January 2012 to May 2014: more than £9 million passes through the bank accounts of eight linked UK charities, while seven of them report nil income to the Charity Commission or file no return at all. 13 June 2014: the Commission opens an inquiry on Metropolitan Police information that the charities may be a conduit for crime proceeds. 21 June 2019: the charities' manager is convicted, with two money laundering charges among the counts. The Commission's inquiry report on Chabad UK and seven other charities records all three steps; published on 16 March 2020 and withdrawn on 16 March 2022, it stays on gov.uk as an archived record. Set against the stages of money laundering methods and typologies, the charities served two at once: placement, as criminal money entered as income, and layering, as it moved on.
How are charities used to launder money?
A charity gives criminal money a story few people question: a gift, a fee, a loan repaid, a grant passed on. Charities rely heavily on donations, some of them anonymous. Most schemes on this page are layering in money laundering, the stage that moves money through enough hops that nobody can trace it back to the crime.
Terrorist financing runs the other way, sending clean or dirty money toward terror. The FATF Recommendations, in their June 2026 edition, frame Recommendation 8 on nonprofits around that risk.
The UK shows the scale. As of 25 June 2025, more than 184,000 registered charities had a combined income above £100 billion, and over 20,000 worked internationally, according to the UK national risk assessment of 2025 (para 5.175). The same assessment rates the money laundering risks for charities and other nonprofits low, though higher within that band than before, and puts the change down to supervisors understanding the sector better, not to the risks themselves growing (para 5.177). A low rating lifts none of the AML and sanctions rules that bind charities and NGOs.
Which schemes move dirty money through a charity?
Nine schemes recur in UK guidance, UK tax law and two cases, each with its own way in and way out.
Table 1. Nine ways dirty money moves through a charity, as of November 2026
| # | Scheme | How the money comes in | How it leaves | What the books or the account show | Source |
|---|---|---|---|---|---|
| 1 | Short hold, then return | A large gift, sometimes in a foreign currency | The principal goes back after a short set period, or in another currency | A large credit, then a matching debit after a short period | Commission chapter 2, 5.4 and 5.7 |
| 2 | Cash loan repaid by transfer | Interest free loans in cash from members or the community | Repayments by bank transfer | Cash deposits, then transfers to lenders | NRA 2025, para 5.178 |
| 3 | Gift passed to a second body | A gift on condition it is passed on | A grant to a body the donor names | Money in and out, no program spending | Commission chapter 2, 5.4 |
| 4 | Connected businesses | A gift tied to using a named person or firm | Payments to that supplier or a connected company | Spending concentrated on related suppliers | NRA 2025, para 5.178; chapter 2, 5.4 |
| 5 | School fees | Tuition fees to an independent school that is a charity | Kept as fee income | Ordinary fee income | NRA 2025, para 5.179 |
| 6 | Anonymous and online gifts | Anonymous donations and online giving platforms | Program or onward payments | Many credits from donors nobody can identify | NRA 2025, para 5.178 |
| 7 | Gift that returns as assistance | A gift on which tax relief is claimed | A loan, guarantee or investment back to the donor's side | A gift and a loan to the donor's circle close together | ITA 2007 s. 809ZH, s. 809ZJ |
| 8 | Nil return conduit | Money through the bank account | Onward payments | Turnover far above the filed returns, or none filed | Chabad UK inquiry, 2020 |
| 9 | Nonprofit sponsor paying shell sites | Public program funds | Payments to shell sites; kickbacks as "consulting fees" | Funds up from $3.4 million to nearly $200 million in two years | DOJ, 22 May 2026 |
Row 1 is the Commission's own warning. Its compliance toolkit chapter on due diligence lists a gift the charity may keep for a short, set period before returning the principal, sometimes in another currency (section 5.4). In one of its inquiries, over $150 million was paid into an account opened in a charity's name. The bank doubted the origin and sent it back to the remitting bank in the US, and the £24,000 of interest went to the owner of the paying companies, not to the charity (section 5.7).
Row 5 needs no scheme at all. The NRA notes that a significant share of independent schools are registered charities, open to criminal money paid as tuition fees (para 5.179). A fee is an ordinary reason to pay a large sum to a charity, so criminal money paid as a fee looks like the rest of the school's income.
Row 7 is the round trip that UK tax law calls a tainted donation, and the donor loses the income tax reliefs on the gift. Where relief is claimed on a gift that comes back anyway, it overlaps with tax fraud, the point where laundering and tax evasion meet. Row 9 is the US case in H2 5.
In the UK case the statements carried £9 million while seven of the eight charities declared nil income or filed nothing. The bank sees the statements as the money moves, while the Commission saw only the returns, which puts a charity's bank, and its transaction monitoring, first in line.
Why is a gift of criminal money a laundering problem for the charity?
Accepting the gift can be the offense. Under the UK's Proceeds of Crime Act 2002, a person commits an offense by acquiring, using or possessing criminal property (section 329), and a charity that takes a gift acquires it. Property counts as criminal only when it is someone's benefit from crime and the person holding it knows or suspects that (section 340(3)). A charity with no knowledge or suspicion commits no offense.
Section 329(2)(c) protects a person who acquired the property for adequate consideration, and a donation has none. What the Act offers a charity instead is an authorized disclosure to a constable, a customs officer or a nominated officer (section 338). Made before the charity does the act, it is a defense once the charity has the appropriate consent (section 329(2)(a)); if the suspicion only arises after the gift arrived, the disclosure goes in as soon as practicable. The maximum sentence on indictment is 14 years (section 334).
A person who passes money on for someone else can commit a separate offense: joining an arrangement they know or suspect helps another person acquire, keep, use or control criminal property (section 328).
In the US, 18 U.S.C. 1957 makes it a crime to knowingly engage in a monetary transaction in criminally derived property above $10,000, where the property comes from specified unlawful activity. A deposit or transfer through a bank counts, and the maximum is ten years.
What did eight linked UK charities show?
Between January 2012 and May 2014, over £9 million passed through the eight charities' accounts. For the year to 31 May 2012 one of them declared income of £312,198. The rest declared nil or filed no return. The accounts also showed £60,850 paid to a trustee between 2007 and 2014, with no record in the charities' books to justify it.
The Commission's release on the inquiry, withdrawn on 14 November 2023 and kept as an archived record, names the source of the money: the sale of counterfeit medication. In 2016 two trustees were removed and disqualified. On 21 June 2019 the manager was convicted of giving the Commission false or misleading information, two charges of money laundering, theft of about £165,000 and fraud, for nine years and nine months in total. Funds in a number of the charities' accounts were restrained by court order under section 41 of the Proceeds of Crime Act. The report concluded that the charities were used as a conduit to launder the proceeds of crime, and the release adds that Chabad UK is a separate charity from Chabad Lubavitch UK.
How did a US nonprofit become a laundering funnel?
Feeding Our Future was a nonprofit that sponsored sites in the Federal Child Nutrition Program across Minnesota. It opened more than 250 sites and went from receiving and disbursing about $3.4 million of federal funds in 2019 to nearly $200 million in 2021. In all, it fraudulently obtained and disbursed more than $240 million, according to the Justice Department's release of 22 May 2026.
The laundering ran through companies around the charity. Its founder and the other conspirators created dozens of shell companies to enroll as food sites and "to receive and launder the proceeds of their fraudulent scheme". The nonprofit took more than $18 million in administrative fees it was not entitled to. Kickbacks were paid in cash or disguised as "consulting fees" to shell companies that its own employees created to look legitimate, each one a front company for the money.
At the verdict of 19 March 2025 the founder was convicted of wire fraud, conspiracy to commit wire fraud, bribery and conspiracy to commit federal programs bribery; the money laundering counts were a codefendant's, a restaurant owner tried with the founder (US Attorney's Office for Minnesota). On 22 May 2026 the founder and executive director was sentenced to 500 months for a lead role in a $250 million fraud scheme. Charity fraud deceives donors or misuses a charity's funds, while laundering moves criminal money through it. This case had both: the fraud brought the money into the nonprofit and the shells took it out.
What does charity money laundering look like to the charity's bank?
AUSTRAC's indicators for nonprofit customers, last updated on 25 March 2026, are written to feed monitoring alerts. With the two cases, they give a bank eight signs:
- Income nobody can explain. AUSTRAC names sources of income that are "unclear and/or confusing". Why: a gift story holds only until someone asks for the source of funds.
- Donations into personal accounts. Donations reach personal accounts, or key staff's accounts stand in for the charity's. Why: money outside the charity's account is outside its books.
- Payments off the declared programs. Spending does not match the programs the charity says it runs. Why: a conduit pays people its programs never name.
- Returns missing or nil against turnover. AUSTRAC lists an income tax return not filed for an extended period; the UK case set nil returns against £9 million. Why: the gap between filings and statements is the clearest single fact.
- Turnover far past history. Feeding Our Future went from $3.4 million to nearly $200 million in two years; one restaurant site with about $600,000 a year in revenue claimed by July 2020 to serve 5,000 children a day. Why: the account's own past gives the bank the baseline the jump breaks.
- A large sum parked, then sent back. The $150 million in chapter 2 went back because the bank questioned its origin. Why: the bank sees both legs of the round trip.
- Cash in, transfers out. Cash loans repaid by bank transfer, as the NRA describes. Why: cash becomes bank money with a charitable label.
- Payments to trustee linked businesses. Close ties between charities and connected companies, or payments to a trustee without records. Why: related parties are where charity money leaves.
AUSTRAC adds that one indicator alone may not be suspicious. Rules need the same care: a velocity rule for many senders paying one account misfires on charities, as the transaction monitoring rules library notes. The fix is scope, and complead, formerly Sanction Scanner, lets a team run such a rule on one segment, such as charity customers, with thresholds of its own. When a sign holds, ask the charity; if the answer fails, file a suspicious activity report.
What should a charity do with a gift it doubts?
Ask before accepting. Under the Commission's chapter 2, due diligence on donors means weighing the timing, the country of origin, the amount and the frequency of a gift (section 5.4). Where a gift is unusually large or part of an odd series, trustees check the donor against the consolidated lists of financial sanctions targets and proscribed organizations and consider whether to refuse it (section 5.5).
Once a suspect gift is in, trustees "should not return it to, or contact, the donor"; they should keep the funds apart from the charity's own and report the gift to the police (section 5.5). Returning it would finish the round trip in row 1. For money laundering, a disclosure can go to the police, an HMRC customs officer or an officer of the National Crime Agency, and one made before the charity deals with the money is its defense once consent is given. Chapter 2 also asks for audit trails of decisions, so the file should show what the trustees decided and why.
Which 2026 changes touch charity money laundering?
As of November 2026, four dated changes:
- 18 March: the Finance Act 2026 receives Royal Assent. Its section 56 drops the purpose test from the tainted donation rule for gifts from 6 April 2026: Condition B now asks only whether a linked person who is not a charity receives financial assistance from the charity, not whether gaining an advantage was a main purpose.
- 25 March: AUSTRAC updates its indicators for nonprofit customers.
- 22 May: the founder of Feeding Our Future is sentenced to 500 months.
- June: the FATF's new edition of its Recommendations keeps Recommendation 8 framed around terrorist financing.
The gap between nil returns and £9 million sat in two records for over two years before police information opened the inquiry. A bank can set the income a charity declares to its regulator beside the turnover on the charity's account, and run that comparison as a standing rule on every charity account it holds.
