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Prevailing Compliance issues in Sport

Topic: Prevailing Compliance Issues in Sport

Panel Members: Adam Garside, Director – Control Risks; Torsten Wolf, Principal –
Control Risks; Richard Davies, Senior Associate – Charles Russell Speechlys LLP;
Barbara Lustenberger, Director Legal & Compliance – Infront Sports and Media

Adam Garside set the scene for the discussion: “We hold sport dear, and that is something we should protect. How do you check on who’s providing you with money?”. The panel members initially addressed the issues surrounding due diligence on
prospective relationships between sports rights holders and potential partners such as sponsors. Barbara Lustenberger kicked the discussion off by saying she could speak for an hour on the topic! She said: “There are three key challenges: third party due
diligence due to the war in Ukraine and sanctions on Russia. Screening companies is very complex. The second challenge is the whole crypto, NFT, metaverse entering sports. The third challenge is the whole betting sector – it is a high risk business. Where are they based, what is the regulatory framework?”

Richard Davies pointed out that the level of due diligence carried out by sports rights holders can vary enormously: “What level of due diligence does the rights holder do on a sponsor? It can be as little as ‘where do we send the invoice?’.” Referencing English football and the fit and proper person’s test for ownership of clubs, he asked: “How do we regulate the participants? Should human rights factor into these sorts of tests ? There’s no consensus on that an all.” Torsten Wolf emphasised the practical difficulties with collecting the relevant information: “You need to use sources on the ground. How much money and time is
available to the client? Where to put the limited capacity and money that you have? For some sports this is the biggest hurdle. Some sports need to tolerate the risk”.

The panel then addressed enforcing existing relationships and ongoing contracts. Davies said: “Audits generally rely on self-reported information, which has its limits.If you have a bad actor, they are not likely to reveal their wrong doing. You’ve seen
how difficult for UEFA it has been to impose their Financial Fair Play regime.” Wolf: “It works best when you link audit and audit clauses to funding. FIFA does something like that, but for the bigger national associations that is not important.”

Wolf asked which areas compliance should extend into: “Safeguarding, integrity, money laundering, bribery? The sport is there for the athletes and public entertainment. It is very important you understand what the needs are”. He added, “As well as understanding where the flow of money goes it is also important to understand what if something goes wrong?”
Lustenberger outlined developments in Switzerland with the creation of an independent whistle blowing hotline: “Within one year there were 264 reports. 20% of the cases led to disciplinary investigations.”

Davies added: “Press attention is the number one driver of adopting proper processes.” He stressed the affect of a scandal becoming public: “What is the reaction of sponsors? The first thing they’ll do is work out whether they can
terminate the contract.”