Covert Foreign Money: Financial Loopholes Exploited by Authoritarians to Fund Political Interference in Democracies

In addition to more widely studied tools like cyberattacks and disinformation, authoritarian regimes such as Russia and China have spent more than $300 million interfering in democratic processes more than 100 times spanning 33 countries over the past decade. The frequency of these financial attacks has accelerated aggressively from two or three annually before 2014 to 15 to 30 in each year since 2016.

We call this tool of foreign interference “malign finance,” defined as “the funding of foreign political parties, candidates, campaigns, well-connected elites, or politically influential groups, often through non-transparent structures designed to obfuscate ties to a nation state or its proxies.” A typical case involves a regime-connected operative funneling $1 million to a favored political party, although buying influence in a major national election costs more like $3 million to $15 million.

Rather than start our analysis by focusing on any given policy area, we review open-source reporting in 16 languages to identify malign finance cases credibly attributed to foreign governments. Finding that approximately 83 percent of the activity was enabled by legal loopholes, we catalogue the resulting caseload into the seven most exploited policy gaps.

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