Illicit Foreign Finance and Election Integrity

The year 2024 has been dubbed the year of elections, with dozens of countries holding national elections from Ecuador to Pakistan, from Indonesia to Slovakia, and more to come. With some estimates that over half of the world will be eligible to vote in an election this year, the global democracy community has identified election integrity as a key issue in the fight against democratic backsliding. While attention is focused on the growing role of artificial intelligence and the ever-increasing threat of disinformation and hate speech, election integrity is experiencing unprecedented attacks from another malign source: illicit foreign funding of political and electoral processes. This issue is among the key topics at the upcoming International Anti-Corruption Conference (IACC) in Vilnius, Lithuania, where hundreds of anti-corruption advocates from around the world will convene to forge a path against the global threat of corruption. With IACC as an opportunity to address the challenge of illicit foreign funding of elections and politics head-on, IFES is advocating for a comprehensive and coordinated approach to bolster resilience and build defenses.

Foreign Interference and Money in Politics

For more than two decades, IFES has worked with oversight bodies, civil society, media, and law enforcement to address vulnerabilities in money in politics, improving transparency and strengthening accountability. The rise of strategic corruption, through which “a government weaponizes corrupt practices as a tenet of its foreign policy,” sheds new light on dark money in politics and stresses the need for increased efforts by the global development, policymaking, and oversight community. Around the globe, illicit financial flows are being used to undermine democratic elections and influence political forces for the benefit of foreign states. Whether through money laundering, undisclosed donations, third-party campaigning, or even direct vote-buying, malign foreign actors are funneling funds to allied political parties, businesses, and non-government organizations (NGOs) to manipulate elections and the voters who participate in them.

The use of illicit foreign funding to destabilize elections and democratic processes complicates already overburdened oversight of and accountability mechanisms for money in politics in many global democracies. As legislators, institutions, and law enforcement work to close gaps in legal frameworks or the implementation of current regulations for political finance, malign foreign actors exploit those vulnerabilities to distort democracy at work, furthering their political and economic aims.

Channels of Illicit Foreign Funding

The entry point for foreign actors to covertly fund politics and election campaigns is often legal. In fact, over 70 countries do not prohibit foreign donations to electoral contestants, allowing foreign support for affiliated political groups to proliferate without disclosure. Legal bans give countries a way to prevent foreign interests from manipulating the electoral process, ensuring equitable campaigns for all contestants. However, a legal ban can only be a first step, and countries with bans are still at risk – a 2020 analysis revealed that 17 percent of foreign money in politics is channeled directly, in contradiction to bans, and the other 83 percent moves through methods outside the law. These activities present critical risks to an equal and fair playing field that offer fringe, radical, and even extremist groups alternative funding streams to maximize their performance in national level elections and to influence political processes, sowing distrust in democratic institutions and processes along the way.

In Moldova, a flurry of illicit financial flows from Russia has entered the political process; authorities recently seized nearly $1 million in cash from private citizens returning from Moscow with funds purported for illegal political financing. According to law enforcement, those citizens carried cash below the declaration threshold of €10,000. The cash was allegedly intended to fund fugitive oligarch Ilan Shor’s new political movement, Victory. This is not the first time Shor and his political bloc have violated political finance laws and regulations. Last year, the Central Election Commission of Moldova disqualified the Shor party from receiving state funds after it violated numerous campaign finance measures, in which campaign funds were directly linked to Russian sources. Shor party politicians were subsequently banned from participating in the 2023 local elections, a decision that the country’s Constitutional Court recently overturned.

Cash is not the only form of illicit finance in elections. Financial support can be transferred through new forms of currency in the digital space. Indeed, the use of cryptocurrencies is increasing around the globe and the general risk of anonymity in traditional money laundering and corruption poses a great risk as national authorities investigate, identify, and prosecute cryptocurrency donations to political actors. In some countries, the use of cryptocurrency is banned altogether; in others, it has been embraced as an opportunity for national digital transformation and economic growth. Regardless, the embedded secrecy of many cryptocurrencies limits transparency and integrity in political finance, and much like cash, opens a space for foreign governments to channel their funding of election interference.

Many global examples of illicit foreign financing in elections use domestic political parties as proxies for influence. Increasingly, businesses and NGOs receive foreign funding earmarked for destabilization campaigns. Businesses, both domestic and foreign-owned subsidiaries, are often permitted to make direct campaign contributions, and oversight bodies can face challenging webs of ownership and interests that mask foreign malign connections. Lack of ultimate beneficial ownership data, and secrecy provided by offshore jurisdictions, complicate the investigation of illicit foreign financing in elections and politics. Meanwhile, foreign-affiliated cultural, advocacy, and educational NGOs have sprung up in many countries, claiming to provide learning opportunities or human rights protections. While some of these NGOs establish themselves as transparent and meaningful representatives of foreign states, others have more nefarious purposes. These NGOs can conduct third-party campaigns, advocating directly for preferred political parties or candidates that represent the interests of the foreign government or undermine confidence in the democratic process.

Devising Solutions

With all these challenges to election integrity – and more elections on the horizon this year – what efforts can be bolstered to root out dirty foreign money in politics? A comprehensive approach that engages the entire chain of enforcement is needed. This includes working with legislators to close gaps in their countries’ legal and institutional frameworks; political parties to foster integrity and responsibility; oversight bodies to enhance their capacities and processes; law enforcement to strengthen investigations and appropriate accountability mechanisms; the judiciary to secure final, irrevocable decisions on violations; and civil society and media to ensure their watchdog roles. Along the way, the entire chain of enforcement should be engaged in regular and meaningful communication to build coordination, trust, and effective responses to illicit foreign finance risks and challenges. Such a holistic approach and joint efforts can overcome notable gaps, including under-resourced oversight and law enforcement bodies, siloed civil society and media advocacy and fact-finding, and conflicting understanding and competences among responsible institutions.

IFES research on the investigation and enforcement of political finance integrity breaches found good practices in engaging the chain of enforcement. For example, legal provisions in Kosovo require the delivery of financial audits to multiple competent authorities, easing access to information hurdles. In France, joint training of auditors and integrated guidelines across institutions has contributed to coordinated oversight efforts. Meanwhile, institutions in Brazil defined a cooperation agreement to overcome overlapping mandates and responsibilities. Additionally, investigations in many countries, such as the Gambia and Malaysia, are prompted by complaints submitted by civil society or investigative pieces published by independent media. These examples offer lessons for advancing collaborative responses to threats posed by illicit foreign financing of elections and politics.

Working with domestic political actors, institutions, civil society, and the media is just one piece of the puzzle, though. With foreign malign actors abusing the global financial system and a vast transnational network of enablers and allies, responses to illicit foreign finance requires a commensurate transnational effort. Linking law enforcement and oversight bodies to share information, data, and intelligence is essential to hasten investigations and identify methods and actors that facilitate the use of covert money in elections and politics. As autocratic leaders learn from each other, it is important that defenders of democracy share knowledge of common tools and approaches to counter foreign interference. While many international fora exist, the challenges of illicit foreign financing in elections and politics have not yet led to dedicated channels for sharing sensitive information. IFES believes this cross-border exchange starts with trust. Already, IFES’s Regional Europe Office (REO) convenes state institutions and civil society peers on an array of election integrity issues. In April, after more than five years of regular exchanges, IFES REO launched a network of oversight bodies in Central and Eastern Europe to formalize partnerships and regional learning, marking the first step toward further information sharing.

However, further international support and coordination is needed, especially to tackle persistent and emerging threats in illicit foreign money in politics. These include networks of professional enablers, unregulated advertising on social media, and unimpeded lobbying and third-party influence. Engaging international champions from across the public and private sectors to build integrity, awareness, and democratic values offers the benefit of expanding channels for transparency and accountability that counteract corrupt forces at the regional and global level.

What’s Next?

Among the main themes of the IACC this year are democracy and human rights, as well as global enterprises of corruption. IFES and hundreds of practitioners, advocates, government representatives, policymakers, business leaders, and others will discuss these challenges in Vilnius to confront corrupt networks and actors. For IFES, emphasizing the importance of transparent, accountable, and inclusive political finance is a key element in fighting illicit foreign finance. In addition, combining efforts with larger integrity initiatives is needed to close the gaps that foreign malign actors exploit to destabilize democracy and hinder global democratic progress. These discussions can serve as the basis for a new resolution on political finance at the 2025 Conference of State Parties on the United Nations Convention Against Corruption, building a common vision for the protection of elections and democracy from foreign threats.

In the months to come, IFES will continue this endeavor, leveraging its decades of practice in conjunction with its renewed thought leadership to root out foreign malign interference in democratic elections and processes.