Closing the book on fraudsters

The sector is perceived as cash-rich, for example multi-million-pound investment in new facilities.

Education is regarded in the criminal world as a relatively ‘soft touch’.

The increased use of online/distance learning leading to an increased risk of data theft.

What is money laundering?

Money laundering is the process of taking monies earned from criminal activity, concealing their origin and transforming them into funds from a seemingly legal source – money laundering occurs every time any transaction takes place or any relationship is formed that involves any form of property or benefit that has come from any crime. For example, receiving large donations from anonymous donors could indicate possible money laundering. Institutions should have processes in place to mitigate this risk, such as establishing and documenting how the funds were raised, and why the donation is to be made anonymously.

Conditions attached to donations may be a red flag. Is the donor asking for money to be spent in a particular area for example?

Other sources of funds, such as legacies, trusts and bursaries, or funding for students who are the children of Politically Exposed Persons (PEPs) and/or sanctioned individuals may also create a money laundering risk.

Additionally, students caught up in a money laundering investigation may have their funds frozen or permanently confiscated, or end up with a criminal record.

How to prevent money laundering

Red flag certain payment methods for further investigation, for example:

• use of complex company structures/shell companies to pay course fees
• paying course fees in full – but the student then withdraws from the course close to the start date or soon after, requesting a refund of fees 
• unusual or unexplained large payments (particularly in cash) being paid directly into an institution’s bank account, purporting to be tuition fees for a student
• cash payments received via a remote bank branch without prior notification
• over-payment of course fees and subsequent request for a refund.

Review all forms of third-party payments - whether by cash, credit card, inter-bank or cross-border transfers, review payments with no clear rationale or justification.

What is underground banking, unlicensed money service businesses, and organised crime?

Managing money outside the formal banking system can seem attractive to international students sending funds to the UK, to settle education fees, provide funds for living expenses, or for investment purposes. Underground and unlicensed arrangements (including unlicensed money service businesses and unlicensed foreign exchange mechanism) are a form of informal banking service which are unregulated, broadly unmonitored and sit independently from the formal banking system. 

Unfortunately, international organised crime groups (OCGs), acting as professional money launderers, target the demand for ‘unofficial’ foreign exchange in order to launder the proceeds of crime in the UK.

Typically, those offering unlicensed FX outside of the UK will receive funds in local currency, from the student or their family. An arrangement is then made for funds to be deposited to the destination account in the UK specified by the student. This is done either wittingly or unwittingly through a third party linked to an OCG in the UK.

The OCG will arrange for proceeds of crime (often as cash) to be deposited either to the student’s account or, if settling fees, the account of their educational institution to the value specified by the unlicensed FX provider. The OCG laundering the funds will then receive the value of the tainted funds by other means.

How to prevent underground banking, unlicensed services, and organised crime

• Know your sources of funding and payment - what due diligence do you undertake on those sources? For example, do you consider the country of origin or where the institution is working with government agencies, what additional checks are undertaken to satisfy anti-bribery and corruption regulations?
• Verify student fees – how do you verify the sources of student fee payments and screen them to avoid financial crime?
• Understand the risks involved in the different jurisdictions in which you operate
• Provide staff training and guidance to ensure understanding and compliance with your financial crime policy, particularly for those dealing with high-risk jurisdictions.

What are foreign student considerations and Informal Value Transfers Systems (IVTS)?

Foreign students, particularly those from East and Southeast Asian countries such as China and Vietnam, are being targeted and coerced to assist organised criminal gangs (OCGs) seeking to move illicit funds via Informal Value Transfer Systems (IVTS).

The term IVTS is also referred to as “underground banking”. These OCGs are coercing students to exchange legitimate funds/currency for cash obtained from criminal enterprise. When settling tuition fees, the cash received or paid in by students or third parties is often in Scottish or Northern Irish notes. This currency has long been associated with money laundering derived from various forms of criminal enterprise within these countries, ranging from protection rackets and human trafficking to drugs and arms trading.

How to prevent criminal gangs moving illicit funds via IVTS

• Use official and licensed money service businesses and banks to send money overseas. Students and their families should seek to comply with local laws in their jurisdiction
• Provide your staff with appropriate training and guidance to ensure understanding and compliance with your financial crime policy, particularly for those dealing with high-risk jurisdictions.

What is bribery and corruption?

Bribery and corruption may not always be obvious, be alert for the illegitimate use of an office or giving or accepting payment for unfair advantages . Universities, colleges and schools need to ensure they have adequate procedures in place to prevent bribery and corruption, for example when dealing with third parties that provide services on their behalf.

Institutions should be particularly aware of the potential risks of providing bursaries, sharing resources with local state educational institutions or raising funds via development teams or parents’ associations.

How to prevent bribery and corruption

Watch out for possible red flags:

• third party payments received in settlement of invoices
• question unexpected interest in specific student applications from members of staff, or requests to circumvent normal application requirements
• using third party agents to identify prospective new students or having associated institutions/franchises in certain jurisdictions
• an entirely non-face-to-face relationship with a student’s parent/guardian
• student fees coming from an account in a different jurisdiction to the student’s country of origin and/or information on source of funds opaque or high risk as in the case of a Politically Exposed Person (PEP) and sanctioned individuals.

What is terrorist financing?

Terrorist financing occurs when any person directly or indirectly provides or collect funds with the intention that they are used for the purposes of terrorism. 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.

Institutions should have policies and procedures in place to help mitigate these risks.

How to prevent terrorist financing

• Do not accept cash payments for student course fees, accommodation or living expenses
• Have a readily identifiable audit trail - only accepting payments by electronic means with a transparent trail e.g., bank-to-bank transfer or credit card
• Always verifying funding sources and obtain appropriate evidence of the origin of those funds
• Apply enhanced due diligence where funds originate from unknown third parties or shell companies
• Adopt a continuous programme of training and awareness for both employees and students.

What are accommodation scams?

Fraudsters 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.

Institutions should warn students about accommodation scams and consider working with genuine accommodation suppliers to tackle this threat.

How to prevent accomodation scams

• Use reputable high street rental agents and students should always view a property inside and out before entering into any agreement or parting with any money
• View legally required documents such as energy performance and gas safety certificates
• Sense check the rent - is it typical of properties in the area – if it seems too good to be true, remind your students, it probably is.

What is money muling?

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 it 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.

Allowing their bank account to be used in this way is illegal and could land students with a criminal record or even a prison sentence. Students caught up in money muling are also likely to have problems opening a new bank account or obtaining credit in the future.

How to prevent money muling

• Be wary of ‘easy money’ offers, often unsolicited approaches are made to students
• Research employers offering such ‘job’ opportunities and make sure their contact details are genuine
• Be sure ‘job offers’ are genuine - be especially cautious of ‘job offers’ from overseas as it will be harder for students to check whether they are legitimate.

Make students attending your institution aware of money muling. You can learn more at https://www.barclays.co.uk/fraud-and-scams/money-mule-scams/

What are fee payment scams?

This fraud targets students, particularly overseas students, making tuition fee payments. Criminals may present themselves as a government agency and request payment for an 'international student tariff', in some cases even threatening to revoke a student’s visa if the payment is not made.

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.

Provide guidance to your students about possible fee payments scams.

How to prevent fee payment scams

• Be vigilant – students should be wary of anyone who offers to make a tuition payment on their behalf
  
• Use endorsed tuition payment services - avoid companies advertising these services that are not endorsed by the institution
• Use legitimate agents - look for warning signs that an agent is not legitimate, such as requests for large upfront payments, offers to create false documents, refusal to provide references or charging fees for services that an educational institution provides to students for free, for example, accommodation support
• Do not share personal, banking or financial information with anyone who lacks a verifiable relationship with the relevant institution.