Discussion Issue 1: Financial Disclosure

Chapter II, Article 7(3) of the United Nations Convention against Corruption (UNCAC) obligates state parties to make good faith efforts to improve transparency in election candidate and political party financing. Campaign finance disclosure is the main policy instrument for achieving such transparency. Disclosure refers to the timely dissemination of information about parties and candidates' receipts and expenditures of material resources. While other forms often regulations are available for controlling the role of money in the political process, such as spending limits, bans on certain forms of income and the provision of public funding, effective disclosure is required for such other regulations to functions properly.

That being the case, IFES asked its Advisory Group on Political Finance the following questions regarding financial disclosure:

Question 1: If no regulations are currently in place, what are the most crucial disclosure reforms and why?

Question 2: What are the criteria for judging when personal security should take priority over disclosure and principles of transparency?

Question 1: If no regulations are currently in place, what are the most crucial disclosure reforms and why?

Lack of political will. If average politicians can agree on one thing, it is to not change rules they perceive to benefit them. For this reason, democracies with institutionalized party systems seldom change their electoral systems. Likewise, attempts to establish independent boundary delimitation procedures are uphill battles. The same can be said of campaign finance disclosure. In a recent IFES survey of experts and regulators, 14 percent of respondents thought the following to be the “strongest argument” against disclosure: “It is impossible to enforce because there are always ways around it.” Even in the United States, disclosure laws in place since 1910 went unenforced until 1975, when Congress created an independent regulatory agency on the heels of a major scandal. The question then becomes how to design reforms when parties and politicians refuse to comply with disclosure laws. Under such circumstances, there is a need to be selective in which requirements are actively enforced.

Disclaimer: The views expressed here are those of the individual authors and do not reflect the official policy or position of their respective organizations or institutions.

Gerardo Berthin , UNDP Regional Center for Latin America

I think that political will should be created or demanded from outside the political party system. While this will be a step-by-step process, in each step there should be a goal to increase political will for more transparency. There has to be a number of incentives in place for parties and leaders to view transparency not as a threat, but as means to gain politically. Strong and independent control institutions can ensure compliance and be armed with respective sanctions. In addition, regardless of the amount of political will that exists, civil society and the media can also play a critical role in advancing reform agendas and in targeting disclosure.

If an agenda for political-party finance system reform is on the table, civil society and media can voice support to help overcome the objections of those who would seek to undermine such efforts. Just as importantly, civil society, as a supportive stakeholder, can act in partnership with media to ensure that critical components of a control system and disclosure are not overlooked or discarded as the design evolves. Where political will does not exist, civil society and the media can be the engine that generates public demand for transparency and accountability from all actors in the political system. At minimum, emphasis should be given to disclosing information about donors (who, how much) about how monies are being spent in favor of the campaign (media, administrative, etc).

Dr. Edna Co , University of the Philippines

Ideally, an electoral management body (EMB) and /or appropriate constitutional bodies should ensure regulation regarding disclosure on political finance practice and behavior. Political parties are another mechanism for disclosure.

In developing societies (including the Philippines), these mechanisms may formally exist, however whether these institutions are effectively functional is another matter. The presence of these mechanisms is one thing and effective enforcement by them is another.

In case the regulatory bodies have weak performance, disclosure reforms on political finance may be considered as follows:

1. Upon registration by any political party or candidate, the party or candidate may be required by the electoral management body to create websites as part of their (party and candidate’s) official accreditation. The website should update the public on information related to the party or the candidate including financial matters such as sources of finance, campaign expenditures, projects and activities which indicate budget utilization, among other information.

   Proposal A suggests regulation on disclosure through the official mechanism (EMB) and gradually shifts toward direct public disclosure using technology as a medium for greater transparency.
   
   

2. Reforms on disclosure may further consider a relocation of transparency efforts from the official mechanisms (Constitutional bodies and EMB) to the public domain. Thus for example, disclosure reforms might be lodged at the level of the public and in a manner similar to a social movement especially when and where civil society is strong.

Proposal B falls along the governance principle of managing networks and invoking citizens’ participation in managing public affairs. The objective is to invoke transparency of information through direct disclosure to the public and the participation of organized citizenry.



3. In the spirit of regulatory governance, a third party that is independent and autonomous, and which may be composed of professional, competent, and credible individuals and network representatives including academics and religious might be constituted to form a regulatory mechanism. Where similar body exists and is already officially recognized, disclosure functions might be lodged in such body. (In the Philippines, there is an Anti-Money Laundering Council created by law and whose objective is to strengthen transparency and accountability on public and private monies and bank accounts through monitoring and scrutiny as necessary.) A similar body is another possible venue for disclosure.

   Proposal C invokes independence of a body that is entrusted with the responsibility of exacting transparency and accountability. It is important that this body has a high level of confidence and trust by most sectors and therefore its composition is crucial. It is possible that this mechanism might also be entrusted with regulatory functions other than electoral/political finance matters.
   
   

G. Jasper Cummeh III,Actions for Genuine Democratic Alternatives, (AGENDA), Liberia

As experience has shown in many places, there may not be lack of laws, but lack of enforcement because enforcers may lack the political will to enforce, or sometimes they lack the technical knowledge to understand why they should enforce.

The kinds of institutions saddled with this problem are part of the traditional institutions responsible for enforcing laws covering other aspects of public life, including murder, rape, embezzlement, robbery, etc, and so in the ranking of priorities or the ranking of crimes which the society considers pressing, false disclosure or failing to disclose may not rank high. Therefore it would qualify as something to give less attention to or gloss over.

The most crucial reforms would be removing the responsibility for enforcing disclosure regulations or the violation thereto from the hands of those institutions that have responsibilities to enforce other laws; this is difficult though, because these institutions are likely inclined to resist devolution of power. But if there should be progress in terms of promoting transparency and accountability, then it would be more easier to put the responsibility in not one but a few institutions that are not saddled with other pressing responsibilities and are also able to talk to one another.

So taking cue from putting responsibilities in a few agencies, If there are no regulations in place, the toughest reforms would be to separate responsibilities and give mandate to one agency that could be responsible for compliance and filing, while another is responsible to review and to ensure that non-compliance or haphazard compliance is punished. The temptation is often to put all the responsibilities in the hands of one institution, which may lack the capacity to do all, or which may be primarily focused on something else, most likely conduct of elections, that is largely taking away all of the resources and expertise in the organization. In post-conflict countries, there exist heavy pressure, traction and urge to get on and along with the elections and exit the transitional phase as quickly as possible, especially for international actors. They are often oblivious of the fact that the reforms that are needed should be lasting and durable, not necessarily a remedy for concluding, resolving the conflict.

Jared DeMarinis, Maryland State Board of Elections

Prior to the establishment of any rules and regulations must be trust in the agency tasked with enforcement. If the agency is toothless against the status quo or used as a vehicle to impede the opposition, then any rules and regulation will lose its importance. The first regulation needed is to create an independent agency outside the direct control and authority of the government. The agency must have the respect and belief of the people that it will administer and enforce the election law in an impartial method bringing legitimacy to the process. The only way this can be achieved is that the agency must operate without fear of repercussions from the government in charge.

Loopholes and the ability to circumvent disclosure requirements will always exist. However, elected officials can only operate and govern on the belief by the people that the election results accurately reflects the people's will. Only the establishment of an independent agency can achieve that desired effect. Furthermore, if a candidate or party refuses to comply with the rules and regulations of the agency, it cast a shadow of doubt on the election and its legitimacy to govern.

Craig Donsanto , United States Department of Justice

Nothing will induce an unwilling legislature to enact transparency legislation that (in the words of my mother) “gores it own ox,” without a significant push from the public. So we start with an underlying need for a public desire for such legislation, however expressed. In the US, we did not enact meaningful transparency legislation until after Watergate focused the attention of the general population on governmental abuses and excesses, and those views were given voice via the media.

Assuming a public desire that inspires the legislature to act against its own interests, to me the most important types of financial disclosure - - and thus the first that should be attempted - -are personal holdings of public officers (at the start national elected officials, cabinet ministers, and perhaps second tier ministers - - to be enlarged upon as the initial legislation takes hold and gathers public support), and (absent local legislation limiting campaign expenditures) campaign contributions received by political parties and national candidates. This selection is based on my understanding of the primary reason for such transparency laws: to provide the voting public with very relevant information concerning what outside interests are funding governance, to allow the public to identify potential and actual conflicts of interest on the part of those who should be acting to further the general welfare rather than personal or political party interests, and in that process to discourage corruption and conflicts of interest.

Carl Dundas , IFES Ethiopia

Getting political parties to accept the principle of disclosure is the first step in laying down a regime of disclosure. Any premature attempt to impose a stiff regime with limits of contributions to parties and candidates will meet with little enthusiasm, as has been the case in Nigeria for some time.

Dr. Trevor Munroe , University of the West Indies at Mona

Increasingly the changing political situation in many states is forcing political leaders to measure the benefit to them of little or no campaign finance disclosure against the cost to them of declining trust in, and consequential increasing alienation from, political leadership and institutions. In this context, global surveys in a number of countries confirm that political parties are amongst the institutions in which national populations have least confidence…

Hence an opportunistic interest arises in the average politician “to do something”, or at least appear “to do something” to arrest, and hopefully, from the politician’s point of view, reduce public opprobrium in relation to politicians. This opportunistic interest intersects with the objective need for disclosure reforms and provides a potential opening for successfully introducing disclosure regulations.

In this context the most crucial disclosure reforms are those which can meet the politician’s interest in “cleaning up his image” and at the same time, the public interest in campaign finance disclosure. Both interests are likely to be met by:

1. The establishment or strengthening where it already exists, of an independent electoral administration authority with power/resources to require and to check on the observance of candidate or party finance disclosure rules. This need may be met by a formula that may add on “independent members” to an authority previously constituted exclusively, or in the majority, by political appointees
2. Requiring both candidate and parties to disclose to the independent members of the electoral administration authority contributions in cash and kind in income bands.
3. By providing an incentive initially in the form of “in kind” support from the public purse to parties and candidates found to be in compliance with disclosure requirements.
4. By investing the electoral administration authority with power to enforce sanctions for non-compliance ranging from public exposure, withdrawal of public funding support up to and including deregistration of candidates and parties.

Dr. Karl Heinz Nassmacher, Carl von Ossietzky University of Oldenburg

My advice is strictly derived from German experience and goes back to a time when Germany was nothing more than a country in transition to democracy with an uncertain future of its political and economic system, which now seems ages ago. However, this was really in 1949 when a new constitution of unknown durability was drafted. The constitution is still effective although at the time it was called “preliminary”.

During the closing days of the constitutional assembly a representative from a minor party, which has dissolved long ago, demanded to enter a clause, which was inspired by the fact that Hitler’s final bid for power in 1932/33 had been financially supported by German industry. The representatives of all other, much stronger and more powerful, parties did not dare to resist for fear of public opinion and the clause was incorporated in the final text: “Political parties … have to disclose to the public the sources of their funding. Details will be regulated by federal legislation.”

From 1949 to 1967 this was a dead letter of the law. Nobody cared about it, nobody dared to do something about it. A “parties’ law” was dutifully drafted by the government, but never passed. The parties of the parliamentary majority needed additional funds, and they added an appropriation to the federal budget. However, what nobody had expected happened. One of the representatives in the constitutional assembly (from a different party) had become premier of one of the states and his state government went to the constitutional court demanding that the parties’ appropriation in the budget be declared illegal. This is what the court ruled and the federal majority of the day had to legalize its measure by passing a law. This law (the “political parties’ law” of 1967) did include transparency rules.

These rules did not preclude the Flick affair to happen in the 1980s, but this affair triggered-off an improved regulation (including an extended clause in the constitution). This improved regulation is still effective and its details are more suitable to the subject than recent British and Canadian rules, not to mention countries like Sweden and Austria, which are still miles away from anything similar.

My consequence from this for other countries now in the process of transition to democracy: Try an “innocent” clause in the constitution first, wait for the next political finance scandal to come (and it will come up - sooner or later) and then demand stricter legislation because such legislation is obviously necessary. Go for further improvements later! Be prepared if the call from history comes and live up to each opportunity you get. In the end the level of transparency obtained in such stepwise process can be rather impressive.

Alvis Vilks , Corruption Prevention and Combating Bureau, Latvia

So, the main conclusion is that it is impossible to establish a real disclosure of political parties financing without a real control mechanism. In the worst situation if there is no regulation in place, it can be started with provisions regarding disclosure of annual incomes and expenditures of political parties (annual declarations) and disclosure of political campaigning incomes and expenditures (campaign financing declarations). In both cases the information should be made public, at least starting from some threshold.

Question 2: What are the criteria for judging when personal security should take priority over disclosure and principles of transparency?

Abuse of disclosure by strong ruling parties. Simply put, governments may selectively enforce disclosure laws against political oppositions, or they may use the information discovered to harass opposition donors and supporters.
Under certain circumstances, IFES has proposed raising disclosure thresholds in order to protect a greater number of identities. Depending on the likelihood of harassment, IFES also proposes reducing the specificity of disclosure: limiting public information to the income brackets or industries of donors, for example. The key here is that the potential for harassment forces a tradeoff between transparency and personal security. In these contexts, it may be more important to foster competitiveness.

Disclaimer: The views expressed here are those of the individual authors and do not reflect the official policy or position of their respective organizations or institutions.

Gerardo Berthin , UNDP Regional Center for Latin America

First of all, the context of harassment and abuse needs to be clearly assessed. In that context, every effort should be made to protect identities and supporters. It should however be the exception. The situation would have to be so dangerous as to merit non disclosure over security.

Jared DeMarinis, Maryland State Board of Elections

The use of the campaign finance contributions against individuals or business entities is a very real and tangible threat. However, the more one shields the disclosure of records, the more problematic enforcement becomes. Political enforcement of disclosure doesn't usually come [from] government agencies which are slow to respond but from the rival political organization or committee. Anytime transparency is lessen, the self-policing aspect of campaign decreases which dampens the ability for change and reform. Protection against reprisals or condemnation from outside organizations and/or countries might be easier to obtain by transparency rather than not disclosing the information. Only when imminent and real threats of death or reprisals occur should take priority over disclosure.

Craig Donsanto , United States Department of Justice

On the one hand the purpose of financial transparency is to provide the voting public with information on where political contestants are getting their financial backing and thus to whom they are indebted. On the other hand no one wants political transparency to produce results that scare off lawful participants in the financing of the political process.

The best compromise I can come up with is to structure campaign financial disclosure -- at least in the first couple of election cycles in emerging systems -- more broadly than on the identities of individual donors. Perhaps requiring disclosure of the occupation of contributors, along with their employers, might suffice. Amount and date of contribution, employer and occupation of contributor –

Carl Dundas , IFES Ethiopia

There should be few such criteria, lest the purpose of disclosure be frustrated. However, there are a few such criteria that should compel consideration for waiver or exceptions to be granted, for example, in Liberia in 2005 the declaration of assets required the stating of bank account numbers and it provoked such an outcry that that requirement had to be dropped. Similarly, where the disclosure of an individual’s address would put the person or his/her family in personal danger, upon proof of such danger by the person/s claiming such to be the case, an exception should be made. This situation would be similar to persons on the register of voters who, in some jurisdictions, can ask that their names and or address be removed off the register upon proof that their security would be endangered if those particulars remained on the register.

Dr. Trevor Munroe , University of the West Indies at Mona

In general the criteria should relate to the extent of observation of civil liberties and political freedoms in the particular country context.

For a start the Freedom House Index may be utilized. Similarly the governance indicators of the World Bank Institute, in particular the Rule of Law Indicator may be consulted to derive in a broad brush way the character of the context.

Within that framework we can drill more deeply into the governance reality along the following lines:

1. Develop or review national survey data on the perception of victimization of opponents/patronization of supporters amongst the public in general as well as interested stakeholders (corporate leadership, professional associations etc.) in the political system.
2. Assess the effectiveness of safeguard/corrective mechanisms against discrimination on grounds of politics. Many states include some such provision in the non-discrimination clause of their constitutions. In some instances this constitutional requirement is reinforced by statute and by administrative institutions (e.g. the Office of Political Ombudsman)
3. The extent of freedom of the press and the incidence of effective utilization of the media in exposing, deterring and rectifying cases of personal harassment of opposition donors and supporters.

The above taken separately could constitute criteria for judging when personal security should take priority over disclosure and principles of transparency. Conceivably, the above taken together might be used to construct an index of personal political harassment/personal political security.

Dr. Karl-Heinz Nassmacher , Carl von Ossietzky University of Oldenburg

In any system that is not really competitive political finance reformers are ill advised to pursue transparency regulation unless there is not the slightest doubt about the rule of law in that system. If political competition is not a serious threat to momentary rulers and/ or rulers can disregard the legal process because it will not interfere with government actions no political trick whatsoever can make transparency rules work as a check on arbitrary action (and worse). If this is the case, personal security of all people who and institutions which may oppose the government needs to take priority over well-meant and carefully designed demands for reform.

Alvis Vilks , Corruption Prevention and Combating Bureau, Latvia

The logic is simple – genuine transparency and control of political parties financing is possible just in the society with certain level of democracy and in that way – with developed system of multi-party system. Quoting the words of popular advertisement clip, no parties and no democracy – no real transparency and no control of parties financing.

For society it is very important to know who is supporting a particular party, who is standing behind this party and who can influence the decisions made by leaders of this party. A financial disclosure at least can show part of potential influence. Therefore, it is really important to know the donors of political parties. Of course, we can discuss protection of personal data and how to gradate the access to information (for example, general public and law enforcement agencies and procedures), but the idea of raising disclosure thresholds is the easiest way to a derogation of transparency and can lead to the ineffective system of control. Besides – if the opposition parties are acting in conditions of political pressure and harassment, no tradeoff between transparency and personal security will help them, they`ll be chassed anyway and ruling parties will use all the possible influence anyway.