The transparency of political parties funding has always been a problem in Moldova. However, after the theft of a billion US Dollars from Moldova’s National Bank reserves, the country sees an explosion of non-transparent funding of political activity. Supporting documents submitted to the Central Electoral Commission are of no use to investigation teams. Donating to a political party in Moldova is considered a ”private” matter and therefore the identities of donors, their names, date of birth, or even occupation, are not disclosed.
Moreover, several politicians have found a way to polish their image while bypassing the law on political parties, in general. A characteristic of a ”charity foundation” with an agenda to promote their founder rather than the cause is their generous marketing and visibility budgets. Funded well, unlike a typical charity, they reside in fancy offices, place commercials on billboards and TV, but are not transparent about the sources of their revenues. We see several such foundations in Moldova in the last years.
This is, essentially, money laundering.
According to the International Compliance Association, the most simplistic scheme of money laundering works in three stages:
1. Placement, the stage at which criminally derived funds are introduced in the financial system.
2. Layering, the substantive stage of the process in which the property is ‘washed’ and its ownership and source is disguised.
3. Integration, the final stage at which the ‘laundered’ property is re-introduced into the legitimate economy.
On political parties which function on fictive donations.
Although the phenomenon is most likely, widely spread, there was one proven case of fictive donations en masse in one of the country’s towns, Criuleni. The scheme would work as follows: people would simply declare and sign that they have donated cash, without contributing anything. The cash would then land on the party’s bank account. These funds are then legitimized and can be used for whatever expenses might occur. In March 2018 there was a leak in mass media about an internal party meeting where the logistic details of this exercise were discussed in detail. The probability is high that this practice goes beyond the case of Criuleni, and more than one party applies it.
To our knowledge, no institution has taken action to investigate and prosecute this case. No one was even questioned.
The case of charity foundations is even more problematic, as there is not even the need of fictive declarations. Money with unknown origin end up on the foundations’ accounts and are being used as legitimate funds.
In both methods, within days, cash of unknown origin is introduced in the official economy as clean money. The money can then be used for any legitimate expense, for supporting the otherwise unprofitable mass media, or for stashing the clean money offshore in safe jurisdictions.
In the concrete example, where a political party is used as a placement vehicle, the first and second stages are reversed. As a result, we have:
1. Layering. Fake donations from diverse individuals disguise the criminal origin of cash. These people would just sign, declaring that they have donated, while not paying anything in reality.
2. Placement. Cash from unknown sources is being deposited on political party bank account. The signed forms declaring the donations are used as supporting documents to report to the Central Electoral Commission. No one will verify, investigate, or prosecute the authenticity of the donation.
3. Integration. The cash of unknown origin has entered the legitimate economy and can be used to cover official expenses. A significant part of it may be further funneled to the politically controlled mass media which will cover communication campaigns, pay for political consultants and lobbyists, organization of credible international events, etc.
In the case of charity foundations, the scheme is even simpler. Layering and placement happen at the same time:
1. Layering/Placement. Donations from undisclosed sources land on the foundation’s bank account. The origin of the money is unknown and will remain unverified and thus disguised.
2. Integration. From the charity foundation bank account, the money is used for whatever legitimate expenditure in the official economy.
The consequences of this situation are serious for the Moldovan political scene, dominated virtually by corrupt politicians. Political corruption is the country’s biggest problem. In order to effectively combat state capture, the non-transparent funding of political parties, and their proxies, must be prosecuted.
In order to overcome this, the following must be done:
1. Investigate the known cases in order to discourage their occurrence in the future. We have at least one known case in Criuleni, and, according to our knowledge, no action has been taken. The Parliament approved new legislation on combating money laundering and terrorism financing, in February 2018. This is one of the conditions for disbursing the first tranche of the EU macro-financial assistance of 100 million EUR. The National Anticorruption Center (NAC) must apply the new legislation and show a credible investigation in a concrete case of money laundering with the use of political party donations, thus proving everyone that reforms undertaken by the present government are not just ”ticking the boxes”.
2. Decrease the threshold of maximum donations – urgently, before next elections. The maximum threshold per month should be up to one average salary per month. The lower the threshold, the bigger the logistical effort to apply the scheme of fictive donations, the bigger the number of involved proxies/individuals, the bigger the risk of leaks and whistleblowers. This would discourage the scheme from perpetuating.
3. Enable the Central Electoral Commission (CEC) to also verify the authenticity of party financial reports. CEC must have the obligation to formally report to the National Anti Corruption Center all suspicious transactions or activity. NAC must carry out such cases with maximum publicity, applying the new legislation on combatting money laundering.
4. Investigations on existing charity foundations affiliated to politicians must be initiated and the origin of funds verified and communicated publicly. Moldova is entering an electoral year and, in order to ensure free and fair elections, eliminating dirty money from politics is key.
5. The government institutions must keep in mind international best, not worst, practice in the field, and remove all barriers to access the information about previous party donors, thus allowing investigation journalists to effectively investigate and publicize other cases. This will discourage the practice for the future, and support the investigations by law enforcement. The pretext of protecting personal data must not be abused by government institutions, as is the case now.