Humanitarian groups sending Gaza aid face banking challenges

This move by banks to derisk stems from challenges many of them encounter in regions governed by sanctioned groups that allegedly have a history of diverting aid, as it can be difficult to ascertain the ultimate beneficiaries of transactions. And normal methods banks use to investigate transactions might not be available in active war zones.

“It’s just hard [for banks] to get a line of sight into what is happening on the ground," said Alma Angotti, a partner at consulting firm Guidehouse specializing in financial crime. “Rather than parsing through which business or region would be OK, sometimes it’s just easier for banks to get out."

Financial transactions and bank accounts related to the Palestinian territories of Gaza or the West Bank were frequently flagged and questioned by banks even before the most recent conflict. One reason for this is that Gaza was under the control of Hamas, a U.S.-designated global terrorist organization, until Israel’s invasion in late 2023.

But the due diligence required for such transactions has mounted in recent months, and the number of organizations that have had their bank accounts closed with no reason being provided, has risen.

From Oct. 7 through late May, there had been 30 incidents where groups or individuals with links to or activities directed toward the Palestinian territories had their bank accounts closed in Europe and other countries, according to Agnese Valenti, an Amsterdam-based lawyer at the European Legal Support Center, which advocates for Palestinian rights in Europe.

In one case in the U.S., Truist closed the bank account of nonprofit American Near East Refugee Aid, or Anera, in April, without providing a way to dispute the closure, according to documents reviewed by The Wall Street Journal. Truist declined to comment.

In another, Nonviolence International, a nonprofit founded by Palestinian-Americans to sponsor and advocate for nonviolent campaigns worldwide, was told by financial technology company Stripe in an email in February to take down a fundraising campaign for a Palestinian-related partner organization for no apparent reason, according to Michael Beer, a director at the nonprofit. None of the groups Nonviolence International raises funds for are under U.S. sanctions, Beer said.

A spokesman for Stripe declined to comment on specific users. The company said in a November financial crime risk appetite policy statement that it may decide not to provide services or facilitate business dealings where such activities are considered high risk and fall outside of its risk appetite even if applicable laws and regulations don’t impose specific prohibitions.

Aid agencies have long faced banking difficulties from financial institutions’ need to comply with complex sanctions regimes meant to combat potential terrorist financing, particularly after the Sept. 11, 2001, attacks.

“All existing challenges are exacerbated [since Oct. 7]," said Ashleigh Subramanian-Montgomery, a senior director of policy and advocacy at Charity & Security Network, a resource and advocacy center for nonprofit organizations, referring to efforts to keep existing accounts open and bank transfers flowing without delay.

Washington-based Anera, which has provided humanitarian aid and development work in the Palestinian territories since 1968, responded to the recent Gaza crisis by delivering meals, medicine, clothing and other items, Sean Carroll, Anera’s president and chief executive, said.

To avoid running afoul of sanctions laws, Anera screens its staff, vendors and partners by using U.S. government databases while its workers in the Palestinian territories vet the receivers of aid, according to Carroll.

Anera had its account shut because Truist said the Treasury Department had been issuing alerts about increasing vigilance over payments sent to Gaza and a Truist representative eventually told Carroll verbally that it found Anera had a relationship with Al-Salah Society, a sanctioned group, he said.

Anera said it no longer works with the group and that the group wasn’t under sanctions when it received medical aid from Anera in 2000. Al-Salah Society in 2007 was sanctioned by the U.S. Treasury for allegedly providing material support to Hamas.

In the case of Nonviolence International, Beer said Stripe, which allows users to accept credit-card payments, saw that its services were being used to raise money for the nonprofit’s Palestinian-related partner organization on its website. Nonviolence International was forced to move the fundraising for that group to PayPal “with trepidation," Beer said.

“We pushed back as best as we can," he said. “We’re afraid that [Stripe] will just shut our ability to get credit-card payments for this project we are supporting, or they might obliterate us and completely drop us."

U.S. and foreign banks that access the U.S. financial system are required to comply with U.S. sanctions laws or face potentially large fines, sometimes reaching into billions of dollars and including guilty pleas. Humanitarian aid and medical supplies are generally exempt from these prohibitions, the U.S. Treasury Department has said.

But despite the carve-out for aid, a decade-plus of expanding sanctions packages has made banks, which tend to be risk-averse, inclined to simply “derisk," dropping clients they deem as potentially problematic.

Carroll from Anera said that banks ought to provide a way for such decisions to be disputed. He added that the Treasury Department could do more to inform banks about their overall policy objectives and exemptions to the sanctions law to prevent blanket account closings. A spokeswoman for the Treasury Department didn’t provide a comment.

“Some people think there is an environment here where we allow too much to happen without being checked. It’s actually the opposite. The volume of the checking we have to do is hindering the work," Carroll said.

Moves by banks to derisk, while not illegal, undermine U.S. government policy objectives, the Treasury Department said in a derisking strategy report published last year.

The Treasury in November issued compliance guidance on sending aid to Gaza. It warned that groups such as Hamas raise funds using charities as fronts for their fundraising, but clarified that there is no embargo on providing humanitarian assistance to Gaza or the West Bank and that providing assistance such as food and medicine isn’t generally prohibited.

The guidance further clarified that humanitarian activities involving necessary transactions with sanctioned groups, such as providing lifesaving medical aid to civilians in Gaza at a hospital staffed or occupied by Hamas, also isn’t prohibited.

Unfortunately for nonprofits, the relatively small amounts of money they deal in provide few incentives for banks to undertake expensive due-diligence work.

“Organizations would like to prove that they are compliant but the banks just refused to engage with them," said Valenti of the European Legal Support Center. “Banks are not interested at all because these are small NGOs."

Write to Mengqi Sun at mengqi.sun@wsj.com