Sports consulting newsletter #2 - Sport and financial crime

On occasion, the sporting landscape has become the playing field for financial criminals through elaborate schemes and game fixing. Such news understandably makes headlines.

As recently as January 2019, Europol dismantled an organized crime group involved in manipulating professional tennis competitions. Out of 83 suspects put under arrest, 28 were professional players.

This Europol investigation, and others like it, prompts the question: just how much corruption is in the sports world?

Sport and corruption

In this case, as in most sport corruption schemes, the suspects bribed professional players to guarantee predetermined results and used the identities of thousands of citizens, or “mules”, to bet on pre-arranged games.

Without having to go to the extent of corrupting players, criminals can also use the “courtsiding” method. This technique consists of attending a sporting event and transmitting sports data in real time to markets where there is a strong gap in receiving and relaying information. The time lapse between the updates of sports odds revealed on the betting site and the time at which the information is obtained, leaves space for gains before the ratings of online notices evolve.

Sport and tax evasion

Due to the income generated by sport, this area is conducive to tax fraud, as illustrated by Football Leaks.

In the largest leak in sport history, a series of investigations were published from 2016 to 2018, showing that players and agents were, among others, using offshore companies to receive their revenues (for example, from their image rights) in order to avoid taxes in their country.

Football Leaks also revealed how agents, intermediaries and club officials were perverting sporting ethics and tax regulations to maximize their access to the wealth generated from football, at the expense of the quality of the game, the development of talent and fans’ expectations.

Sometimes athletes participate in these tax fraud schemes unintentionally or may even be subject to scams themselves. In February 2019, dozens of Ligue 1 football players were victim of fraud operated by intermediaries and wealth management advisers in connection with real estate investments in buildings classified as historic French monuments. The building renovations made it possible for the athletes to make significant tax deductions during the first three years after the property acquisition—but it turned out that the work had never been done.

As athletes usually invest their money earned during their relatively short careers to anticipate their retirement and do not always have the related financial knowledge, they make perfect targets for crooks.

Sport and money-laundering

In 2009, football was also the subject of a FATF report highlighting its vulnerability to money-laundering especially due to:

• The sector’s structure: easy to penetrate, complicated networks of stakeholders, under-professionalized management, diversity of legal structures
• The sector’s finance: presence of considerable sums, irrational character of the sums involved and unpredictability over future results, financial needs of football clubs
• The sector’s culture: social vulnerability of some players, societal role of football, non-material rewards

Among the newer sports, eSport is also being highlighted for its potential money-laundering vulnerabilities. As published recently in the media, Epic’s battle royale game, Fortnite is used to launder money by using a technique called “carding”. Criminals use a stolen credit card to purchase items in a game, and then resell those items at a lower price.

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