This article presents and analyzes the EU values compliance mechanism as set up in Regulation 1141/2014, and amended by Regulation 2018/673, on the statute and funding of European political parties and European political foundations. It assesses to what extent this Regulation, that has been perceived and presented as targeting "populists," provides a comprehensive response to illiberal politics at EU level, and what lessons can be drawn from its origin for the application of other values compliance based instruments such as Article 7 TEU. For that purpose it tracks the Regulation's drafting history in considerable detail and critically assesses the outcome. It concludes that the Regulation offers a limited and limiting framework to act against illiberal political forces within the European Parliament, because it is unlikely to work in disciplining mainstream political groups and parties that harbor illiberal elements associated with Article 2 TEU-related problems in various member states. At the same time, the article identifies elements of the mechanism that provide opportunities to help shape a more effective EU response to rule of law backsliding across Europe.