While de-risking is discouraged as a public policy to facilitate humanitarian intervention in conflict hotspots and during natural disasters, it remains a “practical reality” that non-governmental organisations have to contend with.

Alex Zerden, a former US treasury department official, now founder of Capital Peak Strategies, a Washington-based consulting firm that advises companies on risk, is of the opinions that de-risking is seldom discussed publicly by banks fearful of damaging their reputations or appearing unsympathetic to charity work.

“No banker is going to say, ‘We’re actually not banking this charity,’” he said.

Humanitarian groups facing tight public scrutiny of their finances often fear damaging their reputations by raising banking issues or financial access challenges publicly, especially when it relates to terrorism.

But it’s still a top-of-mind problem. For example, a private working group with more than 100 members regularly meets in Washington to discuss bank de-risking and financial access.

Sharif Aly, executive director of Islamic Relief USA, said banking challenges have forced the NGO to cancel several projects in Syria over the last decade, including food security programmes.

“You’re limiting a huge population from being able to provide support to legitimate humanitarian operations because of banking regulations and limitations.”

Additionally, blockages to international transfers have pushed the organisation to raise funding for humanitarian relief within Syria.

“This is not very effective or ideal because the US is probably the most generous community that’s raising resources for a lot of these humanitarian crises across the world,” he explained. “You’re limiting a huge population from being able to provide support to legitimate humanitarian operations because of banking regulations and limitations.”

Aly refrained from discussing bank-related challenges in detail, fearful of damaging Islamic Relief USA’s relationships with its financial institutions. “One day they could be with you, and then the next day they can be against it,” he said. “Any type of PR plays a huge role in whether they decide to choose to work with you or not.”

To cope with this threat, Islamic Relief USA has seven different US bank accounts. The hope is that at least one will facilitate transfers to the fragile zones in which the organisation works. Other NGOs, such as members of the American Relief Coalition for Syria, reported delays or blocks to wire transfers impeding their ability to serve people in need.

Many humanitarian groups rely on imperfect workarounds.

In Syria, for example, some organisations transfer international funds through Türkiye by way of the Turkish Post and Telegraph Organization (PTT). However, transfers are capped at $5,000, which is well short of what’s needed for large-scale relief projects that can easily cost hundreds of thousands of US dollars.

Additionally, the PTT is mostly unavailable in north-western Syria’s rebel-held Idlib province, which already faced multiple crises before the earthquakes struck. To send money in the absence of reliable banking, NGOs often rely on hawala networks and companies – value transfer systems often considered to be informal and less regulated by Western traditions but widely used across many countries.

Many NGOs wire funds to the nearest “bankable” country or region and then carry cash over the border. But the practice is operationally slow and places a high risk on individuals carrying cash through volatile territory.

The irony is that in the effort to mitigate the risk of AML/CFT breaches, US federal agencies have created a situation that not only undermines life-saving work, but pushes NGOs into more opaque and riskier modes of moving funds.

Policy experts have proposed a range of measures to address de-risking, from making it clearer how banks can comply with regulations to developing special payment platforms for high-risk jurisdictions. But there’s little consensus among the financial community.

One proposal calls for creating a “safe harbour” where financial institutions wouldn’t be held liable if humanitarian funding ends up in the wrong hands. Byrne criticises this idea as unrealistic. He doesn’t believe the US government will give a pass to banks on AML/CFT obligations, especially as it relates to terrorist activity.

Even if this were successful, banks would still likely favour well-resourced aid agencies that meet stringent due diligence requirements – overlooking smaller NGOs, diaspora aid, and private sector groups that are just as integral to driving humanitarian responses and keeping economies afloat.

Byrne believes there is little chance of a “legal panacea”. Instead, he suggests streamlining due diligence measures through a standardisation process to quicken financial services for NGOs responding to crises. But given the time-sensitive nature of humanitarian relief, even the speediest due diligence processes may be too slow.

Zerden says appealing to banks’ business savvy is the solution. Banks are best suited to manage risks, he argues, suggesting donors pay for the cost of compliance for humanitarian projects in “high-risk” areas. This could include time banks spend on staff training, updating systems, and collecting data.

Without financial incentives, there may not be a breakthrough. Banks frequently drop clients seen as high risk because they don’t bring in enough return, Zerden said, and humanitarian relief in conflict zones is a “high-risk, low-margin business”.

“From a business perspective – of which banks are – it is a pretty simple mathematical exercise,” he said.

• The New Humanitarian report