By Iacovos Iacovides, APC Sports Consulting Ltd
In a previous piece, we discussed the legacies of infamous drug lords like Pablo Escobar and the Rodriguez brothers in football. However, it’s not necessary to look to South America to explore the connection between criminals—specifically money launderers—and the sports industry. Recent figures suggest that corruption in sports costs around £78 billion annually. It’s important to first understand why the world of sports is so attractive to money launderers, before examining the various ways the industry is used as a vehicle for money laundering.
Turning Sports into a Dystopia for Money Laundering
There is a plethora of factors that renders the world of sports attractive to money launderers, albeit, none of those are unique to sports. It is rather the confluence of these factors that turns sports into a dystopia for money laundering.
Layering Phase
The second stage of money laundering, the layering phase, easily finds safe harbour in sports. The complexities, particularities, and massive inflow and outflow of cash from transfers and agreements between teams, players, jurisdictions, and agents turn the investigator’s task into a nightmare. In club ownership, multiple channels can be used to launder money. Sports clubs outsource various functions such as marketing, PR, supplies, and other tasks, which can be directed toward illicit purposes.
Industry Size
The size of the sports industry, combined with an insufficient and heterogeneous regulatory framework, creates a sense of hopelessness. The hundreds of countries, dozens of sports, and thousands of leagues and teams (approximately 300,000) are overwhelming for regulators and officials. Additionally, the millions of professional players (around 38 million) add to the challenge.
Institutional corruption at local, national, and supranational levels further complicates matters, making it difficult to know where to start. When globalization is factored in, the need for multiple authorities to trace and investigate issues becomes even more daunting. This complexity often leads to a sense of giving up.
The following list includes some of the common techniques for laundering illicitly derived proceeds in sports:
- Loans to the club. For instance, by directors and owners.
- Over or undervaluing player fees (in the case of transfers)
- Overpriced staff or player salaries
- Payments to agents and other third-parties
- Sponsorships
- TV rights agreements
- Community-based spending programmes
But because actual cases are always more illuminating than theory, let’s take a look at two recent European cases involving money laundering within the sports industry.
The Good Samaritans and Russian Dolls
In 2016, Portuguese police and Europol raided properties and made arrests to uncover Russian mobsters laundering money through EU football clubs. The group, with operations in the UK, Germany, Moldova, Estonia, and Latvia, developed a strategy to identify financially distressed clubs. They donated to these clubs to gain trust, then bought them, integrating them into a complex network of shell companies for money laundering.
This occurred with Uniao Desportiva de Leiria, which was relegated from Portugal’s Primeira Liga in 2012 due to financial struggles. The club failed to meet obligations and was relegated to the third division, leaving it in financial and organizational chaos.
Initially, several “Good Samaritans” gained the club’s trust through donations, and in 2015, the club’s ownership changed. The purchase was facilitated by benefactors acting as frontmen for a sophisticated network of holding companies, owned by shell companies in offshore tax havens.
Taxes, Transfers and Dry Cleaners
In 2014, several football agents and former club owners from Romania were sentenced to jail for tax evasion and money laundering. According to OCCRP, these deals involved the transfer of 12 Romanian players to international clubs from 1999-2005. Prosecutors argued that the Romanian state lost €1.7 million in taxes, while the clubs lost €10 million.
Another investigation revealed that these transfers were part of a larger tax evasion and money laundering scheme across multiple countries. Businessmen and football agents from France, Romania, Bulgaria, Brazil, and Spain used tax havens to avoid taxes and fees.
From this analysis, two main obstacles for regulators combating money laundering in sports emerge: regulatory discrepancies between countries and insufficient resources.
Financial dealings in sports resemble a labyrinth, requiring regulators, investigators, and officials to be equipped with sufficient powers and resources. Coordinated and uniform international efforts are essential to tackle the issue effectively.