oUR Party Finance Rules are packed with loopholes. Shell company. Associations not incorporated. Anonymous donations routed through inter-election digital campaigns. Everything is legal. Everything for abuse is ripe. And now a new gateway has been opened: cryptocurrency.
When someone buys cryptocurrency, their identity is anonymous, but the transaction itself is recorded on the blockchain and published. So far, this anonymity has allowed cryptocurrency to fund everything from sanctions avoidance to election interference. A recent report from the Information Centre revealed that the new “digital ruble” A7A5 is already linked to avoiding sanctions by the Russians. The report also found that Iran Scholl, a fugitive oligarch, accused of being involved in Russian attempts to interfere in Moldovan’s election, used currency to inject at least $39 million (£29 million) into thousands of Moldovan bank accounts in exchange for votes.
In the UK, the UK reform has already declared that it plans to accept crypto donations.
This is the new frontier in campaign finance. Cryptocurrency gives people plenty of ways to hide, obscuring who is funding political parties and what they might want. Online “mixers” can blend personal cryptocurrencies with other cryptocurrencies, making it virtually impossible to track the origins of individual coins. People can also donate using multiple crypto wallets with different addresses, and split large donations into small quantities that bypass reporting thresholds for political donations.
It is a custom built system for hostile stakeholders, and is widely open to abuse, especially by people who wash foreign money into British citizen bank accounts before handing over to British political parties. And Russia is ready to move. Since 2014, at least 24 countries have spent about £230 million to destroy democracy.
This week, the Minister will taper a mini-white paper to prepare the basis for the new election bill. It contains some good ideas. The government will introduce stricter “know your donor” rules. But it’s impossible to really know your donor if they give money in code. A better solution is to ban crypto donations entirely (Ireland and Brazil have already done so). The government must also prohibit unchecked, unverified, unlimited businesses or associations that do not require you to submit an account. The shadowy group known as the “unincorporated association” has led more than £60 million into British politics over the past 20 years, but there is no need to submit an account or explain where their money came from.
It’s very easy to make money abroad and route it to a bank account of a British citizen. From there it will be transferred to political parties. This creates great vulnerability. In 2022, The New York Times reported concerns that money transferred from a Russian bank account to a British citizen’s bank account could have expanded into the Conservatives’ financial resources. British citizen Ehud Shereg said the party’s contributions were unrelated to the gifts from his Russian stepfather, and the election commission later found no basis for investigating the contributions.
When I reported it to the National Crime Agency, a British citizen finally wrote a check to the Tory, so it told me that I had no crime. There is no evidence that Shereg is doing anything wrong. However, this mechanism can be exploited by bad actors. Therefore, only profits or income acquired in the UK should be permitted to fund political parties.
The National Crime Bureau and the Election Commission will need more resources when examining these issues effectively. And they need to be able to impose much larger fines. Workers pledged in their manifesto to strengthen rules regarding political contributions. Foreign Secretary David Lammy has explicitly cooperated to tackle the dirty money that infects global politics and has shut down London’s role as the world’s favourite laundromat. The minister is awakened to the dark threat of money. And the new election bill is good news for those who want to wipe out politics. But only if you close the loophole. Trust me, the Kremlin is watching.
Liam Byrne is a Labour MP for Birmingham Hodge Hill.
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