Social clubs: A haven for money laundering?
Larona Seribe | Tuesday July 26, 2022 06:00
This process enables the criminals to enjoy these proceeds without exposing their source.
There are three stages of laundering money:
Stage 1: Placement This is whereby ‘dirty’ money is placed into the legal, financial systems either through depositing into bank account or other mediums like mobile money services.
Stage 2: Layering This is where a complex web of transactions occurs, transferring money to different accounts, different people, investments, or countries within the financial system.
Stage 3: Integration Here funds will be integrated back into the legitimate financial system without raising a suspicion. Money can now be used to purchase a soccer team, property, or luxury cars. This is a critical stage where it is very difficult to differentiate legal and illegal wealth as the funds will be successfully laundered.
Botswana is currently experiencing an increase in the popularity of 'Sunday Soccer Clubs'. While such social clubs have been in existence for the longest time with the primary goal of uniting and giving back to communities, some entities or individuals may find an opportunity to mismatch the legitimate purpose of social clubs by commingling them with illicit funds from predicate criminal activities like drug smuggling, human trafficking, tax evasion, and so on.
Most of these soccer clubs are non-profiting organisations, solely depending on donations, sponsorships, and sale of merchandise to run their affairs. This presents a perfect opportunity for money laundering, especially since social clubs are subjected to less stringent regulations compared to other entities.
The below section illustrates how money can be laundered through social clubs:
Placement ‘Dirty’ money is placed into a local team through sponsorship or donation .The transaction can be processed through cash payment to conceal trace and avoid enhanced due diligence measures in banking platforms . In some instances, donated funds can be micro structured to avoid raising suspicion. A launderer, who is the main beneficiary at the end of the day, can split P100,000 sponsorship into small units and pay donations to the football team at different time frames.
The funds will later on be deposited into the team’s bank account as a sponsorship.
To legitimise the transfer of the laundered funds, the launderer will normally organise sponsorship presentations and invite the media for positive corporate appearance and gain the trust of the community.
Layering This is the stage where a complex web of transactions occurs, transferring money from soccer team accounts to different accounts, different people, or even countries. In this case some funds may be transferred to other service provider accounts like ticket printing companies, foreign referee accounts, team players accounts as allowances, or even to soccer team medical practitioner accounts.
Integration During the last stage, funds will be integrated back into the legitimate financial system without raising any suspicion and that is where money can be used to purchase vehicles for the soccer team's main owners, property for the team, or support the luxurious lifestyle for launderers. At this stage, funds are presented as legitimate proceeds from activities associated with running a football club, e.g.
• Selling of tickets whereas in most cases there is over-exaggeration of profits in order to conceal other profits made from illicit funds.
• Over-invoicing of tournament arrangements, boat camping logistics, and refreshments. Basically many times this is a planned criminal syndicate and most of people who are clueless about the dirty acts are players and supporters.
• The other factor is creating assumption that players are overpaid whilst in reality they are paid less. This is done to cover up for the influx of money that is made from other illegal activities like tender corruption and undeclared funds from prominent corrupt people who ought to be private donors.
Botswana is obliged to criminalise and combat money laundering by putting in place measurers to curb and combat money laundering, terrorism, and proliferation financing. As such, regulations such as the Financial Intelligence Act 2022 and the Proceeds and Instruments of Crime Act 2022 were enacted by Parliament to deal with and combat all money laundering related offences.
Below are some of the measures that can be put in place to reduce the risk of money laundering through social clubs:
• Enhanced due diligence must be conducted on all potential sponsors or donors before accepting funds by social clubs.
• All social soccer clubs must be registered with the Registrar of Societies to allow for enforcement of basic AML/CFT regulations • Keeping up to date records of how the donations were used, funds allocation budget as well as auditing purposes.
• The Registrar of Societies must also request quarterly submission of cash flow records and do on site assessment to ensure that there is no fraud of submitted financials.