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money laundering

FIFA's Crooks Needed Lessons in How to Be Criminals

Money laundering is actually not that hard. But FIFA executives were too lazy and cheap to pull it off.

by Aaron Gordon
04 January 2016, 12:22pm

EPA

Back in May, when I saw the news that the Department of Justice indicted nine FIFA officials and five media executives for racketeering, money laundering, and wire fraud, my first thought was of a cab driver I had met in Buenos Aires almost a year prior while reporting on the World Cup. I remember asking him what he thought about FIFA, which, back then, was merely presumed to be corrupt. The language barrier between us was significant, but he listed three organizations with no further explanation: Coca Cola, the Vatican, and FIFA.

The indictment of FIFA officials and the drama that has played out since, including Sepp Blatter's downfall and the gutting of its secretive Executive Committee, belies the organization's global stature. FIFA, the most recognizable acronym in the world, was compared by America's top prosecutor to the mob.

A mob's entire business depends on making dirty money clean. But FIFA didn't serve this purpose; the individual (alleged) criminals had to launder the money themselves. The most recent, more detailed indictment filed by the Department of Justice in December against FIFA officials and marketing executives for executing a 24-year "scheme to enrich themselves through the corruption of international soccer" clocks in at a hefty 240 pages and some 50,000 words—roughly 45 times the length of this article—detailing precisely how they tried to cover their tracks.

But the shocking part of the indictment isn't the extent of FIFA's corruption. It's the brazen laziness with which executives executed it.

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Jeff Sklar, an anti-money laundering expert with SHC Consulting Group, says the FIFA guys screwed up. "Come up with a better scam on how to really do it. Don't just go put it in your bank account and go, surprise! Here's our money!"

Sklar doesn't recommend accepting bribes or laundering money—neither does VICE Sports—but sometimes people just can't help themselves. But if you're going to do it, at least have a plan.Take FIFA, for example.

Some FIFA officials were not very good at (allegedly) stealing money. They (allegedly) had bribes transferred directly to accounts under their own names or those of relatives, they (allegedly) used American bank accounts, and they generally didn't seem to be very interested in covering their tracks. Particularly in the last decade, longtime corruption eased the (alleged) criminals into a sense of complacency as they (allegedly) brazenly solicited bribes, which they barely attempted to hide.

This is why I called Sklar. I wanted to find out how money laundering detection works from a law enforcement perspective, and whether the FIFA officials were caught because of their laziness and lack of criminal creativity.

Before we get into the specifics of FIFA's case, it's important to know how money laundering and racketeering investigations work. Fifty years ago, Sklar says, things were different. If you set up accounts in a few different countries and shuffled the money between them, you'd probably be fine. But one of the most common countries to keep laundered money, the Grand Caymans—a place several FIFA execs used for bank transfers—has become much more vigilant about financial crimes, as have other conventional money laundering havens.

In the U.S., banks will file Suspicious Activity Reports, or SARs, if they notice a drastic increase in wire transfers, cash transactions, or other behavior anomalous with an account's history. One SAR is unlikely to trigger an investigation, but three or four on the same account could. The bank—or the authorities—may do a little independent research on the individual or business in question and see if the amounts in question make sense given the individual's reported cash flow. For example, if I, a lowly journalist at an internet company, suddenly started receiving $10,000 in wire transfers every week in addition to my (much smaller) biweekly direct deposits, this would be considered highly suspicious activity.

Like an onion, a good money laundering scheme has many layers. Jack Warner's did not. Photo by EPA.

To avoid suspicious activity alerts, a careful money launderer would not simply dump funds into their bank account. Instead, they would use a process called layering, which is just a fancy term for trying to cover up where the money came from.

Layering is not always "sophisticated," as the DOJ's indictment described FIFA officials' efforts. The DOJ will often refer to layering efforts as such even when they're quite pedestrian, according to Sklar. Layering will not stop a determined investigator from tracing bribes or other improper proceeds—from, say, drug sales or prostitution rings—back to the source. It will, however, make them more likely to give up on the investigation if three, four, or five leads don't go anywhere and they have 30 other SARs sitting on their desks. The feds have their hands full busting terrorism funding rings, not to mention all other white collar crime. Financial crime units are busy, and the more difficult it is to trace a specific laundering scheme, the less likely it is you'll get caught. Or, as Sklar put it, "Which criminal is easier to catch: the guy who's running away from you, or the guy who says OK, I give up?"

Sklar says that if he were a "bad guy"—which he isn't, and we aren't advising that you, the reader, should be either—he first would have set up a company and a matching corporate account without any way to trace it back to himself. To be extra careful, he might create multiple companies that shuffle money between them. Then, he can use the corporate checking accounts to pay for things directly, without ever dirtying his personal finances.

This isn't quite what FIFA officials did. Some, for example, did set up corporate accounts, but rarely did they use more than one or two layers of separation, and it's not clear if they mixed corporate and personal accounts. See, for example, paragraph 148 of the indictment:

Co-conspirators 10 and 6 seemed to be mostly used as intermediaries during wire transfers: media companies would wire money to the co-conspirators, who would in turn wire the money to the FIFA executives. This seems pretty typical: FIFA officials tended to use one layer of separation, which is hardly enough to deter an investigator.

Others were even less inventive:

Or:

Or:

But, none of the FIFA officials seemed to do the one thing that would have helped them the most: pay taxes.

Not many money launderers think to pay taxes for obvious reasons. But Sklar made clear this would be a wise step if you wanted to make dirty money appear clean. Sure, you'd lose a solid percentage of your loot, but any money launderer is likely to pay someone a fee to act as an intermediary (I highly doubt Co-Conspirators 6 and 10 were willing to put themselves in the middle of a felony enterprise out of the goodness of their hearts). By paying taxes, all your personal expenditures can be traced back to a taxable income from a registered company. If a bank questions the source of the money, you can credibly say your private enterprise earned it as a consulting fee and was taxed accordingly.

Banks are incredibly unlikely to file a SAR for income reported on your tax return, and the authorities would be forced to prove that a fraudulent consulting fee or invoice was just that, a very difficult task if all parties insist otherwise. It is, by comparison, quite easy to prove income tax evasion.

This tax issue likely sits at the crux of FIFA's downfall. It seems pretty clear from the indictment that Chuck Blazer, he of the Trump Tower cat apartments, got pinched for tax evasion, which he could have avoided by, you know, paying taxes. Once he got apprehended, he snitched on the rest of the operation, at which point it didn't really matter how careful anyone else was. As it often happens with criminal syndicates, one snitch destroyed the entire operation. Once the feds flipped Blazer, no accounting trick in the world could have saved the rest of them.

This, Sklar says, is the holy grail for any investigator working on a money laundering case. "The hopes of finding someone who is willing to say, 'OK, yes, I want to save my own neck, and this is how everything's been structured over a period of time.' From everything I've read, that's what I firmly believe [happened]. But then again, I don't have all the facts." Whether or not this is how it all went down, paying your taxes is never a bad idea, whether you're a corrupt FIFA executive or not.