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Introduction
Money laundering was considered exclusively an academic issue for courses in criminal justice, law, and accounting at most institutions until recently. Yet, it is becoming more and more obvious that when schools and universities take sizable cash payments for student tuition, they may be exposed to a growing risk of receiving earnings from illegal activities. Universities should review their currency acceptance procedures in order to reduce risk, as two recent sets of events in Great Britain demonstrate that this danger goes beyond mere speculation.
The study, published in the journal Criminal Law Review with an accompanying piece in The Conversation, says higher education institutions are not explicitly incorporated within the scope of UK anti-money laundering regulations, leaving a “significant gap” in how the law is being implemented.
Dr Henry Hillman, lecturer at the University of Reading’s School of Law, said: “We wanted to gain an understanding of anti-money laundering procedures within higher education institutions, having initially identified international students as both presenting a money laundering risk, as well as being vulnerable themselves.
Given the current geopolitical unrest, businesses that draw in clients from outside the UK are receiving more attention.
Banknotes worth £52 million are accepted by up to 49 British colleges as payment for tuition from nations including Nigeria, China, India, and Russia.
Furthermore, with the potential of a Labour administration and the anticipated VAT levy on school fees, there is an increased interest in multi-term fee prepayment. Independent schools are being scrutinized due to significant prepayments and an increasing number of international students.
The independent school sector is a major flaw in the UK's anti-money laundering system since it appears that schools conduct insufficient checks on the source of funds before accepting payments.
Failure to implement sufficient processes risks reputational damage as well as penalties or sanctions.
UK’s National Crime Agency has discovered worrying signals of potential money laundering within independent schools, including third-party payments for school bills, pupils from higher-risk money laundering jurisdictions, monies not coming from UK accounts, and the child's nationality jurisdiction, and third-party payments for school invoices.
Other signs include payments made by people who are politically exposed, transactions that imply upfront fees, and payments made by parents who are not directly involved.
More than £4.1 million in suspicious funds were paid to 178 different UK educational institutions from the large-scale money laundering operations revealed by the Organised Crime and Corruption Project, according to a 2019 report released by Transparency International, an anti-corruption campaign group.
Student Money Muling
Another way of students getting utilized as a tool of money laundering and financial crimes is through money muling. Criminals have been approaching students, both online and in person, with promises of easy money and recruiting them to work as money mules, sometimes without their full knowledge of what they are actually getting themselves into. A money mule's job is to receive illicit payments into their bank accounts and then transfer them to other accounts or cryptocurrency exchanges.
The money that flows through these operations is frequently used to fund a variety of serious crimes, including cybercrime, terrorism, and human trafficking. In response, law enforcement authorities around the globe have increased their efforts to combat such illegal operations, and universities have warned their students that this is a kind of money laundering for which students who participate may be detained and charged by the police.
The magnitude of this issue may also spur action from financial regulators, who may decide to move to bring the sector under the purview of more regulation surrounding due diligence and suspicious activity.
Just lately, the Carnegie Endowment for International Peace published research raising inquiries about the "unexplained wealth" of Nigerian politicians and public officials paying fees to UK universities and private schools. In conjunction with this, organizations like Transparency International have urged the UK's universities to put more robust processes in place to protect themselves against money laundering.
A number of lawsuits have also been filed against students who have been associated with "politically exposed persons," which are those who, according to money laundering regulations, are considered to be more likely to be involved in bribery and corruption because they have been entrusted with a prominent public function.
In a well-known case, the niece of Syrian President Assad, who was studying in London, lost more than £150,000 that had been deposited in cash in her UK bank account. The NCA contended that, even though there was no evidence of misconduct on her part, the transactions' nature implied that they were attempts to get around international sanctions.
