Spotlight on Corruption’s draft ‘Know Your Donor’ policy
Donations to political parties are essential to the functioning of our political process under the current system, but after a series of scandals and warnings from independent review bodies and the security services, it is clear that the UK’s electoral finance rules are not sufficiently robust.
To protect the UK’s democracy from those who wish it harm, Spotlight on Corruption has developed a draft ‘Know Your Donor’ policy for political parties. It provides a proportionate and risk-based framework for handling donations, with enhanced checks on higher-risk donations.
Requiring parties to undertake these checks would not result in an overburdensome administrative process if parties implement a risk-based approach. This means in practice subjecting some donations over a financial threshold (we have proposed £7,500) to additional checks, but without interrupting the steady flow of donations to parties’ accounts.
If this policy had been in place in 2022, the three UK-wide political parties would have been required to carry out a risk assessment on less than half of the donations they accepted during the year. The Conservative Party would have undertaken checks on 43% of donations, Labour 39%, and the Liberal Democrats 19%. The SNP would have had to do checks on 100% of their donations but this only amounted to four donations, so the overall burden would have been low.
The draft ‘Know Your Donor’ policy builds on the recommendations of independent reviews into the UK’s election finance rules and is informed by anti-money laundering (AML) policies already used widely across the private sector, as well as extensive input from AML and electoral finance barristers.
Background to the ‘Know Your Donor’ policy
There is significant public interest in political parties knowing where their donations come from – and ensuring that they do not accept donations from foreign sources, proceeds of crime, corrupt donors, or from donors whose business or political interests create serious reputational issues for our electoral system.
This sort of funding can undermine the integrity of the UK’s democracy, threaten national security and damage the reputation of political parties. Donation scandals have a corrosive effect on public trust in politics, at a time when trust in politics is at historically low levels.
Illicit donations are an issue that affect all main UK parties. A 2020 report by the Intelligence and Security Committee identified that members of the Russian elite linked to Vladimir Putin had donated to UK political parties. In January 2022, MI5 warned that an alleged Chinese agent had sought to influence UK parliamentarians on behalf of the Chinese Communist Party (CCP). While in mid-April this year, concerns were raised in Parliament about alleged links between the CCP and political party fundraising.
But against these risks, the UK’s laws, enforcement and regulatory framework fail to sufficiently safeguard our electoral system or protect our political parties. The Political Parties, Elections and Referendums Act 2000 has significant loopholes, and only requires UK political parties to check the status of donors. It does not require them to check donors’ suitability or their source of funds.
New legislation passed this year may further exacerbate the risks of foreign influence over UK politics. The Elections Act 2022 will introduce measures that will allow up to 3.5 million British nationals living overseas (and therefore potential new donors) to be added to the UK’s electoral register. The UK’s already stretched law enforcement agencies would only be able to investigate suspected foreign donations with the active collaboration of other jurisdictions, which they cannot always guarantee. It is estimated that there are currently 100,000 British citizens living in the United Arab Emirates, for example, and the potential risks of overseas donors channelling funds from other jurisdictions has not been properly assessed.
Whilst the UK’s AML framework has been progressively tightened over the last decade, with other non-regulated entities such as art galleries, antique dealers, money transfer services and estate agents now required to take a risk-based approach to transactions, the minimal checks that parties are required to undertake on donations are an increasingly glaring anomaly.
Calls for a tightening of electoral rules have been growing. In 2018, the Electoral Commission recommended adapting AML controls used by businesses into the rules for political campaigners. In 2021, the Committee on Standards in Public Life called for parties to have procedures in place to determine the true source of donations, and to develop risk-based policies for managing donations proportionate to the level of risk to which they are exposed. In 2022, the Chair of the Electoral Commission said that political parties should be under a duty to know where their donations come from, as a safeguard from unlawful foreign money and to protect public confidence in political finance.
In early 2023, the Chair of the Intelligence and Security Committee, former head of MI5 and other experts backed calls for parties to tackle the risks of donations from foreign powers. Regardless of Parliament’s decision on that proposal, we hope that parties will give careful consideration to implementing the ‘Know Your Donor’ policy.
- The draft ‘Know Your Donor’ policy in the link at the top of this page was updated on 10 July 2023.
