Global Financial Integrity


Money Laundering

What’s Going to Happen to the FIFA Forfeiture Money?

夜間足球 Nighttime Football (Soccer) by See-ming Lee [CC BY 2.0], via Flickr.

GFI’s Heather Lowe Proposes Reinvesting FIFA Forfeiture Funds in Inner-City Youth Soccer Programs

Following from my blogs on Friday and Monday about different aspects of the FIFA case, I’d like to talk a little bit about the forfeiture funds and penalty payments that the U.S. Department of Justice (DOJ) will be collecting in this case and what will happen to them. A proceeding like the FIFA case can result in a really large pile of cash that will be under DOJ control. Unless the Defendants are acquitted of the charges against them at trial or the DOJ decides to drop the case against a Defendant for some reason, we can expect that the DOJ will be collecting from those Defendants the bribe money that they received, anything they bought with that money that will then be auctioned off (for example, check out the list of real estate that will likely go under the hammer in Florida and Georgia from paragraph 343 of the indictment), and, possibly, additional fines in the form of penalties. It is going to add up.

Recouping Expenses

It is obviously critical that the DOJ, Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS) and other government agencies that were involved in this case are able to recoup the money they spent working on this investigation over the past few years. Another way of looking at it is that they need to keep a sizable chunk in order to ensure that they have the resources to work cases like this over the next few years. No matter how you slice it, that’s important to American taxpayers as well, who pay less in taxes because the DOJ and other agencies are able to fund part of their work through forfeiture and penalty payments instead of through tax dollars. Win-Win.

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Can FIFA Victims Sue for Damages?

Brazil World Cup Resources by CAFOD Photo Library, Simon Rawles [CC BY-NC-ND 2.0], via Flickr.

The ‎FIFA Bribery Case Could Lead to Compensation for the Victims of FIFA’s Alleged Corruption

You may have noticed that the U.S. Department of Justice (DOJ) is making sure that we have an idea of whom the victims in this FIFA corruption case are. They noted it in their press release, talked about it at their press conference, and included it in the indictment at paragraph 73. I agree with the Department of Justice that the victims of this case are important. This blog is about why this case could potentially lead to compensation for those victims in a way you might not have considered.

So who are those victims? The DOJ’s indictment describes how FIFA, the FIFA confederations, the confederation members (including national member associations), youth leagues, and development programs all lost out on funds from the marketing contracts that may have been more lucrative for FIFA if there had been competitive bidding for the contracts. In addition, other sports marketing companies that may have lost out on a bid to secure the marketing rights—or may never even had a chance to bid—are also victims.

For those of us that work on development issues, this is a particularly important point. Commercial bribery distorts markets. Among other things, it can:

  1. prevent honest firms from winning bids and therefore stymie their growth,
  2. block new companies from entering a market, and
  3. weaken that market in general because the best service, price, processes, etc., are no longer going to rise to the top, keeping market standards low and depriving consumers of better quality services and products.

When a country or industry is plagued by endemic bribery, these negative economic effects increase exponentially and a country’s economy cannot grow. That’s why the DOJ doesn’t want large-scale bribery taking root in the U.S., and rightly so.

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FIFA: The Bribery Case with No Bribery Charge

FIFA World Cup 2014 Image: “400-Oz-Gold-Bars-AB-01” by Mariya Butd. Licensed under CC BY-SA 2.0 via Flickr.

This was a very exciting week for lawyers who are sports enthusiasts – the Department of Justice indicted fourteen FIFA officials, alleging that they are part of what one could conclude from reading the indictment is a massive, multifaceted, bribery ring. Informal allegations have been made before, and the whispers that FIFA is synonymous with bribery and corruption have been growing louder over the years. But this week the Department of Justice shouted it from the mountain top (or, perhaps more accurately, in front of a lot of the international press corps, which was probably more effective).

There are a number of interesting facets to the case that is now before us. The first is that for a case about bribery, a charge of bribery seems to be conspicuously absent. The Defendants were indicted for a “pattern of racketeering activity,” including charges of violating the Travel Act in aid of racketeering, money laundering, money laundering conspiracy, wire fraud, wire fraud conspiracy, and other charges that do not expressly include bribery. Why is that?

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Checking up on the Banks: Yet More of the Same

BNP Paribas

Until Global Financial Crime Punishments include Individual Prosecutions, Rogue Banks Will Continue to Do as They Please, Writes GFI’s Joshua Simmons

After the recent spate of massive money-laundering, sanctions-busting, and tax-evasion scandals involving large international banks, sometimes it seems more difficult to name a single bank that has not been exposed for wrongdoing than list all those that have. One might think that, having worked their way through so many financial institutions, investigators and prosecutors would be at a loss for what to do next. The banks, though, seem more than willing to provide more work, with many either failing to meet their ends of their settlement agreements, continuing to move money for criminals and tax-evaders, or both.

Standard Chartered, which settled charges in mid-2012 related to its widespread activities violating U.S. sanctions on Iran, Burma, Libya, and Sudan, paid an additional fine this summer for failing to uphold its obligations under the settlement. The bank may now be in line for even more punishment, after new information seems to indicate additional transactions with Iranian entities that weren’t disclosed or admitted in the original settlement. It’s not presently clear whether Standard Chartered retained a relationship with Iranian customers after its settlement in 2012, but it certainly continued to take their money after the initial investigation began.

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What Fixing the Vatican Bank Means for All Banks


Reforms at the Vatican Bank Should Pave the Way for Transparency Improvements at Larger Financial Institutions

Last week, Pope Francis announced that French investor Jean-Baptiste de Franssu will head the Institute for Religious Works (IOR). Franssu’s appointment, as well as the appointment of an entirely new board, signals a new phase in the Holy See’s project to restore faith in the scandal-ridden bank.

Franssu’s predecessor, German Ernst von Freyburg, is credited with initiating the process of freezing and blocking suspicious accounts at the bank, having blocked 3,000 of the 19,000 total accounts. Cardinal George Pell, the Vatican’s top finance official, hopes to continue this legacy, saying “our ambition is to become something of a model in financial management rather than a cause for occasional scandal.”

This transition, however, has generated substantial losses for the bank. The closed accounts accounted for between 60 and 70 million dollars of assets leaving the bank. An audit by Promontory Financial also added to the price tag.

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China’s Underground Bank


Reforms Will Need to Be Further-Reaching and Institutionally Minded if China Hopes to Truly Curb Corruption and Illicit Financial Flows

The coverage of China’s financial sector has been quite the roller coaster of late: from President Xi Jinping’s anti-corruption campaign to bad loan collateral to CCTV’s exposure of the Bank of China’s “money laundering” schemes, it’s hard to discern the emerging country’s financial status.

However, one thing remains eminently clear: China has a deeply systemic illicit financial flow problem. It comprises both the individuals singled out in Xi’s purge (and a myriad of those who are not) as well as the corporations that facilitate this illegal behavior. According to our research, China remains the largest exporter of illicit money, with over a trillion dollars flowing illegally out of the country from 2002-2011:

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Kenya’s Removal from FATF’s Gray List Doesn’t Mean Much

FATF removed Kenya off the grey watch list.

Don’t get too excited about Kenya’s removal from the Financial Action Task Force’s (FATF) gray list.

The FATF list of “high risk and non-cooperative jurisdictions” is a list of countries that the organization believes to be doing very little in the global fight against money laundering and terrorist financing. The list is based off a series of 40 recommendations that it expects countries to abide by to reduce money laundering and terrorist financing. These recommendations include, among other things, the regulation of banks and other financial institutions. Countries that do not adequately address these expectations are placed on the black or gray list based on varying degrees of compliance.

In 2010, FATF placed Kenya on a list of high risk countries for delays in enacting laws to tackle criminal financial activity as well as a failure to track money laundering.

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Put an End to Money Laundering, Bribery, and Corruption


Curbing Cross-Border Corruption via Anonymous Companies Should Be a Priority for Global Leaders in 2014, Says Transparency International’s Cobus de Swardt

Corruption around the world is facilitated by the ability to launder and hide proceeds derived from the abuse of power, bribery and secret deals. Dirty money enters the financial system and is given the semblance of originating from a legitimate source often by using corporate vehicles offering disguise, concealment and anonymity. For example, corrupt politicians used secret companies to obscure their identity in 70 percent of more than 200 cases of grand corruption survey by the World Bank.

For far too long, corrupt figures have been able to easily stash the proceeds of corruption in foreign banks or to invest them in luxurious mansions, expensive cars or lavish lifestyles. They do this with impunity and in blatant disregard for the citizens or customers they are supposed to serve.

Importantly, the corrupt are aided by complacent and sometimes complicit governments of countries with banking centers that facilitate money laundering and allow the corrupt to cross their borders to enjoy stolen wealth. Weak government actions are failing to prevent the corrupt from evading justice and have enabled cross-border transfers of corrupt assets. Complacent governments responsible for protecting the public from such criminal acts are de facto supporting impunity for corruption.

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