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, (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.
Case study: money laundering
Mr Mazhar Majeed bought semi-professional football club Croydon Athletic in 2008. He reportedly boasted of having invested vast sums of money in the club, particularly in terms of infrastructure.
In November 2011, Mr Majeed was jailed for his role in a high-profile international cricket match-fixing scandal involving the Pakistan senior national team. The matter came to light as a result of a newspaper sting operation which offered Mr Majeed a large cash payment in return for information on when no-balls would be bowled.
During this criminal investigation, it was alleged that Mr Majeed had a track record of laundering money through the club, with customs and tax officials believing ‘substantially’ more than £20 million was laundered through Croydon Athletic. Official company accounts stated that only tens of thousands of pounds had been ‘invested’ by Mr Majeed.
Mr Majeed was later sent back to prison for two years for tax evasion by deliberately under-declaring income of £259,000 from his property development and rental business.
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. and the 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:
- bribing – offering, promising or giving a financial or other advantage (active bribery);
- being bribed – requesting, agreeing to receive or accepting a financial or other advantage (passive bribery);
- bribery of foreign public officials; and
- 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 i