Foreign Interference Financing

Testimony to PIFI, and full report to follow

Oct 25, 2024

Hello, Insight Monitor subscribers! My apologies for being a day late with our usual Thursday edition of the newsletter, but I wanted to be able to share what I was up to yesterday. I was asked to participate in the Foreign Interference Commission’s roundtable on political finance. Today, I’m sharing some of my notes and the recording of my presentation. I hope you find this insightful!

~Jess

In 2023, the Government of Canada established the Public Inquiry into Foreign Interference. The focus of the inquiry is foreign interference in federal electoral processes and democratic institutions. The current phase of the inquiry is reaching more broadly to understand the capacity of the government to detect, deter, and counter foreign interference.

I was asked to participate in the roundtable on political financing, and I focused on comments on foreign interference financing, drawing on international examples (and some Canadian) of concrete FI activity and its financial mechanisms. If you’re interested in this topic, you can check out all the roundtables here. I recommend you watch the roundtables from Wednesday, 23 October, on Canada’s national security apparatus and enforcing, deterring, and prosecuting foreign interference activities. Those two panels featured some faces that are likely to be familiar to readers of this newsletter (I have worked with several of these folks, both academically and professionally), and there were some very interesting and innovative ideas for combatting foreign interference.

The main takeaway from both of those panels, plus my own, is that, by and large, we do not need new offences for dealing with foreign interference. My own recommendations focus on structural changes and some tinkering with the Proceeds of Crime, Money Laundering and Terrorist Financing Act and associated regulations, but more on that next week when I submit my final report to the Commissioner.

For today, here’s a summary of my comments on what foreign interference financing looks like and a link to my presentation and questions and answers. I was very heartened by the Commissioner’s interest in financial intelligence, the role of FINTRAC in all of this, and getting to the facts. This was my second time participating in a Commission of Inquiry, and this was an excellent use of my time.

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Foreign Interference Financing

Foreign interference requires resources and money. It takes money to build disinformation networks, pay influencers, and spread messages. It also takes money to engage in transnational repression activities, whether that’s through official salaries, bonuses, or stipends. It also takes money to buy votes, fund candidates and parties, and ensure that voters who support a particular message make it to the polls.

Financing has been a neglected element of foreign interference investigations and research. As such, I focus on international examples of foreign interference financing (some of which will also reflect what the commission has heard here in Canada) and will aim to give concrete examples of how money enables foreign interference.

These cases inform a discussion of Canada’s strengths and vulnerabilities (in terms of legislation, regulation, and capability). While there are some areas of improvement for Canada in terms of legislation, the vast majority of the work Canada needs to do to exploit financial intelligence for foreign interference financing disruption is in investigations: resources, skills, and political will.

Canada needs to invest in its capabilities to detect and disrupt foreign interference. This applies to its financial intelligence unit, FINTRAC, and its law enforcement and security services responsible for conducting these investigations. They must understand and exploit financial intelligence in the foreign interference space.

Financing Foreign Interference Activities

States use various methods to interfere in the politics of other countries:

Financing Political Parties and Candidates: Foreign actors have financially supported political parties and candidates aligned with their interests. These funds can be direct donations, loans, or other financially advantageous transactions.
Funding Political Campaigns: Foreign governments have also funnelled money to support specific political campaigns. This funding can provide a significant advantage to the recipient, potentially distorting the electoral process and undermining fair competition.
Incentivizing Voters: Foreign actors also directly target the electorate to influence voting behavior, such as discounted flights, shopping vouchers to encourage return to vote.
Vote Buying: Vote buying is another potential method of foreign interference. While not as common as other tactics, it involves offering money or incentives directly in exchange for votes.
Exploiting Diaspora Communities: Foreign actors also attempt to leverage their diasporas to influence elections in their host countries. This can involve mobilizing support for favoured candidates, providing financial contributions, or even engaging in voter intimidation.
Misinformation / Disinformation: State actors will also spread mis- and dis-information in elections (and outside of election periods) to shape the information battlespace. In some cases, state actors pay troll farms to amplify particular messages. In other cases, states pay for advertisements, sponsor investigative journalism, and pay for interviews to promote their interests.

Financial Transactions in Foreign Interference

The activities involved in foreign interference financing are essential to understand, as are the transactions that support these activities. These usually involve cash payments, cryptocurrency transfers, loans, and bank transfers, as well as the use of third-party intermediaries, foundations, think tanks, organized crime groups, political consultancies, shell companies, state-owned enterprises, and sometimes embassy accounts and resources. Gifts and luxury goods are also used to compensate threat actors for their role in foreign interference. In-kind donations (payment of legal fees, buying media space to promote a selected candidate or party) and even transportation subsidies to ensure voters get to the polls are all examples of financial transactions involved in foreign interference.

Obfuscation: State actors often use intermediaries (including friends, family members, and trusted business associates) to send and receive funds on behalf of or in support of the political candidate or party and to obfuscate their role in the interference activity. In some cases, financial institutions might be co-opted to enable the transfer of funds with less scrutiny. Finally, states also pressure donors to give money to specific candidates.

These activities and transactions outline how Canada’s adversaries finance foreign interference activities. Much more research needs to be done to establish more robust patterns of activity that can be used to support detection and disruption. For now, however, this high-level description can inform discussions on legislation, regulations, policy, and enforcement.

You can watch my full presentation (and question & answers) here (starting around the 24-minute mark):