UPDATE Football Money Laundering: a Beginner’s Guide
Organised crime gangs cash in on the beautiful game and Europol’s Operation Matrioskas reveals how.
A European Union study has warned that the sports industry is now “fertile ground” for “corruption activity such as money laundering and tax evasion”.
The study found that the annual cost of sport corruption globally is now approximately £78bn, with Europe’s cash-rich football sector attracting particular attention from organised criminal gangs (OCGs).
In recent years, national police forces and Europol have successfully disrupted OCGs suspected of laundering monies through both grassroots and major football clubs. They are also working closely with the gambling industry and regulators to tackle suspicious betting activities linked to match-fixing.
Privately, however, criminal justice bodies admit they have barely scratched the surface of these snowballing threats to the integrity of the world’s most popular, and increasingly wealthy, sport.
So how exactly are criminals laundering money through football?
How It Works
One classic method of laundering cash through football has been for criminals to take-over financially unstable clubs – and then pump illegal monies through the club structure through a series of donations or investments used to ‘clean’ the cash.
These activities can include:
- mixing legitimate monies with illegal funds through cash gate receipts
- inflating staff or player salaries
- over or under-valuing player transfer fees
- payments to agents or third-parties
- club sponsorships
- TV rights deals
- community-based spending programmes
- and directors or owners loans to the club.
But other methods of money laundering and corruption have combined football’s financial vulnerabilities with increasingly sophisticated attempts to target the gambling industry through match-fixing.
Last year, ESSA – a Europe-wide sports integrity body which represents major betting firms – said it detected 52 suspicious football betting patterns: possible attempts to defraud firms through match-fixing.
An example: Operation “Russian Dolls”
In May 2016, Portuguese police assisted by specialists from Europol’s financial crimes unit disrupted a Russian-led OCG which had allegedly laundered money through a major Portuguese football club, Uniao Desportiva de Leiria. Investigators made three key arrests, and searched more than 20 properties – including four football clubs, accountants’ offices and law firms.
The OCG, reportedly linked to a major Russian mafia, had allegedly been active since 2008 and investigators believed they had laundered several million euros through European Union member states.
The arrests were the result of a major police investigation dubbed ‘Operation Matrioskas’, named after the ornamental Russian dolls which fit inside each other.
To give UK readers an idea of the size of Uniao de Leiria, as the club is commonly known, the team plays its home matches in a 24,000-capacity stadium: a similar-sized stadium as those used by Premier League teams Southampton and Burnley. The team’s average attendance, however, is around 4,000 spectators: about the same as AFC Wimbledon or Scunthorpe FC in England’s third tier.
Uniao de Leiria had been relegated from the country’s top division in 2011-12 after encountering serious financial difficulties. During that season, the club struggled to pay its players and on one occasion took to the pitch with just eight out of the usual eleven players.
Unable to complete its registration for the following season, the club was then further punished with a second relegation – meaning it fell from the top division directly to the third tier of Portuguese football. That left the club in a financial mess.
Initially, a number of benefactors gained the trust of the club through donations. But in 2015, Uniao Desportiva de Leiria was subject to a full take-over. The purchase was facilitated by benefactors acting as frontmen for what was described as an “opaque and sophisticated” network of holding companies owned by shell companies based in offshore tax havens.
Investigators have warned that the ultimate beneficial owner of the companies behind the purchase of the club could remain unknown.
But Operation Matrioskas did not only reveal Portugal’s vulnerability. Detectives involved in the case said that they also identified links to organised crime in Austria, Estonia, Germany, Latvia, Moldova and the United Kingdom.
Speaking at the time of the arrests, Igor Angelini, then head of Europol’s Financial Intelligence Group, warned: “The misuse of offshore companies to conceal the beneficial ownership of assets is still one of the major challenges for successful financial investigations.
“The football sector presents vulnerabilities related to its structure, finance model and culture which could be exploited by criminals.”