The EU keeps the ball rolling in its battle against money laundering – next on the agenda: professional football

Professional football is not just an entertaining happening for millions of fans around the world; it is also a big money game. During the 2021/22 football season, the top 10 clubs based in the EU (i.e. without the English Premier League) had an aggregated turnover of more than EUR 4.5 billion. In the same time, the accumulated turnover of the EU’s top leagues in France, Germany, Italy, and Spain amounted to a staggering EUR 10.9 billion. With these numbers in mind, it doesn’t come as a surprise that the EU considers expanding its anti-money laundering (AML) and countering terrorism financing (CTF) framework to include ‘high-level professional football clubs’, ‘sports agents in the football sector’ and ‘football associations’.

In this blogpost, we take a deep dive into some of the money laundering risks associated with professional football and lay out the AML requirements that are on the horizon for professional football in the EU.

How money is laundered in football

Football is one of the most commercialised and globalised sports worldwide. Its unparalleled success roots in an enormous number of close to 130.000 professional players across the globe and even (much) higher numbers in viewers. 1.5 billion people worldwide tuned in for the final match of the 2022 FIFA World Cup. These sheer numbers fuel large investments and attract huge sums of money into a sport that so far does not have any binding AML-regulation at the European level (as do sports in general). Moreover, the often cross-border nature of money transfers in professional football is said to facilitate illegal money laundering activity especially due to the lack of integrated national and international control mechanisms.

Against this background, a 2019 report from the European Commission found that “professional football’s complex organisation and lack of transparency have created fertile ground for the use of illegal resources. Questionable sums of money with no apparent or explicable financial return or gain are being invested in the sport.” It points to football as an “obvious candidate” for money laundering. Apart from the economic aspects, the European Commission also found that the social prestige and celebrity culture that come with association to clubs and players would also attract criminal investments.

While it is naturally hard to estimate the true amounts of money laundered through sports every year, the United Nations Office on Drugs and Crime gave an estimate of an annual range up to EUR 125 billion. With respect to football in particular, legislators and regulators seem to focus on the significant sums paid for the purchase or sales of football clubs, player transfers and ownership, consulting services as well as sponsorships and advertisements, as well as illegal practices such as “match-fixing”.

The current state of the EU AML legislation

The European AML framework currently is based on a Directive (Anti-Money Laundering Directive 5, AMLD 5), which was transposed by the Member States into national law. Different national implementations and administrative practices have resulted in a heterogenous AML landscape. Almost two years ago, the European Commission published an action plan on the prevention of money laundering consisting of an EU single rulebook via a new AML/CFT Regulation (AMLR) and the creation of a new AML/CFT supervisory authority at EU level (AMLA).

Professional football has so far not been expressly addressed by the European AML framework. While money laundering is a criminal offence in all Member States, the AMLD 5 did not extend its scope to the football industry (or sports in general). There have, however, been initiatives in Member States to impose stricter AML requirements on EU football clubs (see for example the already existing AML framework in Belgium or recent press reports from the German Federal State of Bremen).

After the Member States in the Council of the EU (the Council) had already approved their positions in 2022, the Members of the European Parliament (MEPs) in March aligned on their position as well. For the first time during the legislative process, the European Parliament’s position suggests extending the scope of AML legislation to include professional football clubs, sports agents and football associations. After all three institutions, the European Commission, the Council and the European Parliament, now have finalized their positions, the project will enter into the last phase of the legislative process, the intra-institutional trialogue.

Who is affected by the new requirements?

European AML requirements are only binding for so-called ‘obliged entities’. While the first European AML Directive only defined credit and financial institutions as ‘obliged entities’, the list of ‘obliged entities’ has grown significantly over the past years. The AMLR will follow this tradition and expand in Article 3 the scope of AML requirements to further natural and legal persons. The European Parliament’s position suggests extending the scope to the following natural and legal persons in professional football:

• High-level professional football clubs: A ‘high-level professional football club’ is defined as a legal entity established in a Member State which owns or manages a professional football club of which at least one team plays in the championship or championships of the two highest national levels of competition and has an annual turnover of at least EUR 7 million. In Germany, for instance, this would encompass all clubs of the first and second Bundesliga divisions. In Spain, this would – measured by their respective revenues through TV rights alone – include all clubs of the first and second La Liga divisions. Football clubs based in the United Kingdom would not be subject to the new AML requirements, even where they carry out business activities in the EU (such as player transfers or away games).
• Sports agents: In addition to football clubs, the scope of the AMLR draft also includes ‘sports agents’. A sports agent is defined as a natural person who provides private job placements in the football sector for prospective paid football players or for employers with a view to signing employment contracts for paid football players. The draft’s scope is not limited to agents providing job placements in professional football. It rather seems that all brokerage activities with respect to paid football players are captured by the definition. A de-minimis-threshold is currently not envisaged by the AMLR.
• Football associations: Lastly, the AMLR will also include football associations in Member States which are members of the Union of European Football Associations (UEFA). This includes, among others, the Deutscher Fußball Bund (DFB) in Germany, the Fédération Française de Football (FFF) in France, the Real Federación Española de Fútbol (RFEF) in Spain and the FIGC in Italy. UEFA members that are not located in a Member State, most notably the English Football Association, will not be subject to these rules. Members of such UEFA members, such as the German Deutsche Fußball Liga (DFL), do not seem to be captured by this definition.

While the AMLR currently focuses on football, it seems worth noting that the European Commission shall issue a report to the European Parliament on AML risks in other sports within two years after the AMLR came into effect. As such, clubs and associations in professional racing, e-sports and other sports sectors that see large inflows of funds might also become subject to the EU AML requirements.

What are the new requirements for professional football?

The European AML framework is built on three pillars:

• Internal risk management measures: Identifying and assessing the risks associated with money laundering and terrorist financing, inter alia by conducting a specific AML risk assessment, implementing reporting lines, responsibility structures and providing funds for an adequately staffed AML compliance department.
• Customer due diligence (CDD): The process of verifying the identity of customers and assessing the risk of doing business with them. The primary goal of CDD is to ensure that obliged entities know who their customers are, understand the nature of their business activities, and can identify any potential risks associated with their transactions. This includes verifying the customer’s identity using reliable sources such as government-issued identification documents, as well as gathering information about their business activities, sources of funds, and beneficiaries, and conducting ongoing monitoring to ensure that this information remains up to date.
• Suspicious activity reporting: Notification of suspicious activities to the competent authority. This includes transactions that may be related to money laundering or terrorist financing, as well as those that are inconsistent with a customer’s known or declared business activities.

Once in force, these AML requirements would also apply to high-level professional football clubs, sports agents and football associations. The new requirements would supplement the already existing voluntary commitments at the levels of UEFA and FIFA, such as UEFA’s commitment to eradicate match-fixing (and the money-laundering risks that come with it) as well as FIFA’s Clearing House that assesses compliance with AML regulations in the context of payments, for example regarding player transfers (Art. 15.2 b CHR).

Potential impact

Applying these new AML requirements on professional football could potentially have enormous impact and require significant efforts from the newly captured ‘obliged entities’.

In the implementation phase, EU football clubs, sports agents and football associations will in particular be required to conduct an AML risk assessment, draft AML compliance frameworks and establish an AML compliance function. The internal risk management measures will also need to be reviewed and updated regularly.

A greater challenge may prove to be the customer due diligence measures envisaged by the AMLR, which may need to be applied to all sources of funding for professional football clubs, which can typically be broken down into

• TV and advertising revenue,
• merchandising and matchday-sales, and
• investments from private equity sponsors, individuals and even states.

To which of these counterparties would CDD measurers need to be applied?

CDD measures need to be applied to customers when establishing business relationships or when carrying out occasional transactions in excess of EUR 10,000:

• The AMLR does not include a definition of a customer. The general use of the word suggests that only persons that acquire a good or service would be regarded as a customer in this sense.
• Business relationships are relationships which are directly connected with the professional activities of an obliged entity and which are expected to have an element of duration.

With respect to professional football clubs, the following would likely apply:

• Football fans are to be regarded as customers. While a one-time purchase of a jersey or a ticket as a birthday present would not constitute as a business relationship, it seems likely that regular stadium goers (in particular those with season tickets) would be considered to have a commercial relationship with a football club that has an element of duration.
• The same would likely apply to sponsors, as they acquire advertising rights from football clubs.
• Furthermore, a football club purchasing players from another football club is also to be regarded as a customer in the sense of the draft AMLR. Irrespective of the definition of a “business relationship”, the purchase price would typically exceed the de-minimis threshold of EUR 10,000. Free transfers could, however, arguably not be captured by the CDD requirement.
• Importantly, club owners and investors would arguably not qualify as a customer in this sense, as football clubs would generally not sell goods or services to them. . Whether the new European AML authority AMLA would uphold this view remains to be seen, given that the investments into football clubs seem to have been one of the main rationales for including football in the scope of AML requirements in the first place.

Even though shareholders and other investors would arguably not qualify as customers in the sense of the AMLR, football clubs would still be under an obligation to identify and publish their so-called ultimate beneficial owner (UBO) – the natural person that owns at least 15 % of the football club – in transparency registers (for an overview on a recent CJEU decision on transparency registers, please see our separate blogpost). Whether the additional transparency would deter investments in football clubs in the future remains to be seen.

Are there any exemptions for professional football?

Where the risk assessment demonstrates a low risk, obliged entities can apply for an exemption under Article [15(3a)] of the AMLR which would allow them not to apply certain CDD measures with respect to electronic money that can be used in a limited way, where

• the maximum amount stored does not exceed EUR 150 and
• the instrument can exclusively be used to purchase online or offline goods or services.

Professional football clubs should arguably be able to make use of this exemption with respect to matchday sales and CDD measures of fans, which should generally constitute a low risk of money laundering and were evidently not the reason why the EU intends to extend AML obligations to football in the first place.

This exemption could, for example, be applied to prepaid stadium cards. Considering the prices of tickets, merchandise and food and drinks in stadiums, it does however seem questionable whether the maximum amount of EUR 150 has been set too low. Apart from these practical constraints, football clubs would also need to ensure that they comply with regulatory requirements when issuing such cards, in particular the Payment Services Directive 2. The instruments would need to qualify for the so-called limited network exemption (for an overview on this exemption, see our separate blogpost) in order for the activity not to trigger licence requirements.

When will the requirements take effect?

The AMLR is not final yet. The AMLR is, however, on the agenda of the intra-institutional trialogue in May. It remains to be seen whether the Council and the European Commission will agree with the inclusion of professional football clubs, sports agents and football associations as obliged entities.

Once finalised and ratified, the AMLR will enter into force on the twentieth day following the day of its publication in the Official Journal of the EU. The current draft envisages that the AMLR will apply only two years after its entry into force, a period which should leave the European football industry sufficient time to prepare for the new requirements.