The Charity Commission has opened a statutory inquiry into a poverty relief charity for its use of “high-risk” methods to transfer and spend funds, the regulator said.
The commission said the Iraqi Welfare Association was under investigation for concerns including possible unmanaged conflicts of interest, failure to file accounts on time and failure to adhere to its governing document.
The regulator is also investigating the charity for allegedly acting outside its charitable purposes.
The charity was set up to relieve poverty among the Iraqi community, particularly through the provision of advice and interpreting services to Iraqi refugees.
The regulator said it began proactively engaging with IWA, which had an income of almost £800,000 in the year to the end of July 2023, to assess how the charity was managing risks associated with working in Iraq.
“Iraq is deemed a ‘high-risk’ country by the Foreign, Commonwealth and Development Office,” the regulator said.
“Its engagement continued due to the charity’s failure to submit accounts for four consecutive years (FYE 2019, 2022, 2021 and 2022).
“The engagement has been escalated to a statutory inquiry after it found the charity was transferring funds overseas using a ‘Hawala’ system.”
Hawala is described as an informal value-transfer system based on the performance and honour of a network of money brokers known as hawaladars.
Hawaladars operate outside of, or parallel to, traditional banking, financial channels and remittance systems.
The Charity Commission also found the IWA’s director, who is not named, was using his personal bank account to make payments on behalf of the charity.
“Using a personal bank account and transfer methods outside the formal banking system poses a risk to possible loss or misuse of funds,” the regulator said.
“The inquiry will also investigate potential conflicts of interest regarding decisions around salary payments and a contract with a connected private company.”
The inquiry will consider the conduct of trustees and their compliance with their legal duties and responsibilities.
It will also determine whether charity funds have been used solely for charitable purposes.
The regulator will assess the administration, governance and management of the charity by its trustees.
The Iraqi Welfare Association has been contacted for comment.