Regulator Warns Charities of Rising Threats from Complex Cyber Attacks

Charities are increasingly facing sophisticated attacks from malicious actors who exploit regulatory overlaps, as highlighted in a recent official report. The Charity Commission’s latest Charity Sector Risk Assessment reveals a concerning trend of abuse of charitable status for personal gain, with cases rising by 29% in 2025-26 to 374 incidents, following a 38% increase in the previous year.

The report underscores a significant rise in complex casework, particularly among charities that operate within sectors governed by multiple regulatory bodies or where the boundaries of these regulations are ambiguous. The Commission has responded to this complexity by sharing information with other authorities, including HMRC, the police, and local councils, with such referrals reaching 500 in the past year—an 8% increase from the previous twelve months.

Regulatory Gaps in Sensitive Service Provision

While certain charities, such as educational institutions overseen by Ofsted and care services monitored by the Care Quality Commission, are subject to stringent regulations, the Commission has expressed concern regarding other charities providing critical services to vulnerable populations. These include out-of-school settings and specific housing services, which often lack expert regulatory oversight. As a result, beneficiaries may have limited recourse if the quality of services falls short of expectations.

As the charity law regulator, the Commission evaluates concerns surrounding governance and compliance, taking necessary action when required. However, it lacks the authority and resources to ensure that service quality meets the standards that users rightfully expect. The Commission has communicated its apprehensions about the risks facing charities and their beneficiaries to government officials and relevant stakeholders. It also urges trustees to conduct thorough due diligence prior to establishing new service delivery arrangements, advocating for adherence to best practices within their sectors.

Financial Resilience Amidst Recovery Signs

The report also notes a slight increase in sector income, indicating potential early signs of financial recovery, although this upturn is uneven and many charities continue to face financial challenges. Data from annual returns suggests that, while overall income growth marginally outstrips expenditure, many smaller charities are experiencing tight margins. Notably, two in five charities reported expenditures exceeding their income, and one in four charities with incomes below £10,000 only managed to break even in 2024.

The Commission recommends that trustees invest time in meticulous financial planning, ensuring that income aligns with operational costs. Regular reviews of financial forecasts should be conducted, with proactive measures taken if discrepancies between costs or revenues suggest impending shortfalls.

Emerging Risks from Technological Advancements

The assessment also identifies broader risks confronting charities, particularly those exacerbated by rapid technological advancements. The use of artificial intelligence, for instance, has facilitated fraudulent applications to register charities or apply for grants. The Commission has implemented stringent checks on registration applications, with less than half (45%) of applications resulting in successful charity registrations—down from 72% in 2016-17.

Concerns related to safeguarding remain a significant focus for the Commission, with approximately a quarter of issues raised in recent years pertaining to this area. The regulator emphasises the importance for trustees to handle allegations against individuals in positions of power or influence, including those with spiritual authority, with the utmost care and diligence.

Addressing Governance and Social Tensions

The report also highlights the risks posed by governance weaknesses, increasing social tensions, and geopolitical instability, noting a rise in casework linked to allegations of extremism or charities operating outside their defined purposes—particularly in light of the ongoing Israel-Palestine conflict.

Paul Latham, Director of Communication and Policy at the Charity Commission, stated, “The vast majority of charities are well managed and positively impact lives and communities daily. However, our assessment underscores the growing complexity and scale of risks they face, including exploitation of charity status for personal gain and a lack of regulatory clarity that may expose service users to inadequate services or harm. Although relatively few charities are directly affected by these threats, their implications can be considerable for the affected charities, for the Commission’s resources, and for public trust in the charity sector.”

He continued, “We have taken appropriate action in specific instances, while also ensuring that relevant government departments and responsible bodies are aware of these vulnerabilities. We remain committed to collaborating with partners in government and across the sector to identify shared solutions.”

The Commission’s risk assessment synthesises data from various sources, including charity accounts, trustee annual reports, serious incident reports, casework, and intelligence referrals from other agencies, all aimed at aiding trustees in conducting their own risk assessments and updating risk registers. It encourages trustees to consider how sector-wide risks might impact their own charities and what measures can be implemented to safeguard against potential harm.

For further inquiries, please contact the Charity Commission Press Office at: pressenquiries@charitycommission.gov.uk. Alternatively, for out-of-hours contact, please call 07785 748787.

The Charity Commission serves as the independent, non-ministerial government department responsible for registering and regulating charities in England and Wales. Its mission is to function as a fair, balanced, and independent regulator, thus fostering an environment where charities can thrive and enhance public trust, ultimately fulfilling their crucial role in society.