Understanding and Mitigating Fraud Risk in Professional Football

Figures & data

Table 1. Forms and methods of fraud in football.

Corruption Bribery Referees working with criminal elements to defraud bookmakers in return for a bribe Club owners bribe officials to place a referee that will look upon their team favorably Match-fixing & illegal betting Players conspire to lose a football match, score the correct number of goals, miss a penalty, get booked, or be sent off to gain from gambling Champion footballers are taking bribes to ‘play dead. Favoritism Referees setting more extra time in close matches in which home teams are behind Coaches rank teams they defeated more favorably, making their team look better than their opponents. Successful teams are more likely to receive an incorrect penalty than their opponents Referees award significantly more yellow and red cards to the opponents’ players. Referees show favoritism in foul, throw-in, offside, yellow and red cards, extra time, and penalty decisions. Conflict of interests The conflict of interest FIFA faces when allocating places in World Cups suggests that FIFA is focused more on financial gain rather than the organizational interest The conflict referees face when concerned with their career prospects (i.e., corrupt referees are more likely to get promoted to top games). Sports medicine clinicians and doctors face conflicts of interest in providing medical care to athletes (e.g., manipulating medical records to keep their jobs). Politicians’ ownership of clubs creates conflict (e.g., Politicians use their power to provide an unfair advantage to their clubs) Extortion FIFA’s abuse of its monopoly position to extract concessions from countries that favor its interests Criminals extorting football clubs through threats and intimidation to protect their interests in the region Price-fixing Price fixing occurs when football clubs and federations collude to fix the price of their broadcasting rights. This practice may prevent individual competition, raise barriers to market entry or even foreclose the access

Asset misappropriation Intellectual-property theft by insiders Colluding with pirate broadcasters Selling unofficial products via ambush marketing campaigns Illegally manufacturing and dispensing match tickets Payroll fraud Football players commit drug test cheating Clubs perpetuate salary cap breaching. Football players inflate follower count to inflate their market value Age fraud: older yet young-looking and more experienced players are entered into age-specific tournaments Overbilling Overbilling for construction work of the stadium. Changing clubs without clubs paying each other transfers money. Overestimating the value of players’ registration rights

Fraudulent Financial Reporting in Football Tax fraud Ticket sales manipulation Earnings manipulation Overstating the club’s share prices Manipulating players’ salaries

Fraud against Football Players and Fans Football fans are duped into purchasing fraudulent tickets Collecting cash payments for a football player’s image rights without the players’ knowledge and consent Football players are defrauded through investment fraud Deceptive “recruitment” of players for financial gain (e.g., low-income families selling their homes to meet the entry fee required by fraudsters claiming they have connections with major clubs)

Table 2. Fraud risk factors in professional football.

Motives to commit fraud

Pressure to achieve sporting and financial targets Meet investors’ demands (i.e., dividends and stock appreciation) Remain financially competitive Avoid financial distress, insolvency, or bankruptcy Obtain financing from banks or funding from UEFA Fear of zero profit Secure licensing Comply with FFP requirements Meeting unrealistic expectations of football fans and journalists regarding sporting performance Win the championship Pressure on managers to reach specific financial targets Please football fans Declining competitive balance Pressure imposed by financial regulations such as FFP Decline in players’ wages in some leagues Personal financial gain for players, referees, and managers Fear of losing career, status, and pay due to age Job insecurity Pressure on referees to act unethically to keep their careers Religious ideology Gambling addiction Strong illegal gambling networks High levels of relative exploitation of players Perceived corruption of officials Clubs desire to get promoted to the premier league Advance the football team in competitions The desire to predict an outcome of a game to maintain sporting performance The need to bolster sporting performance Poor working conditions for players and referees The enormous financial stakes and the growing influence of betting companies

Opportunity for Fraud

Lack of accountability at the institutional, legal, and public levels (weak penalties for fraud perpetrators) Lack of anti-fraud controls and governance mechanisms: o Lack of awareness of the consequences of fraud o lack of a clear and effective counter-fraud strategy o No single body has a robust anti-bribery policy o Low percentage of football clubs have an internal audit committee o No regular board review of risk assessment reports. o Ineffective monitoring at the institutional and regulatory levels o Insider-dominated boards lacking independent executive directors o The concentration of power in the hands of FIFA executives o Weak ethics culture and unethical leaders o Lack of risk management The reliance of the grassroots club on volunteers Significant turnover Improper information disclosure in football clubs Lack of transparency in the appointment of directors Lack of induction and training of directors No consultation with stakeholders in football clubs.

Integrity Issues

The scale of fraud in football with no adequate counter-fraud measures indicates less emphasis on integrity in the profession The lack of an ethical culture in football clubs and FIFA, for example: o The systemic use of bribing and the exchange of political favors and other means of informal power allocation within FIFA o A member of FIFA’s ethics committee received bribes o Some clubs are vessels through which crime and fraud are conducted and encouraged o Corrupt referees are promoted to top games o FIFA’s fraud response is heavily reliant on a deny strategy, avoiding responsibility and keeping a distance from media engagement

Figure 1. A holistic approach to countering football fraud.

Table 3. A holistic framework for countering football fraud.

What is required?	How can it be implemented?
(1) Reinforcing Accountability	Imposing harsher punishments for fraud perpetrators, preferably prosecution instead of financial penalty Implementing an effective and integrated financial management information system. Developing a professional base of accountants and auditors. Adopting and applying internationally accepted accounting standards. Empowering a robust legal framework for supporting modern accounting practices. Enhancing transparency in allocating budgets Providing clear guidelines for FIFA officials and bodies about their rights and accountability. Considering football stocks as an asset class of their own and unattractive to traditional ‘pure’ financial investors. Disclosing fraud-related activities in annual reports to raise fraud awareness. Re-distributing broadcasting rights on an equal basis and incentivising cost-reduction targets. Implementing a hard salary cap to control costs. Revisiting FFP regulations to bring about financial sustainability in European football. Enhancing monitoring by establishing a supervisory monitoring body Raising public awareness of fraud and its consequences. Reducing responsibilities for FIFA’s governing bodies More stringent monitoring of ethics adherence Establishing a world integrity sports body involving the intervention of public authorities. Obligating officials to report suspicious transactions Enhancing transparency in the transferring of players and ownership of clubs. Establishing and enforcing a corporate governance framework UEFA should prevent non-compliance with FFP by limiting the opportunities to do so and providing information and education.
(2) Promoting Integrity	Enhancing the tone at the top (i.e. control environment): A consistent message from top management regarding ethical values and behaviour Appointing influential, honest managers Appointing FIFA executives raised in low corruption countries Top management in football clubs and federations should lead by example Promoting an organisation’s integrity culture by: Providing mandatory employee fraud awareness training Providing a safe and easily used reporting mechanism for reporting fraud. Rewarding integrity Taking corrective actions when raised by auditors and audit committees Treating employees fairly and respectfully Providing fair pay, workload, and promotions. Investing in robust anti-fraud controls and risk management systems Holding individuals accountable for their responsibilities Imposing severe penalties on fraud perpetrators Establishing a code of ethics for all staff with zero tolerance for fraud Consistently implement disciplinary processes
(3) Implementing anti-fraud controls and governance mechanisms	Adopting a zero-tolerance policy on fraud Establishing a code of conduct for all staff. The code of conduct should: stipulate the forms, methods, and dangers of fraud, and the accompanying sanctions encourage reporting fraud via an adequate whistleblower protection mechanism. focus on the transparency of financial information and greater transparency in corporate governance practices cover accepting gifts policy be incorporated into a broader ethical programme. focus on ethical leadership and whistleblowing protection. Establishing an anonymous fraud reporting mechanism within fraud clubs, federations, and FIFA using multiple reporting channels, including telephone, email, and web-based Providing anti-fraud education and conducting fraud awareness campaigns to football employees, managers, owners, and the public. The educational campaign and training should focus on what fraud entails, the impact and consequences of fraud Job rotation Surprise audits Appointing neutral umpires for all games Establishing an independent panel to oversee the development and selection of umpires. Controlling the sports governing bodies externally and independently. Appointing independent directors to the boards of football clubs and their governing bodies. Separating the roles of physicians serving the player and those serving the club and replacing them with two distinct sets of medical professionals: The Players’ Medical Staff (with exclusive loyalty to the player) and the Club Evaluation Doctor (with exclusive loyalty to the club). Having conflict-of-interests and match-fixing policies Establishing a restricted donations policy. Improving the quality and integrity of financial reporting by: Appointing internal and external auditors with fraud expertise Establishing an independent audit committee, preferably with counter-fraud expertise Thoroughly scrutinising subcontracting companies for organising matches before granting them licences Preventing matches organised for gambling-related activities Developing a comprehensive fraud prevention programme Establishing a match-fixing disciplinary body FIFA should have a clear gift-giving policy, including specific reference to low-value gifts Reducing the FIFA executives’ power and allowing the supervisors to engage in merely advisory roles. Adequate segregation of duties within FIFA to reduce the power in the hands of a small number of executives, Publicly releasing financial accounts, Strengthening the powers available to FIFA’s Ethics Committee. Advising football players to become more vigilant by: conducting background investigations, conflict-of-interest checks, reference checks, and using experienced, reputable, independent third parties to perform these due diligence steps Restricting the access of clubs’ intellectual property to Official Partners Introducing legal and practical strategies to prevent the sale of unofficial merchandise and ambush marketing by other companies.
(4) Using technology to detect fraud	Video Assistant Referee (VAR) to enhance the integrity of football matches Mathematical models to detect illegal betting and match-fixing instances
(5) Legislative reforms	Establishing stronger government-backed independent anti-corruption agencies Strengthening the penalties for financial crime Empowering security agencies to investigate officials suspected of corruption. Domestic reform of Swiss legislation by empowering authorities to hold FIFA accountable Strengthening the law for whistleblowers’ protection from retaliation Regulate betting to undercut gambling syndicates. Placing FIFA on the list of international public organisations to allow the Foreign Corrupt Practices Act of 1977 to prosecute those engaging in foreign corruption. Introducing a global tax on sports betting gains to tackle illegal online betting.
(6) Enhancing national and international cooperation in countering fraud	Establishing a new international treaty on match-fixing to introduce cooperation between states, governing bodies, and regulators in countering fraud. States and public authorities should coordinate their efforts and responses to reduce FIFA’s monopoly Intensifying cooperation between law enforcement agencies and sports bodies and fraud data sharing.

Data availability statement

No data available with this submission.