JUST RELEASED: COVERT FOREIGN MONEY: FINANCIAL LOOPHOLES EXPLOITED BY AUTHORITARIANS TO FUND POLITICAL INTERFERENCE IN DEMOCRACIES
Comprehensive new report by the Alliance for Securing Democracy identifies legal loopholes exposing U.S. elections to financial interference by Russia, China, and others.
Contact: Kayla Goodson, press@securingdemocracy.org
Washington, D.C.– The Alliance for Securing Democracy (ASD) at the German Marshall Fund of the United States today released the most comprehensive global study to date of how covert foreign money is used to interfere in democracies. The report tracks over 100 cases from the past decade totaling more than $300 million funneled into 33 democracies—including more than two dozen in the United States alone. Through analysis of these cases, ASD identifies seven legal loopholes in the United States that currently expose upcoming elections to exploitation by authoritarian regimes like Russia and China.
According to the study, the frequency of these financial attacks accelerated significantly from just two or three annually before 2014, to between 15 and 30 in each year since 2016. Of the 115 cases identified over the past decade, 78 percent have occurred since 2016 and 92 percent since 2014. The report’s authors, Joshua Rudolph, ASD’s Malign Finance Fellow, and researcher Thomas Morley, argue that legal loopholes allowing such activity to go undeterred and unpunished amount to an overlooked threat to the 2020 elections, and they must urgently be addressed.
The seven legal loopholes authoritarians exploit to interfere in U.S. elections include:
- Providing political campaigns with intangible assistance;
- Sending operatives on secret missions to curry favor with or funnel money to preferred candidates;
- Using shell companies to hide illegal foreign donations;
- Using non-profits as conduits to funnel foreign money into politics;
- Secretly buying online political ads without disclosing the source of the funding;
- Funding fringe online media outlets;
- And using small donations and cryptocurrencies to anonymously donate to campaigns.
“Authoritarian governments and their proxies find it relatively cheap, easy, and oftentimes legal to spend money to tilt democratic institutions and process—in fact, these financial operations appear to be legal in 83 percent of cases we tracked,” said lead author Josh Rudolph, an expert on the intersection of finance and national security, who has held high-level positions at the National Security Council, IMF, and U.S. Treasury. “This is the most underappreciated external threat to U.S. democracy, and the amounts, frequency, and boldness are only increasing. The loopholes could be closed with targeted reforms that should be uncontroversial. Policy action cannot wait.”
According to the report, the United States has so far failed to fortify its financial defenses since malign finance and other tools of election interference became top national security threats in 2016—even after the FBI and DHS issued a memo in February 2020 highlighting malign finance as a significant threat to the November election. The authors lay out a policy strategy for addressing this threat, building on preliminary policy work that has already been introduced in Congress, like the SHIELD Act, AML Act, and Honest Ads Act, and presenting new recommendations that will provide policymakers with the groundwork needed to build resilience against this threat.
Among the report’s original recommendations are:
- Congress should pass a bill requiring all non-profits to publicly disclose foreign funders.
- Congress should require U.S. technology companies to maintain public archives disclosing the owners behind online media outlets.
- The U.S. Treasury Department should reorganize to dedicate as much administrative priority to fighting authoritarian influence as it does to combatting terrorist financing.
The Covert Foreign Money report can be accessed here: https://securingdemocracy.gmfus.org/covert-foreign-money
The video summary can be accessed here: https://twitter.com/JoshRudes/status/1295690303417057280?s=20
Reporters interested in an interview with Josh Rudolph or more information about Covert Foreign Money should reach out to Kayla Goodson at press@securingdemocracy.org.
The views expressed in GMF publications and commentary are the views of the author alone.
