FIFA to clean up the jungle
The international transfer market has become a “jungle” in which money-laundering, fraud and deception are rife, according to the director of a Fifa project intended to clean up the system.
Later this year, in an attempt to end the worst excesses of a largely unregulated market that produces between 20,000 and 30,000 deals worth in excess of $1 billion (£650 million) every year, Fifa will introduce a mandatory system for processing all international deals.
The aim is to make Fifa’s regulations easier to enforce, as well as tackling the threat of money-laundering and third-party ownership of the sort that brought Carlos Tévez to England.
The Transfer Matching System is deceptively simple but has the potential to bring transparency and rigour to the wilder reaches of the market. A web-based system, it requires the buying and selling clubs to enter details of transfers, including the contracts, player IDs, payments to agents, total fees and verifiable proof of payment. Only when the details match is the deal cleared.
The system has several advantages. It makes clubs accountable for all deals and provides a verifiable audit trail for regulators. It can be quick – in the last window a transfer between an English and Scottish club who are using it already took seven minutes to complete – and it will end the creeping habit of the window stretching past the 30-day limit.
More importantly, it also gives national associations and Fifa the chance to inspect contracts and deals at the click of a mouse, and makes clubs accountable for deals that are currently conducted primarily with fax machines and on paper. But the implications of the system, which becomes mandatory on Oct 1, go much further than clubs’ stationery bills.
Development work on the TMS has taken Fifa around the world and revealed shocking truths about the global market. A snapshot of the worst excesses reveals suspected money-laundering using the sale of players that do not exist, transfer fees paid in cash and delivered in steel strong-boxes, and the widespread third-party ownership of teenage players hot-housed in Latin American academies before being sold to global leagues.
All these practices should become harder to get away with if TMS works, according to Mark Goddard, its general manager.
“What TMS does is give Fifa the ability to deal with a market that has become so large that it could not be dealt with. The regulations have not changed, but until now there has been no efficient way of ensuring that the rules were being followed.
“Football is one of the last areas of the commercial world where large sums of money can be moved without significant oversight or regulations. It has basically been a jungle with no oversight, and that is changing.”
Goddard said the system was designed with money-laundering in mind. “Anecdotal evidence tells us that it [money-laundering] is probably quite a massive problem. We know of transfers of imaginary players by third parties and other groups using football in order to wash it and turn dirty money into legitimate funds.
“This is potentially a billion-dollar industry, and something had to be done because some of these things were becoming standard practice.”
Eventually Fifa intends to become a clearing house for international transfers, with fees passing through an authorised bank on their way to the selling club.
Until then the world governing body hopes that requiring clubs to declare all interested parties in a system that ensures a verifiable audit trail will make fraud harder to achieve.
One of Fifa’s targets for TMS is to make the practice of third-party ownership, which is routine in Latin America, harder to sustain. The TMS requires clubs to declare that there are no third-party deals in all transfers, and crucially the money has to go from club to club.
The concept of third-party ownership was introduced to English football by Kia Joorabchian, adviser to Tévez and Javier Mascherano and owner of their “economic rights” when they arrived at West Ham four years ago.
The practice takes many forms, with individuals, companies, investment funds and even media conglomerates taking an interest in future revenues generated by players.
It is so widespread in Latin America that it is thought to have played a part in the near collapse of the Argentinian Primera Division, which had to delay the start of the season because its clubs could not meet salaries. The suspicion is that large quantities of television revenue went direct to third parties rather than to clubs.
Fifa is determined to remove third-party influence from contracts, and the TMS requires clubs to expressly declare that none are involved in a deal.
“This is not a silver bullet that will solve everything in one fell swoop, but we want to make sure that it is the clubs that get the money, and most importantly that it is the football value of the player that is being bought, not his marketing or commercial value that is being sold through third parties,” Goddard said.
It is already having an impact, with major third-party owners including Brazilian media giant Traffic examining the impact on their business models.
The system will not temper all the excesses of the markets, and it certainly will not prevent clubs distributing money beyond the reach of the TMS audit trail, but it is a start.
“One association said to us, ‘This means the days of the black money are over’,” said Goddard. “We said, ‘It is coming soon’.”