Football the financial crime magnet: Is it the beautiful game we think it is?

Why is laundering money so common in the world of football?

Football is the most popular sport in the world, with over 250 million players, 38 million registered professional players, and 5 million referees and officials. With about a billion people watching the World Cup alone, it's also the most watched sport in the entire world.

Football is a sport with a lot of money and draws investors from all over the world, even from less-than-legitimate economic areas. This is due to a lack of international AML legislation in sport (this does not include sports betting, which is regulated in most countries).

The financial exploitation of football by criminals

Football is one of several places where illegal money might enter, with the UNODC estimating that the sport facilitates the laundering of roughly $140 billion annually.

This comprises of:

The buying and selling of football clubs - Purchasing an entire football team is one way for those looking to hide their money to do so. According to the OECD, a lot of clubs are actually run by amateurs, who manage their finances poorly and may even have debts, making them easy targets for shady investors.

Player transfers - The value of a player can be vastly overestimated, much like with other popular techniques of money laundering, such art or real estate. Eight executives and management personnel (including former FC owners and agents) were sentenced to prison in 2014 by the Bucharest Court of Appeal in Romania after being found guilty of tax evasion and money laundering in connection with the movement of football players between different international football clubs. Romania lost 1.7 million euros ($1.6 million) in taxes as a result. It was revealed in 2020 that numerous agents orchestrated fictitious transactions through the football team Apollon in Cyprus in order to dodge taxes and launder money.

Agents - Unrealistic agency fees are undoubtedly one method of removing bad money. However, because of their links to important players, agents can also have a significant impact on football clubs. Agents can participate in more intricate ML schemes from such positions of influence. A dishonest football agent claimed in 2019 that he had given the former Manchester United manager a £30K ($34.7K) Rolex watch as "thank you" for manipulating a game.

Image rights - The lucrative nature of contracts for the right to use athletes' photographs can give rise to a variety of financial misdeeds:

• Through the selling of items and media rights, money is laundered.

• Part of the money received cannot be declared by players.

• The funds are collected and placed in a tax shelter.

Fraudulent ticket sales - This is especially common with amateur groups and the corporations who assist them in selling tickets. Authorities are less likely to monitor the amount of spectators entering a stadium for an amateur club than they are for major clubs, which makes it easy to launder money through phoney ticket sales.

The harm caused by money laundering on the beautiful game

Financial crime negatively affects football considerably. For instance, if money is laundered through player exchanges, the true competitive value of the players is hidden. In other words, less gifted athletes may be overpaid, but elite athletes may be paid too little. In addition, clubs that get bribe money have no motive to grow because they already make "profit."

"Match fixing," where the results of games are predetermined in order to move dirty money through betting activity, has another catastrophic effect. According to Europol, organised crime organisations can purchase football teams to serve as massive money-laundering tools. This behaviour can damage a club's reputation if it is verified. It may also erode the confidence of spectators who make honest wagers on games.The projected annual illegal gains from match-fixing related to betting are €120 million ($116 million).

Dealing with money laundering in football

The European Union

In a resolution on the future of professional football in Europe passed by the European Parliament in March 2007, the Council of the European Union was tasked with creating and enacting policies to combat the criminal activity that plagues professional football.

The European Commission acknowledged that corruption, money laundering, and other financial crimes have an impact on sport at the local, national, and international levels in its White Paper on Sport, which was issued in July 2007. The White Paper suggested dealing with issues of transnational corruption at the European level and keeping an eye on how EU anti-money laundering regulations are being implemented with relation to sport.

National Authorities

These organisations combat football-related corruption and money laundering at the national level. As an illustration, France established the Direction Nationale du Contrôle de Gestion (DNCG) to oversee the financial operations of both professional and amateur sports organisations. The DNCG is a voluntary organisation inside the French Football Federation that guarantees "fairness in sports" and is primarily composed of accountants and attorneys. Brazil and Italy also have comparable associations.

The International Olympic Committee (IOC)

A framework of ethical principles, including a Code of Ethics, must be defined and updated by the IOC Ethics Commission, which was established in 1999. The IOC Code of Ethics does, however, caution that the money provided by the IOC must only be used for Olympic activities. Throughout the Olympic Games, the committee keeps an eye on all wagering activity in the 28 sports.

Union of European Football Association (UEFA)

he 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.

Localised Football Associations

Some sports associations take money-laundering concerns seriously. For instance, the English Football Association has a comprehensive guide titled "Money Laundering and The Proceeds of Crime Act" for football clubs. Such organisations should implement employee training on anti-money-laundering laws and create an internal money-laundering reporting officer, according to the Financial Action Task Force (FATF), which has a number of suggestions for them.

International Football Association Federation (FIFA)

This is the core of world football administration, and it has a specific obligation to protect the honour and standing of football everywhere.

FIFA created a special task group called "For the Good of The Game" in November 2005 to look into 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 Regulations, Players' Agents Regulations;

• Player Transfer Matching System (details are available on the FIFA website);

• A clearing house that was established following a number of high-profile corruption scandals at FIFA a few years ago.

FIFA: The problematic leader

Sadly, the world governing body of football is infamous for its problems with money-laundering and corruption. The biggest FIFA scandal to date occurred in 2015 when 14 soccer officials, including FIFA leaders, were accused of racketeering, bribery, money laundering, and fraud totaling more than $150 million in a 47-count indictment made public by the US Justice Department.

The FATF responded to these revelations by stating that "recent reports... underscore how important it is that financial institutions identify and monitor high-risk customers" and that financial institutions "do not appear to have given the financial activities of the concerned officials a sufficient amount of scrutiny, as many of these allegedly corruption-related transfers passed through the international financial system undetected."

Due to "concerns about its language" and a "lack of specific evidence to substantiate the claims," the FATF promptly erased this assertion.

Several bank compliance officers also voiced concern about the degree of due diligence in sports at the same time. However, at the time, no fresh actions were taken.

In 2018, a secret UEFA report titled "Intermediation market and transfers in football" found that money-laundering was pervasive in the sport and that "dominant agents" were taking advantage of lax enforcement of regulations prohibiting outside ownership of teams.

The Center for Sports Studies (CIES) for UEFA put together a report in 2018; a summary of it was read by the Guardian but never made public. It stated that the FIFA ban on third-party ownership of athletes' economic rights "is still a well-established reality." The audit also identified a lack of transparency in agent commission payments, which facilitates tax avoidance and money laundering activities. According to the report's conclusion, payments are frequently routed to tax havens not only to enrich agents but also "the club owners and executives with whom they interact."

FIFA: A much needed improvement

To help FIFA address systemic problems, the CIES report provided a number of recommendations. One recommendation was to end the practise of commissions being paid as a percentage of the transfer fee and cap and connect the agent fee to the player's wage. FIFA plans to introduce the following in 2022: 10% of the transfer fee for agents of clubs that release players, 3% of the player's salary for player agents, and 3% of the player's salary for agents of clubs that engage players.

Also other recommendations were made, such as;

• prohibiting those with criminal histories from signing up as middlemen;

• creating a body of inquiry to look into disputes and double-check the flow of money in transactions;

• creating a clearing house where all agent payments would be processed.

FIFA's clearing house is now exclusively utilised for payments related to "training compensation and solidarity contribution." However, it will soon be used to pay all agent commissions. More knowledge, greater governance, and financial transparency are encouraged, according to some international watchdogs.

Transparency International, for instance, lists a number of tactics that can be used to stop money laundering and the illegitimate funding of football clubs, including:

• codes of conduct should be established,

• creating codes of conduct,

• including whistleblower policies, ethics committees, sanctions, and training programmes to increase awareness of fraud and corruption.

• they also make sure that accounts and records are audited and do "fit and suitable person" examinations on prospective club owners.

Due to the lack of organised sporting laws, money laundering and corruption are major problems in football. However, following a number of significant scandals, international organisations like FIFA are now taking the required measures (such establishing the new clearing house) to combat corruption and money laundering.