Haphazard, random, and impenetrable: Report accuses banks of making life unreasonably hard for smaller charities and not-for-profits

Friday, 30 June 2023

Banks are providing “nightmare” service for smaller not-for-profit organisations with the simplest banking arrangements like opening an account sometimes taking months, a report calling for change says.

Banks have been facing mounting pressure to better treat financially marginalised groups in society, like homeless people, young people from poorer homes, neurodivergent people, people with mental health problems, people who have been bankrupted, and people leaving prison.

Now, the Better Banking report by Community Networks Aotearoa, says getting banking sorted is unreasonably onerous for smaller not-for-profits (NFP) with annual turnovers of less than $2 million.

“The hurdles that these organisations have to routinely overcome when they do their banking is tying up hours and hours that should be being used for the impact they do in our society,” it said.

Poorly-trained bank staff often did not know how to get the simplest things done, such as letting a not-for-profit add a new signatory to an account, the report said.

“NFP staff who are tasked with getting banking done are going to branches over and over again; spending long hours on 0800 lines trying to get the correct information and assistance; sending email after email for the same reason, but these go unanswered, or are never replied to,” the report said.

Information provided by bank staff was routinely incorrect, it said.

Banks also sent out “impenetrable communications” written in difficult-to understand language.

This was making banking a nightmare for too many not-for-profits, it said.

“Most organisations get banked eventually. This can be through sheer grit, determination and Herculean perseverance.'

In one case, when six organisations decided to launch a new organisation together, the bank they asked for an account required all 70 of the board members and trustees to individually go into branches to be identified.

That was not easy as banks had closed many branches, and limited opening hours, the report said.

The report was handed to Attorney General David Parker, and Commerce and Consumer Affairs Minister Duncan Webb earlier this week.

Community Networks Aotearoa executive officer Ros Rice said banks could be making life much easier for not-for-profits, which included environmental groups, sports groups, and community organisations.

“They constitute the very fabric of society and the economy in New Zealand,” she said.

Providing easier banking for not-for-profits was important for highly-profitable banks to earn their social licences to operate, she said.

Currently, banks did not even have information pages on their websites for not-for-profits, as they did for other customer groups.

And the precious knowledge of “golden unicorns”, as Rice calls bank staff who understood how to bank not-for-profits, was not routinely made available throughout banks.

Jane Horan, lead researcher behind the report, found the process of getting a not-for-profit banked was essentially haphazard and random.

The report was compiled after surveys were filled in by 130 not-for-profits.

Banking “shouldn’t be the hardest part of changing the world,” one disability charity worker told Horan.

Rice said some not-for-profits wondered if banks did not consider them a priority because they were not banks’ more profitable customers.

Profitable it might not be, but the sector is large. Rice said in 2022, accountancy firm Grant Thornton estimated the community and social services sector represented $21.1 billion in revenue, and supported hundreds of thousands of people every year.

That number did not capture the entire not-for-profit sector, especially those at the smaller end of the scale, the report said.

Banking Association Te Rangapū Pēke chief executive Roger Beaumont sought to cast the issues raised as being caused by anti-money laundering laws.

“The focus of the report appears to relate to obligations around the anti-money laundering law,” he said.

“Banks take their compliance obligations very seriously,” he said.

However, the Community Networks Aotearoa report said the anti-money laundering expert it consulted said banks had made their anti-money laundering processes more complicated than they needed to be.

Rice said the not-for-profit sector wanted to work constructively with banks to improve things.

Beaumont said: “We’ve helped connect Ros and her team to people in banks who can help work through some of these issues.”

The Government has asked the Commerce Commission to undertake a “market study” on competition in the banking sector, but it is limited to retail customers, and does not include business banking, or not-for-profit banking.

Rice noted that amendments could be on the way for anti-money laundering laws.

Businesses’ interpretation of anti-money laundering rules is seen by some as contributing to cyber risk, with many organisations interpreting them as meaning they must keep digital copies of customers’ identification documents.

Should cyber attackers gain entry to their systems, these can be stolen.

In March, New Zealand suffered its worst cyber breach, when giant Australian lender Latitude was targeted by criminals, who stole details of around a million New Zealanders, including thousands of images of drivers’ licences.