The FIFA scandal and why banks may be facing regulatory issues over KYC failures

By Christine Duhaime | May 31st, 2015

FIFA Indictment against PEPs

The 47-count Indictment against 14 persons employed or engaged by FIFA by the US District Court for the Eastern District of New York (“EDNY“), and their arrest may do more than shake up international soccer – it also has the potential to result in significant fines against many global banks who processed transactions for the indicted persons for failures of anti-money laundering law. US authorities announced charges against nine FIFA officials and five sports executives associated with FIFA, who were part of a scheme in which they received $150 million in bribes for commercial rights to soccer.

FIFA is the international body governing organized soccer and is registered under Swiss law and headquartered in Zurich.    The Indictment alleges that the defendants solicited, offered, accepted, paid and received bribes and kickbacks acting in their capacities as affiliates with FIFA and engaged in fraud and money laundering in respect of the proceeds of crime. In addition, they are alleged to have corrupted the sport of international soccer.

According to the Indictment, in order to hide the proceeds of corruption from being detected, the defendants are alleged to have established trusts, set up shell companies, and used banks for illicit payments in tax havens. In 2012, when US law enforcement began interviewing FIFA officials in connection with the investigation, the Indictment alleges that several defendants obstructed justice by, inter alia, destroying evidence. The Indictment alleges that the bribery scheme deprived youth leagues of funds to support soccer and run soccer programs.

KYC & PEP Failures

The banks that processed the transactions that involved money laundering may be facing regulatory issues under anti-money laundering law because the defendants were politically exposed persons (“PEPs“) in multiple countries because they were senior officers of FIFA or business associates of senior officers, and because the transactions were suspicious. Transactions were suspicious because the indicted persons did not earn anywhere near the amounts they allegedly received as proceeds of crime through bank transactions, to justify the transactions, hence money they received was suspicious.

According to the Indictment, the defendants relied heavily on the US financial system and correspondent banks. The US government said it is looking at the banks that are involved. According to the Indictment, just one US bank refused to process one transaction that was alleged to be proceeds of crime. The other banks processed close to $150 million in alleged proceeds of bribery.

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