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Update Your Fundraising Policy

The importance of effective due diligence

The fundraising sector has had a tough run this past year, marred by scandals and the culmination of several years of high-profile misconduct. Charities, NGOs, and universities alike have learned a vital lesson on the importance of due diligence in the fundraising process and must broaden their horizons if it is to mitigate reputational risk.


Practising ethical fundraising is more important than ever. Even if a scandal doesn’t result in immediate loss of support — such as what happened to Oxfam in 2018 when a report revealed damning evidence of senior staff soliciting sex work — it can still generate long-term consequences. For example, university scandals with more than five mentions in The New York Times correlate with an eight percent decrease in student applications the following year.  


The internet loves a scandal, and immortalises any and all failures in due diligence. However, online information can also be used by fundraisers to vet donors and even find better opportunities. The challenge is gathering and sorting through all of the available information quickly enough to be of practical (and cost-effective) use. Here, we’re going to take a look at due diligence lessons from last year to help you build an ethical fundraising strategy that’s ready for the year ahead. Let’s get started. 

Lessons from 2021: end of year round-up

The year end presents an opportunity to stop and review what went right and what went wrong, to optimise your fundraising best practices. The university, charity, and broader not-for-profit (NFP) sectors in England and Wales were hit hard by the pandemic, with 90% of charities surveyed reporting some negative impact — 60% of which identified a loss of income. However, the news isn’t all bad, and foundations for a brighter future are visible. The importance of flexibility and reputation sits at the top of the list.

The positives: flexibility and digital adoption

There are two big ways in which the not-for-profit sector responded to the challenges of the pandemic that present opportunities for long-term improvement. 

  •  Flexible adaptability: 45% of charities took action to rapidly adapt their services during the pandemic. This meant moving services online, refocusing projects, and reallocating budgets. All of this is critical to forming a resilient operation able to resist shocks in uncertain conditions and should be a critical priority.

  • Increased digitisation: 49% of charities say that their staff and volunteers now make better use of digital technology. Considering that 80% of all donations are now made digitally, this is critical to long-term success for fundraising and service delivery.


Digital technology and online channels of communication remove barriers to public engagement, creating simple donation journeys and allowing NFPs to focus on delivering services - and 2023 is about doubling down on these trends for the long term.


The negatives: scandals and scrutiny

The same digital channels that opened new opportunities for service delivery and fundraising have also escalated the scrutiny of donors and institutional practices. The public is increasingly intolerant of any perceived impropriety. Scrutiny goes beyond illegality to focus on corporate connections, personal and professional relationships, and any activity perceived to be out of line with an organisation's ethical standing and values. Two high-profile cases from 2021 highlight this exact point: 

  1. Cash-for-access: Claims about fundraising misconduct for the Prince’s Trust are a perfect example of how unscrupulous third-party relationships can undermine your reputation. The allegations detail how unofficial intermediaries were skimming up to 25% off donations in order to provide additional benefits like a dinner with the founder and overnight stays at Dumfries House. Due to past misconduct, appropriate due diligence would have likely flagged the central figure in this scandal, Michael Wynee-Parker, as an inappropriate representative of the charity. 

  2. Mosley must fall”: Who you take money from matters, and this is a lesson that two Oxford colleges (St Peter’s and Lady Margaret Hall) learned in 2021. Both were accused of ‘moral failure’ after accepting £12 million in donations from the Mosley family — money that can trace its inheritance to Oswald Mosley, who founded the British Union of Fascists in 1932.  Senior academics have called on students to protest, and there have even been suggestions that government intervention is needed. It’s critical for institutions that depend on their reputation to think long and hard about who they associate with and why.  

The level of public scrutiny applied to donors, partners and fundraising policies has sky-rocketed. Charities and universities need better visibility over internal and external operations in order to preserve the reputations upon which they depend. More importantly, this needs to be done in a way that works with (not against) the technological flexibility that drove success during 2021.

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Suggested reading: Want to know more about performing effective due diligence on donors? Get a headstart with A New Generation of Donor Due Diligence | Part 1, the first of our four-part guide on donor due diligence.

How to build due diligence success


It is vital to understand lessons from the past and put them to use within a framework that’s able to help you make decisions about today. Fundamentally, every organisation and fundraising policy will be unique. However, there are four main principles that we believe will help you identify the right answer.

1. Meet regulatory requirements: 

This is the baseline for good due diligence. If you aren’t meeting regulatory requirements around AML (anti-money laundering) reporting or PEPs (politically exposed persons) and sanctions screening, then it isn’t just your reputation that’s at risk. You face potential fines or government action. When it comes to receiving funding from major donors, you need to know: 

  • Who your donor is: Identify verification requires having an ID in the first place. You need to know who is making a donation, where they are located, and if they are making the donation on behalf of another. The public image of the person you choose to engage with has a huge impact on your reputation in turn by association. Perform online reputational checks to assess their background and public profiles and what impact that might have on yours. When dealing with regular donors, repeat these checks to guarantee you don’t miss out on any changes in your donor’s reputation over time.

  • What form of money is being received: You need to know the currency and whether or not you are receiving cash, a cheque, or a bank transfer. Payments of a large volume should especially raise suspicions. 

  • Where is the money going: You have a responsibility to monitor how your donations are used. The principal objective here is to avoid fraudulent activity and the misappropriation of charitable funds away from those who the charity is looking to support. Part of this requires awareness of your donor’s personal and professional network, and wider objectives. This enables you to vigilantly protect against any undue influence over the use of funds, or the use of donations as a conduit to funnel funds to a third party.

  • How you will report findings: Any suspicious behaviour, presence on sanctions lists, or politically exposed person should be reported to the relevant authorities. Money laundering suspicions can be reported to the police, HMRC or the National Crime Agency. These issues and others should also be reported to the Charity Commission, especially if large sums of money are donated from an unknown source.   

2. Structure a plan aligned with your reputation: 

If the experiences of 2021 prove anything it’s that your due diligence process needs to go beyond the regulatory minimums. You need to identify the reputational risks you are willing and unwilling to tolerate and define questions you need answered about every donation in order to make an informed decision. 

  • What is your appetite for risk? Not every organisation will have the same reputational concerns. You need to consider what types of risks are likely to damage your reputation and how much damage you are willing to tolerate. 

  • What connections does your donor have? An individual may be squeaky clean — or appear to be thanks to a carefully curated public image — but if they consort with known bad actors your reputation could end up tarnished by association. You need to expand your due diligence beyond the individual to their associates, businesses, backgrounds, and more.

  • Are there conditions? Be clear why someone is making a donation, and if there are strings attached. In addition to thinking about if these conditions are reasonable and in line with your organisation’s ethical values, you should consider how they will be perceived by the public and how that will impact your reputation.   

  • What’s in the media? Look beyond official PEPs and sanctions screening to investigate negative news reporting in order to identify any impropriety on behalf of a donor, or their connections, which might damage your reputation. 

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Suggested reading: For more details about questions you should ask yourself, check out our Donor due diligence checklist
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3. Build with efficiency in mind: 

Due diligence shouldn’t be a roadblock. For example, early know-your-donor checks enable you to cut your losses (if necessary) or identify useful information that can be used to deepen and enhance your donor or partner relationship. 

  • When you undertake due diligence: If you wait too long to perform your due diligence you risk losing valuable time, significant resources, and potentially slighting your reputation due to public statements you have already made concerning the donation. This creates pressure to overlook wrongdoing and exaggerates the cost of terminating a donation.   

  • Training due diligence researchers: Manually rolling out your due diligence process across different organisations and individuals is another time and resource-consuming effort. No matter how simplified said process may be, there will be a lot of man hours spent simply training people that could be better spent making high level decisions and/or driving fundraising efforts.

  • How long it takes to undertake due diligence: If your due diligence process is overly time-consuming, it will make it impossible to get early results. Accelerating your results primarily depends on the technology you use to undertake due diligence, which brings us to principle number four…   


4. Use technology: 

One big reason that due diligence systems fail to prevent scandals is that there is no standardised process across organisations, much less sectors. In an industry that is dependent on manual processes, there is no guarantee of a high standard of quality. Every individual who conducts due diligence research with Donor research tools will have a different way of doing it, and differing levels of experience, and tenacity. 


If you are going to conduct robust due diligence early, quickly, and regularly, you need the help of technology to automate the bulk of the technical and resource-consuming elements of that process. Consider solutions that are able to deliver: 


  • Rapid reports: Rather than having to manually find and read through hundreds of search results, the right technology will make it simple by automatically compiling reports using AI-based web crawling. Using widely-known keyword contexts like a name or company, the software will read and review all standard search results (e.g. new publications, blogs, images, webpages, etc.) and grey media (e.g. company and government records, scientific journals, public social media, etc.). This massively short-cuts the time it takes to undertake due diligence, specifically when augmented with the following two capabilities… 

    1. Clear, comprehensive information: Due diligence research is an iterative process. Uncovering details about your research subject allows you to feed that information back into your due diligence process and follow new leads, expanding the investigation. The right automated due diligence software does that process for you so that you are presented with an understandable yet detailed report that you can then base your decisions on. It is important to be able to do this quickly and comprehensively on as many individuals or organisations as you need to get a full analysis, without concern for the time and resources that would be spent conducting manual reports.

    2. Automated verification and cross-checks: Words, and even names, without context are relatively meaningless. For example, there are many John Smiths, and just because there is a negative news article about a John Smith, it doesn’t mean it’s the John Smith you're investigating. Also, was John Smith planting a “bomb” in April? Or did he “bomb” a speech in April? If the technology you are using can’t parse these differences, it won’t be very useful at providing insights, plus you’ll be wasting time attempting to screen these discrepancies yourself.   


Finding the right tool isn’t easy. In fact, we didn’t think there was one up to scratch. That’s why we developed Xapien as purpose-built reputational risk technology. It’s a powerful search tool that will help you achieve the exact outcomes you need.

Put your reputation first


Charities and universities are uniquely reputation-dependent organisations. It’s critical that your Major Donor Fundraising Strategy builds reptuational protection in from the outset. Effective due diligence will minimise your exposure and provide the information you need to make informed decisions about third-party relationships. This means using the right systems and technology that enable you to be efficiently and consistently uphold your institution's values and ethical standards. 

Fundamentally, public scrutiny is at an all time high, and online communication means that news (good or bad) spreads fast. It’s not good enough to simply avoid illegality. You need to think about how actions are perceived, and what connections there are between donors and wider networks of individuals, corporations, governments, and more. The right technology will help you grow sustainably by enabling you to better understand your donors. At Xapien, we’ve set out to make this simple. Get in touch and transform your due diligence process today.  

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