Money Laundering - How Can Schools Mitigate the Risk?

This may herald a renewed focus on this issue but is not the first time it has been suggested that the UK independent education system, which has international prestige, is a target for criminals seeking to 'buy respectability' for them and their families. Nevertheless, the prospect of greater scrutiny on this issue may prompt schools to want to reassure themselves that they fully understand and are meeting their responsibilities.

What Is the Law for Schools?

The UK's anti-money laundering regime is primarily concerned with regulated businesses such as banks, solicitors and accountants. Schools are not regulated businesses under the current regime but they (or in some cases their staff) are subject to a number of criminal offences related to bribery and terrorism, the handling of criminal property and the facilitation of money laundering and tax evasion. These are variously individual and corporate offences and some are liable upon conviction to significant fines and terms of imprisonment.

The most likely offences to be committed by schools are those under Sections 328 and 329 Proceeds of Crime Act 2002 (POCA), which, broadly, prohibit the handling of criminal property (329) and the facilitation of money laundering (328). Either offence could be committed by accepting a payment for fees or a donation (if you are a charity) at a time when you suspect that the money may be the proceeds of criminal activity. Criminal property is defined in section 340 of POCA as 'property constituting or representing, directly or indirectly, a person's benefit from criminal conduct'. 'Suspicion' does not require there to be any specific evidence but does impute a more than fanciful possibility that something is true.

What Should Schools Be Doing?

There are specific defences available to schools in respect of these offences. For example, if you suspect that you are being asked to facilitate money laundering (eg to accept a payment for fees from the proceeds of criminal activity), you should make an authorised disclosure to a relevant authority (the police or customs officers). If you wait for clearance to proceed before accepting the money, you will have a full defence to the Section 328 POCA offence.

However these are narrow and limited protections and do not offer any reputational protection if it transpires that your school has been the unwitting target of criminals. We believe a more comprehensive strategy is called for.

Charities are already obliged to undertake a top down risk assessment of their operations and to have in place suitable procedures to mitigate the risk of financial crime.

Businesses in general, including schools, are also under an obligation to risk assess and, where appropriate, implement suitable procedures to avoid the criminal facilitation of tax evasion offences.

For effective risk management and whether or not your school is also a charity, we would therefore suggest that you:

• identify the key risks for your school
  
  
• implement clear and appropriate risk-based policies and procedures
  
  
• train staff on their application and implementation
  
  
• operate a credit control policy to ensure consistent practice in respect of issues such as taking cash payments and payments from third parties.
  This can be supplemented by a Combatting Financial Crime Policy which details the school's approach to identifying and managing these risks. This is likely to cover appropriate customer/donor due diligence and clear guidelines on internal and external reporting.
  
  
• review your contracts with parents and suppliers to ensure that they are compatible with your particular approach to managing financial risk

To discuss the steps to take to protect your school, please contact James Garside on 0117 314 5639 or complete the below form.