22nd May 2018

Unexplained wealth orders, money laundering and the Premier League

'Some people believe football is a matter of life and death. I'm very disappointed with that attitude. I can assure you it is much, much more important than that.’ Bill Shankly

And it would seem to be as true today as it was then, but for very different reasons.

A staggering £400m was spent in total by all 20 Premier League clubs during the January 2018 transfer window. 

The summer 2018 transfer window has just opened and as the transaction fog swirls it seems that the 2017 numbers of over £1.47bn will be easily surpassed on ‘buying’ players to ‘kick a ball about’. 

Wages are of course on top. 

In the 2017/18 season just ended, Chelsea’s current wage bill stood at £218 million. The bill increased by only £3 million compared to last season’s wage bill. While Man United and Man City now have to maintain a higher wage bill of £221 million and £225 million respectively. 

In any other business environment figures like this would doom any business to failure, and very quickly. But not football. And it would seem that the majority of clubs making a loss are ‘foreign owned’.

According to the Financial Action Task Force (FATF) in the past two decades, “football has changed from a popular pastime into a global industry. With the growing economic importance of football along with other sports, the investment of money into the sector has increased exponentially, and some of this has criminal connections”. 

The FATF recently completed a study to determine what makes the football sector attractive to criminals. 

It is a globalised sport and some 250 million people play – according to FIFA the 2014 World Cup reached 3.2 billion viewers, one billion watched final. The 2018 event will see even more.

Despite rapid growth and the very high level of global visibility the Premier League football sector has, UK’s football’s regulatory structure, and that of others in world football has still not yet caught up with some of the risks that come with these changes.

Europol recently dismantled a Russian money laundering exercise in Portugal.

It seems that the techniques used by the laundering community can be summarised in a simple four-step ‘wash and dry cycle’. I am sure these four simple steps will ring some bells and identify club examples near you.  

1. Find a football club in real financial danger of collapse
2. Gain access to the club boardroom, garner trust by making some short term donations or investments into the club
3. Then, after a while, buy the club using funds sitting behind a myriad of opaque holding companies often owned by offshore shell companies
4. Then you are off to the laundry. You get busy over or under valuing players on the transfer market, negotiate purchase structure of TV rights, engage in ancillary betting activities etc. 

We live in such a highly regulated world. How is it that: 

1. buying a car, 
2. getting a mortgage, 
3. selling a house, 
4. opening a bank account, 
5. arranging a loan, 
6. getting connected to a utility supply, 
7. becoming a client of a financial advisory firm, 
8. becoming a regulated firm with the FCA  (the list is endless) 

The process can be so convoluted by time consuming checks and proofs? 

Yet a football club deciding to spend £100m on a twenty something football player (who in a gentler age Don Revie would describe as “When he plays on snow, he doesn't leave any footprints”, almost overnight on deadline day, the 31^stAugust, is so ‘simples’.

This week brings news that Mr. Abramovich must explain how he acquired his fortune before he receives a new visa allowing him back into the UK.

Is the tide about to turn?

Panacea Comment