the uploaded documents are not accepted or the bank accepts them and then the customer gets a letter telling them to do exactly the same thing again. In many, if not most, cases, the banks’ processes and requirements are designed for businesses, which causes significant problems for voluntary and community organisations. Issues have also emerged with the banks’ over-zealous approach to preventing fraud, money laundering and terrorist financing. Some banks are now asking for more detail and ID verification from charities about their whole committee and not just the account signatories, as it had been in the past. Each bank has its own specific requirements and processes.

We have heard of various instances of charity bank accounts being frozen by their bank and, in some cases, the bank account being closed altogether. That can happen when updating the bank mandate or when the bank asks that the business profile be updated online. As the digital processes are designed for businesses, they do not use language appropriate for charities, and the call centre staff, in a lot of instances, are not able to help as they do not seem to know what the problem is or they do not have access to what the problem is. The process can go on for up to a year or over as the bank keeps asking for more information but not all at the same time. The complexity of the process and the lack of intuitiveness from the bank’s digital systems are very stressful and frustrating for trustees, many of whom are volunteers. The introduction of monthly fees on some bank accounts has also left limited options of free banking for charities.

Do the banks know that this an issue? In short, yes, because we have been telling them for the past two and a half years. It is a UK-wide issue, and we have been working with other representatives of the sector along with charity regulators across the UK to highlight the issues and to get an improved offer from the banking sector. Part of that work involved working with UK Finance, which is the trade association for retail banks, to highlight the issues to the banks. UK Finance’s response was to create a banking tool that would encourage better understanding of each other; for example, the legal structures that the voluntary sector uses and the processes and language used by the banks so that we could both learn from each other. That was our understanding at the time anyway. NICVA, along with other Civil Society Group partners, provided significant amounts of time and expertise to help to ensure that the guidance was relevant and accurate as well as helping to identify areas of potential confusion that needed to be resolved.

The banking guide was published in July 2024, but it is not the be-all and end-all and certainly does not solve the problems. The guide could and should be an invaluable educational tool for banks to improve their systems and to skill their staff on legal structures used by the voluntary and community sector. It all now depends on each individual bank deciding whether it is going to improve its internal systems and processes with the knowledge from this accessible digital knowledge tool. There is a feeling, however, that all banks do not have an interest in making substantive changes to their processes as that will cost money and they are not making a lot of money on small charity bank accounts. We therefore need pressure from government and the Financial Conduct Authority (FCA) to make sure that the required changes to fulfil their customer duty happen and that the direction comes from the top.

The Civil Society Group had the expectation that its work with UK Finance would be a type of forum whereby it would relay the issues to the banks, but that was not the case. With the backing of the wider Civil Society Group partners, the charity finance group set up the charitable sector banking forum, which met for the first time in July 2024. The forum includes Civil Society Group members, charity regulators and UK Finance and bank officials, and it gives us an opportunity to engage with the banks without a middleman holding back the information.

What are the regulators doing about the situation? As part of the Civil Society Group, we have met Treasury officials and charity regulators and have sought advice from the Competition and Markets Authority (CMA). We also participated in the FCA's round-table event with the banks, the Civil Society Group partners and charities in September 2024. The FCA told the banks that it expects firms to be considerate of the consumer duty, which also applies in relation to ensuring that products and services meet the needs of customers.

Last year, our own Charity Commission, along with the charity regulators across the UK, issued an open letter to the UK's main high street banks requesting that banks take urgent action to help charities to have access to proper banking services. The 'Charity Banking Challenges 2024' report was launched in November 2024 and contained a survey on banking issues across the UK that was carried out by the charity finance group partners on behalf of the Civil Society Group. The report reflects that the most common issues involve administration and communication challenges, both of which often arise from the banks' insufficient understanding of how voluntary organisations are structured, governed and managed. The most frequently reported issue relates to the process of adding or removing signatories on bank account mandates. You can see from the graph in your briefing paper that 75% of all respondents had issues with changing signatories on their bank account.

Much time and effort has been spent to date on highlighting the issues to the key stakeholders, and NICVA will continue to work as part of the Civil Society Group to advocate for better banking for voluntary and community organisations.

The Deputy Chairperson (Ms Forsythe): Thank you very much, Denise. That is incredibly valuable and highlights a lot of things that I get quite regularly on a constituency basis, especially where small groups have a lot of trouble getting their signatories changed or are having bank accounts frozen. There are real barriers to them accessing funding. The Finance Minister has been having banking round tables. Are you playing a part in those?

Ms Copeland: Yes. We attended the Finance Minister's banking round table, and we have just been sent the minutes of that meeting, which happened in autumn 2024. The Department of Finance will be compiling a report to send to the Treasury. We raised the issues there, and it was a good opportunity to meet members of UK Finance and express our view that the banking tool is not going to solve the problems.

The Deputy Chairperson (Ms Forsythe): It is brilliant that you were there. There are so many specific issues facing the sector, so it is good to hear that you are involved in that and that those issues are being brought forward.

Mr Brett: Thank you, Denise. I know how much of a help that you and your staff have been to a lot of groups in my constituency about setting up their bank accounts, so thank you for that. It speaks to an issue that my office deals with and which you are having to deal with, which is that we are having to support groups and organisations — we are happy to do that — but it should not take the involvement of specialists to help charities or residents' groups that are investing in society and going out of their way to help the communities that they operate in. It is a burden to them to even set up a bank account.

I am keen to get your views about the charges. There is not only a monthly charge for accounts but a charge for organisations when they deposit or write cheques. Statements are required for verification purposes, and they are being charged for that. Was there much feedback from your membership about the cost of having and maintaining a bank account?

Ms Copeland: Yes. We can see that it is increasingly difficult to get free banking for charities. Since the UK Finance banking tool was launched, it has included a bank account finder. Following on from that, I did a Northern Ireland-specific one. It is on our website, and I can send you a link to it afterwards. It includes a comparison of high street bank accounts and some online accounts. You can see that there are some free bank accounts, but the high street ones can take a long time to set up.

We would encourage people to think differently about banking. Traditionally, charities looked at what banks were on our high street and tended to open a bank account with one of those. Now, however, they have to think, "What are our banking needs? That bank could be closed next year; that branch might not be there". A better option for them may be to do online banking and to lodge their money and cheques in the post office — a lot of banks allow you to do that now. We need to get our heads around that for charities and to think about using online accounts. Even with banks that are not represented on our high streets but are on high streets in England, you can set up a bank account with them, use online banking and use the post office to deposit your money and cheques.

Mr Brett: It is good that you have been involved in that important engagement on behalf of the sector. Have you seen any move by Northern Ireland high street banks in particular to indicate that they have listened to the concerns that you have raised and acted accordingly? The Committee hopes to take representations from the banks at some stage. They may tell us that they are involved in discussions and processes, but we are interested in the tangible changes that they have made to make your life and the lives of those whom you represent easier.

Ms Copeland: We would love to know that, too, Phillip. I agree. As part of the banking forum, we hope to tease out that information. We will have another meeting with the banks and the banking forum on 20 February. I understand that one or two banks in England — I know that you are asking about Northern Ireland, and they may not be so much of a presence here — have regressed in order to try to make changes. For example, they may have a dedicated staff member to help with charity and community bank accounts, having not had that since COVID. I cannot, however, tell you what progress we are seeing with Northern Ireland bank accounts overall.

We have to remember that some banks here are subsidiaries and that their parent bodies are in England. Their parent bodies might be on the banking forum group. The bank might say that it is trying, but we do not see that on the ground: the reality is that there is no difference with some of the banks; we see the same issues.

Mr Brett: We have a slightly different landscape in Northern Ireland given the particular prevalence — in a good way — of credit unions. Do they offer a product that enables charities and community organisations to use a full banking facility?

Ms Copeland: Some credit unions do, and some do not; it depends on the credit union in those organisations' local areas. They would have to speak to their local credit union. It comes down to the size of the credit union —

Mr Brett: Yes, the capacity.

Ms Copeland: — and how much money it has to take on the risk of doing that.

Mr Brett: Thank you so much.

Miss Hargey: Thank you very much for your presentation and paper, which is really good. I will follow on from what Phillip asked. We are trying to look at how we could do things differently, even going beyond the known banking firms. There has always been talk of a mutual bank. Has that formed any part of your discussions within NICVA or with other jurisdictions? Could the role and services of credit unions be expanded so that profit is recycled back into the local economy to meet specific local needs? You touched on opening accounts, emerging technology, the advancement of AI and all those things. A lot of the organisations that we are discussing are run by volunteers. What challenges does that present, or what challenges is it likely to present, for the current capacity and skills? What do you feel that the Department could do to assist in some of those areas?

Ms Copeland: Apparently, the credit union movement in Northern Ireland is a lot stronger than it is across the water. We discussed that at the Civil Society Group on banking issues, which meets every fortnight to progress the issues. The credit union sector in Northern Ireland is quite strong, but it is up to individual credit unions to decide whether they could do that. I know that some offer that service, but others are not able to do so because, perhaps, they are volunteer-run rather than having staff who could help out.

There is work to be done on updating digital skills for the sector, and, probably, society, but, with banking, we do not see digital skills coming up as an issue. A fact in the 'Charity Banking Challenges 2024' report was that — I cannot remember the figure — a majority of people want to use digital banking. The problem is not that they do not have the skills to use digital banking but that the digital offer from the banks is not intuitive. It is built for businesses; it is not for charities. I will give you an example. I am a trustee of a small charity that has no employees. All of us on the committee are digitally savvy, but we had an issue with our bank. Every month, our treasurer, who is an accountant, uploaded the information that was asked for. The next month, we got a letter saying, "We need more information". The bank then needed a letter to verify the constitution of the trust deed and that we were who we said we were, and that letter needed to come from an accountant or a solicitor. The letter said that an in-house accountant or solicitor could sign it. Our treasurer signed the letter and uploaded it.

The next month, we got a letter saying, "You need to update your business bank profile", so our treasurer went back into the system. No different information was required, so she uploaded the document — when you sign in, it says, "You need to upload the document" — but, the next month, we got another letter. That happened every month. She rang the call centre and asked, "Why does this keep happening? What am I doing wrong?". At times, the call centre was not able to tell her; at other times, she was told, "Do not worry about it. It is an automated process". When our volunteers then went to the bank in Omagh to lodge money, they were told that the account was frozen. As trustees, we had no notification of that from the bank. We knew those volunteers very well, so they knew that we could be trusted, but you can see the reputational damage that there would be had they not known us and that we were doing everything right and were able to explain the issues.

In that process, the treasurer made several phone calls but got nowhere. It took the chair to ring and have a lengthy conversation in order to get to the bottom of it. The issue turned out to be the letter that the treasurer had signed; for a year, nobody had been able to tell her that. It is ridiculous. We complained sternly to the bank about what had happened and about the bank account being frozen. By way of compensation, it put £400 into our bank account, which we thanked it for, but that did not negate the stress that everyone felt about the bank account. Unfortunately, just before Christmas, one of our trustees passed, and we will again have to go through the process of updating the bank mandate. We are fearful of doing that because we do not know what will happen and whether we will have to go through all that again.

That gives you a small insight. It is not that we do not have the digital skills but that the digital processes are not intuitive.

Miss Hargey: That is also feedback on one of the first issues that you raised, which was the importance of face-to-face contact —

Ms Copeland: That is right.

Miss Hargey: — and of banks knowing their locality.

Ms Copeland: Our branch of that bank is in Armagh. Our chair went into the branch to sort the issue out, but staff could not help her. They said, "You have to ring the call centre". A lot of branches around Northern Ireland could not help us, and we had to ring a call centre that did not know anything about us or what we were asking about.

What was the third question that you asked, Deirdre?

Miss Hargey: That was it. Thank you.

The Deputy Chairperson (Ms Forsythe): Thank you, Denise. That is a really important example to note, because I know that that sort of thing puts people off being trustees. As an accountant, I move in a lot of circles in which people cannot get accountants to sit on boards because of the time commitment required of the treasurer, who is the accountant, in order to make those phone calls to the bank. That is putting the governance of the charities at risk. That is definitely an important point.

Mr Carroll: Thanks, Denise. It was useful to hear about those problems. Unfortunately, I have heard about them from various organisations in my constituency, and others probably have as well. This might be an obvious question, but it is worth asking it: do you have any idea why it is so cumbersome to open and maintain those bank accounts? Obviously, there should be some form of verification, but it seems that banks are making it onerous and difficult for organisations. I have no answer to my own question, but I thought that I would ask whether you had any insight or whether they have told you why it takes so long.

Ms Copeland: Prior to COVID, you went into the bank and completed the bank mandate; you did it in the branch — in-house. I believe that, during COVID, the front-facing staff who had the knowledge of the people who came in to do their banking — their customers and the charity representatives — were assigned to other work. I think that they were assigned to the bounce back loans, or whatever, that were offered at that time, and I do not think that they were ever reassigned to the front face.

It is also about the banks and their approach to adhering to money laundering regulations. The banks take different approaches. For example, one bank will say that all of the trustees — even if there are as many as 16 on the committee — have to go in and do the ID verification. Another bank will say that the three or four trustees on the bank mandate have to go in. Both banks say that they are following the money laundering regulations. We are asking, "If you're both following money laundering regulations, who's right and who's wrong?". They say that different banks have different risk approaches to that.

As part of the work of the UK Finance working group, we asked the banks, "Why can you not use the same language?". It is difficult. We already use different language. Banks use different language and terminology for various things: they talk about "significant controllers", but we talk about "trustees"; "beneficial owners" has a completely different meaning in the banking world from "beneficiaries" in the charity world. We are asking why they cannot get together and use the same terminology. We were told, "Competition law. We are not allowed to share information". We wrote to the Competition and Markets Authority and asked whether that was true or whether they could, in fact, share information. Apparently, when it is for the greater good, as we talked about in that example, they could. Therefore, legislation and rules are, sometimes, being used as an excuse for why they have their systems and processes. If they invested time and effort in their digital processes, I do not think that it would take a lot to make it easier for charity trustees.

I can give you an example. Every year, charities have to file annual monitoring returns with the Charity Commission. When it was designing that process, it consulted with us in the sector; we are a critical friend of the Charity Commission. It has now put in information buttons alongside a lot of questions explaining exactly what amount it is requesting: "We want your income" or "We want your turnover", for instance. Why can the banks not do that? Why can they not look at other digital systems that work well? There are plenty of them. There seems to be an unwillingness with some of the banks to do that. It might be different if there were a conversation in the boardroom of the banks.

Mr Carroll: Thank you very much. I imagine that banks are sharing all sorts of info, day and daily. Your request that they use a sort of template is very sensible and, frankly, moderate. The Financial Services Union (FSU) has spoken to me and, I think, the Committee about the loss of staff in banks. That has also probably had an impact on the difficulty that exists with opening accounts.

You touched on the issue of people with limited ID or no ID. Will you expand on that? NICVA represents diverse groups of people. Are you finding any problems with, say, newcomers who are involved in the community and voluntary sector and are a very important part of it not being able to open a bank account because of the strict rules regarding ID? Have you experienced that?

Ms Copeland: Yes. As one example, I know somebody who tried to set up a bank account for a canoeing group during or just after COVID. She did not have any household bills in her name, because they were all in her husband's name. I thought, "My poor husband. If he joins a charity, he will have the same problem, because everything is in my name". She did not realise that that would be a problem until the bank needed to verify her ID. It needed two pieces of proof, such as utility bills, and she did not have anything in her name, so she could not be a trustee. In that instance, all the trustees needed to provide ID verification. It will knock out some people from being trustees if the bank that they choose requires all trustees to verify their ID. Of course, people will not know that until they are way down the process of applying for the bank account. The bank does not front-load that information.

Mr Carroll: Thank you.

Miss Brogan: Thank you for your presentation, Denise. I represent West Tyrone, which is a largely rural area. Lots of areas face this problem, but in small towns, all our constituents are having issues with access to cash and banking services. You mentioned liaising with the Rural Community Network. What experiences have it and charitable organisations had with the rural aspect? I assume that they face the same challenges as our constituents face.

Ms Copeland: Yes. They do in rural areas. It is more difficult for those in rural areas. They are all being told, "All your trustees have to come in with their ID at the same time". They may have to drive to Belfast to do ID verification or drive 40 miles to another town, depending on where they are in Northern Ireland. It is a real issue, and it is not particular to here; the exact same thing happens in England and Scotland.

Miss Brogan: It is even about the day-to-day banking that is part of running the organisation. Lots of community organisations in our area have to drive to Enniskillen to go to a particular bank. That may be a 40-mile or 50-mile round trip. It is an area of frustration for them. I imagine that it is similar in the charity sector. That is really what I wanted to ask.

Ms Copeland: Yes. It is the same, and I do not think that we have seen the end of bank closures. We need to look at the online options and see what is available.

Miss Brogan: Thank you.

The Deputy Chairperson (Ms Forsythe): Do members have any other questions? No.

Thank you very much for that, Denise. It has been very informative. Thanks for all the good work that you do and for representing the sector on different bodies. That is incredibly important. It has been great to have that as part of our inquiry. Thank you very much.