Victoria Simpson
- Director
Victoria Simpson
Insights | Charities & Third Sector
The effect of financial sanctions on charity trustees
28 March 2022
The Charity Commission for England and Wales opened an inquiry on 16 March this year into the Genesis Philanthropy Group (GPG). GPG is an English registered charity set up in 2018 that operates globally to educate the public in the arts, culture and heritage of the Jewish people. One of its objectives as stated on its website is to strengthen the Jewish identity of Russian speaking Jews worldwide. GPG launched a £10m appeal for emergency assistance for Ukrainian Jews earlier this month. The Charity Commission inquiry opened after three of the four founding trustees were made subject to financial sanctions.
Overview
Financial sanctions are a way of preventing any form of financial dealing with certain named individuals or firms, who appear on the sanctions list. The UK Government has recently issued financial sanctions relating to Russia. Three of the founding trustees of GPG, namely Petr Aven, Mikhail Fridman and German Khan were named as “designated persons” on the UK financial sanctions list. Mikhail Fridman and German Khan were co-founders of the investment business LetterOne and Alpha-Bank, the largest private bank in Russia. Until March 2022, Petr Aven was head of Alpha-Bank.
All three individuals have now ceased to be trustees of GPG.
The nature of financial sanctions means that any individual who appears on the UK financial sanctions list cannot act as a trustee and fulfil their statutory duties of care and responsibility relating to the charity’s assets.
The Charity Commission has also frozen GPG’s bank accounts while the inquiry is ongoing, in order to fully protect GPG’s assets. This means that the funds cannot be accessed or applied without first obtaining the Charity Commission’s consent.
The Charity Commission has also announced that it may extend the scope of the inquiry further if any additional issues emerge during the course of the investigation.
The most recently lodged accounts for the year to 30 June 2020 show a donation from a company controlled by Mikhail Fridman of $1.1m.
What does this mean for other UK charities?
There is no doubt that there may be more UK charities who are in a similar position, whether they’re registered in Scotland or England and Wales.
This case acts as a timely reminder to all charities of the importance of carrying out proper due diligence before appointing trustees. Any trustee who is found to be on the UK financial sanctions list should be asked to step down immediately or removed if required. Given the seriousness of appearing on the sanctions list, we also suggest that the relevant regulator, whether it is OSCR or the Charity Commission, are also notified that this action has been taken.
What Scottish charities should know
Every Scottish charity is required to be able to properly identify its trustees and ensure that they are not disqualified from acting as a trustee. It is recommended good practice that every new trustee appointed to an existing charity completes a charity trustee declaration form, to be retained as part of the charity’s own records.
All new start charities that apply to OSCR for charitable status are of course required to submit details of the intending trustees on the trustee declaration forms, so that OSCR can hold this information for their own purposes.
A link is provided to the trustee declaration form provided by OSCR on their website.
This declaration requires the individual concerned to confirm that they understand the nature of their duties and responsibilities as a trustee in terms of the Charities and Trustee Investment (Scotland) Act 2005 (the “2005 Act”) i.e.:
- They are not an undischarged bankrupt
- They have not granted a protected trust deed
- They do not have an unspent conviction for an offence involving dishonesty
- They do not have an unspent conviction for an offence under the 2005 Act
- They have not been removed by the Court of Session under the 2005 Act or otherwise from being a charity trustee or being concerned in the management or control of any charity or body
- They have not been removed from being a charity trustee by the Charity Commission or the High Court in England due to misconduct or mismanagement
- They have not entered in to an individual voluntary arrangement to pay off debts with creditors (this only applies to trustees living in England and Wales)
- They are not disqualified from being a company director
It is an offence under the terms of Section 26 of the 2005 Act to knowingly or recklessly provide false or misleading information on a trustee declaration form.
The new Charities Bill
It’s anticipated that when the new Charities Bill is published later this year it will contain provisions relating to the creation of a charity trustee database. This is expected to include both a public database containing the name and contact address of trustees that will be open to the general public, as well as a more detailed database that will be retained by OSCR for its own personal use, and which may be shared with bodies such as the Charities Commission, HMRC etc. if required. It is hoped that the public trustee database will include a list of trustee names who have been removed from the Scottish Charity Register, to make it easier for charities to carry out the necessary due diligence on new trustees.
We will provide a further briefing on the Charities Bill once the details become known. If this or any other issue raised within our article is affecting you, please contact us for advice specific to your situation.
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