"That money was not campaign money. It's not campaign money. No campaign finance violation," Giuliani said.
He said that the money was funnelled through the law firm and the President repaid him.
"He (Trump) paid him back. No campaign finance violations, no crime of any kind. Michael had the discretion to solve these," Giuliani told The Wall Street Journal in another interview.
When the daily asked whether the fact that Trump had repaid his lawyer conflicted with the president's previous statements that he was unaware of the payment, Giuliani said it was "not [an] issue".
"Cohen was his lawyer and had discretion to settle, as I have had for clients ultimately paying for it," he said.
Trump was "probably not aware" of the payment at the time it was made, he said.
The former New York Mayor later told Fox News that Trump repaid Cohen "over several months" by putting him on a "retainer of $35,000 when he was doing no work for the president."
Daniels' lawyer, Michael Avenatti, told CNBC: "This is exactly what we predicted would ultimately be shown. Every American, regardless of their politics, should be outraged."
Asked if Giuliani's admission is evidence of a campaign finance violation, Avenatti simply said, "Yes."
The president has repeatedly denied that he had an affair Daniels, who has described having intimate contact with Trump before he became president.
Giuliani's comments are also in direct contrast to what Cohen has been saying for months that he used his own money to pay the actress.
Cohen is under investigation by the FBI, which raided his home and office last month and seized documents that included information about the payment to Daniels.
The hush-money payment to Daniels is reportedly a focus of a federal investigation into Cohen's private finances and business interests. Investigators are likely to examine whether the payment was legal under election campaign finance laws and whether Cohen disclosed the true reason for borrowing the funds.
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