Party finance rules ‘commendable’ but still raising watchdog’s eyebrows

Malta's adoption of party-financing rules has been hailed as commendable by the anti-corruption committee in the Council of Europe, after registering significant progress in the implementation of nine proposals designed at strengthening party financing rules, GRECO (Group of States Against Corruption) said in a compliance report.

Malta implemented satisfactorily five out of nine recommendations, and only partly implementing four recommendations. “The adoption of the FPPA is commendable. It constitutes an important milestone by introducing a regulatory framework which brings greater transparency in the sphere of political funding in Malta… GRECO urges the authorities to eliminate the remaining gaps, and help secure a higher level of public trust in the political institutions and political parties of Malta.”

But GRECO also said that a disclosure threshold of €7,000 for donations received by political parties from a single source, including in times of elections, remains “critically high”, with no disclosure rules laid down for independent candidates.

It said that despite the adoption of the financing of the political parties Act (FPPA), a number of critical concerns persist.

Only donations exceeding €7,000 to political parties are to be disclosed with reference to their source, which means that the very high disclosure threshold has not been reduced since the last assessment made by GRECO.

In the case of political parties’ accounts, GRECO said that the threshold for the disclosure of individual donations had not been lowered.

Additionally, the committee said that two sets of rules seem to apply for independent candidates: that according to the FPPA they must submit within 60 days of the election a donations report to the Electoral Commission, but according to the Electoral Polling Ordinance they must submit within 31 days an election expenses report that includes donations.

GRECO described the framework as being “somewhat confusing”.

“It is unclear whether the information on them is to be published or not. It would be desirable for the provision of the two legal acts to be further aligned… GRECO acknowledges that, fully in line with its requirement and as envisaged by the 2014 Bill, the spending limits in respect of candidates have augmented and now stand at €20,000, which is a welcome development.”

Under Malta’s party financing laws, anonymous donations below €50 and so-called “confidential” donations below €500 could still be received by political parties without being registered.

But GRECO said there was no evidence that the €50 rule had been extended to independent candidates, whereas confidential donations below €500 could still be received and there was no obligation for them to be either recorded or the identity of their donors revealed to the Commission.

“Also, it is only in respect of donations above €500 that a party or candidate is to carry out due diligence. Consequently, the positive effects of a prohibition on political parties accepting anonymous donations are impaired by the absence of an obligation on parties to register donations below €500.

“GRECO takes the view that the regime introduced by the FPPA remains incoherent and may be interpreted as condoning the acceptance of donations from donors whose identity is not known to a political party or an independent candidate precisely due to the absence of a requirement to register the donations.”

Malta did register progress in introducing a framework for political parties to keep full and transparent books and accounts, so that they can disclose at any time and with reasonable accuracy the financial position of a party, including income sources, expenses, assets and liabilities.

GRECO was also satisfied that the FPPA requires the Electoral Commission to publish on its website the parties’ annual statements, but said it was important that all parties follow a common end-of-year date for their financial statements; and that the time limit for the publication of annual statements be reduced from the generous five months from the end of the financial year.

GRECO also said that it remains concerned that in certain cases, a clear link between an obligation to respect funding rules, and a sanction may still be missing. The financing rules also only empower political parties and other interested persons – but not independent candidates – to contest in a court of law the finding of any FPPA breach by the Electoral Commission.