In the world of international finance and crime, criminals and terrorists have always sought innovative ways to launder money and avoid sanctions. One relatively recent method that has gained prominence is known as "sportswashing." This term refers to the use of sports events and organizations to legitimize illicit wealth, evade sanctions, and make millions for those with nefarious intentions. While the practice of sportswashing isn't exclusive to one sport or country, this article will focus on the intriguing case of MTN Irancell's involvement with Spain's La Liga Soccer League and provide a broader context of potential money laundering in the world of football.
The MTN Irancell and IRGC Connection
By way of background, according to recent federal court filings, when MTN Irancell (an Iranian mobile network operator) was formed, the Electronic Development Company (IEDC) owned 51% of MTN Irancell, and IEDC was in turn owned by two companies that allegedly were and are front companies for the Islamic Revolutionary Guard Corps (IRGC). Importantly, in 2019, the U.S. State Department designated the IRGC as an Foreign Terrorist Organization.
The MTN Irancell and La Liga Connection
Arguably, one of the most high-profile examples of sportswashing can be seen in the case of MTN Irancell and its association with Spain's La Liga Soccer League. MTN Irancell reportedly invested a significant amount of money in a sponsorship deal with La Liga, which allowed them to gain access to a global audience through advertising and promotions. In a recent article published by the Organized Crime and Corruption Reporting Project (OCCRP), as part of that contractual arrangement, MTN Irancell “committed to pay La Liga 10 percent of any profit it earned from subscribers who watched Spanish soccer on its online channel…” But getting money out of a sanctioned regime can be difficult, apparently. According the OCCRP, yet another front company was formed (a Hong Kong-based shell company) to facilitate at least one payment to La Liga.
However, what might seem like a legitimate business arrangement can often serve as a cover for money laundering and sanctions avoidance. Criminal organizations and sanctioned individuals can funnel their illicit gains through these deals, effectively "cleaning" their money and making it appear legitimate. The global reach of popular football leagues like La Liga makes them an attractive channel for such activities.
Money Laundering in Football
The case of MTN Irancell is not an isolated incident when it comes to potential elicit financial flows. Football has long been associated with money laundering, with numerous instances of clubs, agents, and players being involved in financial misconduct. Criminals and corrupt officials exploit the complex financial structure of the sport, which involves multiple jurisdictions, hidden ownership structures, and massive sums of money changing hands.
In 2020, a BBC Panorama investigation revealed that some football agents and officials used secret bank accounts to move money across borders, raising concerns about the integrity of the sport. The combination of vast transfer fees, player salaries, and lucrative broadcasting deals provides ample opportunities for money launderers to exploit the system.
Adding to the challenges presented by sportswashing is its convergence with other money laundering typologies, such as human trafficking and the illegal drug trade.
Combating Sportswashing through KYC Mechanisms
To prevent their organizations from inadvertently engaging in sportwashing, companies and sports leagues must employ robust Know Your Customer (KYC) mechanisms. KYC is a vital component of financial regulations that requires businesses to verify the identity of their customers and assess their risk factors.
Here are some suggestions for companies seeking to avoid issues related to sportswashing through KYC mechanisms:
Due Diligence: Perform thorough due diligence on potential sponsors, investors, and partners. Investigate their financial backgrounds and the source of their funds to ensure they are not involved in illicit activities.
Transparency: Encourage transparency in financial transactions within the sports industry. Clearly define ownership structures and financial flows to minimize the potential for money laundering.
Compliance: Ensure compliance with international sanctions and financial regulations. Regularly update and enhance your compliance programs to adapt to evolving threats.
Third-Party Verification: Engage third-party firms that specialize in KYC and anti-money laundering (AML) services to vet and verify the legitimacy of business partners. Third-party firms that use advanced artificial intelligence and machine learning technologies, particularly those that support name reconciliation and network analysis, can be especially helpful in detecting front companies used to disguise illicit financial flows.
Reporting Suspicious Activity: Encourage whistleblowing and reporting mechanisms to allow individuals to report suspicious activity without fear of reprisal.
Education and Training: Train employees and stakeholders on the risks associated with sportswashing and the importance of complying with financial regulations.
Oversight and Governance: Implement strong governance structures that include oversight by independent bodies to ensure financial integrity and transparency.
Sportswashing is a growing concern in the world of sports, particularly football, and it requires vigilance and cooperation between governments, sports organizations, and the private sector to combat it effectively. By prioritizing KYC mechanisms and maintaining strict compliance standards, companies can help prevent criminals and terrorists from exploiting the global appeal of sports for their illicit activities, thereby preserving the integrity of the beautiful game.
Although Prescentus LLC is a wholly-owned subsidiary of Womble Bond Dickinson (US) LLP, it is a separate entity, is not a law firm, and does not provide legal services. Consequently, Prescentus LLC is not subject to the rules of professional conduct applicable to lawyers and law firms and its clients do not enjoy the protections of the attorney-client relationship.