Allegations have been raised by Sen. Marco Rubio, R-Fla., and Republican Virginia Attorney General Jason Miyares (among others) that millions of dollars may be being funneled into candidate campaign coffers through a process known as "smurfing." We’re not talking about donations being made by small, blue comic-book characters—although we might as well be if the allegations are true.
What is campaign finance smurfing? It is a form of money laundering for campaign contributions. It involves breaking up large-scale donations in a way that disguises who the money is actually coming from, so the contribution limits on how much money can be donated to a particular candidate can be skirted. It may involve widespread mail and wire fraud and the fraudulent use of the identities of unwitting members of the public to violate federal and state campaign finance laws.
Several important rules apply to the funding of congressional and presidential campaigns under the Federal Election Campaign Act or FECA.
First, federal law strictly prohibits corporations and unions from making any direct contributions to federal candidates. Second, the FECA bans foreign nationals foreign nationals from making contributions. Only U.S. citizens and permanent resident aliens can give money to the campaigns of individuals running for Congress and the presidency (as well as state and local offices).
Third, federal law limits the amount that an individual can contribute to a candidate. In the current 2023-24 election cycle, individuals cannot contribute more than $3,300 for the primary election and the same amount for the general election. Other limits apply for contributions to PACs and party organizations.
The Federal Election Commission, where I once served as a commissioner, has civil enforcement authority for FECA violations, while the U.S. Justice Department has criminal enforcement authority for intentional and knowing violations of the law. For an example of a criminal violation relevant to smurfing, consider a case I saw when I was a commissioner.
The senior partner of a law firm told his employees that if they made the maximum contribution to a presidential candidate, he would reimburse them. This is called a conduit contribution and was an attempt to get around the contribution limit by the lawyer – making a campaign contribution in the name of another person is illegal.
One of the clues for the Justice Department was that the law firm staff had never made political contributions before. Yet they were all suddenly giving the maximum amount despite their much lower salaries than the firm’s senior partner.
So how does all of this apply to smurfing? Assume that an unknown perpetrator deposits a large sum of money into a bank account. He ties it to a corporate payment credit-card system, which is often used by companies to generate unique credit-card account numbers for their employees to use for transactions. He then generates credit-card account numbers for members of the public without their knowledge and uses those individuals as straw donors to make political contributions, perhaps through an aggregator like ActBlue, a Democratic fundraising website.
Where does this criminal get the names and addresses? There are all sorts of potential sources, including the lists of reported donors to campaigns listed on the FEC’s website. He can then generate thousands of donations, mostly small ones to avoid raising any red flags, to multiple candidates, using real names and addresses of individuals without their knowledge.
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Miyares’s letter to ActBlue claims that "hundreds of thousands of dollars" in contributions have been made through ActBlue in Virginia "that are facially implausible and appear suspicious." "Virginia donors," says Miyares, "are reported as making multiple daily contributions…amounting to tens of thousands of dollars in aggregate." Yet many list their occupation as "not employed" or "retired," and circumstances make it appear as if they "are being made from fictional donors or dummy accounts" and "without the reported donors’ consent or awareness."
Sen. Rubio has also questioned these transactions in a complaint letter to the FEC; specifically, the fact that ActBlue does not "require CVV numbers as part of making an online transaction." CVV numbers are the three-digit "card verification value" numbers we all have on the back side of our credit cards that are used to verify the legitimacy of credit-card transactions. Rubio says that not requiring a CVV number amounts to "an intentional lack of security engrained within" ActBlue’s donation process.
ActBlue has strenuously denied these charges both in a response to an investigation by the U.S. House Committee on Administration and to Jason Miyares, who ActBlue says is engaging is "a partisan attack and scare tactic" intended to undermine "small-dollar" Democrat donors.
The only way to get to the truth is for these questionable donations to be investigated. That means both the FEC and the Justice Department – and state attorneys general under applicable state fraud laws – need to get busy, including talking to the donors listed in the filed reports to see if they actually made these donations and were not barred from making them.
All of these law-enforcement agencies have an obligation to determine if there are "Smurfs" out there using money laundering to illegally interfere in our elections.
