By Alexandros Chronides, APC Sports Consulting Ltd
Money laundering is a hot topic in global financial and political discussions, with governments struggling to manage fiscal balances. The fight against money laundering has become increasingly crucial as tax evasion, drug trafficking, and criminal activities rise.
So, what exactly is money laundering? It’s the process of legitimizing money generated through illegal activity. In other words, ‘dirty’ money from crimes like drug trafficking, bribery, or tax evasion is “laundered” through various methods. The goal is to make this money appear legitimate so it can be used without fear of criminal consequences.
Money laundering may sound too technical or legal to be connected to international sports. We might imagine ships full of cash arriving on islands with bankers waiting to help criminals move their money. However, this is no longer the case. Money laundering has evolved, and sports, with its low financial regulation and traditional lack of sophistication, are now a prime target for laundering.
This metaphor is not far-fetched. Money laundering is happening in sports right now and has been for decades. In 2009, the Financial Action Task Force (FATF) warned governments about the growing use of football for money laundering. The many ways criminals can use clubs, leagues, or athletes for money laundering are beyond this article’s scope.
The negative effects of money laundering on the global economy and financial sector are well-documented, ranging from market instability to increased government corruption.
However, the impact of money laundering on international sports has received less attention.
This article examines the negative effects money laundering has on international sports, focusing on its consequences for the industry itself.
1. Classic Supply and Demand Distortions
Money laundering creates inefficiencies in the global sports sector. Money is no longer allocated to areas with high fan demand, talent, or good management. For example, a criminal seeking to launder money might buy overvalued football players or clubs in poor economic condition. These clubs become vehicles for money laundering, with little focus on improving management, team performance, or fan engagement.
As a result, the forces of supply and demand become distorted. Players may be overvalued based on inflated prices, and clubs may not prioritize improving operations or performance. Players might also feel disincentivized to perform at their best, knowing their efforts have little impact on the club’s financial success. These distortions ultimately reduce the utility (happiness) that fans derive from sports.
2. Crime Attracts Crime – Crime Breeds Crime
If criminals use sports to launder money, they might also exploit the industry to generate more illegal proceeds. This has led to an increase in match-fixing. Criminals, already involved in laundering money through sports, use their power and resources to manipulate match outcomes. This, in turn, undermines the integrity of sports.
3. Crime Corrupts
Consider a young athlete who has worked hard to reach the highest level of their sport. What happens if they learn their club is merely a front for laundering money? Or if they are instructed to underperform or take performance-enhancing drugs? Many athletes, facing such pressures, may abandon their integrity and comply.
Crime corrupts, and the presence of criminals in sports leads to the corruption of athletes and others involved. Sports used to represent an arena where personal success wasn’t tied to socioeconomic background. Now, athletes from disadvantaged backgrounds, disillusioned with sports, may resort to criminal activities or become criminals themselves. The rise in doping also harms athletes, who trade long-term health for short-term gains in performance.
In conclusion, the increasing incidence of money laundering in international sports is creating significant economic inefficiencies. More importantly, it threatens the core values of sports and athleticism.