Universities warned to tighten controls on suspicious financial activity

Higher education institutions must remain alert to suspicious financial activity and implement effective controls to avoid breaching UK financial crime laws, law firm Pinsent Masons has warned.

The call comes after the publication of the 2025 national risk assessment (NRA), the fourth major review of money laundering and terrorist financing risks in the UK. For the first time, the NRA explicitly highlights threats facing schools and higher education institutions.

Stacy Keen, financial crime and money laundering expert at Pinsent Masons, said: “Inclusion in the NRA signals a need for risk mitigation and controls in the higher education sector to avoid inadvertent non-compliance. Ignorance of risk is not a defence.”

The UK’s universities and private schools attract students globally, including the children of political and business elites. However, their international reputation can also appeal to criminals and kleptocrats seeking to launder illicit funds and gain reputational advantages.

Reports have flagged the misuse of educational institutions by criminal actors. One study found six cases where a UK school or university had admitted the child of a West African politically exposed person (PEP) later convicted of corruption or subject to asset seizure. Other reporting showed that at least 14 UK universities had accepted further donations from Russian sources.

Keen said: “Given the rise in sanctions against Russian PEPs and nationals since the invasion of Ukraine, as well as other unrelated sanctions, educational institutions should be careful to ensure they are not breaching UK sanctions.”

She noted that the National Crime Agency’s first successful prosecution under the UK’s Russia sanctions involved school fee payments made in breach of those rules.

Keen added: “Institutions need to be alert to suspicious financial activity, especially involving overseas and third party payments. Risk-based controls should be implemented. This first necessitates identifying exposure to risk and the NRA highlights areas of concern.

“Institutions should stress test whether existing controls would identify these risks before they materialise, and if the answer is ‘no’ new controls should be implemented, or existing controls enhanced, to protect the organisation from ‘bad actors’.”

Keen also warned that financial crime risk is not limited to direct cash payments. Third party transactions can carry significant risk if institutions fail to undertake proper checks. Students can also be exploited, knowingly or unknowingly, as ‘cash couriers’—allowing criminals to move illicit funds through student bank accounts in return for a cut.

Such schemes can be used to disguise transactions, settle tuition fees, or facilitate international remittances. While some students are complicit, others may be unaware of the criminal nature of the activity or its legal consequences.

Victoria Goddard, university governance expert at Pinsent Masons, concluded: “It is important for universities to be vigilant: institutions may potentially be seen as soft targets as there are so many potential points of weakness.

“Any financial irregularity is bound to be looked at closely by the regulator, the Office for Students.”