FIFA, the Fédération Internationale de Football Association, is the organisation that governs football, the most popular game in the world.  The World Cup is the most watched sporting event in the world.  Bigger than the Olympics, it produces billions of dollars in revenue from corporate sponsors, merchandising and broadcasting rights.  Recently, however, FIFA has been plagued with allegations of corruption and law enforcement agencies have accused FIFA's top executives of being involved in large-scale corruption, benefiting personally from bribes and kickbacks.

Eyebrows were first raised in December 2010, by the bidding process that saw Russia awarded the 2018 World Cup and Qatar given the 2022 hosting rights.  Both results were surprising.  Russia has a long history of racism in football and was in hot water over its involvement in the Ukrainian crisis.  The Qatar win was even more unexpected.  While it is a rich country, it has limited football history and chequered human rights history. In addition, the World Cup is traditionally played during the European summer, the off-seasons of European football.  This means the tournament in Qatar would be played in temperatures potentially exceeding 50°C.  Finally, in contrast to its other bidders, United States, South Korea, Japan and Australia, Qatar has little or no existing footballing infrastructure (of the size and scale required of a host nation). 

Questions of vote-buying were on many peoples' lips.  As a result, in July 2012, FIFA commissioned US Attorney, Michael Garcia, to give an independent report into the bidding process and decision behind the 2018 and 2022 hosting rights.

Garcia released his 350 page report in September 2014.  However, FIFA chose not to release it, instead releasing, in November 2014, a 42 page summary which it said cleared Russia and Qatar of any wrongdoing during the bidding for the 2018 and 2022 World Cups.  However, the Associated Press described the summary as "a whitewash".  Garcia resigned in protest claiming that the summary was "materially incomplete" with "erroneous representations of the facts and conclusions".  Both Switzerland and the United States commenced criminal investigations into allegations of fraud, money laundering, bribery and racketeering within FIFA. 

But the drama really kicked off in late May 2015.  FIFA executive members had gathered in Zurich, Switzerland, staying at the Baur au Lac hotel, for two days of official FIFA meetings.  In the early hours of 27 May 2015, Swiss police (at the behest of the US Justice Department) raided the luxury hotel and arrested seven FIFA officials on suspicion of receiving bribes and kickbacks.

US criminal charges

The seven FIFA officials were formally indicted on various charges and extradited to the US.  On 3 December 2015, a further 16 officials were added.  Now, a total of 23 FIFA officials face 92 counts under the United States criminal code, including racketeering conspiracy, fraud, wire fraud, money laundering and obstructing justice.  The charges have been brought under the Racketeer Influenced and Corrupt Organisations (RICO) Act, which was intended for use against the Mafia. Bribery charges could not be laid as, under US law, bribery is restricted to payments to government officials. 

The money involved is eye-watering. The Justice Department claims that the criminal schemes involve well over US$200m (NZ$287m) in bribes and kickbacks.  More specifically, the indictments allege:

  • The criminal schemes spanned 24 years
  • Media and marketing rights were fraudulently awarded to large corporate entities for FIFA events across the Americas
  • Bribes were taken to influence FIFA sponsorship contracts, the selection process of the 2010 World Cup and the 2011 FIFA presidential election
  • Large sports goods manufacturers paid FIFA significant sums of money for exclusive rights to provide clothing and equipment for FIFA football events.  These companies have sought to distance themselves from FIFA's corruption, claiming they knew nothing of where their money was going, or to whom.

Charles "Chuck" Blazer, former general secretary of the Confederation of North, Central America and Caribbean Association Football (Concacaf), who is cooperating with US prosecutors, has further said that between 2004 and 2011:

  • He and others on the FIFA executive committee accepted bribes for the selection of South Africa as the host of the 2010 World Cup
  • A colleague received a bribe from Morocco for its bid to host the 1998 tournament, which was eventually awarded to France
  • He and others also accepted bribes relating to broadcast and other rights to the Concacaf Gold Cup tournament in 1996, 1998, 2000, 2002 and 2003.

An email obtained by the media appears to show that the then South African President, Thabo Mbeki, and FIFA President, Sepp Blatter agreed to a US$10m deal that US prosecutors say was a bribe to secure the 2010 World Cup for South Africa.  The South African government insists it was a legitimate payment to promote Caribbean football.

Thus far, eight defendants have made guilty pleas and have agreed to forfeit US$40m.  However, the majority have maintained their not guilty position and will face trial.

In respect of jurisdictional issues, the Department of Justice's claims that the corruption was planned in the US, even if it was then carried out elsewhere and in addition, US banks were used to transfer money appear to be key to the investigation.

Swiss criminal investigation

Concurrently, Swiss prosecuting authorities are also undertaking criminal investigations into the bidding process in respect of the 2018 and 2022 World Cup hosting rights.

It was only a matter of time before the spotlight was turned on Sepp Blatter. On 25 September 2015, the Swiss prosecutors commenced criminal proceedings against Blatter for criminal mismanagement or misappropriation over a TV rights deal and a "disloyal payment" to European football chief Michel Platini of $2m Swiss francs (NZ$2.98m on current exchange rates).

Blatter refused to resign.  On 8 October 2015, Blatter, Platini and Secretary General Jerome Valcke were suspended for 90 days by FIFA's Ethics Committee.  Blatter appealed the suspension but lost the appeal on 18 November 2015.

FIFA has denied that Russia and Qatar paid bribes in return for votes.  Sepp Blatter too has protested his innocence, stating that a World Cup cannot be bought.  However, when asked whether his executives were receiving bribes and kickbacks, his response was that he could not watch every one of his executives all the time.

Meanwhile, FIFA executives are dropping like flies.  On 3 December 2015, FIFA vice-presidents Alfredo Hawit and Juan Angel Napout were arrested on suspicion of bribery in the same Zurich hotel where the FIFA officials had been arrested in May.

Banks – implications of the scandal

The FIFA scandal has also questioned the conduct of banking institutions.  Law enforcement authorities have levelled serious questions at the role the banks may have played in this scandal and whether they should have raised more objections to the transfer of money obtained fraudulently. 

US Department of Justice has claimed that the accused relied on the use of “trusted intermediaries, bankers, financial advisers and currency dealers, to make and facilitate the making of illicit payments”.  In particular, US prosecutors are investigating Citigroup over its ties to the alleged bribery and corruption at FIFA.  Other banks such as JPMorgan Chase, HSBC, UBS, Bank of America, Espirito Santo Bank and Julius Baer have all been named as banks through which 'FIFA funds' are said to have passed. 

While on the one hand many of the banks named in the indictments have cooperated and assisted law enforcement agencies in identifying the FIFA officials involved, questions remain as to whether banking practices and procedures were sufficient as to identify and prevent such fraudulent activity.  At least three banks, HSBC, Standard Chartered and Barclays have already announced internal probes into the payments.

Nonetheless this sends a warning shot to banks to ensure they have appropriate processes and procedures to identify and prevent fraud and money laundering.