The UK government has been urged to extend money laundering legislation to the higher education sector to prevent students facing the ¡°horrific consequences¡± of being used as ¡°money mules¡±.

A recent??on money laundering and terrorist financing conducted by the government explicitly highlighted risks to universities, with ¡°criminals and kleptocrats¡± likely to be attracted to their global reputations ¡°to launder their criminal funds and reap the reputational and professional benefits on offer for their children¡±.

Nicholas Ryder, professor of law at Cardiff University, said this recognition was long overdue but the ¡°biggest loophole¡± was that universities are not bound by money laundering reporting obligations by law.

?apply to over 55,000 firms in the UK, including banks and other regulated sectors, such as lawyers and accountants, but not higher education.

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Closing this loophole would legally mandate universities to safeguard themselves against the risk of money laundering ¨C by conducting risk assessments, more consistent training of students and staff and enhanced Suspicious Activity Reporting.

At present, staff who handle money from the proceeds of crime could be prosecuted for money laundering themselves.

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Accepting cash for tuition fees or other services such as accommodation can allow?organised criminals or politically exposed persons (PEPs) to spend the proceeds of crime.??has estimated that PEPs from West Africa alone spend ?30 million on the UK education sector every year.

Samantha Mapston, senior lecturer in law at the University of the West of England, said the number of SARs from the sector has been increasing in recent years, and?that many universities have also stopped taking cash payments?¨C but another threat has emerged.

She said the practice of ¡°money mules¡± ¨C where students are either tricked or paid to forward large deposits on to another account ¨C is becoming a ¡°serious problem¡±.

Experts believe ?10 billion is laundered this way in the UK every year, with about two-thirds of those targeted under the age of 30.

¡°International students are often targeted because they are perhaps particularly vulnerable when they arrive¡­and organised criminals will often try and buy their UK bank account when they leave the country,¡± said Mapston.

Those caught could be prosecuted or have a fraud marker put on their account, which could have serious consequences later in life and potentially prevent them?buying a car or a house.

A??in recent years for??for criminal organisations. Experts fear that the cost-of-living crisis could exacerbate the problem.

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TransferMate, an international bank transfer system used by universities, recently highlighted the ¡°considerable financial and reputational risks¡± faced by the sector ¨C including outdated payment processes, fraudulent links to sanctioned jurisdictions, fake funding documents and misuse of refund channels.

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Extending the legislation to universities would raise awareness of the ¡°horrific consequences¡± money laundering can have on students¡¯ well-being, future employment and criminal records, added Ryder.

In addition, he said that some universities refuse to engage with police forces, which have repeatedly raised concerns about ¡°underground money systems¡±?originating in China.

Ryder warned that the Office for Students (OfS) was not doing enough to help universities protect themselves against the ¡°significant impact on the reputation of the sector¡±.

An OfS spokesperson said: ¡°Universities and colleges should be vigilant to the risks posed by financial and organised crime ¨C this is important for not only for the protection of students and staff, but also for the integrity of the higher education system.¡±

Stacy Keen, partner at international law firm Pinsent Masons and a financial crime specialist, said academic engagement with people caught by countries¡¯ sanctions regimes is an additional risk factor. Higher education institutions should stress test whether existing controls would identify risks before they materialise, she added.

¡°If the answer is no or maybe, then new controls should be implemented, or existing controls enhanced, to protect the organisation from bad actors.¡±

However, Ryder warned that the government was unlikely to extend the legislation to universities given that it was trying to ¡°promote economic growth by essentially cutting red tape¡±.

A government spokesperson said: ¡°We recognise the risks money laundering poses to the university sector and are looking at ways to provide further protection to bolster existing protections from banks and financial institutions as well as addressing student exploitation?.¡±

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patrick.jack@timeshighereducation.com