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The Brexit Party has a 'high and ongoing risk' of accepting "impermissible" foreign donations, the elections watchdog has declared.

The Electoral Commission is now urging Nigel Farage's party to improve its system after the Mirror exposed holes in the way the it takes vast sums of money.

And the watchdog will consider possible enforcement if the Brexit Party fails to take the recommended steps.

Our investigation revealed how loopholes in the law and the party’s website could allow millions in untraceable donations to pour into the party.

Following our story, and condemnation by politicians including Gordon Brown, the elections watchdog paid a visit to the Brexit Party on May 21.

Immediately afterwards Nigel Farage boasted that in seven hours "the Electoral Commission has not found a single misdeed by the Brexit Party."

Yet in a statement today, the Commission said: "We have concluded that the fundraising structure adopted by the party leaves it open to a high and ongoing risk of receiving and accepting impermissible donations.

(Image: Getty Images)

"We have made recommendations that will, if implemented by the party, achieve and maintain robust procedures for receiving funds and help it comply with its legal requirements."

There is no suggestion the Brexit Party has broken the law.

The row relates to the party's decision to accept small donations through PayPal - with minimal checks by the party itself on ID or country of origin.

Political parties can only accept donations of more than £500 from UK-registered voters or organisations. Overseas electors, but not any foreign resident, can donate.

But a loophole in the law means payments under £500 aren’t considered “donations”, and so could come from anyone, anywhere in the world.

A Mirror investigation found it was possible to sign up as a Brexit Party supporter under the name of Vladimir Putin, giving the address of the Kremlin.

It’s a criminal offence to evade controls on donations, including by making multiple smaller payments.

But parties are only required to collect information on the source of donations over £500, so there’s no way of knowing whether someone has done that using PayPal.

To date the Brexit Party has returned one £1,000 donation as it could not identify if it was from a permissible source.

Today's Electoral Commission statement said: "Using online platforms to receive payments is not new.

"We have been advising parties and campaigners since 2015 about what checks and systems they need to have in place when raising funds online to ensure they comply with the law.

"We continue to recommend that all political parties and campaigners check every payment that they receive online to make sure they have identified all donations and not accepted any that they are not entitled to.

(Image: NEIL HALL/EPA-EFE/REX)

"And request as much information as possible from people wanting to give funds, to be sure all payments are from a permissible source."

The Mirror found other parties mostly had safeguards in place.

Labour had two payment pages, one of which accepted PayPal. However Labour and Lib Dem credit card systems require the donor’s address to match the card billing address.

Similarly, the Conservative Party requires donors and members to pay through either their own card system or as a registered PayPal user, which would create a paper trail.

Tory donors are also required to accept the party's terms and conditions, which allow them to reject membership applications at any time.

The Commission's regulation director, Louise Edwards, said today: "It is legitimate for any political party or campaigner to adopt a fundraising strategy that focuses on raising small sums.

"Our visit to The Brexit Party has enabled us to make specific recommendations to the party that will support it to meet its legal responsibilities when it comes to receiving funds.

"Should it fail to meet those responsibilities, this will be considered in line with our Enforcement Policy."

In a statement, the Brexit Party said the commission had confirmed its method of fundraising was legitimate and had been adopted by other political parties and campaigners.

"They haven't found any examples of infringement of Electoral Commission rules," it said.

"However, we are grateful that they have made some helpful suggestions to reduce future risk as we fundraise and we will be working to embrace those recommendations as soon as practicable and possible and in the time frame set out.

"We trust that the Electoral Commission have been applying the same oversight and rigour to the other political parties and their fund-raising."