8. Serving Political Entities – Meeting New Challenges: Recommendations from the Chief Electoral Officer of Canada following the 43rd and 44th General Elections
While the most visible element of Elections Canada's mandate is to administer electoral events and serve electors, a less visible but nonetheless critical element of the mandate is to serve political entities. That service takes different forms. Elections Canada regulates political entities for compliance with the regime (through auditing financial returns, for example) but also acts as a facilitator, providing training to political entities and processing candidate nomination applications, among other services. A key aspect of the service to political participants is enhancing communication and building trust between political participants and electors.
8.1. Simplifying the Candidate Nomination Process
Many requirements of the candidate nomination process are undoubtedly complex and sometimes challenging to meet. The recommendations proposed below are designed to simplify the process for prospective candidates while maintaining the integrity of the nomination process.
Requirement for a Signed Copy of a Piece of Identification
The Act requires a prospective candidate who files their nomination paper in person to provide accepted proof of identity. Where someone other than the candidate submits the nomination paper on the candidate's behalf, they must submit a copy of the prospective candidate's proof of identity, and this copy must be signed by the candidate.
However, there is widespread misunderstanding about this requirement: Instead of submitting a copy of an accepted proof of identity where the copy is signed by the candidate, individuals often instead submit a copy of an identification document bearing the candidate's signature, e.g. the candidate's driver's licence; as such, the copy itself is not signed by the candidate. These errors create delays in the nomination process.
The purpose of the requirement is presumably to ensure that the photocopy is an accurate copy of the piece of identification. While this requirement marginally enhances the integrity of the nomination process, it can also result in the rejection of an application and, moreover, impair the efficiency of the nomination verification process. The requirement for an additional signature should be removed.
Witness Requirement When Signatures Are Collected
The Act requires that prospective candidates gather the signatures of 100 electorsfootnote 1 who are eligible to vote in the electoral district in which the candidate intends to seek election. Each signature must be made in the presence of a witness, and it is the responsibility of the witness to use due diligence to ensure that the signatures made in their presence are all made by electors resident in the electoral district. There is no definition of "due diligence" in the Act and no means available to Elections Canada to make sure that the witness has indeed applied this principle.
Because the returning officer verifies the residence of electors who sign the nomination papers, it is unclear if the witness requirement adds great value. The witness requirement also impedes the development of digital or online mechanisms for collecting signatures. During the 2021 general election, the pandemic context highlighted the desirability of the remote collection of signatures. The demand will likely continue as Canadians become increasingly accustomed to digital transactions. The witness requirement is thus outdated and should be removed.
Correcting an Inconsistency
In 2018, the Elections Modernization Act amended the Act to remove the requirement to submit original paper documents following the electronic filing of an application for nomination. However, necessary correlative amendments were not made in the Act. The subsection currently indicates that, if original documents are not received on time, the returning officer shall cancel the nomination. This is an obvious inconsistency that if applied would undermine the efficacy of the electronic filing system.
- To facilitate the candidate nomination process, amend the Act as follows:
- Remove the signature requirement on the copy of a prospective candidates' proof of identity when the prospective candidate's application is filed on their behalf by another person.
- Remove the requirement for a witness to signatures collected as part of the nomination process.
- Repeal the provision that requires original documents to be submitted before an electronic application is accepted.
8.2. Adjusting the Regulated Fundraising Events Regime
The regulated fundraising event (RFE) regime came into effect in December 2018. It requires parties represented in the House of Commons to post online the date and location of regulated fundraising events—featuring a party leader, leadership contestant or cabinet minister—five days prior to the event. It also requires parties to comply with post-event reporting requirements by listing attendees at the regulated fundraising event. This regime is designed to provide transparency and prevent undue influence with respect to access to influential individuals such as cabinet ministers.
Two significant issues have emerged that should be addressed through amendments to the regime.
Proportionate Consequences for Non-Compliance
The Act requires that where a notice or report for an RFE is not published or filed correctly and on time, all contributions received in relation to the event must be returned. This requirement is in addition to any other compliance or enforcement measure that may apply to non-compliance with a statutory requirement. Currently, the maximum fine for strict liability offences in relation to an RFE is $1,000. Non-compliance with the RFE regime may also result in the application of an administrative monetary penalty (AMP).
Prior to the enactment of the RFE regime, the Act restricted the return of contributions to substantive breaches of the Act such as over-contributions or contributions made by ineligible contributors. In contrast, the RFE regime imposes the return of contributions for minor administrative non-compliance such as for a short delay in publishing the required notice of the event. This consequence for administrative non-compliance under the RFE regime appears disproportionate in relation to the rest of the political financing regime.
Administrative non-compliance with the RFE regime can be addressed most appropriately through the AMP regime. The regime is a flexible mechanism allowing monetary penalties to be appropriately calibrated to the nature and circumstances of an administrative violation.
Excluding Leadership Contestants from the Regulated Fundraising Event Regime Following the Leadership Contest
Second, the regime requirements appear to be extreme in that the presence of a leadership contestant at a fundraising event may trigger compliance obligations—even after the leadership contest is over. This is the case because, under the Act, an individual continues to be a leadership contestant until all financial and reporting obligations flowing from their leadership campaign have been met. In some cases, individuals remain leadership contestants under the Act for several months or years after the end of the leadership contest.
While a leadership contestant may have significant influence before the resolution of a leadership contest, an unsuccessful contestant has significantly less influence, even though they remain leadership contestants for the purposes of the Act. Some unsuccessful contestants even disaffiliate themselves from their party. The result is that, in such cases, the RFE regime imposes a significant regulatory burden that may impede fundraising efforts, but without significantly enhancing Canadians' trust in their democratic institutions and elected representatives.
- To improve the Regulated Fundraising Events regime, amend the Act as follows:
- Repeal the requirement for the return of contributions in cases of non-compliance with the regime, leaving violations to be dealt with through the AMP regime.
- Exclude events attended by leadership contestants outside a leadership contest period.
8.3. Clarifying Candidate Contribution Rules
The Act authorizes candidates (and nomination and leadership contestants) to make contributions "out of their own funds" to their campaigns. The reference to "funds" in the relevant provision suggests that only monetary contributions are included.
However, "contribution" is defined under the Act, and it may be either monetary or non-monetary in nature. Consequently, there is ambiguity as to whether non-monetary contributions are included in the "own funds" contributions of candidates to their own campaigns; this ambiguity can create confusion for candidates and lead to errors. The ambiguity in the wording of the provision also creates difficulties with respect to enforcement.
Since there is no obvious benefit in terms of transparency or integrity to treating monetary and non-monetary contributions differently in these circumstances, the Act should be amended to clarify that both monetary and non-monetary contributions by candidates (and nomination and leadership contestants) to their own campaigns are included in the limit provided under the Act. This would also eliminate the risk of an uneven playing field.
Removing or clarifying the phrase "out of their own funds" would not allow contributions to be made from funds or goods of others through the candidate to the candidate's campaign, as such contributions are prohibited elsewhere under the Act.
- To clarify the candidate contribution regime, amend the Act to remove from the relevant provisions the words "out of their own funds" and "money," as applicable. This will clarify that all contributions, both monetary and non-monetary, are included in the limit of what a candidate or contestant can contribute to their own campaign.
8.4. Cryptocurrency and Other Means of Contribution
In the past, federal political entities have expressed an interest in how cryptocurrencies can be used in the federal political financing system. In 2019, in response to such queries, Elections Canada published an interpretation note on this subject. This note concluded that a contribution of cryptocurrency is a non-monetary contribution for the purposes of the Act, largely because cryptocurrency may not be put directly into a political entity's bank account. Such an approach was noted to be in line with the approach of other federal agencies.
The note also included best practices respecting the use of cryptocurrencies by political entities. This was necessary because, although cryptocurrencies may be used to purchase some goods and services, they cannot be used in a way that allows the various reporting obligations of the Act to easily be met.
Although contributions of cryptocurrencies are "non-monetary" contributions under the Act, the reality of cryptocurrency is that it functions increasingly like money. In some ways, a contribution of cryptocurrency is more like a monetary contribution and, in others, it is more like a non-monetary contribution. For example, unlike money, cryptocurrencies cannot be put directly into bank accounts. However, unlike contributions of goods or services, cryptocurrencies are not inherently useful. They are valuable as an investment or means of exchange. The nature of cryptocurrencies will continue to evolve, perhaps quite rapidly, in coming years.
A consequence of the determination that a contribution of cryptocurrency is non-monetary is that contributions of up to $200 of cryptocurrencies made to a federal political entity are deemed "nil" for the purposes of the law. This is because the Act has a provision to allow small value gifts of goods and services—those valued under $200 and made by a person not in the business of providing such a good or service—without requiring the reporting and other provisions of the Act to apply. This exceptional provision is intended to allow individuals to donate items such as food for campaign workers, or the use of their personal vehicle without the relevant contribution and expense being regulated. However, in the case of cryptocurrencies, it could be seen as a means by which unregulated resources could enter the federal political financing regime.
The above is especially concerning with respect to cryptocurrencies given that they present challenges in terms of being traceable. This is contrary to the goal of transparency in political financing matters. Notably, it raises the prospect of such contributions being a way for foreign funds to enter the Canadian political system.
To deal with a similar problem of untraceable contributions, Parliament has long limited the amount of cash contributions that may be made to federally regulated political entities. The Act currently prohibits cash contributions of more than $20 and has specific reporting obligations for small cash contributions.
One option to deal with contributions such as those made by cash, pre-paid credit cards and cryptocurrencies would be to prohibit them on the basis that they have the potential to undermine the political financing system. However, Elections Canada has noted that many political entities still use small cash donations as an important means of raising funds. In the circumstances, it is more appropriate to maintain the use of small value cash donations.
The same rationale, however, cannot be applied to near-cash, anonymous means of contribution such as pre-paid credit cards, money orders or gift cards. Such means of passing money to political entities raise transparency difficulties without any particular reason justifying their use. Accordingly, they should be banned.
In the case of cryptocurrencies, it would be premature to ban them altogether as they could be legitimate means of raising funds, provided that such fundraising is done in a transparent manner. To address the unique nature of cryptocurrencies and the transparency challenges that they present, it is recommended that the Act be amended to specifically provide for their receipt and reporting as a category separate from "monetary" and "non-monetary" contributions. Unlike monetary contributions, for which only the names of contributors who gave $200 or more are reported, all contributions made by way of cryptocurrencies should be reported. Furthermore, a receipt should be issued for all such contributions, irrespective of the amount.
This will allow cryptocurrencies to be received by political entities and create a framework for their potentially increased use in coming years while also ensuring the objectives of the Act are preserved.
- To allow political entities to collect and use cryptocurrencies under the Act while ensuring continued transparency, it is recommended that the Act be amended to specifically require the receipting and reporting of all contributions of cryptocurrency received by federal political entities. Receipts should be required for all contributions by way of cryptocurrency, irrespective of their value. Only contributions of cryptocurrency that meet these transparency requirements would be available for use by those political entities.
- Untraceable means of contributing such as pre-paid credit cards, money orders and gift cards should be prohibited. Small cash contributions of under $20 should continue to be permitted.
Return to footnote 1 Only 50 signatures are required in specific remote and rural electoral districts, which are listed at Schedule 3 to the Act.