1INTRODUCTION Money laundering as a cr ime only attracted in te rest in the 1980s, essentially, within a drug trafficking context. It was fro m an increasing awareness of the huge profits generated from this criminal activity and a concer n at the mass ive dr ug ab use pr ob lem in west er n so cie ty wh ich cr eated the impetus fo r go ve rnments to act ag ain st th e dr ug de ale rs creating legislation that would deprive them of illicit gains. In the pas t, the ter m "mo ney lau nde rin g" was app lie d onl y to fina nci al tr ansactions related to organi zed cr ime. To da y its de fin ition is of ten expended by government regulators to encompass any financial transaction which generates an assets or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. As a result, the illegal activity of money laundering is now recognized as potent ially by indi vi du als , small an d large bu si ness, corrupt of fic ial s, members of organized crime (Such as drug dealers or the Mafia) or of cults , and even co rr upt States or intelligence agencies ,t hr ough a complex network of shell companies based in offshore tax havens. The increasing complexity of financial crime, the increasing recognized value of so-called FININT in combating transnational crime and terrorism ,and the speculated impact of capital extracted from the legitimate economy, has led to an increased prominence of money laundering in political , and economical legal debate. FI NI NT or th e Fi nanc ia l Inte ll igence is th e co-o pe rati on wh ere th e informations about financial entities are gathered and shared, in order, to identify the nature of these companies in interest as well as their intention. It has been largely involved in the curbing of the money laundering activities. FININT has been using the tecnique called the data mining where mass flow of information of certain individuals as well as companies from banking institutions to identify people who are involved in the particular
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they are not able to implement and enforce anti-money laundering as well
as combating the uprisingof financial terrorism measures2.
Methods of traditional money laundering and reverse money laundering. There are a wide variety of traditional money laundering dated back to
even as early as 1920 in United States. Different culture or society of a
place would constitute into different method of money
laundering.Merchadising laundering has been among the oldest method
where precious earth material such as gold and gems are bought and sold
at the border of the geographical area.Another method of merchadising
laundering is by the way of bartrade trading system where it could be
offering method of “legalising” the money. Secret banking system is
another method of money laundering traditionally used.
In China, the Chinese invented the simplest form of activity called as “fei
chien” where the dirty money is deposited in a gold shop in Guangzhou
where the owner will have it overstamped dollar notes with a mark at the
side.It was then presented to the moneychanger in the Chinatown of
London where the owner will provide him with the cash of the amount
transacted in Guangzhou.3
In India and Pakistan, the method of traditional money laundering is quite
alike to the Chinese “fei chien” where they could launder the money from a
place to another in a matter of hours where there’s a Hawalah network.
In most countries the local laws follow the international conventions.
The Most important of these are:
I-The Vienna convention, 1988
II-The European council convention, 1991
2Monroe, Brian. "Fatf Adds Seven To List Of Countries With Poor Aml Controls." Moneylaundering.Com. October
22, 2010.3 Lintner B,Vladivostok, “Spreading Tentacles: An Influx Of Illegal Chinese Immigrants Into The Russian Far EastIs Helping Chinese Organized-Crime Gangs To Gain A Lucrative New Foothold In This Lawless Territory” .FarEastern Economic Review. October 02, 2003
OECD or Organisation for Economic Co-operation and Development whichmainly promote the policies to improve the standard of living of the peoplearound the globe. The relationship of OECD in the issue of moneylaundering in sports is that OECD work hand in hand with Financial Action Task Force to examine the co-operation between tax and anti moneylaundering experts that involved in the sports money laundering. Jointworkshops between OECD and FATF had been carried out to gatherintelligence and share experiences on some common practices of bothparties4.
Of my main concern for the purpose of this thesis will be critically
evaluating the Financial Action Task Force hereinafter referred to as FATF5
Recommendations and all other regulations in relation to money laundering
in sports, to research pitfalls within the current suggested framework with
the intention that my research will remedy such pitfalls by providing sound
recommendations to the existing framework.
Although globally we are moving in the right direction towards combating
money laundering with the current FATF recommendations, my thesis
would seek to strengthen and solidify the frailness in the area of sports, and
is envisaged that my thesis will fill in the gaps that have been left gaping.
My thesis main focus and scrutiny will be on the lack of regulation on
international sports whereby I shall be examining all pertaining regulations
that are related which includes The (40 + 9) Recommendations of the
Financial Action Task Force (FATF), international treaties, conventions and
sports law regulations.
Regional Level Sports
International level sports could be divided into two different types which arethe regional competition and worldwide competition. Regional competitionis only open to countries of a certain region for instance: ASEAN which is
4OECD Official Website <Http://Www.Oecd.Org/Pages/0,3417,En_36734052_36734103_1_1_1_1_1,00.Html>
Accessed On: 14 TH
June 20115The (40 + 9) Recommendations Of The Fatf And The Inception And The Formation Of The Committee At Basel,
Switzerland Can Be Accessed At Http://Www.Fatf-Gafi.Org
only applicable for South East Asian Countries whereas Worldwidecompetition is open to all countries in the world but commonly restrictedwith qualifying levels.For example: Malaysia Tennis Open .
Sports at national level could be understood as sports events which are
carried out where the representatives of the different constituencies orstates will be gathering to compete. Common practise is that the winner of the national level competition will be representing the country forInternational Competition. National level sports are for example: Super Bowlin United States for the American football and National Open FencingCompetition in United Kingdom.
BACKGROUND OF THE STUDY
statistics and case name
Thaksin Sinawatra’s case
Roman ‘s chelsea ownerExample and cases
IPL
My thesis will be critically analyzing the current regulations and policies of
international money laundering in sports:
1. That current FATF recommendations are silent in respect to thesports industry and it is this environment that there is evidently a lot
of money laundering activities and my thesis will identify such
environments and propose further recommendations under the FATF.
2. In addition, the thesis will explore and recommend how anti money
laundering policies in relation to the sports industry be incorporated
as currently, this industry has little or no regulation. The current
Psychotropic Substances of 1988 convention, to give effect to its provisions
and the further international efforts against money laundering. In addition,
to a number of General Assembly resolution and enact by the European
Union and FATF aimed at the development of preventive measures andmore effective co-operation between Member States, the Economic and
Social Council has adopted supporting comprehensive research and
assistance programmers6 and promoting the criminalization of money
laundering7, as recommended by the Commission on Crime Prevention
Criminal Justice.
Sadly there is no mention in any of the recommendations on how to curb
money laundering in the international sports industry. This issue of not
wanting to meddle into the sport is a big surprise as there is an access of
money changing hands in the sports industry with football having the
voluminous amounts of money changing hands every other day.
Take for example the transfer window for English football alone was in the
region of 350 Million Pounds in cash.8 This amount is tranfers of footballers
in one summer in England alone. What about the rest of the world football
transfers figures? There are many areas pertaining to the sports industry
that need to be examined and investigated in the area of international sport
in relation to money laundering. The Money Laundering techniques used
vary from basic to complex techniques, including the use of cash, cross
border transfers, tax havens, front companies, non-financial professionals
and PEPs. In many cases, connections with other well-known ML typologies
were identified such as trade based ML .
One of the limelight case that has involved the reknown ousted PrimeMinister of Thailand ,Thaksin Shinawatra whom are also famous for theallegation of corruption in his home country and fled to United Kingdomafter the coup de’tat began in Thailand.Subsequently, he had taken over
6Resolution 1993/3o
7 Resolution L994/13
8This Amount Can Be Confirmed By Referring To Http://Www.Deloitte.Com/View/En_Ie/Ie/News/Ie-Pressreleases-
the Manchester City football club for £81.6million in total and then sold theclub with the profit of £21 million.9 As carefully the scrutiny of the sales of the football club, it would be a manner of money laundering if the alleged£81.6million used by Thaksin to purchase the football club is gained incorruption or other illegal proceeds. To add to the funnel of money
laundering in taking over clubs, the famous case of Roman Abramovichwhom currently own the Chelsea Football Club would have been of crossfire when comes to money laundering in sports10.The French authority hadlaunched inquiry into Russian investments in France which includedAbramovich in order to prosecute the Russian investor guilty of moneylaundering.This has been closely related to the activities involving ChelseaFootball Club.As there are an incidentally significant rise of tycoons recentlywhom purchase the major football clubs such as above mentioned as wellas Westham and also the Italian Football Clubs and Bulgarian FootballClubs11.
Nickolay Gigov who is known involving the arm dealings in Bulgaria, ownsLokomotive Sofia of Bulgaria.Aside from football, the latest scandalinvolving money laundering in sports is the Indian Premier league in thesports of cricket. The Indian authority launched investigation and found thereal beneficiaries of Rs. 1.25 million payoff made by the cover companyBritish Virgin Island for the TV rights of the IPL cricket series12.
Indian detectives found the real beneficiaries of a Rs1.25 billion(approximately $27 million) payoff that was made to a British Virgin Islands-based company Park House Holdings Limited for TV rights of the Indian
Premier League (IPL) cricket series. This money is said to be part of theRs42.5 billion ($94 billion) facilitation fee that was allegedly paid for TVrights by Multi Screen Media, Singapore, to Mauritius-based World SportsGroup (WSG).
examples?, the use of non-financial professionals and NPOs for ML purposes
examples?, ML through the security sector, the real estate sector and the
gaming sector examples?.13
9 Tariq Panja And Arif Sharif, “ Manchester City Owner Agrees To Sell To Abu Dhabi” Bloomberg,
September 1, 2008. <Http://Www.Bloomberg.Com/Apps/News?Pid=Newsarchive&Sid=A1qqm9gkexwq&Refer=Uk>
10 R. Tieman, “Abramovich Under Probe” ,Evening Standard.3rd Of June 2005.11
Novinite, “Bulgaria:Soccer Symbol Of Organised Crime And Corruption” ,Flare Network.19th January 2011.
12“ British Virgin Islands-Based Firm To Be Investigated By Indian Agencies”. Oct 15,2010 <Http://Bvi-Grey-
Thaksin Shinawatra as well as other form of economic entities. Money flows
that was recorded above opens up the possibility of money laundering.
Another method of money laundering in sports is by the online betting.It
has been a recent issue of the sudden booming of online betting website
especially in the area of sports which covers NHL, NBA and even the FIFA
and UEFA. Betting on games is nothing new but online betting is another
issue of a total difference. It provides a great opportunity and avenue for
money launderer to launder the money by transferring money online via
wire or even online banking and other method.
In many cases, there will be a middleman company whom will act to receive
the money and create a virtual online cash account where it could be then
cash out for betting purposes. This very much gave the opportunity to
launder the money as there yet to have restrictions and supervision on the
transfer of money for the usage of online betting. The booming of online
website conducting betting also arises from the offshore companies which
are set up offshore for example in Cyprus and Carribean countries where
the control on Anti-money Laundering is not well extended17.
Money laundering is often described as occurring in three stages,
placement, which refers to the initial point of entry for finds derived from
criminal activities. Secondly, the layering, which refers to the creation of
complex networks of transactions which attempts to obscure the link
between the initial entry point and the end of the laundering cycle and
finally, the integration which refers to the return of funds to the legitimate
economy for later extraction.
Font must be consistent
Based on the reports’s analysis of the use of the football sector as a vehicle
for laundering the proceeds of criminal activities, a variety of money flows
17 General Accounting Office, Report To The Ranking Minority Member, Permanent Subcommittee OnInvestigations, Committee On Governmental Affairs, Us Senate, Money Laundering: Rapid Growth Of CasinosMakes Them Vulnerable, Gao/Ggd-96-28, P. 4.
The next step is to compare the two sets of data and if any flaw of matching, then the transfer will not be proceeded. One of the motives of TMS is to provide a transparent process of the transfer of players20.
The general manager of TMS Mark Goddard added on that TMS was
formulated in order to curb money laundering via transferring of phantomplayers21.“Anecdotal evidence tells us that it [money-laundering] is probably quite amassive problem. We know of transfers of imaginary players by thirdparties and other groups using football in order to wash it and turn dirtymoney into legitimate funds.”
Now in a deeper sense of money laundering in football of its reason why to
be vulnerable, among the aspect which I discovered is:
First, the professionalism in terms of management, this is obvious by
looking through on how the management of clubs being handled including
the factor being handled by neither inexperienced volunteers nor
professional.
Second, by recent development of Football associate in many countries, the
market became easily penetrable22
. Look it through it this way, many‘secret’ meetings or maybe a hidden agenda could be done (i.e. with just
attending the stadium for a match) and then an agreement which actually
allows the money laundering to take place without being apprehended by
the authority.
Third, the financial status or the need of money by a club. Every club in the
world will require their fund. And most of them is in a bad shape in terms of financial, and this will allow them to receive any some of money by any
party who are willing to sponsor them. (Another problem in tracing the
legality of the money)
20 Circular 1174 - Fifa Transfer Matching System - Directive From The Fifa Executive Committee21
Robin Ooi, “Are New Transfer Rules A Step In The Right Direction?”<Http://Www.Footballfancast.Com/2010/10/Football-Blogs/Are-New-Transfer-Rulings-A-Step-In-The-Right-
Direction>22 Money Laundering Through Football Sector By Fatf Gafi, July 2009
secondary was supplement in this paper to stimulate a much more decisive
and accurate result. With a proper preparation and understanding in this
area, not to forget more guidelines to be obtained, a guide as addition can
actually make it possible. A better insight of this paper can only be done, if more field work, interview, legal issues and problems to be identified by
implementing both the FATF GAFI and FIFA regulations (this can also
mention football clubs) into a test. By doing this, a test can actually make
it possible for the paper work to know the foundation and core for this
problem. It is the aim of this paper work to explore the complexity of a
dangerous act which threatening the world without realizing its major
damage for the development of a clean and zero corruption.
The methodology for this research work is essentially library based, i.e.
analytical and qualitative. Materials are sought to be obtained from
available literary works which include books, papers, articles and internet
sources. For each of the sources used, relevant and unbiased works will be
consulted to ensure the dependability of this research. The overall
methodological approach of the study will involve three components: data
collection and analysis; review of documentation and literature. The data
collection and analysis forms a critical empirical basis for the report’s
overall conclusions. Hence the study of the relevant Protocols and
Conventions, the relevant statutes related to AML and CFT, the relevant
international sports regulations as well as the data and figures collected
from studying recent cases being heard in the courts of law shall assist in
the discovery of the adequacy or inadequacy of the current regime.