Photo by Kuncheek: https://www.pexels.com/photo/accountant-counting-money-210990/


The proper implementation of sanctions against Russia is just one aspect of an urgently required reaction to the threat that corrupt money poses to European democracy.

Since many years ago, Western democracies have been welcoming of capital and investment in an effort to profit from the advantages they bring. Capital controls, which were once used to erect financial barriers between allies, are no longer necessary because finance fosters investment, economic expansion, and job possibilities.

However, there is another aspect to these financial flows that Western nations voluntarily accept; this aspect, known as illicit finance, was almost largely overlooked until the democratic world was compelled to pay attention by Russia's campaign of aggression against Ukraine.

The European Union has started to address some of the illegal finance that has spread throughout the Continent by passing action plans, establishing new anti-money laundering directives, and debating where the organization's anti-money laundering authority will be located in the future. Less obvious examples of dirty money, or so-called "active financial measures," have, however, been undermining European political institutions, purchasing influence through the sponsorship of cultural and sporting events, and even trying to influence election results.

Simply put, Western democracies must fight to protect themselves from the influence of malicious financial flows, strategic corruption, and the widespread weaponization of finance by adversary countries after more than a decade of focus on strengthening systems and responses to criminal finance — a job that is far from finished.

Consider the most recent claim made by the US State Department that since 2014, Russia has secretly spent over $300 million in this manner. It targeted the heart of the EU by using Brussels "as a hub for foundations and other fronts that back far-right candidates," taking advantage of Europe's poor track record in implementing financial crime standards. It has attempted to influence politicians in at least 24 countries across four continents.

President of the European Commission Ursula von der Leyen emphasized this crucial vulnerability to such financial influence in her State of the Union speech. She urged the EU's member states not to "lose sight of the way foreign autocrats are targeting" the organization, calling particular attention to the funding given to academic and research institutions with the intention of undermining European values. She also denounced foreign spies attempting to manipulate the bloc's political systems and dubious organizations and foundations misusing taxpayer funds.

What should be done, then?

Priority must be given to expediting and securing the years-long reform and security process for the EU's defenses against illegal money.

The response to problems has been slow, as evidenced by the Danske Bank money-laundering case. Additionally, the ongoing delays in enhancing and coordinating monitoring and implementing transparent corporate registrations provide openings for criminals and hostile nations to take advantage of.

The EU must also make sure that other "hybrid" warfare techniques, such as disinformation, are tackled in addition to the threat posed by corrupt financial and economic influence.

Many of the "gray zone" dangers the EU is confronting have a financial component. NATO noted in its Strategic Concepts 2022 document that authoritarian actors who pose a threat to the alliance's interests frequently use economic coercion, and the United Kingdom's Integrated Review of Defense and Security Policy also calls attention to bad actors who test "the line between peace and war."

The EU and its member states also need to be aware that their current systems for countering illicit funding are unlikely to be successful in identifying it. It is necessary to reform the current procedures, which look for money used to harm democracy rather than the proceeds of crime.

Here, it is equally crucial that the EU's sanctions against Russia are carried out successfully.

Since its further invasion of Ukraine in February, a blizzard of sanctions has been placed on Russia, including on oligarchs and others deemed to support or benefit from Moscow. While it’s highly unlikely these individuals will change President Vladimir Putin’s war calculus, the sanctions do shine a light on them — and their associates — who have connections with the Kremlin and, in many cases, already have money in the EU. Sanctioning these individuals should help to identify and freeze their assets, removing the possibility of their use for malign, anti-democratic activity.

Therefore, it is crucial to make sure that the private sector is fully aware of all of its legal obligations and that there is sufficient manpower and legal authority to implement punishments. Failure to do so will compromise the goals of sanctions and open the door for the use of this money to finance anti-Western activity.

Finally, the EU and the Western democracies as a whole need to pay much closer attention to where political funds are coming from. Politicians accept contributions from questionable, albeit "legal," sources much too frequently. However, not only should the source of a donation be taken into account, but also the aim, for both individual politicians and political parties. And those who accept funding from organizations working to destroy democracy need to be disqualified from holding public office.

Open societies in the West have been fought for decades, but in recent years, apathy and ignorance have allowed rivals to purchase their way into a variety of influential positions. Leaders must take action in response to these active financial measures and acknowledge both the criminal and security implications of illicit funding.