The FIFA Corruption Scandal: ABAC Compliance Lessons

September 1st, 2015

When it comes to soccer, the United States is usually several steps behind the rest of the world. The drafts and matches central to the rhythm of life in many countries have traditionally been an afterthought at best in the U.S. This made it all the more of a shock when it was the United States that put world football’s most powerful officials in handcuffs.

In May 2015, the world watched in stunned satisfaction as seven high-ranking officials of soccer’s world governing body, the Fédération Internacionale de Football Association or FIFA, were arrested at a luxury hotel in Zurich on charges brought by the United States. The indictment cited “rampant, systemic, and deep-rooted” corruption, declared U.S. Attorney General Loretta Lynch (1), alleging that soccer officials solicited millions of dollars in kickbacks and bribes in exchange for their support of events related to the FIFA World Cup.

The arrests are a unique instance of Anti-Corruption and Anti-Bribery (ABAC) compliance in the world limelight, and an important symbol of the current enforcement environment. Whether they are football fans or not, here are three lessons that companies should take from the FIFA scandal.

IT’S NOT ALL ABOUT THE FCPA

Though bribery is the underlying theme of FIFA’s alleged misconduct, the 161-page indictment contained no trace of the world’s banner bribery legislation, the U.S. Foreign Corrupt Practices Act, or FCPA. The FCPA targets bribe payers rather than bribe takers. What’s more, it applies only to payments given to government officials and their agents- not a private organization such as FIFA. The limitations of the FCPA did not stop U.S. prosecutors from bringing 47 criminal counts. The great majority fall into three categories—racketeering, wire fraud, and money laundering. The Racketeer Influenced and Corrupt Organizations Act, or RICO (2), allows prosecution of all members of a global conspiracy for a “pattern” of criminal activity. Though FIFA is arguably a far cry from the organized crime families for which RICO was originally drafted, it is nonetheless a natural fit for the statute’s definition of a criminal “enterprise.” The wire fraud (3) and money laundering (4) statutes have also appeared with increasing frequency in prosecutor’s attack plans for international corruption cases. This range of criminal charges represents a larger trend of prosecutors using creative and incisive legal tools to pursue corruption cases (5).

DOJ IS ADEPT AT CRACKING COMPLEX SCHEMES AND SEEING THROUGH INTERMEDIARIES

In today’s sophisticated enforcement environment, rarely is corruption so simple as cash passing from the hands of the bribe-giver to the bribe-taker. The alleged scheme behind FIFA is as complex as one might expect from a high-stakes global enterprise in the public eye. The indictment details how defendants attempted to conceal corrupt payments through elaborate mechanisms including sham consulting contracts and the use of intermediaries such as bankers, financial advisors, and assistants, as well as complex networks of shell companies and secretive foreign bank accounts (6). FIFA is far from alone in such attempts to disguise illicit payments. A staggering 75% of public bribery cases involve payments through intermediaries (7). U.S. prosecutors have repeatedly shown that they will not be deterred by even highly complex schemes, and enforcement actions routinely detail untangled webs of contracts, contacts, and bank accounts (8).

THE REACH OF U.S. LAW IS LONG AND STRONG

If you wondered how the soccer-lukewarm United States came to be arresting foreign officials in Zurich in the first place, you would not be alone. Russia, for its part, maintains that the prosecutions are an illegal overreach motivated by geopolitics (9). Yet what is undisputed is that U.S. law has a more powerful extraterritorial reach than that of most countries, and that Attorney General Lynch has the resources and the will to wield it.

The FIFA prosecutions illustrate how the economic power of the United States often generates enough links to the country to establish jurisdiction. Despite the international context, the indictment reveals connections to the United States more than sufficient to support jurisdiction over the soccer body. Of the 14 individuals charged, two were U.S. citizens, another was a permanent resident of the United States, and three others owned residences in the United States. The U.S. banking system was used extensively to facilitate the transactions at issue (10).

Even far more tenuous connections to the United States can be found sufficient to apply U.S. law. In one 2013 case, an email inadvertently passing through a server located in the United States was enough (11). The power of U.S. law combined with the muscle of its economy and its wealth of enforcement resources mean that it is a force like no other when it comes to ABAC enforcement.

Though the FIFA case underscores its status as a trailblazer, the United States should of course not be the only country on companies’ compliance radar. Other ABAC laws may even be tougher in text, such as the UK Bribery Act’s coverage of commercial bribery or the Brazilian Anticorruption Law’s lack of knowledge requirement (12). Although the United States remains singular in its record of enforcement and the resources at its disposal today, this active stance on corruption may represent the future of world ABAC enforcement.

Whether or not they maintain a personal interest in the fate of world football, company executives and compliance officers should take note of the FIFA prosecutions as a sign of the times in international ABAC enforcement. Experienced due diligence partners can help companies build a strong compliance program that will keep them ahead of the headlines.

1 Nine FIFA Officials and Five Corporate Executives Indicted for Racketeering Conspiracy and Corruption, (2015) http://www.justice.gov/opa/pr/nine-fifa-officials-and-fivecorporate-executives-indicted-racketeering-conspiracy-and (last visited August 26, 2015).
2 18 U.S.C. §§ 1961 et seq.
3 18 U.S.C. §§ 1343 et. seq.
4 18 U.S.C. §§ 1956 (“Money Laundering Control Act”).
5 See Nadine Tushe, Beyond the FCPA: Other U.S. Law Applied to Foreign Bribery, Ethisphere, June 2015, available at http://ethisphere.com/magazine-articles/beyond-the-fcpa/.
6 See, e.g., FIFA Indictment, May 22, 2015, at 29-30, available at http://www.justice.gov/opa/file/450211/download.
7 Org. for Econ. Cooperation and Dev., OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Public Officials 9 (2014).
8 See, e.g., Statement of Facts, United States v. Rama, 2015, criminal no. 1:15-CR-I43-GB, ¶¶ 3-11.
9 Reid Standish, Foreign Policy, “Russia: U.S. FIFA Investigation is Illegal, Extraterritorial Use of the Law,” May 27, 2015, available at http://foreignpolicy.com/2015/05/27/russiau-s-fifa-investigation-is-illegal-extraterritorial-use-of-law-world-cup-2018-sepp-blatter-putin/.
10 Indictment, supra n. 6, at 2.
11 See Sec. Exch. Comm’n v. Straub, 921 F.Supp.2d 244, 263 (2013).
12 Meanwhile, other countries, such as initial partner Switzerland, lag far behond in ABAC enforcement capacity. See Marc Hosenball and Mica Rosenberg, Reuters, “Swiss probe into FIFA runs into obstacles-sources,” August 21, 2015, available at http://www.reuters.com/article/2015/08/21/soccer-fifa-swiss-idUSL1N10W15B20150821.