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Guidance on charity fundraising due diligence and a simple donor compliance checklist, plus guidance on gift acceptance, anonymous donations, scams and sanctions, with the Charity Commission Know Your Donor and other donor compliance checklists at the end. We also have a charity due diligence checklist.
Fundraising due diligence is the process of assessing the legitimacy, credibility, and ethical practices of organisations and individuals involved by carrying out checks to ensure that the donation complies with legal and ethical standards.
We will carry out proportionate checks to ensure that the donations we are offered or receive are not subject to restrictions, prohibitions or sanctions, such as relating to:
We will record findings and decisions and will report any suspicious activity to the Police and/or other relevant authority.
The fundraising due diligence you may need to carry out depends on you and the donor but here's a simple donor compliance checklist.
The Charity Commission has published much more detailed donor due diligence guidance, such as it's Know Your Donor and other compliance checklists; see below.
Virtue Signalling
Virtue signalling, including 'green washing', is when companies make exaggerated or even false claims about their commitment to some form of ethical working.
You cannot accept funding from a donor where it would not be in the best interests of your charity. For example, if a donor wanted to fund something outside of your charitable objects, or to impose unreasonable conditions or for any other reason that would not be in your charity's best interest.
And if you do but need to refund it, it's not quite as simple as it might sound. You may also need to consider issues, such suspicious donations, or managing large anonymous gifts, or those from vulnerable individuals. If you need any of these fundraising policy templates, you can download an Acceptance & Refusal of Donations, Refunds and Ethical Fundraising policies by logging in and asking the AI bunny nicely.
Fundraising due diligence is not something that applies only to donors. For example, when working with commercial fundraising companies. Charities must carry out appropriate due diligence to ensure that companies fundraising on their behalf are operating in line with the Fundraising Code, and have appropriate oversight and training. The Fundraising Code Section 7.3: Monitoring that fundraisers are meeting the code.
In the event your due diligence uncovers a significant problem, you must be mindful of your obligations to report major incidents to the Charity Commission and, if appropriate, the Fundraising or other regulator; see below.
When carrying out donor due diligence, be mindful that charities are at risk from attempts to breach sanctions and scams and, donations from anonymous donors, may pose a particular risk. Outlined below are how these should be managed, with detailed procedures contained in the Charity Commission Compliance Toolkit.
Donations through collection tins and online platforms are often anonymous and any donor may remain anonymous if he or she chooses to. The Charity Commission 'know your' donor principle does not mean charities cannot accept anonymous donations and doing so is perfectly acceptable providing charities look out for suspicious circumstances and put adequate safeguards in place.
Trustees will take reasonable and appropriate steps to know who the charity's donors are and will not accept a donation where the risk to the charity is assessed to be greater than the benefit of having the funds donated.
With the crisis in the Ukraine both the Commission and banks are focussing much more on the risk of breaching sanctions. This is a complex area as the sanctions applied can be to individuals, organisations or even countries, the sanctions applied vary and other countries also apply sanctions. In some circumstances a charity may obtain a licence from OFSI or rely on an exception in the legislation.
However, other than those exemptions, it is against the law to receive money, goods or economic resources from, or send these to – an individual or organisation subject to financial sanctions. In the event of any grounds to suspect the charity may be involved, or may become involved with a sanctioned individual, organisation or work in a sanctioned country, the first step is to read the OFSI guidance below, then seek and comply with their advice.
There can be no absolute guide to what may be suspicious, but indicators are where significant sums are being donated, particularly if this is unusual, in cash or from overseas. Moreover, any prospective donor who wishes cash to be forwarded in advance or for the charity to pay some of the donation to a third party will always be considered highly suspicious.
The following situations may indicate higher risks:
Listed below are the due diligence top tips from the Charity Regulator, although this does stress that these are not legal advice nor exhaustive.
1. Carry out due diligence checks into the financial and reputational dealings of your donors and their donations in proportion to the risk, before accepting.
2. Make sure your donors are not subject to restrictions, prohibitions or sanctions.
3. Know what to do if your due diligence checks indicate anything suspicious, including reporting the matter to the police and/or other relevant authorities.
4. Document in writing any risks you have identified, the actions you have taken to reduce or eliminate the risk to your institution and to fundraising, and any decisions you make as a consequence.
5. Due diligence checks into small cash donors and their donations will not normally be necessary unless there are other risk factors present.
6. Before entering into any agreement with a fundraising partner you must carry out proportionate due diligence.
7. Have procedures in place to carry out due diligence checks into the suitability of people working or volunteering with you where they are likely to have access to children or adults at risk.
8. If you use a third-party fundraiser, ensure that your written agreement with them requires them to carry out appropriate checks on anyone engaged by them, whether employed or contracted, to fundraise on your behalf.
9. Know how to rapidly refer or report safeguarding concerns and suspected or actual incidents of harm and ensure you do so where the situation arises.
10. Make sure people acting as ‘house-to-house’ collectors are ‘fit and proper persons’ to comply with applicable legislation.
Listed below are the fundraising donor due diligence compliance checklists and guidance from the Charity Commission E&W and other regulators.
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This fundraising donor due diligence article and compliance checklists are for general interest only and does not constitute professional legal or financial advice. I'm neither a lawyer, nor an accountant, so not able to provide this, and I cannot write guidance that covers every charity or eventuality. I have included links to relevant regulatory guidance, which you must check to ensure that whatever you create reflects correctly your charity’s needs and your obligations.
In using this resource, you accept that I have no responsibility whatsoever from any harm, loss or other detriment that may arise from your use of my work. If you need professional advice, you must seek this from someone else. To do so, register, then login and use the Help Finder directory to find pro bono support. Everything is free.
