What are the effects of illegal and improper financing on politics? This paper suggests that illicit political finance is a key contributor to democratic governments’ underperformance and loss of credibility. International actors should help transitional democracies to: (a) understand why the problem is arising; (b) raise awareness of it; (c) develop knowledge and tools to defend key institutions; and (d) where appropriate, create new laws, policies and institutions.
Illicit political finance can include bribery and corruption, but also improper lobbying and some types of foreign aid. It is used to influence or ‘capture’ agencies, local governments, state territory or even the entirety of states. State capture aims to systematically distort or displace the state through a clandestine parallel entity or entities.
Inadequate attention is given to illicit political finance. Analysing illicit political finance provides a clearer understanding of the processes by which government loses touch with the people, and how representation is eroded. In the current economic crisis, political processes are likely to be particularly at risk from cash-rich transnational criminal works.
The effects of illicit political finance and state capture on democratic governance include: reduced government revenues, investment and economic growth; increased social, economic and gender inequality; the fostering of transnational crime, terrorism, corruption and conflict; and the erosion of democratic political institution building – and possibly of the substance and credibility of democratic processes.
- A state organ may not only become infiltrated by illicit interests, but could itself direct illegal business activity. A government agency could thus use illicit political finance to exercise control over other parts or the whole of a government, or over legal and illegal markets.
- Some national governments (such as Brazil and Colombia) are losing localities to organised crime. Drug trafficking networks are becoming particularly sophisticated and dangerous.
- Women are disproportionately vulnerable to organised crime, which may also have an indirect adverse effect on gender equity by discouraging women from actively engaging in
- In many countries, the enforcement of campaign finance laws tends to focus on presidential elections. Parliamentary and local elections (where monitoring, auditing and enforcement capacity is weakest) are often neglected or overlooked.
- As political parties become dominated by one or few candidates, party finance becomes candidate finance and opportunities for illicit influence and capture may increase.
- Efforts to address illicit political finance are emerging. Colombia’s legislature, for example, is proposing severe sanctions for some campaign finance violations, even if such violations are not proven until well after the elections in which they took place.
More attention needs to be paid to defending, as well as building, democracy. National and international efforts should investigate what types of legislation and international cooperation might prove most effective in deterring illicit political finance, and how different political actors can be equipped to fight it.
- Regulation of campaigns should focus on regulation of access to the media, and on the use of television, radio and the Internet. New rules could be established to make election campaigns less reliant on money for advertising, and more reliant on the public broadcasting of face-to-face debates between candidates.
- As political will for the reform of political finance is often lacking, a free and independent media with a strong investigative capacity is important in generating public demand for reform.
- There should be an open discussion of how better to control the sale and use of narcotics.
- Research should dedicate particular attention to how links between illicit finance and democracy-building affect women.
- Opportunities should be created for the sharing of lessons learned in revealing and dismantling networks of illicit political finance.
