Managing the risks of financial crime in the education sector

Institutions should conduct risk assessments to identify whether they operate in high-risk areas and focus their risk mitigation processes on those jurisdictions. Due diligence also needs to be conducted on partners and employees in the jurisdictions in which they operate to prevent funds from being diverted for terrorist or other criminal purposes.

Unlicensed foreign exchange (FX) mechanisms can seem attractive to international students sending funds to the UK, to settle education fees, provide funds for living expenses, or for investment purposes. Unfortunately, international organised crime groups (OCGs), acting as professional launderers, target the demand for ‘unofficial’ foreign exchange in order to launder the proceeds of crime in the UK.

Bribery and corruption rules cover cash payments, gifts, travel, entertainment, training programmes, work experience, charitable contributions and sponsorships. In the UK, the key legislation is the Bribery Act 2010. The UK Financial Conduct Authority (FCA) can impose heavy fines on an educational institution for lack of sufficient anti-bribery and corruption controls, regardless of whether any bribery or corruption has actually taken place.

Economic sanctions can restrict dealings with certain individuals or entities, apply restrictive measures against a whole country. A key sanctions risk for educational institutions is inadvertently dealing directly or indirectly with a restricted person or entity. It is vital that institutions check the names of donors, beneficiaries, suppliers and partners against restricted persons lists maintained by the relevant government authority (see useful contacts).

Educational institutions are prohibited from facilitating any activity for UK Home Office Prescribed Terror Groups, which are banned by UK law. They also have a duty to disclose any known or suspected terrorist activity to the National Crime Agency (NCA). Under the Terrorism Act 2000 failure to disclose a known or suspected offence is a criminal offence. Due diligence processes, audit trails for money paid or for building works, for example, are essential to ensure that funds are used for their intended purpose.

Students' personal data can be at risk through the use of digital devices connected to the internet, whether for study or social activity, exposing them to the threat of fraud and scams.

Students are often targets for phishing (emails), vishing (phone calls) and smishing (texts), with fraudsters often posing as their bank or some other official body.

Students should be aware that the popularity of booking tickets, getting student discounts from restaurants or buying course books online makes it easier for fraudsters to advertise fake products or services that may never arrive once the student had paid.

Typically, fraudsters might advertise a property that belongs to someone else – or even a property that doesn’t exist at all. They may make excuses as to why the student can’t view the property but insist on rent or a deposit up front, promising to forward keys via a courier service, which then never arrive.

The ‘money mule’ trap involves students being offered payment in exchange for receiving money temporarily into their bank account. They will then be asked to withdraw the cash to hand over or transfer it on. This type of scam is on the increase, targeting students who are short of cash and may be tempted by offers to make ‘easy money’ on job search or social media websites.

Criminals may present themselves as a government agency and request payment for an “international student tariff”. In other cases, fraudsters may create a fake email which appears to be from a genuine UK educational institution, requesting payment for fees or informing a student of a change in bank account details to pay fees.