Islj 2009 3-4 - TMC Asser Instituut

O P I N I O N
Money Laundering and Tax Evasion in Football
CAS Publishes the Decisions Rendered at the 2008 Beijing Olympic Games
English Premier League Clubs Win Important ‘Cyber Squatting’ Case
Two New Sports Added to the Olympics
English Premier League ‘Fit and Proper Person’ Rules: Are They Tough Enough and are They Being
Strictly Applied and Enforced?
by Ian Blackshaw
Money Laundering and Tax Evasion in Football
Football is not only the world’s favourite game, but also the world’s
most lucrative sport. In fact, according to Sepp Blatter, the President
of FIFA, football’s world governing body, it is actually a product in its
own right. Therein lies its success and also the seeds of its potential
downfall, if it loses touch with its sporting objectives and also its constituents
- particularly its fans and players at the grass roots’ level.
With so much money sloshing around and at stake - both on and
off the field of play - it is not surprising that football is vulnerable or
susceptible to exploitation by unscrupulous businessmen and criminals,
as the July 1 2009 Report on Money Laundering and Tax Evasion
in Football of the Financial Action Task Force (FATF)(the full FATF
Report can be downloaded from their website at: ‘www.fatf-gafi.org’),
an international agency, responsible for tracking down the proceeds of
crime, of the OECD - Organisation for Economic Cooperation and
Development based in Paris - which has been waging war on money
launderers and tax dodgers for several years - has pointed out. Money
laundering, that is, turning ‘black’ unusable money resulting from
criminal activities into ‘white’ usable money and tax evasion - not tax
avoidance, which is so organising/arranging one’s financial affairs as to
reduce or mitigate the resulting tax burden, which is perfectly legal -
are illegal. And, in fact, are complex criminal offences and punishable
as such.
So, what has this Report, in the compiling of which both FIFA and
UEFA, the governing body for European football, have been consulted
and have cooperated, brought to light? And why are its findings so
important for sport in general and football in particular?
Perhaps the best way of summarising the findings and the extent of
the problem in football is to quote from the Report’s so-called
Executive Summary as follows:
“The study analyses several cases that illustrate the use of the football
sector as a vehicle for laundering the proceeds of criminal activities.
After this analysis, money laundering (ML) through the football
sector is revealed to be deeper and more complex than previously
understood. Indeed, this analysis appears to show that there
is more than anecdotal evidence indicating that a variety of money
flows and /or financial transactions may increase the risk of ML
through football. These are related to the ownership of football
clubs or players, the transfer market, betting activities, image rights
and sponsorship or advertising arrangements. Other cases show
that the football sector is also used as a vehicle for perpetrating various
other criminal activities such as trafficking in human beings,
corruption, drugs trafficking (doping) and tax offences. The ML
techniques used vary from basic to complex techniques, including
the use of cash, cross border transfers, tax havens, front companies,
non-financial professionals and PEPs. In many cases, connections
with other well-known ML typologies were identified such as
trade-based ML, the use of non-financial professionals and NPOs
for ML purposes, ML through the security sector, the real estate
sector and the gaming sector. Various initiatives are taken by international
and national actors in order to combat threats to the
integrity of football, including ML. Looking ahead, there appear to
be a number of areas that could be considered to improve the
capacity to cope with the ML risks associated with the football sector.”
One particular risk area highlighted by the Report is the use of players’
image rights to evade tax, where payments are made to offshore
tax havens, but, as mentioned above, certain legitimate avoidance
schemes, such as the one upheld in the case of David Platt and Dennis
Bergkamp of Arsenal FC (Sports Club plc v Inspector of Taxes [2000]
STC (SCD) 443) is perfectly fair game! See page 11 of the Book ‘Sports
Image Rights in Europe’, Blackshaw, Ian S and Siekmann, Robert C
R (Eds.), 2005 TMC Asser Press, The Hague, The Netherlands, ISBN
90-6704-195-5. Although, it should be noted that the OECD is currently
involved in a large-scale and coordinated crackdown on tax
havens and, in particular, their secrecy arrangements.
Again, international football transfer deals, recent examples of
which are breaking all previous financial records with the transfer in
June, 2009 of Christiano Ronaldo from Manchester United to Real
Madrid for a sum of £80 million, are also vulnerable to money laundering
and tax evasion schemes. And some specific examples of abuses
of the transfer system in the UK are mentioned in the Report. As
the UK Inland Revenue has been able to claw back substantial unpaid
taxes and social security contributions in out of court settlements, the
names of the players, agents and football clubs involved in these cases
are not disclosed and will remain anonymous.
So, what is to be done to rid football of this scourge? It is clear that
football needs to put its house in order to restore some integrity to the
beautiful game - both as a sport and as a business. The Report recommends
that a Code of Practice, similar to the one introduced by the
English Football Association (FA) a year ago establishing some guidelines
on money laundering, should be adopted. But will this work and
be effective?
Self-regulation in sport, as in other fields of business and other
human activities, has a mixed reputation and often gives rise to conflicts
of interests’ situations. For instance, it has long been felt that the
regulatory functions of the FA should be separated from its commercial
activities.
In other words, as the Roman poet, Juvenal, aptly expressed it
many centuries ago in the following Latin tag: ‘Quis custodiet ipsos custodes?’
In other words: ‘Who will guard the guards themselves?’
134 2009/3-4
O P I N I O N