Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are identified in the footnotes below.
By Ines Chu
Section Editor for Criminal Law
Introduction
Financial institutions, accountants, legal companies, and real estate brokers have traditionally been seen as the most vulnerable to money laundering. Criminals, on the other hand, have grown increasingly proficient and inventive in their search for new ways to legitimize the proceeds of their crimes, and colleges have been the target of their unwanted attention. offences at risk from a variety of sources, including criminals who want to use their illegal earnings to advance their children's education, overseas students who fall victim to credit card frauds, and high-value cash deposits and payments from students with ties to politically exposed persons.
According to a report published by The Times[1] earlier this year, at least 49 institutions enabled students from nations with a high risk of money laundering to pay £52 million in cash during a five-year period. The conclusion drawn from this is that it is possible that some colleges are oblivious to the substantial hazards they confront. The UK's anti-money laundering (AML) framework is unquestionably complex and ever-changing. Nevertheless, colleges and their employees must understand how the law relates to them and what actions they must take to prevent money laundering, fulfil any regulatory responsibilities, and, most critically, avoid being targeted by law enforcement.[2]
The offences
The principal crimes are included in sections 327 to 329 of the Proceeds of Crime Act 2002, which describe money laundering as the process of dealing with the proceeds of a crime in a way that conceals their origins (POCA).[3]An employee, or even a university, may be guilty of money laundering if they know or believe the money they have dealt with is the proceeds of crime, regardless of how little the crime was, where it was committed, or how long ago it occurred. Moving money between a university's own bank accounts or directing or issuing reimbursements, for example, might be considered criminal conduct if the employee directing the money knows or thinks it is the profits of a crime.[4]
Defences
Money laundering is subject to statutory defences. In instances where the money it has received constitutes appropriate compensation (fair value) for the tuition or services it gives the student, a university may try to establish that it has not committed the offence of obtaining criminal property under s329 POCA.
However, this is uncharted and untested ground, and an institution that relies on this defence runs the danger of a court later ruling that the consideration was insufficient. It's also only good for one of the three main money laundering offences. Furthermore, a primary money laundering crime may not be committed if the individual discloses their knowledge or suspicion of money laundering to the university's appointed officer (if one exists) or to the authorities, or has a valid cause for failing to do so.[5] SARs (suspicious activity reports) or DAMLs (daily activity reports) are common reports submitted to the National Crime Agency (NCA) (defence against money laundering).[6] The National Crime Agency can request that bank accounts that it believes may contain profits of illegal activity be frozen.
Obligations
The charitable status of a university puts AML requirements on them as well. Regardless of whether the university is a registered charity or not, the governors must implement specific anti-money laundering policies, controls, and processes to safeguard the university from financial crime. If they uncover possible money laundering offences in connection with the institution, they must promptly contact the police and the Charities Commission (or the Office for Students).[7] If universities are classified as a "regulated sector" under POCA, they will be subject to additional AML requirements. The regulated sector is made up of businesses that are seen to be at a higher risk of money laundering and are thus scrutinized more closely. They are also vulnerable to further charges, such as failing to report knowledge or suspicion of money laundering, or if there are reasonable reasons to suspect money laundering, as well as ‘tipping off' offences if the revelation is likely to jeopardize an investigation.[8] Universities must evaluate if any aspect of their company is subject to these extra requirements; for example, universities licensed by the Financial Conduct Authority (FCA) for credit broking and debt advisory services may also be regulated for AML reasons.[9] A university that is subject to the Money Laundering Regulations 2017 must, amongst other requirements, take steps to identify and assess the risks of money laundering it faces, establish and maintain AML policies, controls and procedures, appoint a nominated officer (also known as a money laundering reporting officer or MLRO) and conduct due diligence (know your client checks or KYC) on their customers and students.[10] It is a criminal offence to breach the requirements of the Money Laundering Regulations but an employee will not be guilty of the offence where they can demonstrate they took all reasonable steps and exercised due diligence.[11]
Procedures
Failures with AML can result in both practical and financial issues. The NCA, for example, can request to freeze bank accounts that it believes may contain profits of illegal activity, and it can then forfeit the money. There's also the possibility of significant reputational harm and, in the worst-case scenario, criminal charges with maximum penalties of 14 years in jail and limitless fines.[12] Universities must put in place reasoned, strong, and proportional anti-money laundering policies and procedures that cover the whole spectrum of money laundering threats they confront, from tuition payment through contribution receipt. Many institutions will already have these policies in place, but it is important to make sure they are practical, followed, and tested.[13]
Conclusion
The AML regime may be imposing, but it must become ingrained in a university's daily culture since turning a blind eye has significant implications. Money launderers are intelligent, and while a university may not always get it right, a good risk-based strategy and recorded risk-based judgements in specific situations will allow one to explain their position in the future if necessary.
[1] George Greenwood CP, “Money Laundering Fears as Universities Accept £52m in Cash” (News | The TimesFebruary 22, 2021) <https://www.thetimes.co.uk/article/money-laundering-fears-as-universities-accept-52m-in-cash-vrc7q6s9b> accessed June 17, 2021 [2] “What Do Universities Need to Know about the UK's Anti-Money Laundering Regime?: Criminal Law Blog: Kingsley Napley” (Criminal Law Blog | Kingsley Napley) <https://www.kingsleynapley.co.uk/insights/blogs/criminal-law-blog/what-do-universities-need-to-know-about-the-uks-anti-money-laundering-regime> accessed June 17, 2021 [3] Participation E, “Proceeds of Crime Act 2002” (Legislation.gov.ukAugust 12, 2002) <https://www.legislation.gov.uk/ukpga/2002/29/contents>; accessed June 17, 2021 [4] Ibid n2 [5] Ibid n2 [6] “Home” (National Crime Agency) <https://www.nationalcrimeagency.gov.uk/> accessed June 17, 2021 [7] Office for Students, “Home” (Office for StudentsJanuary 12, 2018) <https://www.officeforstudents.org.uk>; accessed June 17, 2021 [8] Ibid n.2 [9] Ibid [10] Ibid [11] Ibid [12] Ibid. [13] Ibid.
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