Other legislation

Money laundering

Money laundering is the process of disguising the source of money obtained from serious crime or terrorism so that it appears to come from a legitimate source.

Businesses can be used for money laundering, which is a criminal offence in most countries.

In the UK, Part 7 of the Proceeds of Crime Act 2000 (POCA) sets out money laundering offences and those offences resulting from a failure to act on a suspicion of money laundering. Directors and executives should be familiar with this legislation and know what red flags to look out for, especially when people from outside the sport suddenly want to invest in it.

There is also another offence under POCA which applies to sports organisations, where an individual knows or suspects that a money-laundering investigation has begun, or is about to begin, in respect of another, and that individual makes a material disclosure to any other person which is likely to prejudice the investigation, or interferes with relevant material.

Committing any offence under POCA is extremely serious and could lead to a prison sentence. The offences are punishable by a maximum of 14 years’ imprisonment, a fine, or both for individuals including directors, managers and officers of any organisation. There are also unlimited fines for corporate entities.

Simple steps an organisation can take to prevent money laundering include:

• employing a specialist outside organisation to undertake a money laundering risk assessment; and
• undertaking a proportionate level of due diligence for sponsors and other commercial partners in the sport. Organisations may wish to extend that to cover those who own the clubs in their sports.

There are three money laundering offences in POCA relating to the direct handling of the proceeds of crime, all of which require either knowledge or suspicion of money laundering. These can be committed by any person. It is an offence to:

• conceal, disguise, convert or transfer the proceeds of crime, or to remove the proceeds of crime from the jurisdiction of England and Wales;
• enter into, or become concerned in an arrangement, in which a person knows or suspects the retention, use or control of the proceeds of crime (aiding and abetting); or
• acquire, use or possess the proceeds of crime (handling).

Bribery and corruption

Bribery and corruption in sports organisations has been covered extensively in the media in recent years. As a result, the sector has never been subject to more scrutiny to be clean. Organisations must know the applicable laws, and have internal regulations and policies to minimise the major criminal, financial and reputational threats that come with bribery and corruption.

Each country has its own laws when it comes to individuals or organisations committing offences linked to bribery and corruption. The UK Bribery Act 2010 and the United States’ Foreign Corrupt Practices Act (FCPA) are the most powerful pieces of legislation as they have extra-territorial effect, meaning they apply beyond national borders.

The Bribery Act 2010 largely abolishes the existing common law and legislative offences in the UK against bribery and corruption, and introduces four new criminal offences:

1. bribing – offering, promising or giving a financial or other advantage (active bribery);
2. being bribed – requesting, agreeing to receive or accepting a financial or other advantage (passive bribery);
3. bribery of foreign public officials; and
4. organisations failing to prevent bribery by an associated person.

Individuals found guilty of one or more of the first three offences can be punished by up to ten years’ imprisonment and/or an unlimited fine. If an organisation commits the fourth offence by failing to prevent the individuals within the organisation from committing acts of bribery, it can face an unlimited fine, plus untold damage to its reputation.

A consequence of the Bribery Act is that UK companies must have internal controls sufficient to prevent bribery by any of its employees or agents, and to detect bribery when it does occur. This will defend an organisation against a charge of failure to prevent bribery, as the Bribery Act acknowledges that it is impossible to prevent it at all times.

There are six principles to consider when putting ‘adequate procedures’ in place within a sports organisation to ensure it complies with the Act. These are:

1. proportionality;
2. top-level commitment;
3. risk assessment;
4. due diligence;
5. communication; and
6. monitoring and review.

When it comes to monitoring, and ensuring there is an ethical approach taken by your organisation, a comprehensive and robust (yet still proportionate) anti- bribery and corruption policy should be in place covering the following actions by all participants, including board members and other executives:

• prohibition of any acts of bribery or corruption;
• prohibition of any payments made to facilitate any transactions;
• gifts or hospitality can only be offered or received where it is transparent, proportionate, reasonable and for a legitimate business purpose;
• expenses incurred must be reasonable and for a legitimate business purpose;
• no political donations on behalf of the organisation;
• no charitable donations other than with the consent of the board;
• prohibition of any act to fix, manipulate or ensure a specific outcome in the sport for financial gain and/or competitive advantage which negatively impacts on the integrity of the sport;
• duty on individuals to do their part in preventing, detecting and reporting any possible acts in the policy; and
• duty not to threaten or retaliate against another individual who has refused to commit bribery or who has raised concerns under the policy.

This is more detailed and wider in scope than the Bribery Act; therefore, training and the communication of this policy will be crucial to its success in ensuring individuals’ compliance.

For more on bribery, in particular match-fixing, look at our section on ethics and culture.

Insolvency

Companies can get into financial difficulty for a number of reasons. If your organisation finds itself in that position, it is important that the board and other executives are aware of the laws on insolvency and comply strictly with them. Otherwise those individuals could face both civil and criminal liability.

The principal law in the UK dealing with this issue is the Insolvency Act 1986. That Act does not define the term ‘insolvency’ itself, but embodies the concept in the phrase ‘unable to pay its debts’, which can mean one of four things:

1. failing to comply with a statutory demand for a debt of over £750;
2. failing to satisfy enforcement of a judgment debt;
3. the court being satisfied that the company is unable to pay its debts as they fall due (the ‘cash flow’ test); or
4. the court being satisfied that the liabilities of the company (including contingent and prospective liabilities) exceed the assets of the company (the ‘balance sheet’ test).

If a company is ‘unable to pay its debts’ under any of the tests set out above, any creditor (a person your organisation owes money to), among other potential stakeholders, may petition for the company to be placed into compulsory liquidation.

The latter two tests are the most common grounds for a business being liquidated/wound-up (closed down). Crucially, a board must be aware that a seemingly successful and stable organisation can go out of business due to the cash flow of the business being neglected. Always remember, cash is king! Therefore, the finance director or treasurer (which is most likely for the majority of sports organisations being run by volunteers) must, for example, not just issue invoices to members, but ensure they are paid promptly, so that the organisation can pay any people to whom it owes money.

For more on insolvency, look at our page on financial control in our risk and control section.

Whistleblowing

Whistleblowing is a term commonly used when someone who works in or for an organisation raises a concern about possible fraud, crime, danger or other serious risk that could threaten participants, stakeholders, the public or the organisation’s own reputation. It can act as an early warning system about improper or illegal behaviour within the organisation.

The need for whistleblowing arises when internal channels are not able to unveil the potentially damaging activity, because the individuals responsible can avoid detection and/or others with suspicions/knowledge of the conduct do not have sufficient trust in your organisation to disclose it.

In the UK, the Public Interest Disclosure Act 1998 (PIDA) protects ‘workers’ from being subjected to any detriment on the ground that they have made a protected disclosure.

‘Workers’ are defined more broadly than just the employees of your organisation, and arguably could include other participants, as PIDA covers individuals who have entered into works under any contract (whether express or implied) whereby the individual undertakes to do or perform personally any work or services for another party to the contract.

A ‘worker’ under PIDA will be protected by law if they report any of the following matters in relation to your organisation:

• a criminal offence (such as bribery or corruption);
• that someone’s health and safety is in danger;
• a miscarriage of justice;
• that the organisation is breaking the law (alleged discrimination, for example); or
• the ‘worker’  believes someone is covering up wrongdoing within the organisation.

The term ‘whistleblower’ often has negative connotations; therefore, to encourage people to use mechanisms made available by an organisation, it is better to describe such individuals as ‘reporting persons’.

For more on whistleblowing, check out our guidance on it in our risk and control section.

Health and safety

Health and Safety at Work Act (1974)

Board members are collectively responsible for the health and safety of employees, volunteers and members of the general public who visit buildings when engaging with the organisation’s activities. The Health and Safety at Work Act (1974) is the main legislation for health and safety, and there is a large and complex body of statutory regulation concerning health and safety.

While only a brief introduction can be provided here, sports boards must be sufficiently familiar with their obligations. This might involve taking external advice.

The Health and Safety Executive, along with the Institute of Directors, has published guidance which states that boards should:

• set the direction for effective health and safety management – that is, develop and communicate a policy;

• introduce management and practices that ensure risks are dealt with sensibly, responsibly and proportionately;

• monitor and report with health and safety appearing on board agendas; and

• undertake a formal boardroom view of health and safety performance.

Sports Grounds Safety Authority

Major spectator sports face unique health and safety challenges in creating the conditions for safe and enjoyable experiences for spectators at sports grounds.

The Sports Grounds Safety Authority (SGSA) was established to carry out a range of statutory functions in relation to football in England and Wales and advisory functions in relation to other sports. The agency’s statutory functions are set out in the Football Spectators Act 1989 and the Sports Ground Safety Authority Act 2011.

You may benefit from a range of services provided by the SGSA, including:

• stadium inspections;
• advice on capacity calculations;
• Green Guide compliance for new stadia;
• training for stadium safety staff at all levels;
• conference presentation and organisation; and
• advice on the development of operations manuals and other documentation.

For more on health and safety, head over to our section on safeguarding.

Employment legislation

Employment legislation applies to full-time, part-time, casual and temporary employees, and board members must be clear about those individuals who would be classed as employees under legislation. A self-employed person is not an employee and has no obligation beyond the specific piece of work for which they are contracted. In sport, many clubs and NGBs appoint coaches, instructors, consultants and others on a contract basis.

In general, employees have a right to certain benefits and conditions in the

areas of leave, pay and conditions. These include (but are not limited to) rights to:

• not be discriminated against;
• equal pay;
• if part-time workers, be treated no less favourably than full-time workers;
• take leave in certain circumstances, including maternity leave;
• pay, including the minimum wage, statutory sick pay, sick pay, etc;
• not be unfairly dismissed; and
• protection when making disclosures of wrongdoing to the employer.

Board members must ensure that there are policies for recruitment that ensure applicants are treated fairly. They should also establish processes for appraisal, support, probationary periods and remuneration that are proportionate to the size of the organisation.