FRAUD
and believe they are just returning. The use of artificial intelligence to manipulate a candidate’ s voice and image is also commonplace.
All public communications on the federal level, such as advertising and solicitations for donations by PACs, must have a disclaimer stating who is paying for the communication. A legitimate PAC may also display its address and contact information. A website with no disclaimer is a major red flag.
While not required by law, a legitimate site will usually have a button for the donor to click on to acknowledge they are not a foreign national, not a federal contractor and confirming that the donation is from their own personal funds.
The finances
Just like any business, even a PAC needs a bank account at an FI to operate. There is no legal requirement regarding the amount a PAC is obligated to directly transfer to a candidate or cause. A legitimate PAC will generally transfer at least 70 % to as high as 90 % of their donations. The fraudulent PAC will transfer a very small percentage ― perhaps even nothing. A simple rule of thumb is that the lower the percentage transferred the higher the potential of fraud.
A PAC has operating costs, so it stands to reason that the lower the percentage of donations transferred, the higher the expenses. This is where further evidence of fraud can be exposed. All that is needed is some conventional business acumen and analysis. High salaries, expensive meals and first-class travel and hotel accommodations for the operators of the PAC are definite red flags.
While payments to third-party vendors, such as bulk mailing operations, are a normal PAC operating expense, further investigation is required as members of a fraudulent PAC will often have interlocking relationships with the vendors, possibly even being one and the same. This is where a clever PAC fraudster will try to obfuscate their fraud by taking a limited salary while looting the PAC through the vendor. A 25 % transfer to the candidate or cause is also a clever move to further obfuscate the intent, as the 25 % represents a threshold that gives some cover for plausible deniability. The argument on the surface is that the PAC just had high expenses, dissuading further investigation from being undertaken.
Straw donation schemes
Although not associated with donation fraud by an illegitimate PAC, AFC professionals need to be on guard for another type of fraud: straw donation schemes through a legitimate PAC. The scheme is the same as the one seen with a candidate’ s campaign finance account. The same reasons apply: a ceiling on the amount an individual can donate and / or a desire to avoid their name appearing as a contributor for any number of reasons, none of them generally good. The same red flags also apply, such as maximum individual donation amounts and no history of donating or being politically active. 1
Straw donation schemes through PACs have one advantage as opposed to a scheme involving a candidate’ s campaign finance account. Candidates and their supporters will scrutinize each other’ s campaign account, hoping to find some impropriety they can leverage against one another. PACs do not have that same personal level of scrutiny, which makes it even more important for the AFC professional to act as the gatekeeper.
Conclusion
Just like any business, even a PAC needs a bank account at an FI to operate
The amount of money that passes through the U. S. financial system for elections is staggering, in the billions of dollars. There is an unfamiliarity at the FI level with these issues as election laws, donation requirements and PAC operating procedures are complicated and confusing. With the amounts spent on elections and politics rising every year, and no signs of curtailing, it is incumbent that targeted training be established for the red flags associated with this often silent fraud.
Charles Falciglia, former Rockland County, N. Y., legislator and congressional candidate, charlesfalciglia @ yahoo. com
1
Charles Falciglia,“ Elections and Suspicious Activity,” ACAMS Today, March-May 2025, https:// www. acamstoday. org / elections-and-suspicious-activity /
44 acamstoday. org