International Anti-Corruption Conference "Preventing. Fighting. Acting", Kyiv, 16 November 2015

1. PREVENTING CORRUPTION IN POLITICAL
FINANCING
Ukrainian reforms in the light of international standards
/ good practice
Dr. Quentin Reed, Council of Europe expert

2. Regulation: key points
• The most difficult thing to regulate in politics?
• Complexities
– Distinguishing ordinary party activity from election campaigning
– In-kind donations, loans, donations, delayed donations…
– Timing of spending and income
• Need for a balance:
– Dependence on any particular source of financing creates risks
– Encourage diverse sources of funding – no silver bullet!

3. Regulation: key points
• Regulatory impact assessment – extremely important if
regulation is to be designed to work in practice
• Regulation leads to the regulated (parties/candidates) altering behaviour
• Regulation should be designed to positively motivate
compliance or good practice. e.g.
– State subsidies conditional on submission of audited financial report
– Subsidies to match donations up to a limited size
• Transparency
– Key to success of all other regulations

4. Monitoring and oversight: key points
• Monitoring and oversight
– One institution is the ideal solution
– Key question is not “which institution” but whether it has:
• Independence
• Resources
• Role of oversight body is not just to ‘control compliance’, but
to ENABLE parties to comply
• Official oversight is not sufficient to ensure compliance
– Cooperation with non-governmental sector the way forward. e.g.
Serbia.

5. Ukraine – proposed amendments
• Key elements
– New system of generous state funding; Stringent disclosure requirements; New system of
oversight, enforcement and sanctions
• Joint opinion of OSCE and Venice Commission/CoE on first
draft: key findings/recommendations concerning:
– State funding biased towards established parties: consideration lowering the threshold.
– Election campaign reimbursement too generous, especially with abolition of campaign
spending limit; reintroduce limits and consider other measures to lower the cost of
elections
– Prohibited donors too loosely defined
– More complete definition of contribution/donation needed (loans, sponsorship)
– Exempt small donations and small parties from reporting and disclosure requirements
– Establish annual (not quarterly) financial reporting and clarify reporting requirements
– Need for clear requirements for independent external audit
– System of oversight – division between CEC and NAPC – not clear or ideal
– Widen range of sanctions and ensure they are proportionate

6. Ukraine – proposed amendments
• Second draft - many recommendations implemented:
–Prohibited donors more stringently defined
–Donations more clearly defined
–Spending limit reinstated
–State funding threshold lowered
–External audit set-up much more clearly
–Sanctions widened and more proportional

7. Recommendations not implemented
• State funding (especially) reimbursement of campaign spending) extremely
generous
• No restriction of campaign activities to cut election costs
• No exemptions from reporting requirements
• Reporting still quarterly
• External audit – no conflict of interest provisions,
• Oversight of election campaign funding divided between CEC, NAPC (and AC)

8. Other outstanding issues
• Ceilings on donations raised (22,000/44,000 Euro) – possibly
high?
• Generosity of electoral reimbursement:
– To ensure competitiveness, parties have to raise maximum electoral
fund in advance (either from own funds or donations)
– Little dynamic to reduce spending

9. Challenges for implementation
• Envisaged regulatory system can function, but:
– Huge task of implementation – both for parties and
regulators
• Reporting requirements more stringent than they need to be
• Entirely new system of oversight
– Needs clarification of competencies for oversight
– Regulation will not do much to lower election costs (and
reduce pressure to raise money)
• Very important given likelihood that parties spend much more than
official limits

10. Oversight: lessons of international
experience
• Ordinary party activities and election activities are difficult to
separate clearly:
– One oversight body or very clear coordination between bodies
needed
– Use Regulatory Impact Assessment to determine staff and resources
needed
• FIRST TASK: Enable and assist parties to meet their
obligations
– Written guidance, templates and explanations
– Guidance, e.g.:
http://www.electoralcommission.org.uk/i-am-a/party-or-campaigner/guida
– Training/meetings