Financial Transparency Coalition

Early this morning in Switzerland, some of the most influential officials in the worldwide soccer body, FIFA, were probably waking up or getting ready for breakfast. What happened next was, most certainly, unannounced and unexpected.

Plain-clothes Swiss authorities raided a hotel in Zurich, where FIFA officials from around the globe had gathered for the body’s annual meeting. What followed was an indictment by the U.S. Department of Justice of nine FIFA officials and five corporate executives on charges of corruption, money laundering, and bribery involving everything from who was awarded lucrative television contracts to where the World Cup tournament would take place.

From the New York Times:

“These individuals and organizations engaged in bribery to decide who would televise games, where the games would be held, and who would run the organization overseeing organized soccer worldwide,” said Ms. Lynch, who supervised the investigation from its earliest stages.

The Department of Justice indictment names 14 people on charges including racketeering, wire fraud and money laundering conspiracy. In addition to senior soccer officials, the indictment also named sports-marketing executives from the United States and South America who are accused of paying more than $150 million in bribes and kickbacks in exchange for media deals associated with major soccer tournaments.

While FIFA has endured numerous allegations of corruption in the past, U.S. Justice Department officials have said that this indictment is “just the beginning” and more charges could potentially be on the way. Though the headlines have focused on the list of officials charged, the absence of embattled FIFA President Sepp Blatter from that list, and the actual charges themselves, if you dive into the 164-page indictment document, you’ll see that some time-honored secrecy tactics were once again at work to move money and hide identities.

On page 29 of the document, the Justice Department reveals that these officials allegedly created shell companies in tax havens to funnel illicit money and bribes, often relying on “nominee directors” or a lack of disclosure requirements to conceal their identities. The DOJ points out that much of this activity took place in jurisdictions where secrecy is coveted, allowing the officials to allegedly hide their identities, as well as any bank accounts that may have held cash from their bribes.

From the indictment:

The conduct engaged in by various members of the conspiracy included, among other things: the use of “consulting services” agreements and other similar types of contracts to create an appearance of legitimacy for illicit payments; the use of various mechanisms, including trusted intermediaries, bankers, financial advisors, 29 and currency dealers, to make and facilitate the making of illicit payments; the creation and use of shell companies, nominees, and numbered bank accounts in tax havens and other secretive banking jurisdictions; the active concealment of foreign bank accounts; the structuring of financial transactions to avoid currency reporting requirements;

While the full indictment is certainly worth a read in its entirety, lets take a look at one example of how secrecy jurisdictions and hidden ownership aided the alleged corruption. According to the DOJ, two individuals behind a company called Full Play Group made bribe payments to secure the exclusive media and marketing rights to the Copa America, a bi-annual tournament of national teams throughout South America, from 1993-2011. But they knew that these payments couldn’t just be made out in the open, so they did the next best thing: created an anonymous company.

From the indictment:

The defendants Hugo Jinkis and Mariano Jinkis set up another account at Bank Hapoalim in Zurich, Switzerland – the same bank where Datisa held its account – in the name of another Full Play company called Bayan Group S. A. (“Bayan”) , a Panamanian company used specifically to pay bribes. On or about January 31, 2014, 107 February 27, 2014, and July 23, 2014, Hugo Jinkis and Mariano Jinkis caused payments of $50,000, $250,000, and $400,000, respectively, to be sent from the Bayan account to accounts in the names of entities controlled by the defendant Rafael Esquivel at UBS, Bank of America, and Espirito Santo Bank in Miami, Florida. The bribe payments to Esquivel were made in this manner so as to conceal their true source and nature.

The last sentence of this paragraph summarizes a criminal’s rationale behind using secrecy jurisdictions perfectly. They simply allow you to “conceal [a payment or deposit’s] true source and nature”. But this simplicity also begs an obvious and oft-asked question: why do we have a financial system that includes tools to distort ownership, conceal payments, and hide in the shadows in the first place?

Introducing increased transparency measures would help governments and authorities track down corruption, money laundering and tax evasion that much sooner, business investors would be able to have more confidence in who they were actually doing business with, and journalists and concerned citizens would be able to keep a watchful eye on multinational corporations doing business in their backyard.