The head of the government’s ethics advisory body has called for an overhaul of the rules on political donations, warning stronger safeguards are required against the influence of foreign money.
Lord Jonathan Evans, chair of the independent committee on standards in public life, told the Observer that the government needed to implement new measures which would establish the true source of donations and improve diligence checks.
Evans’s comments come after the Observer revealed last week that Karan Chanana, a food tycoon from India who donated more than £220,000 to the Conservatives through a UK subsidiary controlled from the British Virgin Islands, is under investigation over claims of fraud and money laundering.
The party accepted more than £58,000 from Chanana’s firm after a consortium of banks had filed the claims with India’s Central Bureau of Investigation. No charges have been filed and Chanana has not responded to the claims. There have also been concerns over hundreds of thousands of pounds donated to the Conservatives by benefactors linked to Russia.
“The UK’s current rules do not provide a sufficiently robust safeguard to protect our electoral system from the effects of foreign money,” said Lord Evans. “Our 2021 report included important recommendations to mitigate these risks.
“The changes we proposed were not radical or bureaucratic, but they could have a significant impact on the integrity of our electoral system. We would urge the government to take them forward as a matter of urgency.”
Parties are banned from taking money from foreign donors, but critics argue that there are loopholes rules designed to prohibit foreign donations under the Political Parties, Elections and Referendums Act 2000 (PPERA).
An amendment to the national security bill that would have required political parties to carry out due diligence on the true source of donations was voted down by the government this month.
Labour has accused the Tories of being “asleep at the wheel” over the influence and sources of foreign money.
Labour party chair Anneliese Dodds said: “With recent news that Tory donors have links to alleged money laundering, fraud, corruption and other unacceptable activities, the question is: is there anyone the Conservatives won’t accept money from?
“Rishi Sunak and the Conservatives have serious questions to answer. They need to come clean about what due diligence they carry out on their donors – and why it appears to be so inadequate. They also have to explain why they whipped their peers to vote against an amendment to close loopholes on foreign donations.”
Amira G Foods, controlled by Chanana, was among the new corporate donors supporting the Tories in the run-up to Boris Johnson’s landslide election victory in December 2019. Ben Elliot, appointed co-chair of the Conservative party in July 2019, presided over a surge in donations, with the party receiving more than £37m in the last quarter of the year, a record figure and more than that given over the same period to all the other parties combined.
The Tories have previously been challenged by Labour over whether they would keep donations from Britannia Financial Group, which also first donated in the same period. The group, which has its headquarters in London and is controlled by the Venezuelan-Italian banker Julio Herrera Velutini, according to corporate filings, is a client of Hawthorn Advisors, the public relations firm co-founded by Elliot.
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Velutini was charged last year by the US Department of Justice with conspiracy, federal programmes bribery and honest services wire fraud in relation to an election in Puerto Rico in 2020. He has pleaded not guilty to the charges, which his lawyers have said are baseless and politically motivated.
“It’s quite obvious there need to be much tighter rules on political donations from individuals, companies or other types of entities,” said Steve Goodrich, head of research and investigations at Transparency International UK. “The government [is] worryingly complacent, and there has been a lack of curiosity about the provenance of funds which parties have been accepting.”
A Conservative party spokesperson said they only accept donations from permissible sources, namely individuals registered on the UK’s electoral roll or UK registered companies.
““Donations are properly and transparently declared to the Electoral Commission, openly published by them and comply fully with the law.”
A government spokesperson said: “Transparency of electoral funding is a key cornerstone of the UK’s electoral system. It is an offence for a political party to accept a donation from a foreign donor, and we have introduced a new requirement on political parties to declare their assets and liabilities over £500 upon registration, as recommended by the committee on standards in public life.”
Britannia Financial Group declined to comment.