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Money laundering is not complicated, you just need a cash generating business. Football is a cash generating business.
The Financial Action Task Force (FATF) describes itself as “an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing.”
In July of 2009, the FATF released a detailed report titled “Money Laundering Through the Football Sector,” in which they identified many “vulnerabilities” that make the football sector uniquely attractive to criminals looking to launder money.
According to the FATF, football clubs “are indeed seen by criminals as the perfect vehicles for money laundering.”
Basically, the main reason for this is because there is a lack of transparency in football regarding the origin of funds invested in clubs (including player transfers). This makes it difficult for anyone to verify exactly where the invested money came from.
As a result of this (as the FATF puts it), “suspicions of the influx of dirty money into football through these ‘sugar daddy’ investments are hard to prove.”
In other words, if you launder your dirty money through a football club, it is very difficult to prove that you are laundering dirty money. This naturally makes football club ownership quite appealing to many, if not most, criminal elements who are looking to sweep some “suspect” cash under the rug.
Getting into specifics, the FATF report identified four primary areas in which football is particularly vulnerable to money laundering. These are:
1) Ownership of clubs
2) The transfer market and ownership of players
3) Betting activities; and
4) Image rights and sponsorship or advertising arrangements
Our series on this subject will focus primarily on money laundering through the transfer market. However, before we get into that, I thought we should start with something more basic; namely:
What is money laundering, exactly?
Contrary to popular belief, money laundering is not complicated. At least, not in essence. Don’t believe me? Allow me to explain with the following simple example.
Say that you are a wealthy individual who has acquired your wealth by running a highly profitable narcotics trafficking business. Naturally, you want to use your ill-gotten wealth to “live the good life,” with all the cars, women, social prestige, etc. that “living the good life” usually entails.
However, there is one thing standing in your way; namely, the likelihood that someone, somewhere, at some point, will probably ask you where your money came from. And on such an occasion, there would be a certain awkwardness in replying:
“I’m an international drug kingpin.”
Aside from being awkward in social situations, the above response could prove particularly problematic if the person asking happens to be the taxman, given that you did not pay taxes on any of your criminal earnings. So, how to solve this problem?
Being the diabolical criminal genius that you are, you decide that you’re simply going to lie and say that you got your money somewhere else. For example, from your highly successful chain of restaurants. So, you start some restaurants.
Say that, in a single month, you earn $1,000 from your restaurants, and $15,000 from narcotics trafficking. But when you’re keeping the books for your restaurants, you lie and write that your restaurants earned the entire $16,000. That way, you can lie to everyone else as well, and say that you earned all of your money from the restaurants.
And that’s money laundering. In essence, money laundering is never more complicated than what I just described above. The way it becomes complicated is when you’re trying to move really large sums of money, and you have to move the money through more and more locations and transactions.
However, in any kind of money laundering, you’re basically just putting your dirty money through the quintessential “wash cycle.” You send it out dirty, it comes back clean.
From there, let’s move into a simple example of how money laundering could work in football.The example I used above describes money laundering in it’s most simple form. The reason I used restaurants in my example is because restaurants are “high cash flow businesses.”
You may have heard the term “high cash flow business” in conjunction with money laundering before. And the reason for that is because any “high cash flow business” is highly vulnerable to money laundering. Why? The reason is, again, very simple.
If, as in the example above, you write in your books that your business earned $16,000, when it actually earned only $1,000, that’s not going to do you much good if there are still a bunch of bank records out there showing that your business really earned only $1,000. However, because a restaurant receives a huge portion of it’s proceeds in cash, there are no records out there proving that your business earned anything other than what you said it did.
So, basically, as long as the money is coming in in cash, the authorities can’t prove that you’re lying about where you got it.
Moving onto football… According to the FATF report, 35% of all revenue in English football is “matchday revenue.” In other words, it comes from ticket sales, refreshments, etc. And what is one defining characteristic of this type of revenue? (Hint: “high cash flow” would be a good guess here). Or, as the FATF report puts it:
“Cash received from ticket sales for football matches may be open to manipulation in order to launder funds by falsifying the books of a football club. A football club would…not be different from other cash-generating businesses outside the football area, such as restaurants, bars etc….”
(But just think how much money you could claim that you earned from matchday revenues at a football club, as opposed to a measly little restaurant!)
The above example is just one of many ways that the football sector is vulnerable to money laundering, and it is far from the area of highest vulnerability. However, it does provide a good basic introduction to the topic of money laundering in football.