The control of flows of money into and out of politics cannot be ignored by those seeking to implement anti-corruption reform. Political finance is a mechanism by which political parties and candidates acquire power and is therefore at the root of political corruption. Political corruption undermines democratic and economic well-being and reduces accountability and representation in policy-making. Political corruption leads to corruption in other spheres of life, either by design, by example or by the failure of elected leaders to enact anti-corruption laws and foment transparent practices.

Political parties and candidates need money to operate and to compete in elections. They need to pay for the general running of a party, for salaries, educational work, policy analysis, training of candidates and so on. During election periods they need to pay for campaign staff and to communicate their messages to voters, whether through televised campaigns or through billboards, baseball caps and t-shirts. These are legitimate expenditures - even if they prove very expensive - and are often funded through legitimate means, such as membership dues, public funding, private donations and candidates' personal funds.

Problems arise, however, when the level of funding a party or candidate raises determines the outcome of an election, or when the party in power uses state resources to favour its candidate. Another concern is when sources of funds are illegal (e.g. the proceeds of criminal activity) or when donations are illegal (i.e. are outlawed by electoral of political party laws) or corrupting (quid pro quo donations from legal sources). An additional problem is when money is spent on corrupt campaign activities such as buying votes.

There is no model political finance regime that can be transposed from country to country. Regulations need to consider a country's specific constitutional, legal and democratic traditions. For example, in countries where political parties are considered private, rather than public or societal bodies, it can be more difficult to introduce external regulations such as requirements to disclose sources of funding.

In practice, regulations tend to reflect the perceived problems of countries where they are enacted. Where corruption scandals and interested money have triggered reform, countries have tended to regulate the financing of parties and candidates, and the conduct of donors. Another problem that has motivated regulation in some countries is the perceived "arms race" in terms of campaign techniques and expertise. Many countries have a mixture of distributive and regulatory policies.

These variables notwithstanding, there are certain baseline standards for any political finance regime. Transparency is an important starting point: the general public should have access to information about how parties and candidates are funded. Diversity of funding is desirable, including both public and private support. Finally, regulations governing political funding and campaign expenditure need to be enforced by a strong authority endowed with sufficient legal powers to supervise, investigate and institute legal proceedings.

Regardless of the political finance regime in place in a given country, it is incumbent upon candidates and political parties themselves to ensure that their funding is clean and that information about the money raised and spent is made available. Parties can and must resist the temptation to accept money that binds them to serve interests other than those of the general public. A code of conduct for political parties and for elected officials should refer specifically to funding for election campaigns (see the ACH Public Sector Codes of Conduct page). Attempts to curb corruption in the funding of political parties and candidates must also speak to voters: in many countries it is the expectation that voters will be "paid" that drives up campaign costs, in others, it is the fear of punishment at the ballot-box by scandal-weary voters that motivates parties to clean up their finances.

There are many legal tools available to curb corruption in the financing of politics and the influence of interested money. Some regulations outlaw sources of funds that are considered corrupting, such as donations from foreign sources or, in some countries, from private companies. Others aim to reduce the need for parties and candidates to seek endless funds, for instance by providing public funding, capping the amount a party or candidate can spend on an election, reducing the length of campaigns or providing public funding. The main types of regulation are:

• Public subsidies for political parties or candidates: either direct subsidies provided to parties before an election or refunded after an election, or indirect subsidies such as tax relief, free postage or airtime on state-owned television.
• Bans on certain types of contribution: typically for donations from private companies, trade unions or foreign citizens and organisations.
• Bans on expenditures: for example buying votes from individual electors or providing meals and drinks at campaign rallies, or bans on paid political advertising.
• Ceilings on the levels of contributions: for individual donations or for the total amount of money received by a party or candidate. These might differ according to the type of contributor. It is important to note whether the definition of "contributions" includes in-kind gifts such as printing services or broadcasting time.
• Ceilings on expenditures: which might be a total amount or set as an amount per voter.
• Time limits on the campaigning period.
• Disclosure regulations: requiring parties and candidates to declare publicly their funding sources, including amounts, name and address of donor.

Competing objectives
Regulations imply restrictions on political parties and candidates that may clash with other parts of a country's legal or constitutional framework. In the United States, for example, despite widespread concern about the spiralling costs of elections and the decisive role money seemed to be playing, the Supreme Court ruled against spending limits on the grounds that unlimited expenditures would increase the amount of political speech. In neighbouring Canada, however, the reverse decision was taken, and the Supreme Court deemed it constitutional to restrict campaign spending.

Getting buy-in from political parties and the legislature
It is often difficult to persuade politicians to adopt regulations that they themselves will be affected by. Increasingly expensive election campaigns on the one hand and dwindling numbers of paid-up party members on the other have left political parties in many parts of the world reliant on large private sector donations which they would probably prefer not to disclose. Moreover, disclosure is perhaps the least controversial of regulations; the introduction of bans or ceilings on expenditure or the introduction of sanctions for violating political finance rules are often even harder to achieve.

The enforcement deficit
All too often there is a gap between regulations and their implementation. One reason for this is if the body charged with enforcing the rules lacks the resources and legal authority to supervise them and deal with infractions. Another reason is that, however tightly knit the regulations, money seems to find its way around them. Complex sets of rules are matched by sophisticated attempts to find loopholes. For this reason, successful political financing regimes tend to marry the regulatory approach with incentives to comply with regulations, for example making compliance with disclosure regulations a precondition for receiving public subsidies. Civil society monitoring efforts can also help by providing a complementary source of information that can be checked against balance sheets provided by the parties themselves, thereby providing a disincentive to cheat.

The security question
Two arguments are often put forward to resist efforts to improve disclosure practices. The first is that legitimate revenues may dry-up since donors will not want their donations to be revealed. This has not, however, happened in the United States which has both a good disclosure policy and a tradition of high individual and corporate donations to political campaigns. The second relates to the security of donors, discussed in the box below.

Legislation is not the only answer to money politics in the party system. Critics of regulation point to countries such as Sweden, with few party funding regulations and relatively few scandals, as evidence that regulation may not be the most successful way of cleaning up political finance. Sweden does, however, have a long tradition of transparency and accountability in the conduct of public affairs. In many other countries, particularly new democracies that lack a tradition of voluntary disclosure, laws that are binding on all parties are necessary to shed light on the financing of parties and candidates.

In all contexts, regardless of the political system and traditions, regulations do not work in a vacuum. Civil society and the media can perform an important monitoring role. The information they provide to the public can allow voters to choose candidates and parties that are not involved in corrupt acts. It is the electorate that must, in the first instance, demand reform from those they put in power. Elected officials who respond to public demands for good, clean government, may be rewarded at the ballot box when they or their party aim for re-election.

It is also up to parties themselves to act with probity. Without internal reforms, such as the introduction of fair candidate-selection procedures and transparency funding requirements for internal party elections, and a genuine commitment to abide by external regulations, it is often not difficult for parties and candidates to seek out loopholes or circumvent legislative requirements. Internal reforms have the added advantage of demonstrating to the voting public that the party is practicing what it preaches, to curb corruption.