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On Wednesday afternoon, Europol, the law enforcement agency of the European Union, announced that they had, with he help of the Portuguese police, dismantled an organized criminal group consisting of mainly Russian citizens, who used football for money laundering.

On Tuesday the Portuguese police ended a year-long investigation under the name ‘Operation Matrioskas’, named after the famous Russian dolls, and searched Portuguese second division side UD Leiria. Aleksandr Tolstikov, the Russian owner of UD Leiria was arrested alongside the club’s financial director and one of the club’s administrators. Tolstikov is under suspicion of money laundering, tax fraud and forgery of documents according to CNN.

More than 70 police officers took part in the search, which included 22 houses and companies as well as four football clubs, including UD Leiria. According to Europol, several thousand euros in cash were seized, most of the bills in €500 bank notes. The criminals have links to organized crime in Austria, Estonia, Germany, Latvia, Moldova and the United Kingdom.

The €500 banknote is the preferred denomination for money laundering as its high value makes it easier to transport with the banknote requiring less space than, for example, the British Pound Sterling, where the highest denomination is £100. This has made highly ranked police officials around the European Union propose dropping the banknote in order to make life harder for criminals.

Mafia links and money laundering

Tolstikov is accused of being part of a criminal group believed to have been active since 2008 and has links to the Russian mafia for whom it has laundered several million euros over the years.

According to Europol, the money laundering has been done through investments in European football clubs with financial problems, which allows the criminals to gain the trust of clubs. Afterwards the group purchase the clubs through ‘a sophisticated network of holding companies invariably owned by shell companies registered offshore and in tax havens’ as the Europol press-release says. This way, the real owners can remain anonymous, while the source of their income remains secret.

As soon as the clubs are in the hands of the mafia, the money laundering begins through over or under valuation of players on the transfer market as well as betting activities, either through match fixing or simply for pure money laundering purposes.

This description fits perfectly on what happened at the financially weak UD Leiria, which, after a series of donations and investments, was bought by Tolstikov in July 2015.

“The investigation started due to the detection of strong red flag indicators against the suspects,” it says in the Europol press release, “In particular, suspicion was aroused by the high standards of living suspects enjoyed while using high value assets registered under the names of third parties. They imported large amounts of cash from Russia to Portugal in violation of EU cash regulations, and they created and used opaque networks of offshore shell companies intended to preserve the identities of their beneficial owners.”

D-Sports and player representation

Since Tolstikov’s takeover, several Eastern European players have joined the Portuguese club. The best known of the players is 22-year-old wingback Kirill Kostin, who used to play for Zenit St. Petersburg, and he is the only of the Russians to actually feature for the first team.

Interestingly enough, all of these players are represented by the agency D-Sports, where Aleksandr Tolstikov is the general director. D-Sports has the Russian internationals Aleksandr Erokhin and Stanislav Kritsyuk as the most prominent names on their books.

Examining the transfer deals made by Leiria shows big differences between the actual value of players and those claimed by the club. According to Portuguese tabloid Correiro da Manhã, no fewer than 40 transfers are currently under scrutiny, including Russian international Stanislav Kritsyuk’s move from Braga to FC Krasnodar this winter.

The most noticeable Russian player to represent UD Leiria is the current Russian U21 international Vitaly Lystsov who later moved on to powerhouse Benfica, where he is currently playing for the second team. Lystsov is however not the only player who has moved from UD Leiria on to bigger challenges. 19-year-old Russian goalkeeper Ivan Zlobnin went the same way, while 20-year-old Lithuanian Tomas Rucas went from Russian side Sibir to UD Leiria and on to Sporting.

Football is vulnerable to money laundering

“The football sector,” Head of Europol’s Financial Intelligence Group Igor Angelini said after the arrest of Tolstikov, “presents vulnerabilities related to its structure, finance model and culture which could be exploited by criminals. It seems Tolstikov and his companions have used these vulnerabilities to their advantage by moving players around European clubs, either over or under charging for the players who were sold.”

Angeli’s claim is supported by a report on money laundering in football published in 2009 by The Financial Action Task Force (TFATF), which concluded that complicated networks of stakeholders, unprofessional management, the considerable sums involved as well as the financial needs of the clubs all made the football sector vulnerable to money laundering.

TFATF identified four different ways of laundering money through football; 1) ownership of football clubs, 2) the transfer market and ownership of players, 3) betting activities, 4) image rights, sponsorships and advertisement arrangements, the first three seeming to be the case with UD Leiria.

Because of the lack of transparency in the source of funding, football clubs are easy to use for money laundering. It is simply difficult to verify the origin of the invested funds, and it’s hard to prove that the money invested in the club is in fact dirty, especially considering how easy it is to send the money through various holding companies. The biggest advantage for the criminals is however, that the clubs are relatively easy to purchase, and the large sums that frequently change hands in the world of football as a result of transfers.

The lack of transparency in transfers is also making it easy for agents to commit fraud. TFATF identified agents as the focal point of money laundering activities on the transfer market.

In this case, Tolstikov has acted as both agent and club owner, which has given him rich opportunities for money laundering through his work and daily access to the different actors in the world of football.

Unfortunately, this is far from the first time the Russian mafia has been involved in the beautiful game. The most famous case involves the former Spartak wonder boy Dmitri Sychev who was forced to hand in a transfer request and later try to get his contract terminated by notorious criminals who wanted a cut of the young star’s transfer income. In Marc Bennetts’ brilliant book Football Dynamo: Modern Russia and the People’s Game, he describes how Sychev arrived at the Russian Football Union’s headquarter after trying to get his contract terminated having ‘a convicted killer, assigned to him by the gang that had muscled him to accompany him everywhere he went.’ Sychev was eventually handed a six month suspension after his desperate attempt to leave Spartak, before he was exiled at French side Marseille, where he played for one year before returning to Lokomotiv.

Follow Toke on Twitter: @TokeTheilade