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Old 01-07-2009, 12:40 PM
fred tissue
Default Football 'vulnerable' to money laundering

Official report highlights the dangers of criminals exploiting the game, but does not identify wrongdoing

Today's report by the Financial Action Task force raises the spectre, in calm, plain language, that football is vulnerable to criminals, who might take over beloved local clubs or use the transfer system to launder dirty money of evade tax. Some of it is not mightily surprising, but still, there is something startling about reading these warnings, set out calmly in an official report by an inter-governmental body whose job is "to protect the global financial system against money laundering and terrorist financing."

One of the frustrations of the report is that it cites actual cases which it says were referred to it by authorities in 22 countries which answered questionnaires - our FA has confirmed that it did so - yet no names are given, and we are not told if any action was taken.

Two of the cited cases are said to have taken place in the UK. One (page 28 for those of you following the link to the report was tax evasion. The report says a player himself revealed that tax evasion had taken place when he was signed from abroad, by disguising his 300,000 signing on fee as a payment to his agent.

"The player confirmed that the agent then paid him 300,000 and did not previously disclose this to the UK tax authorities," the report says.

Yet no case like this has ever been made public here by HM Revenue and Customs or the police, and as far as we know, nobody has ever been caught or punished for it. HMRC has an ongoing investigation into alleged tax offences in football, but no charges have been brought and all involved still maintain their innocence. Puzzling, then, that the FATF have written this case in their report as fact, which the player himself disclosed.

The second UK case is said to have involved tax evasion through image rights. This again, is written as a fact. Read it in full on page 29, but the bones of it are that the club paid the player huge money for his image rights, to an offshore company in which he had shares, even though the club did not actually make any money out of his image. The case study says the club has been forced to pay almost 1.4m in extra tax after admitting that it was not in reality an image rights agreement, but part of the players' wages, on which no tax was being paid.
It all seems done, established, and the figures for extra tax are very precise, but no names are named. Intriguing.

Most fascinating to football fans who have long worried that their clubs can be taken over by anybody however dubious their character or financial backing, is that the FATF wholly agrees that this is a risk. Highlights are:

- "Despite the tremendous growth of the industry, many clubs are financially in bad shape and their financial trouble could urge football clubs to accept funds from dubious parties";
- Football clubs are indeed seen by criminals as the perfect vehicles for money laundering;
- Criminals often seek a status outside the criminal world and football can offer the opportunity for acquiring such a patron status ("sugar daddy")

The report says that football clubs are more vulnerable than other businesses becauset they are "deeply rooted in local societies."

So the report puts into official form the warning raised by fans around the country for years: the very fact that football clubs are beloved local sporting homes makes them prey to unscrupulous people taking them over. Those individuals gain fame and respectability from hob-nobbing in directors' boxes, can seek to make a fortune and, possibly, launder their money through the clubs too.

The FA here receives three honourable mentions for having issued guidance to its clubs last year on the dangers of money laundering, having a compliance unit, and working with the relevant authorities to combat crime. It is worth remembering that English football is in fact less "wild west" than most other countries, having dragged itself into better regulation over the last ten years. The warning signs, though, are all still there, in black and white in a useful, but rather tantalising report, in which big crimes are cited, but no names mentioned.
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