Report highlights the financial crime being committed in football

I read an article on the BBC by James Munro yesterday and found it very interesting in the light of all the high profile financial dealings at many of Europe’s top clubs.

Hardly a day goes by when we do not hear about a huge money transfer, ridiculous wages being paid or a multi-million pound takeover of one club or another.

Report

It is against this background that a report from the Financial Action Task Force (FATF), the international agency responsible for tracking the proceeds of crime, becomes very interesting indeed.

The report says that football is being used for money laundering and that the game is at risk from criminals buying clubs, transferring players and betting on games.

Tax

Another area that the report highlights is tax evasion in British football. The report gives two examples of footballers in the UK evading their tax liability with the full knowledge of their clubs.

In one case the report says,

“A disclosure was made by an international player, revealing that his signing-on fee was disguised as part of a fee to a foreign agent. He confirmed that the agent then paid him £300,000 abroad and did not previously disclose this to the UK tax authorities. It is likely that the club concerned was fully aware that the payment to the agent included a signing-on fee for the player and the benefit to the club in such an arrangement is that it avoided social security contributions of £38,000.”

In the second case, a club avoided paying tax through the use of image rights.

“A foreign player entered into an image rights agreement with a club. The player had transferred the rights to exploit his image exclusively on a world-wide basis to a company registered in a known tax haven in return for shares of that company. Unlike all the other players at the club, he was the only individual not to have either a signing-on fee or a loyalty bonus and appearance fees. The club had not exploited the player’s image in any way and after two years had sought professional advice, only to be advised that the image had no commercially exploitable value. Nonetheless, the club renegotiated both the playing and image rights contracts after three years, increasing the level of payments in both. The club concerned conceded that the image-rights agreement was part of the employment terms and paid over additional duties of £938,688. Additional duties of £404,480 were also to be paid over the future life of the image-rights contract.”

It is understood that HM Revenue and Customs has been looking into these cases but was not prepared to comment on them specifically. A general statement was issued.

“Money laundering is a complex crime and one which HMRC is tackling. We have a very good track record in the field of law enforcement and we take money laundering and tax evasion extremely seriously, focussing significant resources into tackling them. Our investigations can and do result in criminal prosecution sending a clear message to anyone tempted to launder money that they are taking a serious risk”

The report provides a series of recommendations for how football can cope with money laundering risks. This involves adopting a best practice guide produced by the Football Association which introduced a number of guidelines in relation to money laundering.

Gambling

The report also discusses the risk of internet gambling which has been in the news a lot over the last few months with betting being suspended on a number of games when irregular betting patterns have been discovered. It is suggested that the FATF may conduct a full review of that area alone.

All in all the report does not paint a particularly pretty picture of the state of money within the beautiful game. I suppose it is naïve to imagine that in an area where there is so much money to be made there would not be an element of the criminal fraternity who found the possibilities too enticing to ignore.

Amunition

With the constant worries being expressed by Sepp Blatter and Michel Platini about the amount of debt and the high transfer fees and salaries, this report will give them more amunition to look at cleaning things up.

In truth, it is probably time for football to step back and have a long hard look at where it is going. The current drift towards financial meltdown must be stopped before it is too late and the game changes too drastically from the one that we all love.