Why should compliance officers start learning football?
In my family, my husband is the one watching football games and enjoying this sport. Whenever our national team plays, my very calm husband transforms into a very vocal supporter whose strong voice shakes the windows of our house and bewilders the children. Summer of 2024 meant Greece and sun, but also Euro 2024 lived at its fullest every day, no matter the location – beach, tavern, evening walk, etc.
My current knowledge of football is that it has 2 teams, a ball that goes into a gate and I had to google the number of players in each team – 11. My strong football foundation is also supported by the fact that I sometimes watch our national team playing (mostly for the conversation and popcorn that comes with the activity) and 2 Netflix series about some extremely rich professional football players. And wow… the amounts of money rolled in this domain!
And yet… on the 15th of November, at 9 p.m., I have football tickets on the National Arena. Besides the fact that it is our national team playing and they are trying to qualify to … something (husband: “the World Cup”), my current endeavor at 3 degrees Celsius is also for a professional purpose.
It is high time I learned more about football!
Because, dear compliance colleagues, EU professional football and its huge amounts of money flowing in and out will soon need compliance officers. 😊
The European Union adopted in 2024 its first Anti-Money Laundering Regulation (AMLR 1), which includes football agents and professional football clubs as obliged entities for anti-money laundering purposes. We are talking about Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. And, let’s not forget that EU Regulations are directly applicable within the European Union and don’t need to be transposed into national law. So, no bargaining in this area.
The majority of AMLR1 provisions shall automatically apply starting 10th of July 2027. However, the provisions regarding professional football will start applying 2 years later, from 10th of July 2029. I guess the European Union considered that a longer period of preparation is needed in this domain – procedural, technical, professional and … emotional.
What does the EU AMLR actually impose in the area of professional football?
- New obliged entities
The EU Regulation states new categories of obliged entities, in the scope of anti-money laundering
a) football agents;
b) professional football clubs in respect of the following transactions:
- transactions with an investor;
- transactions with a sponsor;
- transactions with football agents or other intermediaries;
- transactions for the purpose of a football player’s transfer.
Of course, a risk based approach applies.
The AML Regulation applies to football clubs granted a license and participating in the national football leagues in a Member State. Member states may require exemptions for smaller clubs and decide to address only clubs with a total annual turnover of more than EUR 5.000.000 or equivalent.
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All the AML obligations that come with this new title
- Internal policies, procedures and controls in order to ensure compliance with the EU AML Regulation, the national AML laws and all the other administrative acts issued by the supervisory authorities
- Business wide risk assessment, “proportionate to the nature of their business, including its risks and complexity, and their size”
- Compliance Function – one member of the management body in its management function who shall be responsible for ensuring compliance with the AML laws
- Ongoing AML/CTF training throughout the entire organization
- Actions to ensure the integrity of the employees
- Reporting of breaches and protection of reporting persons
- Customer Due Diligence measures, correctly formalized in their procedural framework and properly implemented in their activity
- Monitoring of business relations and of transactions, including reporting suspicions to the FIU
- Measures for customers subject to UN financial sanctions
- Enhanced due diligence for high risk cases (which as you remember include Politically Exposed Persons, an aspect that might be import in the area of professional football)
The 2022 EU Supranational Risk Assessment paved the way (with good intentions) for this AML Regulation, as it evaluated the money laundering and terrorism financing risk of professional football. Professional football was assessed by the EU with high risk for money laundering and medium risk of terrorism financing.
The sporting industry is attractive for criminals for money laundering purposes. According to the EU, sport and gambling have been used by criminals to launder money and derive illegal income. As in the art world, criminals in the sports world are not always only motivated by economic gain. Social prestige, appearing with celebrities, and the prospect of dealing with authority figures may also attract private investors with dubious intentions.
The most affected sport is football, due to its global popularity, the considerable sums, cash flows and financial interests involved, the prevalence of cross-border transactions, and the sometimes opaque ownership structures used.
Tax evasion
In football, image contracts, advertising contracts, and sponsorship contracts can be tools for criminal practice, notably tax evasion, since the money stipulated in these contracts is commonly transferred to accounts belonging to companies in third countries.
Image rights are also used to conceal the amounts actually paid to players.
Front business to launder dirty money
Another modus operandi is to identify football clubs in financial distress, then infiltrate them with benefactors who provide short-term donations or investments. After gaining trust through donating, these same benefactors orchestrate the purchase of the clubs.
The purchase of the clubs is facilitated by front men for opaque and sophisticated networks of holding companies, owned by shell companies registered offshore and in high-risk third countries. Thus, the real owners, who ultimately control the club remain unidentified, just like the true origin of the funds used to purchase them.
Once clubs are under criminals’ control, the large amounts of financial transactions, the cross-border money flow, combined with lack of AML knowledge and shortcomings in clubs’ governance allow them to use the clubs to launder dirty money. This may be done via the over-or under-valuation of players on the transfer market and on television rights deals, as well as combined with betting activities (both for the generation of illegal proceeds due to match fixing or for pure money laundering purposes).
EU states that in many cases, the source of funds laundered through football clubs come from corruption, drugs, fraud, human trafficking and other similar crimes.
Shortcoming in transparency at international level
Football is administered by FIFA, which is based in Zurich, Switzerland. It is a private entity, governed by Swiss law, controlling the whole world of football with the assistance of confederations. It has the authority to promote and develop football globally. Each country has a national association that must follow FIFA’s rules and laws. FIFA has a clear responsibility to safeguard the reputation and integrity of the sports sector.
However, FIFA data are not public and difficult to obtain, and therefore authorities are forced to request international legal cooperation to access the data, because FIFA is headquartered in Switzerland.
Long story short, professional football clubs and football agents will soon be forced by law to put in place robust anti-money laundering measures, including carrying out customer due diligence on investors, sponsors, including advertisers, and other partners and counterparties with whom they transact.
But does the EU overreact?
March 2024:
Most probably, it doesn’t overreact.
So, dear compliance fellows. It is high time we started learning football. And, as a thorough AML Officer, I decided to start with the basics.
On Friday night, go, go Romania! My next homework is learning what an offside is. After that we’ll go to the next steps – tax evasion, front people, under/over-valued contracts, cross-border transfers and so on.
You cannot control what you don’t know!
By Andreea Tampu, ACAMS, ACSS
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