Oversight—A Toolkit for Political Finance Institutions

This part of Oversight—Toolkit for Political Finance Institutions includes information about areas of political finance regulation. Since the toolkit focuses on the implementation of regulations, the main focus of this section is on the relevance and implications of different regulations for those working in public oversight institutions. It is not an exhaustive review of all issues that need to be considered when creating regulations on political party and campaign finance. You can find more information about such issues in, for example, the ACE project Encyclopaedia and in International IDEA’s Funding of Political Parties and Election Campaigns: A Handbook on Political Finance. 

International standards are a set of principles defined in international/universal instruments and good practice guidelines. There are two distinct strands of international standards impacting on political finance: there is a series of international treaties and agreements that address democratic participation (for example, human and political rights) and another that focuses on anti-corruption measures. At the regional level, there are also standards for oversight, accountability, and enforcement [see Standards relating to oversight, accountability, and enforcement.pdf]

International standards, including regional ones, are important to understanding the scope and purpose of regulating political finance, as respect for fundamental rights needs to be balanced with the necessity to limit the negative impact of money in politics. They not only inform legislators in drafting laws; they are also important reference tools to guide oversight institutions in implementing political finance laws—whether through bylaws, enforcement policies and procedures, or reaching decisions in individual cases. As the political finance oversight body, a solid understanding of international and regional standards and good practice will be very helpful in how you plan and implement your work. Do not expect much consideration to be given in these standards to the enforceability of political finance regulations.
The European Commission, in its Compendium of International Standards for Elections, 4th edition, has classified agreed criteria or “benchmarks” based on their degree of importance (that is, standards, political commitments, or nonbinding good practice), their level of influence (that is, international or regional), and their region of application. 

Below is an illustrative list of international and regional standards and agreements.

Universal/General Instruments
Paragraph 19 of the United Nations Human Rights Committee General Comment No. 25 to Article 25 of the International Covenant on Civil and Political Rights (ICCPR) and Article 7.3 of the United Nations Convention against Corruption (UNCAC) 2005 call for reasonable limitations on campaign expenditures and the need for transparency in the funding of candidatures for public elected office.

General Comment No. 25, Paragraph 19
“Reasonable limitations on campaign expenditure may be justified where this is necessary to ensure that the free choice of voters is not undermined or the democratic process distorted by the disproportionate expenditure on behalf of any candidate or party. The results of genuine elections should be respected and implemented.”

UNCAC Article 7.3 
“Each State Party shall also consider taking appropriate legislative and administrative measures, consistent with the objectives of this Convention and in accordance with the fundamental principles of its domestic law, to enhance transparency in the funding of candidatures for elected public office and, where applicable, the funding of political parties.”

Regional Instruments
Different regional institutions have developed a framework of commitments and standards for political finance regulation and supervision aiming at giving guidance for approaching and assessing political finance systems.
The 2003 African Union Convention on Preventing and Combating Corruption 
Article 10
“Each State Party shall adopt legislative and other measures to proscribe the use of funds acquired through illegal and corrupt practices to finance political parties; and incorporate the principle of transparency into funding of political parties.”

The 2005 Southern African Development Community (SADC) Protocol against Corruption 
Article 4.1.i
“Mechanisms to encourage participation by the media, civil society and non-governmental organizations in efforts to prevent corruption” 

The 1996 Inter-American Convention Against Corruption of the Organization of American States (OAS) 
Article 3.11
“Mechanisms to encourage participation by civil society and non-governmental organizations in efforts to prevent corruption” 

The 2001 Inter-American Democratic Charter of the Organization of American States (OAS) 
Article 5
“The strengthening of political parties and other political organizations is a priority for democracy. Special attention will be paid to the problems associated with the high cost of election campaigns and the establishment of a balanced and transparent system for their financing”

The 2001 Parliamentary Assembly of the Council of Europe Recommendation 1516 on the financing of political parties
Article 7
“The Assembly believes that the rules on financing political parties and on electoral campaigns must be based on the following principles: a reasonable balance between public and private funding, fair criteria for the distribution of state contributions to parties, strict rules concerning private donations, a threshold on parties’ expenditures linked to election campaigns, complete transparency of accounts, the establishment of an independent audit authority and meaningful sanctions for those who violate the rules.”

Recommendation Rec (2003)4 of the Committee of Ministers of the Council of Europe to member states on common rules against corruption in the funding of political parties and electoral campaigns
Preamble
“Considering that political parties and electoral campaigns funding in all states should be subject to standards in order to prevent and fight against the phenomenon of corruption”

Recommendation CM/Rec(2007)15 of the Committee of Ministers to member states of the Council of Europe on measures concerning media coverage of elections campaigns
Article I.6
“If the media accept paid political advertising, regulatory or self-regulatory frameworks should ensure that such advertising is readily recognizable as such. Where media is owned by political parties or politicians, member states should ensure that this is made transparent to the public.”
Article II.5
“Member states may consider introducing a provision in their regulatory frameworks to limit the amount of political advertising space and time which a given party or candidate can purchase.”

The 2002 Convention on the Standards of Democratic Elections, Electoral Rights and Freedoms in the Member States of the Commonwealth of Independent States (CIS)
Article 10 
“fair and open financing of elections, and election campaigns of candidates political parties.” 
Article 12 includes guidance on sources of financing, reporting, monitoring, and sanctions related to political finance.
In addition to international and regional standards, there are a number of political commitments and good practice guidelines relating to political finance. 

Political Commitments
As underlined by the European Commission’s Compendium of International Standards for Elections, “political commitments may contain standards, but can be considered more of a political dialogue between the states concerned, the intention of which is not to make the standards binding at the level of international law.” While these are nonbinding, they shed light on and explain the aspirations and methods to be used in regulating political finance.

The 2003 Statement of the Council of Presidents and Prime Ministers of the Americas on “Financing Democracy: Political Parties, Campaigns, and Elections”
“regularizing, monitoring and enforcing standards of political financing to reduce corruption, promote citizen participation, and enhance political legitimacy of democratic institutions.”

The 1990 Organization for Security and Co-operation in Europe (OSCE) Copenhagen Document—Document of the Copenhagen Meeting of the Conference on Human Dimension of the CSCE
Article 5.4
“a clear separation between the State and political parties; in particular, political parties will not be merged with the State.”
Article 7.6
“To ensure that the will of the people serves as the basis of the authority of government, the participating States will […] respect the right of individuals and groups to establish, in full freedom, their own political parties or other political organizations and provide such political parties and organizations with the necessary legal guarantees to enable them to compete with each other on a basis of equal treatment before the law and by the authorities”
 

The 2015 New Delhi Declaration on Political Finance Regulation in South Asia
Paragraph B1
“In order to strike a balance between the need for a healthy competition and the level playing field, the [political finance] regulations should be realistic, protecting every legitimate need of political parties, candidates and the citizens. These should take into account the realistic costs of campaign materials, services and advertising.”
 

Good Practice (Nonbinding Documents)
According to the European Commission’s Compendium of International Standards for Elections, “good practice” refers to policy papers that certain state institutions/organizations are working on, or to draft conventions and declarations that have not yet been adopted and can therefore neither be considered as legally nor politically binding documents.

The 2001 Southern African Development Community (SADC) Parliamentary Forum Norms and Standards
Part 2.3
“In the interest of creating conditions for a level playing field for all political parties and promoting the integrity of the electoral process, parties should not use public funds in the electoral process. The electoral law should prohibit the Government to aid or to abet any party gaining unfair advantage.Those countries that are not yet funding contesting political parties should introduce the necessary legislation to do so in order to foster uniformity and leveling the playing field.There must be accountability in the use of public funds.”
Part 2.5
“In the interest of promoting and entrenching pluralism, multi-party democracy and the integrity of the electoral process, the complete independence and impartiality of the Electoral Commission in dealing with all political parties should be reaffirmed in the constitution.To further enhance the independence and impartiality of the Electoral Commission it should have its own budget directly voted for by Parliament and not get its allocation from a Ministry or a Government Department.”
Part 3.6
“The Electoral Commission should therefore be legally empowered to prohibit certain types of expenditures so as to limit the undue impact of money on the democratic process and the outcome of an election. It should be empowered to ensure that proper election expenses returns are submitted on time, to inspect party accounts, and for parties to have properly audited and verified accounts.”

The 1994 Declaration on Criteria for Free and Fair Elections of the Inter-Parliamentary Union (IPU)
Article 4.1.3
States should “Provide for the formation and free functioning of political parties, possibly regulate the funding of political parties and electoral campaigns, ensure the separation of party and State, and establish the conditions for competition in legislative elections on an equitable basis.”

Guidelines on the financing of Political Parties, Venice Commission of the Council of Europe (European Commission for Democracy through Law), 2001.
Preamble 
“the need to further promote standards in [the area of political finance] on the basis of the values of European legal heritage.” 

Code of Good Practice in Electoral Matters, Venice Commission of the Council of Europe (European Commission for Democracy through Law), 2002
Article 108
“First of all, funding must be transparent; such transparency is essential whatever the level of political and economic development of the country concerned” 

Code of Good Practice in the field of Political Parties, Venice Commission of the Council of Europe (European Commission for Democracy through Law), 2008
Article 38
“Party funding must comply with the principles of accountability and transparency.”

OSCE Office for Democratic Institutions and Human Rights/Venice Commission Guidelines on Political Party Regulation, 2nd edition, 2020.
Article 204 
“Political parties need appropriate funding to fulfil their core functions, both during and between election periods. At the same time, the regulation of political party funding is essential to guarantee parties’ independence from undue influence of private donors, as well as state and public bodies, to ensure that parties have the opportunity to compete in accordance with the principle of equal opportunity, and to provide for transparency in political financing.”

OSCE Office for Democratic Institutions and Human Rights, Guidelines for Reviewing a Legal Framework for Elections, 2nd edition 2013.
Section 11.1
“Campaign finance is a difficult subject of regulation in elections, due to the balance that must be sought between minimizing disproportionate expenditures, which may undermine the free choice of voters, and the rights of freedom of association and expression, which often are exercised by donating money or services to a candidate or political party.”

Reports of the Council of Europe’s Group of States against Corruption (GRECO) that encompass the assessment studies on transparency in political party funding in all 49 GRECO members.
 

It is widely agreed that political parties play a vital role in democracy and need money to do their job. It is also well acknowledged that money can result in undue influence and corruption, which, in turn, undermines the democratic process. Protection against corruption and undue influence is one of the key reasons to regulate political finance.

A second reason for regulating political finance is to ensure transparency about the source of party and election funding and how it is spent. Most countries impose reporting and transparency requirements as part of their political finance legislation. Transparency allows the public to know who is backing whom and about the spending decisions of political actors. This information can help voters decide how they will cast their ballots. At the same time, transparency is an important mechanism for deterring corruption. 

As the oversight body, you are likely to shoulder responsibility for the implementation and enforcement of reporting and disclosure rules. It thus is vital that you understand the importance of ensuring timely, accurate, and meaningful disclosure of political finance data and deliver this area of your remit well. See further in the sections on the publication of data, actions, and decisions, and on the receipt and review of statutory reports.

A third rationale for regulating political finance is to provide equality of opportunity or a level playing field in electoral contests. Rules governing public funding, limits on the size of donations, and election campaign spending restrictions are legislative tools designed to help achieve fair competition. Of course, their effectiveness will depend largely on how well you, as the oversight institution, control compliance with the requirements set out in law. Effective control requires that you have solid policies and procedures for supervising and monitoring political finance. See the sections on the receipt and review of statutory reports, and on operational policies and procedures.

Finally, the fourth rationale for regulating political finance is to ensure proper accountability. There is no point in having rules if they are never enforced or enforced in a partial and unfair manner. This simply brings the entire system into disrepute. Once again, as the oversight body, your actions are essential to making the required accountability a reality. Depending on the jurisdiction, this will likely mean that you need mechanisms in place for handling issues of noncompliance, that your agency can undertake timely and credible investigations, and that you impose (or recommend) proportionate sanctions where the law has not been followed.
 

Political finance regulation can be boiled down to five key elements: donations, public funding, expenditures, transparency, and oversight/enforcement. Not every country includes all these elements in their legislation, and not every country adopts the same rules for each element. Ideally, each country will adopt a regime that speaks to its relevant needs in regulating money in politics. It is thus critical to carefully examine the legislation in your own jurisdiction when considering your remit and how you will approach it. 

Private Funding (Contribution) Restrictions

Some countries impose quantitative or qualitative restrictions on sources of political funding. There may be a limit on how much a permissible donor may contribute to a political party, a candidate, or both (quantitative limitations). This helps contain the influence of the wealthiest donors and thus protect the system against undue influence and help foster an even playing field.

The restrictions may include bans (qualitative limitations) on anonymous donations and/or on donations from foreign donors, corporate donors, trade unions, government contractors, public bodies, charitable/religious organizations, and/or minor children. Some countries ban all cash donations, whereas others only ban cash donations above a certain threshold. In some jurisdictions, the law prohibits donations made in the name of another (for example, straw donors).
The bans on various donation sources serve a variety of purposes in terms of safeguarding the democratic process, as summarized in the following table:*

* This table is drawn from International IDEA’s 2014 publication, Funding of Political Parties and Election Campaigns: A Handbook on Political Finance, p. 21.

As the oversight authority, you will need to consider how you are going to ensure compliance with the restrictions governing sources of donations. This may include:

• Determining what other state register(s) exist that will enable you to confirm the permissibility of a particular donor (for example, a civil registry to determine whether a donor is “foreign” or list of government contractors or social assistance registers to assist in determining whether the donation was made from the donor’s own funds). This is relevant when legislation includes qualitative donation limits.
• Developing a process for identifying and aggregating all donations made from the same donor to a political party or candidate to assess compliance with quantitative contribution limits.

Private funding also comprises membership fees paid by party members, candidates’ personal funds, and loans. A political party may even raise money through income-generating activities (for example, property rentals or the sale of publications). Contribution limits could be circumvented if other sources of financing, such as loans or membership fees, are not subject to the same limitation. You will need to include these other funding sources in your compliance program.

The section on compliance control mechanisms sets out more information about compliance measures you can take.
 

Public Funding
The introduction of a public funding mechanism is often triggered by one of several goals. Public funding has been introduced to offset the lack of private funding in countries without a tradition of private financial support for political parties or where growing disengagement of citizens has resulted in a decrease in private sources of funding. In other countries, public funding has been introduced to limit the influence of private money and to constrain its potential distortive impact on the political process. A more cynical view would attribute public funding as a means for political parties to fund themselves from the public coffers. At least theoretically, public funding aims to level the playing field, and thus enhance political pluralism, by facilitating access to the electoral arena for new or small political forces.

Public funding can be targeted to assist political parties and/or candidates to fund their electoral campaigns, or it can be targeted on non-election campaign activity such as office space and policy development. Public funding can also be used as a tool to help change political party behavior and foster inclusivity through supporting the participation of underrepresented groups, such as women, persons with disabilities, national minorities, and youth. Whatever the focus in your jurisdiction, there probably will be eligibility criteria that recipients must meet to receive funding and allocation criteria that determine the portion of funding recipients will receive.

Depending on your jurisdiction’s laws, your role as the oversight body may require you to consider how you will:

• Determine whether an applicant meets the eligibility criteria to receive funding.
• Determine the amount of funding an applicant is entitled to receive.
• Ensure the funding is disbursed in time.
• Undertake controls to confirm that the funding was properly used.
• Take whatever measures are specified for withholding public funding and/or sanctioning the misuse of such funding.

Expenditures
If donation restrictions and bans address the supply side of political finance, spending restrictions can be seen as addressing the demand side. The theory is that it is possible to limit the need for ever-increasing amounts of funding by imposing limits and bans on how much money political parties and candidates can spend. Again, there are many variations on how to set spending limits. Some countries use average salaries as a guide; others use a formula that incorporates a base limit and then adds a specific amount per elector in the voting area.

For spending limits to be effective, the cap needs to be set at the right level. If it is set too high, it will be meaningless; if set too low, there will be temptation to circumvent it. What constitutes the correct level depends on the goal that the limit is intended to achieve and on the current level of spending. It is equally important for there to be clarity about what counts against the limit and to whom it applies (for example, to candidates only, to political parties only, to their combined spending, and to third parties/non-contestant campaigners).

In some jurisdictions there are bans on specific expenditures such as vote-buying (often handled by criminal prosecution) and on paid broadcast advertising.

As the oversight institution, you may be called upon to:

• Set the spending limit.
• Provide clear definitions in secondary legislation as to what will count against the limit.
• Monitor compliance with the spending limits during the electoral campaign.
• Control whether the reported spent amounts are accurate and within the limits.
   

Transparency
Transparency of political finance is fundamental for accountability and preventing corruption in the political process. It is the backbone of any political finance regulatory system. First, it provides voters with information about who backs the various parties and candidates and how they spend their money. Second, it provides the oversight body with the information necessary for it to supervise compliance with the other substantive political finance rules. And, third, it is a means to deterring corruption.

As the oversight body, you are likely to shoulder responsibility for the implementation and enforcement of the reporting and disclosure rules. It thus is vital that you understand the importance of ensuring timely, accurate, and meaningful disclosure of political finance data and that you deliver this area of your remit well. Civil society also has an essential role to play in ensuring transparency in political finance. See more in the sections on the publication of data, actions, and decisions, and on the receipt and review of statutory reports.

Oversight and Enforcement
There is little point in enacting political finance regulation if the rules are then not enforced. While oversight and enforcement responsibilities rest with different types of oversight bodies across the globe (ranging from election management bodies to auditing and anti-corruption agencies to ministries and to courts), they ideally share key characteristics:

• Supported by a robust legislative framework.
• Independent (for example, in the appointment process, funding stream, and powers).
• Have established and be guided by strategic and operational frameworks.
• Capable of exercising political will.

Political finance oversight institutions should also consider the Autonomy and Accountability Framework that IFES has developed for independent governmental institutions.

Part 2 of this toolkit addresses in depth how you can develop your strategic and operational frameworks and Part 3 identifies and provides insights into how to deliver your oversight and enforcement functions.
 

Regulating political finance raises numerous and significant challenges. Legislation must be appropriate for the political and legal context of each individual country. Therefore, the combination of the different building blocks—that is, the rules on sources of financing, expenditure, transparency, and oversight—is unique to each country. While each country aims to adopt a regime that speaks to its relevant needs in regulating money in politics and that reflects its cultural, historical, and practical considerations, all countries have been faced with common emerging issues, such as third-party campaigning, social media advertising, and the use of cryptocurrency during election campaigns. This is also the case for some issues that have been considered in many legislative frameworks for decades (for example, foreign funding) or where changing circumstances may have created new or increasing loopholes (for example, cross-border advertising and new forms of international financial transactions). From a regulatory perspective, the goal is pretty much the same as regards these issues: tracking the amount of money spent by third parties on campaigns (and notably political advertisements) and tracing the funding to its source.

Third Party or Non-Contestant Campaigning
(based on IFES Political Finance Discussion Series—Transparency Serbia)
Election campaigning is most often associated with the activities of political parties and candidates to get elected, and election finance regulation generally focuses on these direct participants. Increasingly, however, other individuals and organizations have entered the election arena to campaign in favor of or against particular issues, candidates, or political parties. They do not stand for election themselves, they do not put forward their own candidates, and sometimes they are not formally associated with candidates or political parties. This form of electioneering is called “third party” or “non-contestant” campaigning.

Although non-contestant financing of election campaigns can be done in coordination with candidates/political parties, it is usually defined as campaign expenditures made independently of a party/candidate with the aim of promoting or opposing a candidate or party, directly or indirectly. The focus here is on non-contestant involvement undertaken independently.

Some countries have a long history of companies and other organizations campaigning to influence the outcome of elections. They may organize a campaign to support or oppose a particular party/candidate in order to protect their financial or philosophical interests.

The involvement of non-contestants as an expression of political pluralism and citizen involvement is not generally a negative phenomenon, and it is in line with international standards and regional agreements on democratic participation. The 1996 International Covenant on Civil and Political Rights recognizes that citizens have the right to participate “in the conduct of public affairs, directly or through freely chosen representatives” (Article 25). At the European level, the Organization for Security and Co-operation in Europe’s Copenhagen Document of 1990 addresses participatory rights of citizens and affirms the fundamental freedoms of expression, the press, assembly, and association. The European Convention for the Protection of Human Rights and Fundamental Freedoms expressly recognizes these fundamental freedoms may only be subject to certain restrictions “as prescribed by law” and “necessary in a democratic society” (Article 10). As stressed by the OSCE Office for Democratic Institutions and Human Rights and the Venice Commission’s Guidelines on Political Party Regulation, “[t]hird parties should be free to fundraise and express views on political issues as a means of free expression, and their activity should not be unconditionally prohibited. However, it is important that some forms of regulation, with comparable obligations and restrictions as apply to parties and party candidates, be extended to non-contestants that are involved in the campaign, to ensure transparency and accountability” (Paragraph 255).

In recent years, the frequency and magnitude of such spending has increased. This raises a number of concerns in countries where it is not regulated:

• It may open the door to circumvention of rules for candidates/parties. For example, the funds used by unregulated non-contestants may be derived from impermissible sources (including foreign sources), the size of contributions to support the election activity may exceed donation limitations, and the amount spent may be not subject to any expenditure limit. When social media platforms are used, their policies may contravene domestic advertising regulations.
• It may diminish the voice of the actual candidates/parties in the electoral context and make the playing field less level. Non-contestant campaigning may impede the outreach activities undertaken by electoral contestants or blur the messages of some electoral contestants by competing with and outspending them.
• It may diminish the level of transparency since the source of funds used, the amount spent, and the identity of suppliers remain cloaked in secrecy. As a result, and depending on the regulations that are in place, it can be virtually impossible to hold relevant actors accountable.

A total ban on non-contestant advertising would not likely be acceptable in most countries and jurisprudences, such as in Europe and North America. According to International IDEA’s political finance database, 55 out of 139 countries for which data is available have adopted third-party regulations in the form of bans or limits. Each aspect of non-contestant regulation raises a series of questions that warrant serious consideration. For the OSCE countries, the various non-contestant regulations and requirements are well summarized in the Note on Third Party Regulation in the OSCE Region.

As an oversight institution, you may find that the introduction of legislation on non-contestant financing may increase transparency of the flow of money through the political process, and thus increase the comprehensiveness of political finance oversight. This may increase public confidence in the regulation and oversight process. On the other hand, adding oversight of non-contestant campaigning to your remit is likely to require a significant increase in resources for your institution, the development of new procedures, and adding new staff skill sets.

Social Media Political Advertising
(source IIIDEM project—2021)
Political advertising can be broadly defined as any advertisement run by a political/electoral contestant or by a non-contestant to influence opinion in support of, or in opposition to, a political/electoral contestant during an election campaign (on during a referendum campaign). While electoral contestants (and third parties) have the right to disseminate political ideas in accordance with the right of freedom of expression, political advertising may be subject to reasonable limitations through regulations pertaining to advertising expenditure levels or reporting as well as through disclosure requirements to ensure political finance transparency and accountability. The main campaign finance issue in that regard is to ensure that social media communications are identified as electoral expenditure and that they are financed through identifiable and lawful sources so as to guard against foreign or other illegal interference in the electoral process. For an introduction on regulations of social media advertising, see IFES’s 2021 Lessons for Regulating Campaigning on Social Media.

In a significant number of countries, political advertising is banned in broadcast or print media during all or some of the election campaign period. However, in most countries, social media political advertising is unregulated. Digital campaigning has become one of the most effective campaign tools used by electoral and non-electoral contestants and the surge in digital spending has been accompanied by attempts in different countries to increase the transparency of online political advertising through the adoption of regulations imposing the identification of the payer.

Social Media Platforms
Social media companies have adopted blanket self-regulatory measures that vary by platform: Twitter has banned all political ads on its platform, and Google (which owns YouTube) and Meta (which owns Facebook and Instagram) expect advertisers to comply with domestic regulations. Some social media platforms maintain ad libraries/archives and provide application programmatic interfaces (APIs) that can be used to access and collect data. Depending on the platform, different types of information can be accessed and scraped, such as target audience and ranges of prices for ads run. Moreover, in some countries, Facebook  and Google also require advertisers that seek to run political ads to register, and they reserve the right to remove political ads run by unregistered advertisers. In Canada, online platforms that meet the definition set out in the Canada Elections Act (CEA)—“an Internet site or Internet application whose owner or operator, in the course of their commercial activities, sells, directly or indirectly, advertising space on the site or application to persons or groups”—must keep and publish a digital registry of all regulated ads and the name of the person who authorized the ad. All ads must be included in the registry on the day they are first displayed. The CEA requires an ad registry when the following monthly visit thresholds are reached:

• For platforms mainly in English: three million unique visitors in Canada in a month.
• For platforms mainly in French: one million unique visitors in Canada in a month.
• For platforms mainly in a language other than English or French: 100,000 unique visitors in Canada in a month.

Social media platforms should be fully involved with any legislative initiative aimed at raising digital awareness in order to ensure that all advertisers are educated on domestic political advertising regulations, as some platform policies may conflict with domestic regulations. Such initiatives could be, for instance, to:

• Ensure that social media platforms set up archives/ad libraries containing all political advertisements for specific time periods, accompanied by an accurate cost for each advertisement by electoral contestant.
• Put in place controls to check that the account administrator who runs and pays for advertisements is actually based in the country.

Social Media Monitoring
The main challenge posed by digital political advertisements is the partial or inadequate control of electoral activity on social media platforms. In countries where campaigning on social medial is unregulated, advertising on platforms raises concerns regarding the sources of financing behind the payment of such ads and the possibility to circumvent donation limits and/or bans. Moreover, in countries where social media platforms do not maintain advertising archives and/or where unregistered advertisers can run advertisements, it is challenging to monitor those advertisements and impossible to assess total social media advertising expenditures.

The increase in digital spending has been accompanied by attempts in different countries to increase the transparency of online political advertising, such as requiring all campaign electoral actors to identify who sponsored or paid for advertisements through the use of a “digital imprint” or “disclaimer” in order to ensure compliance with campaign finance regulations, or to provide detailed and meaningful invoices from and/or contracts with their digital suppliers. In countries where ad libraries exist, such archives enable a degree of scrutiny of political advertising and allow the oversight body, as well as civil society organizations and journalists, to identify potential violations of campaign finance regulations. Social media monitoring can be partially outsourced by the oversight body (as in Lithuania) or done by civil society organizations (as in Croatia) and through innovative approaches (as in the Netherlands) (see Social media advertising.pdf).

Given the increased use of social media for political advertising, it is likely that regulatory systems that do not address this issue will be seen as outdated and not fit for purpose by the population in many countries. Regulating the issue may increase the relevant information available and increase trust in the system, and also in your work as an oversight institution. However, regulating social media also carries challenges for oversight institution, not least in getting timely access to relevant information from social media companies. Your institution should make sure that it is closely involved in any discussions about legal change in this area, to ensure that any provisions introduced are possible to implement in practice.

The Carter Center has published Monitoring Online Political Advertising: A Toolkit to guide election observation missions’ analysis of online political advertising, notably on social media platforms. This document provides tools and techniques to analyze domestic regulations, and it also provides tactics to better identify accounts that run political advertisements on social media platforms, as well as to monitor and collect information about such advertisements with a view to formulating recommendations for institutional and noninstitutional stakeholders.

Cryptocurrency
The use of cryptocurrency in political finance is an emerging issue that calls for better regulatory consideration. While this technology can be used to enhance political finance transparency and accountability, it can also pose new challenges. Depending on their design, some cryptocurrencies could make it almost impossible to identify the source and destination of transactions. They could be used to circumvent some political finance regulations, such as donation bans. The main policy concerns regarding the use of cryptocurrency are anonymity, volatility, and lack of oversight.

As IFES has noted, “cryptocurrency political donations and non-fungible tokens (NFTs) open new avenues for corruption in elections. The volume of cryptocurrency transactions globally has exploded in recent years, though illicit crypto transactions are estimated at $14 billion (USD), a drop in the sea of illicit physical currency. What constitutes “illicit” transactions in this sphere is largely undefined, however, and the alacrity and sophistication of malign actors is likely to vastly outpace the ability of democratic actors to respond to them. It would be dangerous to ignore the potential impact of unregulated cryptocurrency and its digital kin on democratic elections.”

Cryptocurrency refers to virtual currencies that operate in a decentralized manner and employ blockchain technology to track transaction history and other related information. They are by definition not associated with any banking institutions or governments, and they can increasingly be used in the same way as traditional currencies. Blockchain technology “provides proof of who owns what at any given juncture. This distributed ledger is replicated on thousands of computers—bitcoin’s [and other cryptocurrency’s] ‘nodes’—around the world and is publicly available.” Blockchain is considered to be an incredibly secure form of cryptography where the transaction history provides its own unique signature to avoid duplication.

There are several important considerations for cryptocurrency’s application in the political finance realm, most notably regarding issues of anonymity, fluctuations in value, and environmental concerns related to crypto “mining.”
Concerns about the anonymity of cryptocurrency users raises potential challenges for its widespread use in the political finance arena. In tandem with its decentralized nature, anonymity is considered central to cryptocurrency’s DNA. Individual owners typically have some type of identifying user number but that is not necessarily attached to a real-world identity. This might change eventually as efforts to find the identity of individuals or groups behind cryptocurrency holdings increase. For example, the U.S. Federal Bureau of Investigation used blockchain ledgers to seize part of the ransom paid to hackers as part of the Colonial Pipeline Incident in 2021, raising questions about whether cryptocurrency could be truly anonymous.

Additionally, the value of cryptocurrencies can fluctuate wildly. For example, in 2010, a unit of Bitcoin, the most popular cryptocurrency, was priced at around $0.09 (USD). In 2021, Bitcoin reached an all-time high of $64,000 (USD) per unit, before crashing to below $30,000 (USD) per unit in that same year. This volatility poses a challenge for determining the value of a unit of cryptocurrency, and thus for enforcing limits on political finance spending.

Overall, the likely continuing rise in the widespread use and popularity of cryptocurrency will have implications for political finance.
Policymakers and electoral management bodies are often too slow to react to digital challenges such as the regulation of technologies (for example, social media and big data analytics) and underequipped to deal with them appropriately.

As with regulating third-party campaigning and social media advertising, introducing regulations on the use of cryptocurrency in political campaigning can make the oversight process more relevant in the current climate in many countries, and may increase popular support of your work as an oversight institution. A main challenge may simply be to understand the issues and technology involved, and you may well wish to consult experts on this topic at an early stage if the question of regulating the use of cryptocurrency in campaigning arises.