Over the years, our educational institutes have become a key part of the economy. Various sources estimate that International students contribute over £20 billion to the UK economy. According to the Institute of Fiscal Studies the foreign university fee income alone in 2020 represents some £7 billion each year. Add to that accommodation, living and travel and it is easy to see the massive level of foreign funds that need to be imported into the UK.
Forensic Accounting In Money Laundering Cases
As a forensic accountant I see a large number of money laundering cases involving Hawala money transfer and I am aware that this system of alternative money service business is a popular method of payment for students from China, India, Pakistan and many other places to settle their tuition bills with the Universities.
I have seen the records kept by many persons supposedly conducting Hawala money transfer business but who are also complicit in the activities of the organised money laundering gangs. I have seen agents making regular deposits of cash into bank accounts of various learning institutions for “tuition fees”
The problem is that the money has most likely come from legitimate funds being paid by the student’s family abroad, but the actual cash being deposited into the University’s bank account in the UK to settle the tuition bill has come from the criminal gangs who are trying to launder cash! The gangs then can take the value of the original money deposited abroad as “clean funds”. It is a popular method of disposing of UK street cash from criminals such as drug dealers and fraudsters.
The Hawala payments represent extra money being laundered – in addition to the mere £77 million cash being paid by students directly to the Universities that was reported by the Times in February 2021. The report suggests that the preparedness to accept cash by the Universities is a gap in the UK’s money laundering defences. I would say that it is just an indication of a much bigger problem because of the incidence of fees being paid by Hawala transfers.
It Might Be Criminal Cash?
The preparedness of many people to use unregulated money transfer agents in their countries, which are often illegal in those countries, is generally a cultural preference. We would all prefer to avoid the burdensome bureaucratic and fiscal impositions placed upon us by the UK authorities, but most of us accept these in the UK with nothing but a moan. This is not the same around the world, and the tendency to avoid central bank rules in some locales is fully exploited by the criminal gangs who are continually seeking legitimate transfers to hijack them and substitute with funds that need laundering.
In the UK, it would be a simple and effective layer in the anti-money laundering framework to add all educational institutions to the list of regulated bodies that have an obligation to participate within the anti-money laundering framework – by carrying out “know your customer” checks, training staff to recognise suspicious transactions and the obligation to report these to the authorities – in the same way as lawyers, accountants, estate agents and all other parties who might be exposed to money laundering risks.
With annual fees for international students ranging from £10,000 to some £60,000, any student paying for education in cash or by cash deposited by a transfer agent into the institution’s bank account, would come under close scrutiny thus making it much more difficult for the money launderers to take advantage.