Football is the wealthiest, most commercialised, and globalised sport in the world and it has long been a magnet for enormous investments and vast financial flows.
Prestige and global appeal have propelled the football market, but it has also made the sport susceptible to manipulation and exploitation by organised crime, who seek to capitalise on its huge economic footprint. Many cases of money laundering, corruption, and match-fixing continue to surface and it is clear how this vulnerability can stem from a combination of factors, including:
- The value of player transfers, sponsorships and media rights deals;
- The complex and cross-border nature of financial transactions;
- The lack of control mechanisms currently in place;
- The inability to effectively track the origins and destinations of funds to unmask the true beneficiaries; and
- The involvement of oligarchs and other high-risk individuals in football club ownership.
Football has not previously been subject to any specific anti-financial crime obligations and clubs have not been required to maintain robust legal and compliance frameworks. This is now beginning to change.
Following growing acknowledgement that football is a high-risk sector for financial crime, often linked to the opaque sources of sponsorship and club ownership, international bodies and regulators are focussing their attention on tackling the risks in the sport.
Professional clubs, agents, and national football associations now need to act.
The Wave of New Regulation Across the EU and UK
In January 2024, the EU took a significant step towards combatting financial crime in sports by positioning professional football clubs, agents, and European Football Associations as “obliged entities” under the scope of its Anti-Money Laundering (AML) framework. The move, which was finalised and published in the Official Journal of the EU in June this year, is significant as it brings the sports sector, which has previously operated outside the scope of EU-wide AML regulations, within the regulatory perimeter for the first time.
Given the unique nature of football’s financial operations, the next few years will be critical for clubs and agents to establish the necessary internal processes and compliance frameworks to meet their new obligations.
This updated EU regulation only applies to clubs that are legal entities within an EU member state, and while member states may exempt smaller clubs in lower divisions if they are considered low-risk for money laundering, top-tier clubs (such as those in Germany’s Bundesliga, France’s Ligue 1, Spain’s La Liga, and Italy’s Serie A) will be fully subject to these new requirements.
The English FA, however, although an UEFA member, is of course outside of the EU. Yet, as many UK clubs engage in EU cross-border activities and transactions, awareness of and compliance with appears necessary.
English clubs and the English FA are also facing additional obstacles, including:
- The proposed introduction of the Independent Football Regulator (IFR): The UK government has proposed the IFR to ensure financial sustainability and proper governance in English football. The IFR itself will have a broad mandate, ensuring clubs remain solvent and conduct strict checks on the suitability of club owners. It will also have access to data from HMRC, and the National Crime Agency, to perform detailed due diligence. It will also have the authority to intervene if owners are deemed unsuitable. While some Premier League clubs have raised concerns about how the regulator could impact competitiveness, the government and supporters view it as a necessary step to address financial mismanagement and secure the long-term stability of English football.
- The upcoming National Risk Assessment (NRA) into Money Laundering and Terrorist Financing: Due in 2024, this risk assessment will play a crucial role in evaluating various sectors’ vulnerabilities to financial crimes and will likely prompt further changes to the regulatory landscape for UK football clubs.
- The Economic Crime and Corporate Transparency Act (ECCTA): The UK’s ECCTA, passed in October 2023, represents a significant overhaul of corporate criminal enforcement and transparency, providing law enforcement agencies with enhanced powers to prosecute corporations for financial crimes.
What are the new requirements?
The new EU AML regulations have mandated a comprehensive approach to identifying, mitigating, and reporting potential financial crime risks. Specifically, the new regulations have highlighted that the following measures be implemented:
- Effective Internal Risk Management: Clubs will need to implement robust internal risk management systems to ensure they can identify and assess money laundering risks. This includes developing AML risk assessments and defining clear reporting lines and responsibility structures within the organisation. The creation of an adequately staffed AML compliance department is also essential to maintain ongoing risk assessments and ensure compliance with the new framework. This function will become integral to the club’s overall governance, requiring resources and investment in training and oversight.
- Customer Due Diligence (CDD): Clubs must conduct CDD on significant counterparties, such as sponsors, media rights buyers, investors and other key stakeholders. This involves verifying identities, assessing risks, and understanding the source of funds, with ongoing monitoring to keep information current. While most fans are exempt from CDD due to low transaction amounts, high-value transactions like sponsorship deals and player transfers require thorough scrutiny. Clubs buying players from other clubs must treat them as customers for CDD purposes. Although owners, shareholders, and investors typically don't qualify as customers, clubs must still identify and publish their Ultimate Beneficial Owners (anyone owning at least 15% of the club) in transparency registers.
- Suspicious Activity Reporting (SAR): If clubs detect suspicious transactions or activities, they must report these to the competent authorities or Financial Intelligence Units. Suspicious activity can include transactions that are inconsistent with the customer’s known or declared activities or any transactions that could be linked to money laundering or terrorist financing. Clubs must also ensure their staff are trained to detect and promptly report such transactions.
When Will Any New Regulations Come Into Effect?
These new regulations will not become fully operational and enforceable immediately. Football clubs have been granted a five-year window to adhere to the new EU AML Regulations, pushing full enforcement of these rules to mid-2029. This is a longer timeframe than other sectors, for who the rules will come into effect in July 2027 and highlights the significant challenge ahead for football clubs that are “behind the curve” compared to other sectors. It is crucial for clubs to keep ahead of the game by implementing sufficient compliance measures immediately in order to avoid any potential penalties for non-compliance.
If and when similar requirements get fully passed in the UK, it is likely to be several years until we start to see penalties being handed out for non-compliance. However, the Football Governance Bill, which supported the creation of the IFR, is expected to pass through Parliament with cross-party backing, potentially making the IFR operational by 2025.
The Importance of Compliance
To safeguard their future, it is critical that clubs start to understand these requirements and develop plans to ensure compliance. Aside from the moral obligations of helping to prevent the occurrence of financial crime, there are many other reasons why football clubs should take compliance extremely seriously, including to avoid potential future repercussions such as financial penalties/fines, transfer bans, club takeovers/forced sales or possibly even point deductions, relegation or expulsion from major competitions.
However, while these may sound extreme, a potentially more serious risk is the indirect effect from a reputational perspective. A money laundering scandal could hugely tarnish a club's image, alienating and losing the trust of fans, sponsors, and business partners, damage which could be enduring and deeply impact the club's standing and value.
By acting ethically, adhering to laws and regulations, and cultivating a “culture of compliance,” clubs can ensure that their operations do not facilitate illicit activities such as money laundering, fraud, or corruption and not only protect themselves from legal and reputational risks but also contribute to the broader fight against financial crime, thereby promoting trust and stability in the financial system.
Ensuring Compliance
Clubs need to start investing in their compliance infrastructure now and as a minimum start looking into some initial practical steps to begin this compliance journey, including:
- Conducting an AML risk assessment to identify vulnerabilities in the club’s financial operations.
- Establishing a comprehensive AML compliance function with clear reporting lines and adequate staffing.
- Implementing ongoing CDD procedures for all high-value transactions and relationships.
- Training employees on how to detect and report suspicious activities.
Navigating these complex regulations requires expert guidance. Ankura’s extensive experience in helping organisations across various sectors implement AML and CTF compliance frameworks, coupled with our global sports practice, uniquely positions us to offer the necessary support for clubs to successfully navigate and thrive in this new regulatory environment.
From conducting in-depth risk assessments to developing tailored compliance programs, Ankura offers end-to-end solutions that will ensure clubs remain compliant with both EU and UK obligations. As the 2029 compliance deadline approaches, clubs will need a trusted partner to help them navigate the regulatory landscape, mitigate risks, and avoid costly penalties.
Do not hesitate to get in touch with any of our anti-financial crime and sports experts in case you require support or if you have any questions.
- Jonny Gray, Senior Managing Director, Sports Advisory
- Jonathan Brown, Senior Managing Director, Risks, Forensics & Compliance
- Lee Hale, Senior Managing Director, Anti-Financial Crime
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© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
