STORY
The Charity Commission has issued an Official Warning to East London Mosque Trust following an investment deal that wiped out £1 million of the charity’s funds. Regulators found that trustees failed to carry out adequate due diligence and did not exercise proper oversight over the investment, amounting to misconduct and/or mismanagement in the administration of the charity. East London Mosque Trust, established in its present form to advance the Islamic faith through the upkeep of mosque and community facilities, reported the problematic investment to the Commission in February 2023. The trustees had placed £1 million with an NHS-approved supplier, anticipating a 20 percent return over six months. However, the supplier subsequently went into administration, rendering the entire sum unrecoverable.
In reviewing the case, the Charity Commission concluded that trustees did not undertake sufficient checks on the supplier or scrutinise key investment documents prior to committing charitable funds. “When people donate to a charity, they put their faith in those running it to manage those funds with care and in line with its aims” said Joshua Farbridge, Head of Compliance Visits and Inspections at the Charity Commission. “In this case, we found that trustees lacked the oversight we would expect of such a substantial investment, nor did they ensure thorough due diligence had been undertaken. We have now issued a formal warning.”
East London Mosque Trust—whose origins date back to 1910 and which operates one of London’s oldest mosques—was previously reminded by the regulator about the need for robust financial controls. Despite those admonitions, trustees went ahead with the investment without adequate governance checks. The Commission’s warning notes that this failure to act with reasonable care and skill directly contributed to the loss of the charity’s funds.
Under the terms of the Official Warning, East London Mosque Trust must, within six months:
– Implement stronger financial controls and ensure continuous oversight of all investments.
– Commission an independent review of its governance structures and report the findings to the Charity Commission.
– Take all reasonable steps to recover the lost funds, including exploring potential legal or insolvency remedies.
If the charity does not comply with these requirements, it may face further regulatory intervention, including the possibility of an inquiry or removal of trustees.
Trustees of East London Mosque Trust have acknowledged the Commission’s findings and say they will work to put the required controls in place. In the meantime, the charity continues to provide a range of spiritual and community services, but must now demonstrate that it can safeguard its assets more effectively going forward.