The UK government has proposed legislation to close loopholes in political finance rules and prevent the influx of dirty money and undue foreign influence. Global Insight assesses the flaws in the current system and the changes needed to safeguard free and fair elections.

Foreign funding of political parties and politicians is banned in the UK. And yet the current rules provide routes for foreign money to influence UK democracy, whether through hostile states, such as China or Russia, looking to undermine UK interests or wealthy overseas individuals who wish to sway electoral outcomes.

In recent years, civil society organisations, the National Crime Agency, the Electoral Commission and the Committee on Standards in Public Life have all increased pressure on the government to do more to tackle the risks of foreign interference. In response, the government is proposing strengthening political finance rules and enforcement as part of an upcoming Elections Bill. ‘Public confidence in politicians is very low and if you link that to overseas interference in elections, the agenda is to undermine our democracy,’ says Bob Posner, former legal counsel and Chief Executive at the UK Electoral Commission.

In 2020, the Intelligence and Security Committee warned about Russian influence in the UK, including by political financing and the spread of disinformation. Two years later, MI5, the UK’s domestic counterintelligence and security agency, issued an ‘interference alert’ that an alleged Chinese agent had sought to influence parliamentarians by donating over £420,000 to an MP over a five-year period. More recently, concerns have been raised about the rise of the political mega-donor and the ability of wealthy overseas individuals to donate vast amounts of money to political parties.

Political donation rules in the UK are covered by the Political Parties, Elections and Referendums Act 2000 (PPERA). The law requires all donations and loans to political parties above £500 to come from ‘permissible donors’, which include voters on the electoral register, companies registered in the UK and unincorporated associations carrying out business in the UK. Reforms that the government has proposed include measures aimed at preventing shell companies and unincorporated associations from being used as conduits for foreign or dark money and strengthening know-your-donor requirements for political donations. The government has also set up a Defending Democracy Taskforce, which aims to reduce threats to UK democracy, including by finding legislative and enforcement gaps in political finance laws. ‘We see time and time again a permissible donor being used as a Trojan horse for dark money to enter UK politics,’ says Eliza Lockhart, a research fellow at defence and security think tank RUSI. ‘Unincorporated associations and UK registered companies have historically been massive loopholes through which truckloads of money have been driven’.

An unincorporated association is an informal group of two or more people and can donate up to £37,270 to a political party without needing to register with the Electoral Commission. Any person or company can fund an unincorporated association and therefore foreign and other impermissible donors can use them to funnel money to political parties. Under the current rules, foreign individuals can also set up shell companies, registered in the UK and funded abroad without any trade activities in the UK, to be used for political financing and obscuring the source of funds.

Steve Holt, a partner at Grant Thornton and an officer of the IBA’s Anti-Corruption Committee, says that the UK political financing system is ‘absolutely’ vulnerable to money laundering risks, largely because there appears to be a lack of awareness among politicians and political parties about the checks they should be making to the origins of political donations. ‘Some [of it] is genuine naivety, but others are taking advantage of these opportunities which is always the way in any financial crime scenario,’ he says. ‘In an election cycle you will see substantial donations from offshore entities that may appear on members’ registers, but it is those that aren’t reported that present the biggest risk,’ he says.

According to Transparency International, £43m in reported political donations between 2001 and 2024 came from donors alleged or proved to have been involved in corruption, fraud or money laundering. Polling by the Electoral Commission in 2025 found that 82 per cent of the public believe the funding and spending of political parties isn’t transparent and only 40 per cent believe that parties that break the rules will face action.

Lockhart says that cryptocurrency donations, which are now accepted by three UK political parties, present another mechanism for funds from hostile foreign actors or criminal origins to flow into UK politics. ‘The problem with crypto is that it’s essentially a money laundering accelerant,’ she says. ‘There are many foreign interference risks in the current political finance rules and, when you add the pseudonymity and cross-border speed of crypto, it pushes the scale and scope of this behaviour beyond the capacity of the current regulatory system.’ Lockhart and her team at RUSI’s Centre for Finance and Security are calling on the government to temporarily ban crypto donations until a bespoke regulatory regime is designed for them.

As well as amending the rules relating to political donations, the government is planning to boost enforcement by increasing the civil fining power of the Electoral Commission from £20,000 to £500,000. Posner says that these changes don’t go far enough and that the regulator should be awarded criminal prosecution powers to ensure a more meaningful enforcement of the law. Criminal prosecutions for electoral finance breaches in the UK can result in prison sentences and unlimited fines, but they remain very rare, with only one case brought before the courts for alleged breaches under PPERA in the last 25 years. ‘Regulation relies on the fact that those being regulated believe that laws can be enforced and there are serious sanctions,’ Posner says. ‘There needs to be a body somewhere in the UK that is proactive, has the specialist expertise and is looking and willing to prosecute election offences.’

The independence of the Electoral Commission was called into question in 2022 when the government introduced changes to force the regulator to consider the policy priorities of government in its decision making. ‘This is a problem enough with a fairly benign government but if we ever had a more authoritarian government it could be a real problem because it could order the Electoral Commission to conduct investigations or not investigate things in a way that could pose real political problems,’ says Kamila Kingstone, Senior Policy and Campaign Lead for Spotlight on Corruption’s Defending Democracy Programme.

The Electoral Commission is pushing for the government to restore its independence in the upcoming Elections Bill. ‘We remain opposed to the principle of a strategy and policy statement, by which a government can guide our work,’ says John Pullinger, Chair of the Electoral Commission. ‘The independence and impartiality of an electoral commission must be clear for voters and campaigners to see, and this form of influence from a government is inconsistent with that role.’

The big money problem

One of the solutions for countering foreign financial interference in UK democracy would be to impose a donations cap, which would reduce the amount of money a foreign individual could funnel to a political party. There is currently no upper limit on what an individual or company can give to a politician or political party they support. In late 2023, a potential £70m donation by US-based tech billionaire Elon Musk to the far-right party, Reform UK, brought the vulnerabilities in the UK political donations system into sharp relief, a contribution which would have smashed political donation records and had a significant impact on the democratic process. The most obvious way Musk could donate to a British political party is by using a UK-based subsidiary of his social media company X, or electric car business Tesla, to send the funds.

Mark Stephens CBE, Co-Chair of the IBA’s Human Rights Institute, says the UK’s political financing law needs modernisation and does not account for the role of multinationals or people who are global citizens. ‘The difficulty is that when the law was created it was in a very nationalised world when there was little interest in foreign politics,’ he says. ‘What’s happened is that as businesses have become globalised, the perceived necessity for foreign businesses or individuals to interfere in global politics has grown,’ he says.

Sam Power, an academic at the University of Bristol and an expert on political finance, electoral law and corruption, says that multimillion-pound donations by wealthy individuals to UK political parties are problematic in general because of the access to politicians and influence they can achieve, which undermines public trust. ‘The idea that political parties are funded by us is important in the sense of keeping the link between political parties and the people they represent,’ he says. ‘The risk is that if you are giving a serious amount of money to a political party, it becomes really hard for that political party to take a divergent viewpoint from yours,’ he says.

Transparency International research shows that in 2023, UK political parties received £85 million in donations from private sources, with two thirds coming from 19 mega donors giving over a million pounds, with a single donor accounting for one in every eight pounds donated that year. In December, a Thailand-based businessman broke the record for the largest political donation in the UK given by a living person. ‘The proposals for the Elections Bill include some welcome reforms but are really missing the gigantic elephant in the room, which is about the scale of money in UK politics that’s corroding our democracy,’ says Steve Goodrich, Head of Research and Investigations at Transparency International UK.

The Committee on Standards in Public Life has recommended a £10,000 cap on political donations for individuals, companies and organisations, including trade unions. Jess Garland, Director of Policy and Research at the Electoral Reform Society, says a donations cap should be introduced to limit the influence of the rich and powerful on UK democracy. ‘Ultimately, a cap is about putting voters more front and centre and making sure that they know their voice is the important one and not big business,’ she says. According to research published in April by democracy watchdog International IDEA, 49 per cent of countries worldwide including France, Japan and South Africa, place caps on donations to political parties during election periods.

In addition to the growing size of political donations from wealthy individuals, political parties are spending more on election campaigns, with 2024 being the most expensive election on record since regulation of party spending began in 2000. This has led campaigners to express concern about the pressure on political parties to court individual wealthy donors and accept money from dubious sources. ‘The government proposals do nothing to address the arms race between parties in major election years, which is putting pressure on fundraisers to adopt highly questionable tactics to fill party coffers, and that in turn is pushing parties to offer incentives to donors to support their cause, including privileged political access and influence,’ Goodrich says.

Spotlight on Corruption believes the current spending limit for political parties during elections, which currently stands at £35m, is too high and want the government to regulate political spending between elections. ‘At the moment the spending limit only applies for 12 months before a general election, but that risks parties spending more money between elections on campaigning, data harvesting and research and therefore extending the length of an informal election campaign,’ says Kingstone.

Beyond donations

Foreign interference and financial influence in UK democracy can manifest in various ways beyond political donations. In November, a judge sentenced Nathan Gill, a former Member of the European Parliament and leader of Reform UK in Wales, to 10 years in prison for accepting approximately £40,000 in bribes between 2018 and 2019 to make pro-Russia statements in the European Parliament. The case led to the government opening an inquiry into foreign financial interference in UK politics. Lockhart says that case shows how a relatively small amount of money can buy political influence. ‘The Nathan Gill case is the tip of the iceberg,’ she says. ‘There are many other backdoors for foreign interference, particularly around lobbying, that operate in far more insidious ways – exploiting grey areas and staying out of sight.’

Campaigners have long called for reform of the UK lobbying laws, including the Foreign Influence Registration Scheme, which has been criticised as covering only a small proportion of lobbyists and allowing hostile states to access MPs and ministers. ‘There’s so much lobbying from foreign countries that we don’t know about because it’s not covered by the scheme,’ says Peter Geoghegan, an investigative reporter focused on finance and influence in British politics. ‘And that opens huge opportunities for foreign interference.’

All-expenses-paid trips for MPs by foreign governments, which are legal under electoral law, have also come under scrutiny, with Transparency International arguing that they present a reputational and security risk to UK democracy. ‘It has been a common practice by foreign governments, including corrupt regimes, to try and curry favour with parliamentarians through all-expenses-paid visits which have been proven to be successful at winning several MPs to lobby for their cause inside and outside parliament,’ says Goodrich. In the lead up to the 2022 FIFA World Cup in Qatar, the Qatari government funded 38 visits by British MPs to the country, worth approximately £250,000. After the visits, several publicly praised Qatar’s human rights record in parliament, despite concerns from human rights groups about working conditions in the country.

As part of the government’s inquiry into foreign financial interference, Spotlight on Corruption wants the government to examine social media and whether there is a need for regulation of social media algorithms for political content and greater powers for the Electoral Commission to request information from social media companies.

Lockhart says that social media makes it very difficult to understand who is funding political narratives online. ‘Some state actors are highly sophisticated in how they manipulate algorithms and use AI to generate high volumes of online messaging targeted at specific demographics,’ she says. ‘Not only is this extremely difficult to trace and attribute, but it is also a much cheaper way to create disruption and exert influence than the traditional political donation route’.

When it comes to protecting democracy, there’s clearly much work to be done. The upcoming Elections Bill looks set to be an important step in the right direction. But those who are painfully aware of the risks will be watching closely for any remaining loopholes.