Money laundering jeopardises the security of UK citizens and the integrity of its economy. Money launderers often target financial institutions, but they are also increasingly targeting lesser regulated or unregulated sectors, such as universities.
Our research has focused on how universities apply anti-money laundering legislation, as well as their response to identified threats. We have found that universities, their employees and students are vulnerable to threats from money launderers because universities are not explicitly included within the UK’s money laundering, terrorist financing and transfer of funds regulations.
The government’s anti-money laundering laws and regulations focus on preventing the crime by requiring organisations to submit suspicious activity reports to the National Crime Agency’s (NCA) Financial Intelligence Unit. These are reports of financial transactions that may be linked to money laundering.
In the UK, more than 90% of suspicious activity reports submitted to the NCA are from financial or credit institutions. However, money launderers have adapted their techniques to exploit the weaker controls and regulations in the university sector.
UK universities, in some cases, attract the family members of convicted criminals and corrupt politically exposed persons. These are people who hold prominent positions in government, business or other organisations. Their status makes them vulnerable to corruption and involvement in money laundering schemes.
The NCA revealed in 2020 that increasing numbers of students are having their bank accounts used by organised criminals. Young people can be used or exploited as “money mules” by crime gangs for laundering money. In 2018, students Abdi Mohamed and Nyanjura Biseko were found guilty of laundering more than £10,000 through their bank accounts, part of a £37,986 fraud.
There have also been instances where people have used their student loans to finance terrorism. For example, Yahya Rashid was jailed for five years in 2015 after using his student loan to pay for himself and four friends to go to Syria to join the terror group, Islamic State.
What we found
We sent freedom of information requests to 120 universities across the UK to discover how anti-money laundering legislation is being applied. Nine out of ten institutions responded to our requests, and while some universities provided a full response to every question we asked, others declined to answer some or all questions. Overall, we found there is a disparity among universities regarding the implementation of anti-money laundering legislation.
A significant minority of universities are failing to provide staff and students with guidance on money laundering and terrorism financing risks. We found that 20% of respondents do not provide any internal anti-money laundering training for staff. While 24% of respondents do not provide any guidance to their students on the risks posed to them by financial and organised criminals.
Some universities are failing to recognise the money laundering risks inherent in large cash payments, with more than 21% of respondents willing to accept cash payments. For example, three universities received more than £1 million in cash between 2019 and 2020, for tuition fees and accommodation. This is concerning, particularly given that some universities do not impose any limits on cash payments.
Also, universities are seemingly failing to recognise the value of the financial intelligence created by submitting suspicious activity reports. This is despite the fact that university employees are bound by the obligation to submit these reports under the Terrorism Act 2000 and the Proceeds of Crime Act 2002.
In fact, we found that most universities do not submit any suspicious activity reports at all to the NCA. Most suspicious activity reports are submitted by a small number of universities.
This means that while universities are not explicitly included within the regulations, the current disparity of its application by the sector will continue. It means that universities and their employees are at risk of criminal and civil liability for committing money laundering and terrorism financing offences, or for failing to establish preventative measures.
To reduce the risks to which universities and their students are exposed, the UK’s money laundering, terrorist financing and transfer of funds regulations should be explicitly applied to the higher education sector. This should include providing guidance to staff and students on terrorism financing and money laundering risks. And allowing cash payments for accommodation and tuition fees should be prohibited, or at least severely restricted.
by : Nicholas Ryder, Professor of Law, Cardiff University