April 08, 2022
Early last year, we published a blog citing multiple statistics on the rapid influx in political contributions, specifically showcasing an increase on the federal level – unsurprising, given that 2020 was a presidential election year.
Because 2021 is classified as an off year, it would be easy to assume a rather drastic drop-off occurred over the next 12 months. No federal election means less contributions, and thus less pay-to-play risk. Right?
However, following that line of thinking is flawed in the sense that the comparison verges on the old apples to oranges conundrum. After all, we really shouldn’t be comparing election years to non-election years as a means to averaging political contributions and thus pay-to-play risk.
In fact, there are hundreds of state and local elections across the country in off years, with contributions flowing to candidates in jurisdictions that are higher risk, harder to track, and often times, subject to additional state local regulations.
A better way to analyze political contributions and gain a clear insight into your firm’s pay-to-play risk is to compare similar years and circumstances, gaining transparency into whether or not you face a cause for compliance concern.
Understanding the need for firms to gain better insight into this potential risk factor, we aggregated the political contributions – both state and federal – from similarly “off years.”
As you’ll see, while there is no doubt a steep decline occurred between 2020 and 2021, when comparing 2021 to 2017, you’ll actually note an increase. A trend which extends both in terms of count and spend on the federal level as well as the state and local level. And in fact, on a federal level, the spend nearly doubled between 2017 and 2021.
Moving beyond 12-month comparisons allows us to note a clear and substantial increase in political contributions, which in turn signals a need for firms to seriously and proactively address pay-to-play risk or face the consequences. How?
- Identify whether or not you have a covered associate
- Decide whether an employee’s contributions are direct or indirect contributions
- Identify who the employee is making a contribution to
- Look at the political committee status
- Remember the requirements of public funds and others
Unfortunately for firms, pay-to-play risk doesn’t simply turn off during the off years. However, with the right technology, your firm can mitigate risk and continue your work without the storm cloud of potentially problematic political contributions.
At illumis, we provide the leading monitoring solution to help reduce risk and increase transparency around pay-to-play rules. Our platform continues to set the standard, with cutting-edge technology to help ensure comprehensive coverage. Interested in a demo of the illumis Compliance platform? Click here or email [email protected]