Time to remove dirty money from UK political party finance

Author: Spotlight On Corruption

Revelations this morning in The Times provide another example to the already compelling body of evidence that the UK’s main political parties have too often turned a blind eye to accepting dirty money from criminals and politically exposed persons to fund their activities.

The presence of dirty money at the top table of UK politics poses grave consequences for the health of our democracy and opens up the UK’s power structures to potential foreign subversion. Donors get privileged access to decision-makers and may even benefit from privileged treatment by law enforcement bodies. Who becomes a political party donor and the source of their wealth is therefore a key indicator of the health of our democracy.

The Elections Bill, currently being debated in the House of Lords, has many flaws and problems, not least the clauses that seek to weaken the Electoral Commission’s independence. However, it is also a major opportunity to close loopholes that allow dirty money to enter political finance and to help restore public trust in the integrity of the UK’s democratic processes and election finance system.

To get it right, the legislation must require political parties to run anti-money laundering (AML) checks on the source of donations in line with 2021 recommendations made by the Committee on Standards in Public Life. Putting these checks – which are broadly supported by some of the major political parties – in place would make it much harder for parties to turn a blind eye to donors’ controversial activities

These checks would ensure that parties are legally required to satisfy themselves that they are aware of the real source of donors’ cash, whether donors are involved in high-risk business sectors, and whether they have been convicted or subject to formal law enforcement or regulatory investigation in the UK and abroad. 

As the UK’s AML framework has been progressively tightened over the last decade for banks, businesses and others, the regime of checks that political parties are required to undertake has stayed largely unchanged since 2001. This is a serious anomaly and leaves political parties open to serious reputational damage as well as the influence of dirty money. 

Establishing a “fit and proper person test,” as called for by The Times editorial, based on the type of test already used by the FCA to vet company directors, could result in the worst offenders being excluded from political finance almost immediately.

The Elections Bill needs to be amended to ensure that the Electoral Commission’s independence is guaranteed, not neutered, and that it is emboldened to play a more active role in policing donations. This idea, already debated in the Commons as a cross party ‘Pandora amendment,’ would give the Electoral Commission the ability to review and rescind individual donations on national security grounds. This would mirror the existing regime for the assessment of investments in critical national infrastructure.

The Electoral Commission should also have the powers to block donations that pose a political integrity risk to Britain’s democracy, particularly by ensuring that donations that are made from the proceeds of crimes such as corruption, fraud or money laundering are not accepted by parties. 

To ensure that the new rules are being followed, the Electoral Commission  should have the powers to impose fines where parties accept money from criminal sources, or fail to make adequate checks on the source of funds, and be staffed by specialist investigators with forensic accounting and compliance skills.

Getting the Elections Bill right would prove that the government is putting into practice its commitments made as recently as December 2021 to “strengthen the integrity of UK elections.” At a time when the public has a heightened sense of the damage being wrought on British politics by the presence of malign influence from countries like Russia and China, the government needs to show that alongside its tough rhetoric on cracking down on dirty money in the context of Russian invasion of Ukraine, it is working to set up adequate defences to protect our democracy at home.

23.03.2022