With the advent of globalisation the sports industry has shown exponential growth in the last 20 years. The surge of commercialisation of sport, the unprecedented internationalisation of the sports labour market, the enormous sums of money paid for the broadcasting rights of big sporting events, the attraction by multinational blue chip sponsors as well as the direct private investment by the worlds super wealthy have all contributed to the growing economic and social importance of sports.
This massive influx of big money into sports does have its drawbacks. The criminal world has always shown adaptability in finding new channels to launder the proceeds of their illegal activities. Ever increasing and stricter measures and standards put in place by inter-governmental bodies like the Financial Action Task Force (FATF) as well as the increasing compliance of financial institutions the world over with these standards has meant that various legitimate sectors are at risk of being infected with criminal money.
In a Report released by the FATF entitled ‘Money Laundering through the Football Sector’ one of the vulnerabilities of football clubs that was identified was the increased strain on their financial needs. Big Clubs require large budgets to be able to compete and afford the best players. Prices for players appear irrational and are very difficult to control. Player salaries comprise a substantial portion of the clubs total budgets. The result of this factor is that a large percentage of clubs are in financial trouble. This financial vulnerability can make clubs more susceptible to offers made from criminals looking for avenues to launder their ill-gotten gains.
A salary cap is simply put a limit on the amount of money a club is permitted to spend on salaries. This limit or cap comes in various forms but is usually implemented as a percentage of the club’s annual average revenues. It is a rather controversial measure and certainly has its detractors, but it has shown to increase competitive balance and maintain financial stability in the leagues that they have been introduced.
Salary caps are in effect in professional team sports all around the world. It has been used successfully in North America in their National Football and National Basketball leagues respectively, as well as in Australia in the Australian Football League and the National Rugby League and into UK professional rugby by the Rugby Football League and later by the Rugby Football Union.
This mini dissertation aims to illustrate the threat posed to professional football by criminal organisations seeking to find new ways to launder the proceeds of their crimes as well as provide an overview of money laundering as a crime. It further aims to provide an overview of salary capping and then tie in the purpose and benefits of the implementation of a salary cap and how it may inadvertently be used to curb money laundering.