European football clubs face scrutiny over complex finances

1. Uncover the link between football and the increased risk of illicit financial activity
2. Understand the regulatory efforts being undertaken to ensure call for better protection

New regulations will force Europe’s football clubs to improve their monitoring and reporting of financial transactions in an attempt to tackle money laundering in the multi-billion-dollar industry.

The multi-billion-dollar football industry is known for its complex finances. In a previous post, we looked at player transfers – a system within which clubs, players and agents exchange vast sums of money, often without clear reporting. Here we turn the spotlight on other areas in football where financial transactions could be used to conceal illicit activity.

Huge sums of money flow into football clubs from multiple sources. There are corporate sponsors whose names adorn the players’ shirts and sports apparel manufacturers who pay for the right to make those shirts – then profit by selling replicas to fans. Stadiums are sponsored and companies pay to be a clubs’ official betting, hospitality or tourism partner. Then there is prize money, broadcasting revenue and more.

Amid the complexity lie opportunities for abuse. Individuals may use clubs to store their wealth away from government scrutiny, while organised crime groups can profit from involvement in activities like gambling-related match-fixing. Tackling illicit activity is vital not only to tackle financial crime, but also to safeguard the integrity of the game.

It starts at the top. When a wealthy person buys a club, football bodies, such as FIFA or UEFA, do not always look closely at where their wealth comes from. A well-known Russian oligarch sold his shares in Chelsea Football Club in 2022 after being sanctioned by the UK for alleged ties to the Russian government. It has been publicly suggested that more questions should have been asked about the oligarch’s wealth at the time he made the purchase in 2003.

Since football is a global industry, transactions often cross borders and jurisdictions, which makes it harder to confirm legitimate transactions and complicates enforcement. In 2023, another owner of a football club was accused of funnelling £400 million received from a Russian oligarch into the club, shortly before said oligarch was sanctioned. That club’s owner was also previously an investor in another Premier League club, together with the now sanctioned individual.

However, there is no suggestion of wrongdoing in relation to the payment, beyond the implication that the oligarch may have acted in breach of sanctions. Nevertheless, the complexity of the financial arrangements involving ownership of football clubs indicates how difficult it can be to trace true sources of funds.

Meanwhile, another English club was accused of receiving money from club owners disguised as sponsorship payments. The amount owners can invest in clubs is strictly controlled by regulatory bodies such as the Football Association, to ensure a level playing field for all, so the suggestion is that the club’s owners set up bogus deals to boost the team. The club currently faces 115 Premier League charges of alleged financial irregularity – charges it denies.

Transactions made by football clubs now face increasing scrutiny. In May, the European Union extended its anti-money-laundering and counter-terrorism financing rules to cover football clubs and agents. The regulations set tighter due diligence requirements, mandate stricter reporting of beneficial owners and limit cash payments to a maximum of €10,000. Clubs will be required to adopt policies, procedures and controls to ensure compliance.

The rules cover transactions with investors, sponsors, agents and other parties, as well as player transfers. Clubs will have to adapt to new working methods to conduct necessary checks. There are technology tools that can ease the burden. LSEG’s World-Check, for example, is a risk intelligence database that collates information to support organisations with necessary due diligence and regulatory compliance.

The EU authorities will also find themselves needing to adapt to an unfamiliar sector. The EU is also setting up a new European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) to coordinate between national authorities and ensure rules are applied consistently.

Removing criminal activity from the game, and increasing AML efforts and transparency, would make for a fairer sport. And that requires action across the entire sporting world.