Fighting Misuse of EU Funds

The EU wants to strengthen measures to fight against fraud and the misuse of public funds, in order to better protect the financial interests of European taxpayers.

To this end, a Commission Communication, which forms part of an overall EU anti-fraud and anti-corruption strategy, was recently published.

It points out the main criminal policy challenges, the reasons for shortcomings in criminal law and identifies the tools needed to protect the financial interests of the EU.

The Communication follows the entry into force of the Lisbon Treaty, which gives the Commission greater powers to fight illegal conduct that misuses the EU budget.

Criminal Policy Challenges

The Communication outlines several criminal policy challenges.

Insufficient protection against criminal misuse of the EU budget

While Member States are legally obliged to combat criminal activity, including fraud against the EU budget, the Communication states that there is still much to do in this field. For example, there are different penalties for fraud in each Member State, and there is no consistent approach towards corrupt elected or appointed office holders and official persons.

Insufficient legal action to fight criminal activity

Since financial crimes against the EU are often of a cross-border nature, it makes even harder for criminal justice authorities at national level to investigate crimes and prosecute criminals. Furthermore, insufficient legal means often results in operational and organisational mismanagement, which hinders the proper protection of EU financial interests.

The Communication also says that national authorities sometimes do not take into account the recommendations of the Office of Anti-Fraud (OLAF) and refrain from taking further action in cases concerning fraud against the EU budget.

The reasons for shortcomings in this area of crime

The Communication also emphasises that in addition to Member State legal differences, there are also a number of inconsistencies and loopholes concerning the quality of justice.

No level playing field in criminal law

The reality is that Member States have their own criminal laws to fight crime against the EU budget. This complicates cases which involve a cross-border context. 

According to the Commission, Member States laws differ with regard to: (1) the definition of relevant criminal offences, their sanctions and time limitations for criminal offences; (2) the concept of public official in relation to anti-corruption; (3) criminal liability of the heads of businesses and legal persons when criminal conduct is on behalf of the company.

Insufficient cooperation between authorities

The Commission stresses that Member States may be reluctant in cases where mutual legal assistance is needed due to complex procedures and uncertainty of the final results. Restrictive procedural rules, including limits on evidence collected abroad, are also a problem. This means that national criminal courts often do not take into account results provided by the EU administrative authorities. 

In some Member States, national institutions are not allowed by law to investigate cases of fraud that go beyond their national jurisdiction.

Insufficient investigation powers

The Communication stresses that two EU institutions - the Office of Anti-Fraud (OLAF) and Eurojust - must become more actively involved in the safeguarding EU financial interests. While OLAF will soon see improvements in its power, Eurojust remains limited to steering prosecutions related to EU financial interests.

New tools to protect EU financial interests introduced by the Lisbon Treaty

The Communication states that there is a need for some guiding principles with regard to criminal law and its contribution to fight fraud: (1) respect for fundamental rights; (2) approximation of criminal law within the EU; (3) and strengthening of the EU bodies, such as OLAF, Eurojust and a possible European Public Prosecutor’s Office.

In order to implement the provisions of the Lisbon Treaty concerning the protection of EU financial interests, the EU must therefore focus on the following three dimensions: legal procedures, legal substance, and institutions.

Strengthening criminal and administrative procedures

This includes adopting new measures on existing legal instruments such as the European Judicial Network in Criminal Matters and the European Judicial Training Network, and preparing proposals concerning asset recovery and confiscation. The Communication also states that it is important to facilitate cross-cutting exchanges of information among law enforcement institutions and to mutually recognise evidence taken by Member States and by OLAF.

Strengthening substantive criminal law

The Commission considers criminal law to be the best action in preventing and combating illegal activities affecting EU financial interests. The Commission is ready to present a proposal on the protection of EU financial interests, which would replace its pending proposal on criminal law protection of financial interests.

The new measure will set out rules on the consistent and fair application of criminal sanctions, on the approximation of rules on jurisdiction and time limitation, and on aiding and abetting, instigation and attempt.

Strengthening institutional framework

The institutional structure of the EU must be reinforced in order to guarantee an effective and equivalent protection of EU financial interests throughout the Union. Therefore, the Commission underlines that the following changes in EU institutions must take place: (1) the modernisation of Eurojust; (2) the establishment of a specialised European prosecution institution, such as a European Public Prosecutor’s Office; and (3) enhancing the effectiveness and efficiency of OLAF in applying its powers.

Next steps

The Communication will now be sent to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions for further examination.