Higher education institutions vulnerable to money laundering

Current UK legislation needs strengthening to protect staff and students from organised criminal gangs, study concludes

A “significant minority” of higher education institutions are failing to provide staff and students with guidance on money laundering risks, research from Cardiff University, the University of the West of England (UWE), and University of Reading has found.

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.

“We analysed the current Money Laundering Regulations and concluded that universities were not obliged to implement counter measures.

“Based on the responses to the freedom of information requests we sent to UK universities, we identified a mixture of approaches being implemented across the sector.

“A consistent approach may be best achieved by including universities within the regulated sector."

Freedom of Information requests were submitted to 120 universities across the UK for the research, with 110 providing responses.

The anonymised analysis that follows shows 20% of respondents do not currently provide any internal anti-money laundering training for staff, and 24% of respondents do not provide any guidance to their students on the risks posed to them by financial and organised crime.

Although 17 universities noted they stopped accepting cash payments during or after 2019/2020, the results show 22 institutions continue to accept cash for tuition fees and accommodation.

Three institutions each accepted more than £1m in cash payments in 2019/20 with the total amount of cash payments across 39 universities adding up to £12m in the same year.

The findings also reveal most universities do not submit suspicious activity reports (SARs) to the authorities. Current guidelines require organisations and individuals to do so when they suspect criminal activity and to ensure they are not liable for wrongdoing.

Money laundering is the process from which the proceeds of organised crime enter the banking system to appear legitimate, funding a “champagne lifestyle” for criminals. Although it is difficult to quantify the scale of the problem, academics estimate it could amount to between £44bn and £111bn annually in the UK alone.

Lead author Professor Nicholas Ryder, based at Cardiff University’s School of Law and Politics, said: “Organised criminal gangs are increasingly using higher education institutions and students as a means to launder money. But the response to the issue from the sector up to now has been poorly understood. Our findings demonstrate that many universities are failing to establish robust preventative measures, putting staff and students at risk of being targeted.

“Most universities have ceased the acceptance of cash payments, but we found a significant number are still willing to do so. What’s even more concerning is that some organisations do not impose any limit on the amount paid in cash. Most higher education institutions are also seemingly failing to recognise the value of financial intelligence created by suspicious activity reports, as well as the related defence they provide to employees.

“Current legislation needs to be tightened. While universities are not explicitly included within the regulations, the disparity of its application across the sector will continue, leaving universities, their employees, and their students at high risk of money laundering and criminal liability.”

Dr Samantha Bourton, Senior Lecturer in Law at UWE said: “Our research has identified reports of universities accepting suspicious payments from convicted criminals and corrupt Politically Exposed Persons. Further, several reported cases have illustrated how students allow their bank accounts to be misused by organised criminals, with detrimental consequences to their wellbeing and future career prospects.

“Despite these risks, our research revealed that there is significant disparity among higher education institutions regarding the implementation of established anti-money laundering measures. To address this issue, our paper recommends that universities are explicitly included within the scope of anti-money laundering regulations.”

IMAGE: "Money Laundering - Pounds" by Images_of_Money is licensed under CC BY 2.0.