Football money laundering revelations should kick start action in the corporate boardroom

10/07/2009 by Steve Barclay.

The revelations this week of money laundering in football by the UK Financial Action Task Force pose questions beyond the opaque sources of wealth of top football club owners.  It shines a light on payments to third parties used more widely in the corporate world.

The report highlighted money paid for non existent services and sums hidden within fees paid to third parties.  Such transactions are difficult for the authorities to spot.  With the Ministry of Justice estimating the cost of bribery and corruption globally at $1 trillion a year, the lack of corporate convictions tells its own story just as much as the silence which followed the Lord Steven’s enquiry.

Behaviours in the cut throat world of the football players transfer market may not be as far removed as some think from that of their sponsors in the corporate boxes.  Competition for the next Brazilian megastar is fierce.    Football managers either pay the bung and disguise it, or refuse and risk losing the player.  The same dilemma can be faced by business managers when competing for contracts with the Chinese in Africa, or with the French and Russians in the Middle East.

Football managers do not get long with a club, and their club is rarely the only one chasing a particularly player.  Experience may have taught them that winning requires sometimes cutting a few corners.  The ambitious executive fighting to beat their rivals for scarce business in a recession will want to keep their client happy.  Training and written safeguards do not stop bribes being disguised and paid at the sharp end.

Varying interpretations of what is an acceptable payment in different jurisdictions and cultures adds ambiguity. It is not just in the UK that the old school football culture turned a blind eye to side payments.  The recent prosecutions of top Italian football clubs shows attitudes have not changed elsewhere. Concern at similar types of third party payments in the business world was reflected in the Wolfburg Statement in 2007 which sought to try and restrict their use amongst financial organisations.

Successful deals tend to receive less scrutiny.  It is a brave junior club official who questions the football manager closely on their hot new signing as the excited fans cheers outside.  Likewise few in business want to put at risk the surge in share price which follows a major new order.  It can be tempting to take assurances at face value, and difficult to penetrate the true nature of personal relationships at arms length.

In football as in the corporate boardroom, both parties to the bung have an incentive to keep it hidden.  Those paying get their player or their bonus, and those asking receive tax free extra cash.  The authorities need to tackle this pact of silence. 

Without change, it will remain difficult to prove a payment was corrupt to the standard required in a court of law. Was it a legitimate service, valuable research, or just a bung?  It is not just in the UK that former Government ministers are hired by companies seeking work from their old departments. 

The Bribery Bill currently going through Parliament will do little to help detect corruption.  Yet the Proceeds of Crime Act provides an example of what could be done.  It allows an avenue through which firms can disclose potential money laundering without fear of prosecution.  A similar enabling provision should be included in the Bribery Bill, but going further to allow the payment of the bribe to go ahead subject to disclosure.

Such an indemnity would allow the manager to secure their player or deal, releasing them from their current dilemma.  It would also shatter the pack of silence, allowing the authorities to target those asking for bribes.  Investigators would receive real time information regarding exactly what money had been paid and where.  Assets could then be frozen.  Tax could be reclaimed.  There may even be scope to allow those making the disclosure to reclaim the bribe anonymously from funds seized after prosecution.

It is easy to think that football clubs play to different rules from their corporate sponsors.  Yet even the UK Government which helps make the rules was not immune from flexing them to win business.  When selling new warplanes to Saudi Arabia, the need to secure jobs at home trumped any reservations about payments to third parties to facilitate the deal.  To some a legitimate fee and accepted business practice in a different jurisdiction, to others a bribe (including the Serious Fraud Office before they were warned off).

Without change to break the pact of silence around bribery the authorities will continue to chase shadows.  There is little incentive for those involved to blow the whistle.  It is now time for not just football managers, but also their business counterparts, to break ranks.  Agents should be made to fear what they ask for. They may get it - followed by a knock at the door.  Switching the floodlights on to such payments will allow the authorities to finally penetrate these murky business deals.  It may even mean we see some top footballers starting to pay tax on all their earnings.

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