Football is not the national sport of Russia (that accolade goes to ‘bandy’, a form of ice hockey), but it is the most watched sport in that country. As such, it should come as no surprise that since the creation of the Premier League in 1992, and the huge TV and sponsorship deals that went hand in hand with it, club ownership has become an attractive proposition for those who can afford it, including Russian oligarchs.
In 2003, Roman Abramovich bought Chelsea Football Club from Ken Bates for a sum of £140m and, arguably, changed English football forever. In the 19 years since he took over, and under his patronage, he has seen Chelsea FC win multiple trophies, including five Premier League titles and two Champions League trophies (arguably the biggest competition in club football). Nevertheless, success has come at a cost, with Abramovich reportedly having loaned the club around £1.5bn over the years.
However, Abramovich’s tenure in West London appears to have come to an abrupt end. With the conflict in Ukraine raging, Abramovich’s ties to the Russian state (he was elected to the State Duma in 1999, served as Governor of Chukotka between 2000 and 2008, and most crucially is said to have a very close personal relationship with Vladimir Putin) have seen him fall under worldwide scrutiny . In particular, the UK Government announced on 10 March 2022 that it was imposing sanctions on Abramovich and freezing his UK assets, including Chelsea FC.
Russian-Uzbek billionaire Alisher Usmanov, a close ally of Putin’s, who previously owned a 30% share in Arsenal FC (2007-2018) and now holds a financial interest in Everton FC, was also sanctioned by the UK government earlier this month. Everton FC announced that they have cut all ties with him.
Abramovich’s takeover in 2003 started an arms race of spending amongst clubs, with many consequently opening their doors to any ‘benevolent’ billionaire looking to invest. Technically, this should not have been a problem. The ‘fit-and-proper-person test’ or director's test, introduced into UK football in 2004 after Abramovich’s takeover, was supposed to prevent corrupt or untrustworthy people from becoming owners and directors of major British football clubs. It is safe to say its success has been limited.
Just Russian money?
Whilst the Russian invasion of Ukraine has crystallised the issue of foreign investment in football clubs, owning a football club is not just the preserve of oligarchs.
In 2007, despite a history of human rights violations during the brutal drugs war in Thailand and allegations of corruption, Thai politician and businessman Thaksin Shinawatra was allowed to buy Manchester City FC.
Similarly, Carson Yeung, who had been convicted of financial crimes in Hong Kong in 2004, was allowed to buy Birmingham City FC in 2009 after it was decided that the offences for which he had been convicted, namely 14 counts of failing to disclose shares he owned in a stock exchange-listed company, were not criminal offences in the UK. He was subsequently convicted of money laundering and sentenced to six years in prison in 2014. Some of the laundered funds were identified as having been used to purchase the club in 2009.
Most recently, the protracted takeover of Newcastle United FC by the Saudi Arabian Public Investment Fund (PIF), the national sovereign wealth fund, was finally completed in October 2021. Despite Newcastle United providing legally binding assurances that the Kingdom of Saudi Arabia will not control the club, the takeover has seen public condemnation due to the involvement of the controversial Mohammed bin Salman, who is the Crown Prince of Saudi Arabia and the chairman of PIF.
‘Sportswashing’
The purchase of Newcastle United led to many claims that the Saudi state was attempting to engage in ‘sportswashing’, effectively diverting attention away from its human rights record by association with a more positive brand. Its image has been severely tarnished by its actions in the vicious civil war in Yemen since 2014, in which it has been accused of leading an indiscriminate bombing campaign targeting civilian areas, and by the murder of Saudi journalist Jamal Khashoggi in 2018.
Club ownership is not the only way for individuals to ‘launder’ their reputations. Ever since Germany hosted the 1936 Olympics, nation states have entertained ways to improve their global standing by sponsoring or hosting major sporting events. Gazprom, a Russian majority state owned energy company whose chairman is a close ally of Putin’s, has sponsored German club FC Schalke since 2007 and the UEFA Champions League since 2012 (both deals now having ended following the invasion of Ukraine).
In 2010, Russia and Qatar were chosen to host the 2018 and 2022 football World Cups respectively. Russia’s winning bid followed the assassination of Alexander Litvinenko in 2006 and the invasion of Georgia in 2008, neither of which seemed to negatively influence the judges’ decision. In Qatar, neither a history of human rights abuses or the safety of LGBT fans or players appear to have been taken into consideration before awarding the tournament.
In 2010, Lord Triesman, the head of England’s bid to host the 2018 World Cup, resigned after being secretly recorded making allegations that rival countries had engaged in bribery attempts to secure the tournament. Lord Triesman specifically named Russia and Qatar. Whilst the allegations were not proven, his predictions of which countries would be successful at the bidding process were accurate.
Where does football go from here?
Football undoubtedly has a money problem. When Roman Abramovich walked into Chelsea in 2003, there were cries from many quarters - fans and journalists alike - that he ‘bought’ the club’s success and that his money had ruined the game. Whilst this is hugely simplistic (and rooted mostly in a classist ‘old v new money’ paradigm), it does beg the question of whether football is intrinsically greedy. Are the owners, directors, players and even the fans so enamoured with the thought of success that they are willing to turn a blind eye to the origins of the wealth?
Investor due diligence is a key tenet of anti-financial crime work. Identifying a potential investor’s source of wealth and funds is a prerequisite for running a regulatory compliant financial institution. So why, for years, has football been given a free pass?
The Premier League’s chief executive has said the organisation is reviewing the owners’ and directors’ test and looking at whether more tests need to be added and whether independent scrutiny needs to be included. Some remain sceptical about how much will actually change, given Abramovich’s links to the Kremlin and the concerns around his source of wealth were clear to all from the start. But ultimately, if this moment is to represent a turning point, momentum and change must come from the top. It is unrealistic to expect clubs to apply too much scrutiny and turn away investment, thereby making themselves uncompetitive, when their peers are not and when no one is compelling them to do so. So the onus must be on the governing bodies to strengthen the regime and give it real teeth.
However, while recognising that it is likely naive to expect clubs to turn down money, the Chelsea saga does show how a permissive approach can backfire. Like financial institutions, football clubs need to actively consider their risk appetite and what risks they are prepared to accept, and then carry out adequate due diligence to determine where funds are coming from and what the legal and reputational implications may be. And financial institutions who bank football clubs, professional bodies and other related parties need to be aware of the sector’s vulnerabilities, and know how to interrogate and assess their clients so they can take a nuanced, risk-based approach and identify good and bad actors.