WHERE FINANCIAL CRIME, GEOPOLITICS AND SPORT COLLIDE: Is this the Law of Unintended Consequences?

Russian troops entered Ukraine on 24 February 2022. Within three weeks the UK Government conjoined with the US and EU to crack down on “dirty money” and “corrupt elites” by imposing a raft of Sanctions upon a broad class of persons/entities deemed to be involved in obtaining a benefit from or supporting the Kremlin. UK Government also fast-tracked into law the Economic Crime (Transparency and Enforcement) Act 2022 that aims in part to deliver transparency into the ownership of UK real estate owned by overseas entities and to toughen existing Sanctions legislation. The over-arching implications of the legislation extend beyond Vladimir Putin and can already be seen to have impacted upon sport in particular. The most high profile target of UK sanctions legislation to date has been Russian billionaire and former owner of Chelsea FC, Roman Abramovich. The repercussions however have been felt beyond football and extend into wider allegations of “sports-washing”. By a curious juxtaposition of timing and target, on 11 April 2022 the US Treasury announced sanctions against seven members of the suspected ‘Kinahan Organised Crime Group’ (KOCG) drug cartel together with three associated corporate entities and offered a $5m reward for information leading to their arrest. Most prominent among them is Irish-born Dubai-based Daniel Kinahan whose assets there have recently been frozen by the UAE. He is said to have been an advisor to a number of internationally acclaimed boxers including Tyson Fury and to have negotiated some huge fight deals in recent years through his alleged links to the boxing management & promotional company MTK Global and its fighters. The planets of Crime, Geopolitics and Sport collide. After four months of headlines, financial crime and sports compliance specialist Simon Pentol QC provides an essay in retrospect in which he reviews the legal framework, attendant developments and ramifications for certain sports / their stakeholders.

 

Sanctions

In essence, the term ‘Sanctions’ covers a range of measures designed to bring about an adverse impact by means of prohibitions and requirements against targeted foreign countries, persons (individuals or corporates) or third parties that otherwise deal with or trade with them.   The use of economic sanctions this millennium as a mechanism by which Western governments and international bodies seek to curtail military aggression and/or human rights abuses by other regimes/states, has intensified. The deployment of sanctions to freeze the assets of an entity/individual/government or prevent financial services / economic resources being made available to that entity/individual/government is carried out with the objective of severing the financial arteries of the offending recipient and bring them to heel without recourse to military intervention and/or having to institute complex criminal proceedings that require a higher standard of proof. The presumption of innocence does not feature. It is claimed by respected sources that in the three months since the date of invasion, more sanctions have been imposed on entities linked to Russia than had been applied worldwide in the last decade. As the West embraces the mechanism of sanctions as a means by which to signal its opposition to Russian military aggression, the stark reality of the size and scale of the exercise is becoming evermore apparent for both the enforcers and those entities / their legal advisors trying to stay on the right side of the law. Many Russian or Russian-linked entities susceptible to sanction have labyrinthine business structures and are far larger, increasingly complex and more deeply rooted in global business networks than might otherwise be apparent on the surface. This is not as straightforward as sanctioning previous targets in Libya, Syria, or Venezuela et al. It all creates a genuine problem of enforcement and by corollary an equal problem of compliance when for example a GB company might be susceptible to Sanction as a subsidiary to a Russian sanctioned energy giant by way of obliquely having issued it a financial instrument. It’s not as straightforward as simply identifying a prominent individual allegedly linked to Putin, slapping them with an asset-freezing order and denying them entry to the UK. Whereas the punitive element of Sanctions properly signals opposition to international aggression, enforcement and compliance remain problematic. It is as equally far from straightforward to measure the success of Sanctions. They are often imposed as part of a package of other measures all of which cumulatively risk retaliatory economic action and create the potential for creating unanticipated alliances between national governments such as driving Russia closer to China that in turn will inevitably generate a new set of problems. Some might say that Sanctions seldom work – and in the case of Russia, a cynic might argue that four months on, self-sufficient Russia is carrying on carrying on, much of western Europe is living in fear of inflation or having its gas supplies turned off and half the world’s population live in countries that have no intention of imposing sanctions against a country they regard as a necessary bulwark against the decadent West. And then there is the danger of unintended consequences . . .
 

UK Legal Framework: The Sanctions & Anti-Money Laundering Act (‘SAMLA’) 2018

The legal framework by which the UK has imposed Sanctions on more than 1000 entities/persons post the invasion of Ukraine, is provided by SAMLA 2018.
SAMLA was introduced into law on 31 December 2020 upon us leaving the EU to enable the UK independently of the EU and/or the UN to impose its own economic & other sanctions (Part 1 of the Act) with which this essay is concerned, together with money laundering / terrorist financing regulations (Part 2 of the Act).
 

Sanctions – Sec1 SAMLA

 
Sec.1 SAMLA confers upon the relevant Minister the wide powers to impose Sanctions regulations by statutory instrument for the purposes of:
Compliance with a UN or other international obligation; or
 
Achieving one of a number of defined “discretionary purposes” including the prevention of terrorism, promoting national/international security, and promoting compliance with international humanitarian or human rights laws (“Magnitsky-style”).
 

Criteria for Imposition

The single criterion for imposition is simply where it is deemed “appropriate” in order for the UK to meet its international obligations or to meet one of the stated purposes. This contrasts with the EU requirement that allows for sanctions in situations only when considered necessary and proportionate.
 

Types of Sanction include:

Financial – essentially: ‘asset-freeze’ and/or the prohibition of financial services / funds or economic resources being provided to or received from designated persons;
Trade;
Immigration;
Aircraft;
Shipping; and
Those to aid meeting UN obligations.
 

Designation

Those persons or organisations targeted for sanction tend to be powerful and/or have substantial wealth. However and controversially, SAMLA confers upon the appropriate Minister the power to ‘designate’ persons to be sanctioned not only by name but also by description in circumstances where the minister could not practically name every individual who fell within the description but whose identity from the description, could be established by a reasonable person.
The persons or entities so ‘designated’ in response to the Russian invasion of Ukraine are those considered to be involved in or obtaining a benefit from or supporting the Russian government.
 

Challenging a Designation

Sec.23 allows for a designated person to request that the minister vary or revoke the designation. The onus of proof is upon the challenger. Set against the historic backdrop of difficulty in overturning UN sanctions where certain persons have remained blacklisted even when dead, the only inference to draw is that variation or revocation will be far from easy.
Any subsequent legal challenge by way of Judicial Review will be equally as difficult as it places the onus on the applicant to establish that the relevant minister erred or acted ultra vires in deeming the designation “appropriate” or otherwise that the decision was “Wednesbury unreasonable”.
 

Implementation

UK sanctions post-Ukraine invasion have been implemented thus far through various Russia (Sanctions) (EU Exit) (Amendment) Regulations.
Individuals and entities that are so ‘designated’ together with the reasons therefor and the scope of Sanction, are published on the UK Sanctions List.
 

Sporting Context - Football

The most high profile individual so far sanctioned is Roman Abramovich. Until recently, he was the majority shareholder of Chelsea FC. He is described in designation as a “prominent Russian businessman and pro-Kremlin oligarch associated with a person who is or has been involved in destabilising Ukraine . . . namely Vladamir Putin”.
 
Similarly sanctioned by the UK and EU for his ties to Putin is the Uzbekistan-born billionaire Alisher Usmanov, a close business associate of Farhad Moshiri the majority shareholder of Everton FC. In 2017 Usmanov’s company USM Holdings began a five-year sponsorship of Everton’s training ground and also paid £30m for a first naming rights option on Everton’s new stadium – deals that were immediately suspended as a result of UK government freezing all Usmanov’s assets in the UK and preventing British entities from dealing with him. Mr. Usmanov has publicly vowed to challenge his designation.
 
By immediate extension and at its AGM in early June 2022, the English Premier League (EPL) suspended its six-year £43m broadcasting deal with Russian station Match TV due to its reputed links to the Kremlin via its ownership by Gazprom Media, a subsidiary of Gazprombank that was established in 2009 by decree from Vladimir Putin.
 

Enforcement

Enforcement falls under the auspices of the Office of Financial Sanctions Implementation (OFSI).
Breaches or contraventions of sanctions legislation can be enforced either civilly or criminally. Breaching a sanction amounts to a criminal offence punishable by seven years’ imprisonment and/or the imposition of an unlimited fine.
 

Exceptions by Licence

By secs.64-66 within Part 7 of The Russia (Sanctions) (EU Exit) Regulations 2019, UK Government is allowed to issue licences that authorise Russian associated sanctioned persons/entities to carry on business within circumscribed limits.
Dovetailing: the Economic Crime (Transparency and Enforcement) Act 2022 (the Act).
 

Background

The 2016 announcement by (then Prime Minister) David Cameron as to the possibility of the creation of a register of overseas owners of UK real estate and the 2018 draft Economic Crime Bill were both left on the back burner until events in the Ukraine fast-tracked into law the Economic Crime (Transparency and Enforcement) Act 2022 with the aim of simply identifying, tracing and enforcing measures against ill-gotten wealth.
The speed with which the Bill was drafted in order to receive its Royal Assent on 15 March 2022 is reflected by the fact that four months on, the only sections of substance of the Act currently in force concern Unexplained Wealth Orders (UWOs) in Part 2 and Sanctions in Part 3 of the Act. Neither creates new law, they just toughen existing law.
 

Legal Framework

The Act applies across the UK and comprises three Parts as follows:
 
Creation of a Register of Overseas Entities (Part 1, sections 1 to 44 of the Act).
Amendments to the Unexplained Wealth Order (UWO) regime (Part 2, sections 45 to 53 of the Act).
Amendments to the existing legislation on UK sanctions (Part 3, sections 54 to 66 of the Act).
 

Brief Overview

Of most relevance to Sport are Parts1 and 3.
 

Part 1: Register of Overseas Entities:

Per the explanatory notes to the Act, the Register is to “deliver transparency about who ultimately owns and controls the overseas entities that own land in the UK.” It is to act as a deterrent to those who would seek to hide and launder the proceeds of bribery, corruption and organised crime held in real estate in the UK. The regime is to apply retrospectively and applies to overseas entities that became the registered proprietor of land pursuant to an application made to the Land Registry on or after 01 January 1999. The Register is to be operated by Companies House and so becomes the third register of beneficial ownership in the UK, alongside The People with Significant Control (PSC) and Register for Companies & Trusts.
Essentially, the Act provides that any overseas entity wishing to own UK land would need to identify their beneficial owners and register them within six months of this part of the Act coming into a force on a date yet to be assigned.
An Overseas Entity is defined as any body corporate, partnership or other entity that is governed by the law of a country or territory outside the UK.
Importantly, not all beneficial owners need to be registered – a beneficial owner for these purposes is any party that holds more than 25% of the shares or voting rights in an entity.
Failure to register or submitting false information will be a criminal offence and will also prevent the overseas entity from being able to buy or sell (or mortgage) UK property in the future. A transfer of land by an overseas entity in breach of the registration requirement will also amount to a criminal offence committed not only by the overseas entity but also every responsible officer of it, punishable by a fine or imprisonment.
 
Significantly for football, this part of the Act will require disclosure of all/any overseas entities that own the real estate associated with any club including the stadium, training ground or any other land either owned by the overseas beneficial owners of the club or by a separate overseas entity as is now a common occurrence at a number of clubs whose stadia or other real estate are not owned by the club itself.
 

Part 3: Sanctions

Since its creation in 2016 and despite its criminal enforcement powers, the OFSI has only brought six enforcement actions all of which were civil and the largest of which was for circa £20m issued against Standard Chartered Bank.
Most pertinently, this part of the Act amends the sanctions designation under section 58 by removing the SAMLA “appropriate” test to allow a Minister to speedily designate an individual or entity “urgently” for 56 days to mirror the sanctions imposed by other Western allies even when no reasonable grounds exist to suspect that the individual or entity would otherwise qualify for sanctions designation.
 

Additionally and importantly, the Act amends the Policing and Crime Act 2017 and SAMLA 2018 by:

Giving the OFSI the power to enforce Sanctions breaches on a strict liability basis, having removed the defence to a civil action of a person neither knowing nor suspecting their transaction or activity was in breach of a Sanction (sec. 54); and
 
Giving the OFSI the power to publicly name companies that have breached Sanctions on the balance of probability even when those companies have not been issued with a fine (sec. 56).
 

For completeness – The Government ‘White Paper’ on reforms of Companies House

On the same day (28 February 2022) as the government published its draft bill for the Economic Crime (Transparency and Enforcement) Act, the Department for Business, Energy & Industrial Strategy announced its proposals for reforming the workings of Companies House to provide greater corporate transparency and compliance to oversee the creation and operation of corporate entities in the UK.
The reforms are premised upon turning Companies House from a passive recipient of information to a more active gatekeeper and custodian of more reliable data.
In essence, these involve verification of the identity of anyone setting up/controlling a company in the UK, giving Companies House the power to challenge suspicious information and prohibiting company agents from overseas from creating companies in the UK.
Although no timetable has been set, expect these measures to be included within a further Economic Crime Bill anytime soon.
 
All 92 Football League clubs in England are corporate entities and will have to comply with the new regime.
Similarly affected will be all UK corporate entities involved in the provision of services connected to all sports.
 

The Ramifications for Sport in general

Preface

For sometime, suspicions of “sports-washing” (the purchase or sponsorship of sporting teams to improve reputation) and/or laundering ill-gotten gains or facilitating other economic crime via the business of high-end sports (football and boxing in particular) have infiltrated top-level sport.
Traditionally these sports have turned a blind eye. Recent events should promote a clarion call for greater diligence.
 

Roman Abramovich and Chelsea FC

Background

Publicly available information from Companies House discloses that Mr. Abramovich owned 75%+ of the shares in Fordstam Limited, then the ultimate parent company of Chelsea PLC.
Despite the inveterate suspicions linking his considerable wealth to the multi-billion dollar profit made on his acquisition at a knock-down price and subsequent resale of the giant Russian oil producer Sibneft [renamed Gazprom] (as confirmed by him in High Court proceedings in 2012 against fellow oligarch Boris Beresovsky when Jonathan Sumption QC on behalf of Abramovich conceded that his client was party to a “corrupt” deal that was no more than how business was done in Russia at that time) together with his reputed ties to the Kremlin, which he denies, no action had been taken against Mr. Abramovich until the invasion. All of this had been known for some time – but it didn't stop Chelsea from taking his money or the English Premier League and the FA from welcoming him. There was in terms, a reconstructed morality to ignore his past when he bought Chelsea FC back in June 2003. He was one of a number of super-rich Russians welcomed into the UK under the ‘golden visa’ scheme operated by governments of both political persuasions, as the acceptable face of Putin’s Russia. No one it seems was bothered to check the source of all this Russian money.
It has been reported that in 2018 he withdrew his Tier1 Investors Visa application thereby avoiding scrutiny into the source of his wealth and subsequently was even refused entry to Switzerland to protect its international reputation. Nevertheless, no action was taken against Mr. Abramovich until the Russian invasion of Ukraine despite him being latterly being described on the UK Sanctions List as also benefitting from contracts in the run up to the Russia-hosted World Cup in 2018.
For all of this, documents submitted on behalf of Mr. Abramovich as part of his legal challenge to the imposition of EU Sanctions reportedly show that the UK was perfectly agreeable to banking the cumulative £1.75b in tax that he paid.  His challenge is premised upon the argument that the EU Sanctions are discriminatory, disproportionate (the EU Test) and wrongly allege his closeness to Putin. Should he succeed, one might imagine that similar submissions will be made to the UK Government albeit the bar for imposition is lower here than the EU.
Whether or not he jumped before he was pushed, but within days of the invasion of Ukraine and before he was eventually sanctioned, Mr. Abramovich announced his departure from Chelsea FC and his intention to sell the club.
In his 19 years at the helm of Chelsea FC, Mr. Abramovich’s spending transformed the fortunes of the club. It brought them unparalleled success and turned Chelsea from an established if middle-tier Premier League club, into one of Europe’s elite. Respectfully, none of this would have been possible but for the provision by Mr. Abramovich of £1.6b in personal loans that he agreed to write-off. This in turn allowed Chelsea FC to buy on-field glory at un-recoupable expense. In the process, it distorted the wage / transfer-fee structure atop the football pyramid to such an extent that the regulators had to invent Financial Fair Play rules in an attempt to curb runaway expenditure.
 

Effects of Sanction on Chelsea FC

The ‘asset freeze’ elements of the Sanction imposed upon Roman Abramovich were so widely drawn as to restrict the running of any business let alone a football club.
Even though Chelsea FC had not been named as a designated entity, its assets were frozen because it was controlled by an entity in which Mr. Abramovich held a majority stake.
The impact of the Sanction would have forced Chelsea FC to cease trading within days . . .
 

The Chelsea FC Licence

Recognizing the inevitable cessation of Chelsea FC and taking account of sporting-integrity implications, the Government elected to issue Chelsea FC with a general licence that allowed it trade until 31 May 2022 and operate a limited number of football-related activities.
These included: paying its playing and non-playing staff, paying those bills contractually agreed before 10 March 2022, meeting reasonable costs for hosting home fixtures / competing in away fixtures and receiving broadcast fees together with match-day revenue from refreshments. All revenue so received was however immediately frozen.
As a counterpoint, there was a prohibition on receipt of ‘inter-club’ payments for transfer fees for player sales not in place before 10 March 2022 and a prohibition upon the renewal of player contracts for players out of contract at the end of the season. The latter resulted in the formidable Antonio Rüdiger choosing to depart for Real Madrid and Andreas Christensen departing to Barcelona rather than be left in limbo unable to renegotiate their contracts before 31 May 2022.
 

The Sale of Chelsea FC

Whereas the licence initially prohibited the sale of the club, the Government eventually allowed its sale on the strict understanding that none of the proceeds went directly or indirectly to Mr. Abramovich and any charitable donations therefrom do not bear his name.
Having undergone a complex bid process, the consortium led by the part owner of baseball’s LA Dodgers, Todd Boehly, eventually bought the club (or the ‘franchise’ as he’d call it) for £2.5b with the promise of a further £1.75b committed to fund both a rebuild of Stamford Bridge stadium and future player procurement. Of the £2.5b buy price, £1.6b was tied up in a loan from a Jersey-registered company linked to Mr. Abramovich that was extinguished in favour of charity supporting the victims of the Russian invasion of Ukraine. The EPL ratified the change of ownership.
What cannot be corrected in this new dawn however, is the massive 19-year on-field advantage enjoyed by Chelsea FC from its now maligned owner giving it a £1.6b personal handout that in turned fuelled football hyperinflation.
 

A Delicious Irony

The irony of the role of UK Government in its control of club operations via the terms of its licence and its oversight of the sale of Chelsea FC cannot be overlooked – after all, in the furore concerning the recent sale of Newcastle United FC (NUFC) to the Saudi Public Investment Fund (PIF), wasn't one of the key complaints that the club would be under effective control of the Saudi government to the extent that the EPL should have rejected the sale in its application of the Owners and Directors Test (ODT)?
My fellow BASL director Nick De Marco QC acted for NUFC at the confidential arbitral dispute arising out of the EPL’s decision-making under the ODT. I thank him for sharing that the EPL told the High Court that Saudi Arabia would fall under its definition of “control” if the PIF bought the club because, “The definition of ‘Control’ … includes either effective management control or beneficial ownership, or both. In particular, the relevant parts of the definition describe ‘Control’ as "the power of a Person to exercise … direct or indirect control over the policies, affairs and/or management of a Club …”. [2021] EWHC 349 (Comm) para 4.
Rhetorically and within this definition, how does the role of the UK Government in exercising its control over Chelsea, differ in real terms from that of the Saudi PIF?
With the government as a party to the eventual sale of the club, doesn't this contravene all rules that exclude governmental interference? Or is an exception now to be made for the unpredictable course of world events and if so, what future criteria are to be applied?
 

Ramifications for Football

Atop the direct impact upon Chelsea FC from the sanctioning of Roman Abramovich was the temporary suspension by the telecoms giant Three of its £40m per year shirt sponsorship of the club for reasons of reputational damage akin to the financial hits taken by Everton FC arising out of its suspension of lucrative sponsorship deals linked to Alisher Usmanov / his companies.
Albeit the imposition of sanctions upon Russian businessmen said to be linked to Vladimir Putin and the attendant fast-tracking into law of the Economic Crime (Transparency and Enforcement) Act 2022 have been in response to an unexpected and unique international event, it brings sharply into focus issues of club ownership, transparency, sponsorship/funding and governance in football. This dovetails with the stated aims of the recently published Tracey Crouch MP’s Fan-Led Review of Football Governance recently embraced by government in its Queen’s Speech and so adored by particular football pundits.
At its heart, the Review recommends the appointment of an independent regulator with the power to oversee the financial stability of clubs, issue licences for clubs to compete and oversee the application of the ODT in regard to source of funds, enhanced due diligence and conflicts of interest of new owners, investors & directors.
The Review was triggered predominately by the collapses of Bury FC & Macclesfield Town FC, the controversial NUFC takeover and the decision of six, top-tier EPL clubs to join the speedily disbanded European Super League.
What the Review fails to acknowledge however is that the financial instability of many clubs is linked to extraneous factors, mismanagement by owners who would otherwise have met the criteria of an enhanced ODT (such as Derby County FC) and that fan-power together with public outcry in fact brought about the demise of the European Super League (even if only for the time being).
It also ignores the role of the FA as English football’s arbiter and the splintered perspective of clubs in different tiers of the football pyramid.
Suffice it to say, a reset of the football pyramid and a fairer distribution of wealth might be long overdue but is the appointment of a government-sponsored regulator the panacea to football’s ills?
What recent circumstances have proved is that world events move fast and clubs are at risk of asset-freeze if their owners, funders and/or sponsors are linked to any foreign government or persons/entities that are sanctioned or are even susceptible to sanction.
Are future enhanced ODT considerations now to contemplate the potential ramifications of geopolitics when evaluating the suitability of prospective new owners or funders? How far is a club or sports organization to go in its assessment of the suitability of a new owner / investor or sponsor? How is any potential damage to be ring-fenced and by what mechanism?
Where would all this leave Newcastle United FC were Saudi Arabia to invade Yemen? What might be the impact upon for clubs whose owners are from or linked substantially to questionable foreign regimes such as China or Abu Dhabi, if there was to be an up scaling of alleged human rights violations? And what criteria should clubs adopt in their consideration of sponsors either linked to or promoting nation states with questionable human rights records that might be susceptible to future sanction such as the Arsenal FC (and PSG) shirtsleeve sponsorship by Rwanda?
Geopolitical factors turn all of this into a whole new ‘ball game’ (pun intended) replete with complex and competing issues affecting both the choice of commercial bedfellow and contractual considerations.
 

The geopolitical new ‘Ball Game’

Football

As a consequence of the invasion of Ukraine, FIFA banned all Russian international and club sides from competing in international tournaments. The Court of Arbitration for Sport (CAS) recently published its written reasons for upholding the ban. The CAS rejected the Russian appeal to temporarily lift the ban citing the integrity of FIFA competitions and security concerns as primary justifications.
UEFA stripped St. Petersburg of its right to hold the UCL Final, banned Russian clubs from continued participation in UEFA competitions and terminated its huge sponsorship deal with Gazprom.
The inherent contradiction
But what of the Russian/Belarusian officials that still hold seats of power/influence atop football’s governing bodies?
By way of example: Alexander Dyukov is the President of the Russian Football Union. He is one of a number of prominent Russian/Belarusian football administrators at the helm of European football. He is also the CEO of a subsidiary of Gazprom and has been sanctioned by the UK Government for ties to the Kremlin. He is not alone.
Yet he and others still hold their positions of prominence within UEFA.
How come?
 

Other sports governance

Football is not alone in its current “Janus-like” position. Russian/Belarusian officials remain influential in the governance of swimming, motor racing and tennis too.
 

Gymnastics

As a consequence of displaying the (pro-Russian) ‘Z’ emblem at his medal ceremony on the podium of the gymnastics World Cup in Doha in March, Russian gymnast and former soldier Ivan Kuliak was given a 12-month ban by the International Gymnastics Federation. Kuliak remains unrepentant but before outright condemnation of him through Western eyes, spare a thought that Russia has passed a law to the effect that saying anything other than the war is a “special operation” can get you locked-up for 15 years’.
 

Wider Considerations

The unintended consequences of signaling the right response to the Russian invasion of Ukraine extends to persons or regimes of other questionable legitimacy in their impact upon the more genteel UK summer sports otherwise considered to be a safe haven from this murky world - even when Sanctions have not been imposed.
 

Tennis – sanctioning the unsanctioned

The hornets’ nest of signaling virtue in response to the invasion of Ukraine has extended to the otherwise serene backdrop of the All England Lawn Tennis Championships at Wimbledon SW19 from where Russian and Belarusian competitors were banned from this year’s tournament. The rationale was premised upon Wimbledon’s standing as the pre-eminent world grand slam tournament in circumstances where the players cannot be separated from their nationality despite there being no link to the Kremlin or none of them having been sanctioned. Controversy ensued. The Players’ Union expressed its opposition and in reprisal, the ATP withdrew ranking points from the tournament. The LTA took no action against the ATP’s action and as a consequence, successful competitors were denied the ranking points needed to gain entry into other ranking tournaments. Unintentionally, those most adversely affected were the GB men players Liam Broady and semi-finalist Cameron Norrie who’ve been deprived of the ranking points that would have elevated them significantly up the rankings. Most ironically of course, this year’s Women’s Champion Elena Rybakina who plays under the flag of Kazakhstan, was in fact born and brought up in Moscow until she was 18 years of age. Her jubilant parents still live in Moscow and unsurprisingly a spokesman for the Kremlin has publicly expressed delight.
 

Golf – an old-fashioned restraint of trade, or a genuine criticism of “sports-washing”?

As a rival to the long-standing pre-eminent US PGA Tour and the DP World Tour (formerly the European tour), there has finally been the launch of the controversial Greg Norman fronted, Saudi PIF $2b+ funded “LIV” (Roman numeral 54 - equivalent to the number of holes to be played cf. the standard 72)) Golf International Series that introduces a new team competition format to a series of tournaments, making it shorter and snappier à la the IPL in cricket. This is all intended to be far more lucrative for the players and more appealing to the next generation of spectators. The 48 golfers who’ve signed up include most significantly the great Phil Mickelson and former world no.1 Dustin Johnson, together with other major champions / big name stars plus others yet to be announced. They have all been promised enormous riches. The inclusion of six-time major champion Mickelson is something of a coup for the LIV tour not only because of his status as a genuine ‘world great’ but also because it represents something of a volt-face by the winner of 45 PGA Tour events who had previously and very publicly criticized the Saudi regime, referring to the Saudis as “scary motherf*****s”. The LIV tour has caused an existential rift in international golf. It has turned golfer against golfer and tour against tour. Releases from the established tours were sought and rejected. The sting for the American golfers is that to be eligible to play for the US in the Ryder Cup, its players need to be members of the PGA Tour. Very recently, Henrik Stenson lost the captaincy of the European Ryder Cup Team upon his departure to the LIV Tour. The prospect of weakened teams participating in next year’s Ryder Cup in Italy has consequences for both sponsors and broadcasters who signed-up on condition that they would have exposure to the best US and European players. Expect a battle to ensue around the contractual obligations to pay for something that might not be delivered and whether as a result, there’s a rethink to allow LIV-players to participate.  Because golfers signed to the DP World Tour have ‘conflicting tour’ obligations, the DP has been able to impose upon its golfers that participated at the inaugural LIV Golf tournament at the Centurion Club, fines of £100,000 and suspended them for two weeks with a threat of doubling the punishment for competing in future LIV Golf tournaments. Those players affected have obtained an interim suspension of their censure in reliance upon EU anti-competition law principles. The LIV has publicly promised to reimburse the golfers. As even more high profile defections to the PIF are expected, there is now pressure for the criteria for eligibility of European players in its Ryder Cup team to be changed to include membership of either the DP or PGA tours and for the same criterion to be extended to the qualification for entry to the four “majors” that are otherwise operated independently of both sets of international tours. Aside from this and disallowing ranking points for LIV tournaments, the PGA has threatened bans and fines against its golfers too. However, this would likely engender an antitrust lawsuit being brought by the LIV on the basis that the players are considered independent contractors, something that is crucial to the PGA Tour’s tax-exempt status. Golf by its nature is a conservative sport and for the established tours to survive they will have to find a pathway to reach an accommodation with the LIV Tour that is backed by the attraction of limitless financial resources. The divide is deepening in pace with recriminations among the world’s elite golfers. Opponents of the Saudi PIF incursion into golf have publicly invoked the now well-worn criticisms of “sports-washing” citing oft-repeated human rights abuses and allegations of terrorist funding. At a time when Joe Biden has recently visited Saudi and in circumstances where Saudi Arabia / its PIF have neither been sanctioned by the UN, EU, US or UK nor is there any embargo on trading internationally in that part of the world however discredited its regime, might not the condemnation be considered somewhat hollow? Especially when Formula 1 benefits hugely from Saudi PIF investment, Newcastle Untied FC is Saudi-backed and on 20 August, Oleksandr Usyk will fight Anthony Joshua in Jeddah in a a blockbuster heavyweight boxing rematch? Whereas the battle lines in golf appear as a microcosm for all sport, might it not be better viewed as us “meeting the new boss, same as the old boss” or should we “not get fooled again”? (apologies to Roger Daltrey and Pete Townsend).
 

Horseracing – turning an old-fashioned blind eye?

And how might this newfound sensitivity play out in British horseracing? The Flat Racing season is now fully upon us. The world’s most successful thoroughbred breeding operation & flat racing team is Godolphin. It was founded and owned by His Highness Mohammed bin Rashid Al Maktoum, the billionaire vice-president of Dubai, UAE. Two years ago the High Court found to the civil standard that Al Maktoum was responsible for the abduction of two of his own daughters. In March of this year, the High Court settled the matrimonial dispute between Al Maktoum and the youngest of his six wives Princess Haya Bint al-Hussain finding that he conducted against her a “campaign of fear” and domestic abuse that was “conducted on a scale which is entirely outside the ordinary circumstances of cases heard in the Family Court”. Al Maktoum has neither been sanctioned nor convicted of a criminal offence in the UK but clearly has been found civilly liable of matters tantamount to criminal offences. Should he therefore be welcomed here to attend any of the great horseraces of the summer or even be allowed to own racehorses? The British Horseracing Authority (BHA) Ownership Guidance Notes reference “honesty and integrity” as the key criterion in its consideration of suitability for an applicant to be registered as an owner. A conviction of an offence in the UK is the starting point. On their face, his infractions are tantamount to such. Issues of sovereign immunity aside, will the Jockey Club simply turn an old-fashioned blind eye?
Beyond geopolitics and “sports-washing”, there still remains the wider consequence of Sanction against individuals or entities resulting from national/international investigations into individuals or entities said to be involved in organized crime – which brings us neatly onto the special case of boxing and the sanctions recently imposed by the US Treasury Department against the Kinahan Organised Crime Group (KOCG) et al  . . .
 

Boxing

The Historical Perspective

Modern professional (or Western) boxing has its origins in illegality.
It grew out of the illegal venues and outlawed prizefighting of the 1800s in the US and UK to become a multi-billion dollar industry.
Inherently, boxers have and still tend to be drawn from the most deprived, least advantaged sections of society where success in the ring provides the best chance of betterment, fame and fortune.
Historically these are young men least equipped to withstand the advances of manipulative and ruthless promoters/managers who exploit their talents by promising enrichment but often delivering somewhat less.
From these roots it is no surprise that the business of professional boxing or prizefighting has been infiltrated by a full complement of nefarious characters dating back to the Victorian days of bare knuckle fighting.
Boxing lends itself to gambling that for many years has been illegal especially in the USA. Where’s there’s gambling there’s the potential for fixing fights. When the criminal fraternity is involved, there’s the potential for fighters to ‘throw fights’ or ‘take a dive’ either under threat or promise of career advancement at the behest of and for the enrichment of their crooked managers/promoters.
Given that absent a knockout or stoppage, the referee or ringside judges decide the result, it's a heady mix that has mired boxing in controversy since the beginning of time.
Add to the mix the consequences of US Prohibition (the Volstead Act) from 1920-1933 that accelerated the growth and power of the underworld and the rest, as they say, is history.
As boxing became evermore popular via the advent of live radio broadcasting and motion pictures, the milieu was set for organized criminals to control fighters as a means to capitalize on the opportunities presented by gambling on a pre-ordained result.
From the involvement of Vincent “Mad Dog” Coll and Owney “The Killer” Madden in the 1930’s through Frankie Carbo and the “Combination” in the 1940 - 1960s and John “Teflon Don” Gotti and the Gambino family in the 1970s – 1980s, US boxing has been inextricably linked to the criminal underworld - firstly as a means to capitalize on ‘fixed’ contests and latterly to benefit from a cut in the huge revenues generated when boxing became very big business in the 1970s/1980s.
Boxing has long suffered from having a grubby underbelly where fighters would often be pawns and certain results were often questioned for being fixed by complicity of the fighter and/or the judges.
Romanticism aside, fighters often publicly expressed their appreciation to those who they thought had at least “given them a shot”. Boxing has continued to exist in its own bubble. It took US Treasury intervention and the 1960s Kefauver Hearings to firstly lift boxing’s veil that 25 years later culminated in the passing of the Muhammad Ali Boxing Reform Act (The Muhammad Ali Act) 1999 with the objective of protecting the welfare & rights of boxers from exploitation and rigged fights. Enshrined into federal law in 2000, the Muhammad Ali Act unfortunately suffers from having too few powers for enforcement.
And crucially to this day, no international over-arching single regulatory authority has ever been created to govern professional boxing.
 
Fast forward to 23 April 2022 when 94,000 spectators squeezed into Wembley Stadium to witness the heavyweight showdown between Tyson Fury v Dillian Whyte and 100s of 1000s tuned in to watch the broadcast. The backdrop to this extravaganza was set by the announcement of the US Treasury Department on the Tuesday of the previous week . . .   
 

The Kinahan OGC (KOCG)

The US Government imposed sanctions and a $5m bounty on Daniel Kinahan, other members of his family / key protagonists in the KOCG and associated corporate entities that in the words of Greg Gatjanis of the US Office of Foreign Assets Control now rank among “Italy’s Camorra, Mexico’s Zetas, Japan’s Yakuza and Russia’s Thieves In Law”.
 

The Background

According to Irish investigative journalists and the Irish Criminal Assets Bureau (CAB) the KOCG has been operating its violent drugs cartel for well over 20 years during which it has withstood attempts of derailment and prosecution from the Irish authorities and Europol (Op. Shovel). It relocated from Dublin to Marbella and then again to Dubai in 2017.
 
Daniel Kinahan has not been convicted of any offence and denies complicity in criminality. However, the CAB as part of Op. Lamp seized assets, mounted some prosecutions and publicly stated back in 2018 that whereas Christy Kinahan Senior (a convicted drugs trafficker) had set up the cartel, the day-to-day operations were “managed and controlled” for many years by his sons Daniel and Christy Junior. Their long-running feud with the rival Irish “Hutch Gang” allegedly generated multiple tit-for-tat shootings/murders. These included the failed attempt to kill Daniel Kinahan at a boxing weigh-in at the Regency Hotel in Dublin in February 2016 whereupon Liam Byrne of the Irish branch of the KOCG was shot dead. This is said to have occasioned the KOCG killing campaign against the Hutch crime gang.
 
As part of its asset-freeze in 2018, the Irish CAB described the KOCG as an international gang trafficking drugs and guns into GB, Ireland & mainland Europe with an annual turnover of circa €1b.
 

Daniel Kinahan and Boxing

In 2012 and together with the former highly rated boxer of Irish descent Mathew Macklin, Kinahan opened a gym in Marbella named “MGM” (Macklin’s Gym Marbella) for the benefit of fighters whose careers had otherwise stalled or had not progressed as they’d hoped. The boxers were provided with facilities, were paid expenses and were given free accommodation for them and their families. It took off. And off the back of it, MGM went on to provide management/promotional services at highly subsidised rates to the obvious benefit of the fighters concerned. From the boxers’ perspective, what's not to like?
The source of the funding however is a different matter. It was one upon which the boxing world chose not to dwell.
Similarly ignored among other things, was the near-fatal shooting of former boxing champion Jamie Moore in the Costa del Sol in August 2014 when visiting the home of Daniel Kinahan. Moore was in Marbella to train Macklin. There is no suggestion of any impropriety on his part. Media reports suggest that Moore was mistakenly caught up in the Kinahan-Hutch feud. Moore has stated publicly that the Spanish police told him they attributed his shooting to Eastern European gangsters. Moore claims he had no idea of the suspicions encircling Kinahan.
 

Regency Hotel Shooting

Built upon the success of MGM, Kinahan brought big-time boxing back to Ireland and it was in February 2016 ahead of the forthcoming promotion of the “Battle of the Clans” that the infamous shooting at the Regency Hotel, Dublin, took place.
 

In the years that followed:

The violence between the Kinahan and Hutch gangs intensified;
Key members of the KOCG including Daniel relocated to Dubai;
Macklin announced that Kinahan would be stepping back from boxing promotion due to “bad publicity”;
MGM rebranded as “MTK (Mack the Knife) Global” with Macklin remaining on the board in an advisory capacity until eventually cutting ties completely to become a pundit on Sky;
MTK Global repeatedly and publicly disavowed any connection with Daniel Kinahan dating back to February 2017;
The wife of MTK chief trainer Danny Vaughan, Sandra Vaughan, became the CEO of MTK, ultimately succeeded by Bob Yalen;
The Irish CAB announced its findings into the KOCG to the Irish High Court in 2018;
In February 2021 a BBC Panorama investigation claimed that Kinahan was still working atop the sport as an advisor, despite the repeated denials from MTK Global; and yet
By early 2022 MTK reputedly managed or promoted 200-300 fighters worldwide and operated more than 20 gyms globally; and
Daniel Kinahan rose to inhabit a space at boxing’s top table and became advisor to a stable of loyal fighters readily available to defend his reputation.
 

All of which poses two distinct yet overlapping questions:

1. How does Daniel Kinahan fit in?

Distinct from the likes of Frankie Carbo who was sentenced to 25 years’ imprisonment for corruption and even the legendary Don King who was sentenced to 4 years’ imprisonment for manslaughter before going on to promote Muhammad Ali and other high-profile fighters to this day, Daniel Kinahan has not been convicted of any crime.
 
Some commentators have argued that having moved from Dublin to Marbella 20 years ago Kinahan kept ‘his head down’, avoided the reach of international law enforcement agencies and eventually became too powerful to stop - before decamping to the UAE.
 
Where Kinahan has been consensually visible however, is on social media – in the company of certain fighters and others involved in the business of boxing. In recent years he has appeared in numerous posed photographs together with most notably Tyson Fury and other fighters/ promoters/organisers who have extolled his virtues and expressed their support and gratitude for his role as their “advisor” for furthering their careers.
 
From social media posts, The Times has reported variously that Kinahan has been featured with a number of fighters against whom is there is no suggestion of criminality, including:
 
World heavyweight champion and superstar Tyson Fury – as recently as this February with Fury sporting Arabic headdress arm in arm with him in Dubai, having previously publicly thanked Kinahan on social media in 2020 for organizing a two-fight deal v Anthony Joshua (that didn't actually materialize);
The IBF flyweight champion Sunny Edwards, as recently as this year;
Dublin fighter Jono Carroll;
MTK Global ‘head coach’ Danny Vaughan with boxer Sunny Edwards and two others – as recently April this year, days after the announcement of the Sanctions - captioned “Top Team - Advisor Daniel Kinahan #loyalty”; and
Sam Jones who is associated with the promoters, Probellum – in a tweet that the Times reported as having been later deleted but stating “Always good seeing my friend Daniel. Great advice as always and brilliant for the sport,”
 
In what has the appearance of a quest to achieve public legitimacy aka “sports-washing”, The Times has reported variously that Kinahan enjoyed public affirmation from a variety of boxing’s key players against whom there is no suggestion of criminality, including:
 
Tyson Fury – for helping him out of his vortex of physical & mental unfitness to rebuild his career;
Bob Arum, former legal counsel to Robert Kennedy & Muhammad Ali and longtime head of the giant US promoter Top Rank – who once described Kinahan as “an honorable guy”;
Eddie Hearn of UK promoter Matchroom – saying that Kinahan was someone everyone knew had been advising fighters “for many, many years”
Former world champion fighter Amir Khan – referring to Kinahan as “one of the nicest guys I’ve met” in a social media post in 2021;
President of the boxing sanctioning body the WBA, Mauricio Sulaiman - who in an article for a Mexican newspaper earlier this year spoke of the prejudice suffered to Kinahan’s reputation from adverse media comments, before adding “That is why Daniel will have our full support in his quest to bring benefits to boxing”; and
The Punjabi Provincial Minister for Sports and Youth Affairs, Rai Taimoor Khan Bhatti – who posted photographs in March 2022 of him posing with Kinahan and Sandra Vaughan with the accompanying tweet “Met @probellum on aligning vision of boxing for Punjab and how to make this sport bigger for our youth”
 

2. So, how was Daniel Kinahan allowed to become such a powerful force?

Whatever the level of suspicion concerning Kinahan’s criminality, he has been able to operate as an advisor simply because there is no regulatory framework to stop him.
 
Whereas boxing managers have to be licensed by governing bodies, “advisors” remain free to operate outside of regulation. Accordingly and whereas the UK governing body the British Boxing Board of Control (BBBoC) should and might have had its suspicions, they have no regulatory mechanism in place to stop Kinahan from acting as an advisor to any fighter or fight over which it has jurisdiction or bar any boxing entity with which he might have been associated.
 
Whatever the absolute truth of Kinahan’s criminality, his links to MTK Global and his role as an advisor, no mechanism existed to prohibit MTK Global from operating or its fighters from fighting or Kinahan from acting.
 
The suspicions however were plain to see. Suspicion is no defence in law to Money Laundering and suspicion is all that’s required to impose Sanctions. Boxing needs to understand this. Kinahan remained in Dubai and only ever visited ‘friendly’ nations for the obvious reason that he remained out of reach of the US, UK, Irish and EU. Boxing effectively happily rubbed along with a fugitive from international justice and it shouldn't have – the presumption of innocence cannot properly be asserted in such circumstances. In the same way that the US Sanctions have severed his financial arteries, there’s a strong argument that boxing could and should have done more to sever his links from the world of the “noble art”. The fall out from the announcement of the US Treasury Department has put boxing into a tailspin but is it all too little and too late?
 

The Fall Out from Sanctions against the KOCG

In the immediacy of the announcement of Sanctions against the KOCG, the vast majority of those who were so enamored with Kinahan have swiftly deleted earlier social media posts and even more swiftly have sought to distance themselves from him.
 

In particular, The Times has reported that:

Bob Arum the head of Top Rank appeared on Newstalk Breakfast and said “I can’t deal with him [Kinahan] in the future because of the position of my government. Unless something changes, which I can’t foresee, I will not do business with Kinahan”;
In respect of  Arum’s revelation that he previously paid circa $4m in consultancy fees to Kinahan for four fights involving Tyson Fury between 2019-21, he told Yahoo Sports that the money was paid to the Dubai-registered company Hoopoe Sports. The company has been sanctioned by the US Treasury Department and its website boasted of acting on behalf of certain high-profile fighters;
According to Arum, Top Rank’s former general counsel Harrison Whitman put together those four deals. Whitman now has a senior role at the promotional company Probellum;
Probellum quickly released statements denying any involvement with Kinahan or any sanctioned individual/entity and there is no suggestion that they are so linked;
However in a widely viewed interview with FightHype.com on 29 April 2022, Arum went on to disclose both that he stopped dealing with Kinahan prior to the Sanctions announcement and to prophesize that “no network will deal with Probellum”. In response, Probellum president Richard Schaefer accused Arum of making baseless statements;
Within days of the Sanctions announcement, The Daily Mail reported that Eurosport dropped the final two shows of its broadcast deal with Probellum;
Before the end of April 2022, MTK Global closed its website and Bob Yalen announced it ceased trading;
The gold MTK Global logo that was ubiquitous throughout boxing, disappeared without trace;
Mauricio Sulaiman did his best to re-write his earlier support of Kinahan;
Renowned UK boxing broadcasters have announced enhanced compliance regimes to ensure they adhere with the terms of the US Sanctions; and
In the ensuing months the US has denied travel to 600 individuals reputedly linked to Kinahan – including Matthew Macklin and members of the Fury family.
 

Will this finally act as a trigger for boxing to clean up its act?

What is clear is that boxing has long operated in a bubble. Its default position in the face of such allegations has been to shrug its collective shoulders and claim “that’s boxing”.
 
Clearly such indifference is untenable. The future viability of “the noble art” in this brave new world depends upon it restoring the public’s faith that it adheres to the same level of governance as all other big business.
 
Historically, fighters, promoters and broadcasters have shown themselves either unwilling and/or unable to resist infiltration from the malevolent forces that have for so long infiltrated professional boxing. However, without the collective will to establish a centralized international governing body sufficiently resourced and empowered to rid the sport of its pernicious underbelly, sadly, plus ça change . .
 
The UK governing body the BBoC has shown itself powerless to withstand the machinations of ‘fixers’ or ‘advisors’ that operate outside its regulatory framework.
In the US, each state has its own boxing commission operating its own set of rules independent of other states.
The four world sanctioning bodies (WBA, WBO, WBC and IBF) exist only in essence to provide their own individual rankings and in-ring compliance.
 
There remains no world policeman for boxing or over-arching regulatory mechanism to impose much needed changes in governance.
 
As with football, it has taken US criminal justice intervention to shake things up.
 
However capable a dealmaker Kinahan might have been, however much his financial muscle might have furthered the careers of those boxers who benefitted from MTK Global gyms, management and promotional activities, two questions for international boxing remain unanswered:
 
If Daniel Kinahan was such a force for good, why did he operate only in the shadows?
 
What if anything, is the sport of boxing finally prepared to do redeem its lost opinion?
 
Enjoy the summer . . .
And well done the England Women’s Football Team for at last “bringing it home”!
 
 
July 2022
Simon Pentol QC
                                 
Simon Pentol is a Tier1 ranked QC in Fraud (Crime) by the Legal 500 (2022). He has long advised individuals and organizations in all sports and sports-related matters especially football and boxing. He continues to act as external principal legal counsel to the Sky-exclusive boxing promoter Ben Shalom and Boxxer Limited. He is a long-term director of the British Association of Sport and Law (BASL).