Donor due diligence:

Donor due diligence: why it matters and what’s required


Donor due diligence – part 1

No institution is exempt from public scrutiny. Universities and other institutions that receive charitable gifts must do their utmost to protect themselves and the industry at large from major reputational damage, but where to start?


Without robust measures in place, institutions can be exposed to significant negative attention from the media or other sources that can have crippling results on Major Donor Fundraising Strategy efforts. In a digital world, public profile is everything and bad news travels quickly. If you get something wrong, it can be a permanent black mark on your digital footprint – the shop window for any institution.

Major scandals such as that exposed by the Times’ February 2021 freedom of information request on universities accepting major donations in cash were an unwelcome reminder to universities and other charitable institutions that they must adhere to robust anti-money laundering and other financial crime policies and guidance if they are to be able to continue to deliver on their missions. 

The Times: Money laundering fears as universities accept £52 in cash

Criminal activity in the sector can have a major negative impact on individual institutions’ ability to raise funds and deliver on their much needed objectives. But more significantly it seriously harms the sector at large.

And that is just the public. What about the regulator? The use of charitable institutions to facilitate money laundering and other criminal activity is also a key concern to the Charities Commission. The Commission saw a 75% increase in the number of whistleblowing disclosures in 2021, compared to 2020, with by far the greatest number occurring in the education/training sector.

The Commission has the power to restrict transactions a charity may enter into, freeze charities’ bank accounts, suspend or remove trustees and/or make referrals for investigation to law enforcement agencies. 

Public trust and confidence that institutions are honestly and effectively managed is especially important in a sector that is inspired and moulded by principles of trust, voluntarism and altruism

Cambridge Legal Studies research article on the regulation of universities, January 20201
Civil Society: Commission freezes bank account st charity woth £200,000 'discrepancy'

What universities can do to protect themselves

Although universities are usually exempt and under no obligation to comply with the Charity Commission’s regulation, it is widely regarded as best practice that fundraisers comply with the Charity Law and the guidance issued by the Charity Commission. At a minimum universities should seek to uphold the fundraising principles for trustees set out by the Charities Commission which stresses the importance of protecting a charity’s reputation.

The Commission encourages all institutions to apply Know Your Donor (KYD) principles to significant donors. By what exactly does this mean?

Trustees are encouraged to answer an extensive series of questions when it comes to receiving certain donations, with criteria covering the size and nature of the donation and if it appears to have any suspicious characteristics.

Here is a helpful checklist of what any university due diligence department ought to find out about the individuals or entities making the donation to protect themselves from unwanted public scrutiny:

Xapien’s helpful checklist of donation due diligence

​Adequately fulfilling this criteria is a challenging task in the age of hyper-information. Stay tuned for the next part in our series on how to implement an effective donor due diligence process that prevents your organisation from becoming the next story.

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