The beautiful game is dirty – football is an attractive target for money laundering

In May 2015, the biggest football scandal ("FIFA Gate") led to the arrest of some FIFA executives in Zurich.

• https://www.theguardian.com/football/2015/may/27/several-top-fifa-officials-arrested

The accusations focused on the use of bribery, fraud, and money laundering to rig the $150 million media and marketing rights auction for FIFA games in the Americas, which included at least $110 million in bribes from different sources.

This is one of the several cases of money laundering through football.

To understand why this sport is especially prone to money laundering and how it works, we need to answer a few questions.

Why is football an attractive target for money laundering?

1. Football is the most popular sport in the world, with 250 million amateur players, 38 million registered professional players, and 5 million officials and referees.
2. Around 1 billion people watched the World Cup alone, making it the most-watched sports competition in the entire globe.
3. As a result, it is a very profitable industry that gets funding from a variety of sources.
4. Due to the lack of reinforced international anti-money laundering regulations in the sports sector, some investors with less-than-legitimate backgrounds have been able to fund football clubs, frequently intending to become well-known and form relationships with players.
5. Clubs are reluctant to reveal any alleged money laundering activities since doing so could harm the sport's reputation.
6. Money laundering is simpler to do in this industry due to the high cash flows and minimal entrance barriers.

An estimated $140 billion is laundered through football each year according to the United Nations Office on Drugs and Crime.

How have football clubs been used to launder money?

Criminals exploit football in various ways to launder their illicit funds:

• Overvaluing players during trades:in 2013, Brazilian football star Neymar was transferred from Santos to Barcelona for a reported fee of €57.1 million. However, it was later revealed that the true value of the transfer was much higher, with some estimates putting it at over €80 million. The transfer was investigated for possible money laundering and tax fraud. Fc Barcelona and Santos received multiple fines and the case is still ongoing to this day.
• Player image rights:player image rights can be a legitimate source of income in football, they can also be vulnerable to abuse for money laundering and other financial crimes. A case involving money laundering and player image rights in football is the "Football Leaks" scandal. This involved the release of confidential documents relating to the business dealings of several major football clubs and players, including details of tax avoidance and money laundering through image rights.
• Agents fees:through inflated fees, more complex schemes due to their influence, and connections within football clubs, agent fees play a significant role in money laundering. Mino Raiola received a fee of about €49 million for his involvement in the transfer of Paul Pogba from Juventus to Manchester United in 2016. This amount was reportedly the biggest ever paid to an agent in a football transfer. The payment was thought to be significantly out of proportion to the job that Raiola completed, which led to concerns about possible money laundering.
• Purchase and sale of football clubs:one example is the case of Leeds United which was purchased by the controversial businessman Massimo Cellino in 2014. Cellino had a history of legal problems and was later convicted of tax evasion in Italy. He was also accused of using the club to launder money and evade taxes.
• Sale of fake tickets:on 26 May 2018, the UEFA Champions League final was played between Liverpool and Real Madrid. It was reported that thousands of fans were affected by the sale of fake tickets sold at inflated prices. Fans who had paid for these fake tickets were turned away at the stadium entrances and were unable to attend the match. The profits from these sales were believed to have been laundered through a network of shell companies and offshore accounts.

How are football organizations working to combat money laundering?

Football organizations, such as FIFA and UEFA, have implemented various measures to combat money laundering in football. Here are some of the ways in which they are working to address this issue:

• Regulations and guidelines:

• FIFA and UEFA have established regulations and guidelines that football clubs and individuals must follow to prevent money laundering. The fifth AML directive also focused on the sports sector, and it requires the member states of the EU to take certain measures. These include anti-money laundering policies, know-your-customer (KYC) procedures, record keeping, and due diligence checks on sponsors and other business partners.
• FIFA created a special task group called "For the Good of The Game" in November 2005 to investigate and address challenges to the integrity of football. Since then, the group has implemented the following policies to combat football-related corruption and money-laundering: Early warning system on betting activities (EWS), FIFA Club Licensing Rules, Players' Agents Regulations, Player Transfer Matching System (details are available on the FIFA website), a football transfer clearinghouse that was established following several high-profile corruption scandals at FIFA a few years ago.

• Financial monitoring:

• Football organizations have also established financial monitoring systems to track financial transactions and identify suspicious activity. These systems can flag unusual patterns of transactions or large cash deposits, which can then be investigated further. For example, France established the Direction Nationale du Contrôle de Gestion (DNCG) to oversee the financial operations of both professional and amateur sports organizations. Furthermore, the 53 national associations that are connected with UEFA are monitored by a Europe-wide Fraud Detection System that looks for unusual betting patterns during domestic matches and national cup competitions.

• Collaboration with law enforcement agencies:

• Football organizations work closely with law enforcement agencies to share information and cooperate in investigations.

• Sanctions and penalties:

• Football organizations have the power to impose sanctions and penalties on clubs and individuals found guilty of engaging in money laundering. These can include fines, bans, and even expulsion from competitions.

• Education and awareness:

• Football organizations also provide education and awareness programs to clubs and individuals to help them understand the risks of money laundering and how to prevent them. These programs cover topics such as anti-money laundering regulations, financial monitoring, and due diligence checks.

What is the future of money laundering in football?

1. The combat against money laundering is a fierce one. Football needs better governance, enhanced awareness, and financial transparency. For instance, Transparency International lists several measures that can be taken to prevent money laundering in football clubs, such as:
   1. Confirmed identity checks of the owners, directors, and other important senior staff.

1. the use of forensic independent accountants to determine the owner's source of wealth.
2. Checking databases for politically exposed persons (PEPs) for international investors.
3. Conducting checks with information-sharing programs on individuals currently under investigation for fraud or corruption, both nationally and internationally, with other football authorities as well as with law enforcement authorities.
4. Adverse media internet searches on individuals, companies, and teams, keeping in mind that the results would need to be verified.
5. Whistleblowing policies should be put in place to protect employees who could report money laundering suspicions.
6. Executing ethics and honesty checks, including meetings with Amnesty International and Transparency International, and meeting the possible owner in person.

Conclusion

• Given the lack of transparency in the football sector, the risk of corruption in football clubs is high.
• Although an enhanced AML strategy might deter money-launderers, further research for other sports sectors and other business sectors is also critical.
• Every effort needs to be made to try and ensure that only fit and proper persons own and run football clubs.

Sources

https://pideeco.be/articles/how-is-money-laundered-through-football-soccer/