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EU fights 600 million euro annual fraud

07.02.2017 - 14:16
Euro bank notes in a briefcase

The European Parliament has successfully concluded negotiations on legislation that will help fight fraud against the EU’s financial interests by means of criminal law. The Parliament thereby puts in practice the Union’s zero-tolerance approach towards the inappropriate use of European taxpayers’ money.

Implementing anti-fraud mechanisms

In 2010, the European Commission announced that suspected fraud against the EU’s financial interests amounts to approximately 600 million euro annually. The actual figure may well be higher due to unreported cases.

Since the governments of the Member States manage approximately 80 percent of the Union’s budget, it is crucial that their anti-fraud mechanisms are sound. In 2015, it was concluded that there were 22,349 irregularities concerning revenue and expenditure in national governments that affected a total of 3.21 billion euro in EU funds. 1461 of these were reported to be fraudulent, with the concerned amount of EU funds totalling 637.6 million euro.

Since the governments of the Member States manage approximately 80 percent of the Union’s budget, it is crucial that their anti-fraud mechanisms are sound

The European Parliament realised that certain tools were missing at EU level to investigate fraud and irregularities in the implementation of the EU budget, such as mechanisms to prosecute fraud cases as they arise and deter future fraudulent activity. The Directive on the protection of the Union’s financial interests (PIF Directive) is instrumental in defining the financial interests that will be covered by Union legislation. It also defines the types of fraudulent behaviour to be criminalised and provides a definition of corruption to be transposed into national law.

The directive also defines the types of fraudulent behaviour to be criminalised, and provides a definition of corruption to be transposed into national law

Most importantly, fraud related to value-added tax (VAT) is included in the scope of the directive for cases involving a loss of at least 10 million euro in two or more Member States. This is particularly relevant in light of the Parliament’s parallel efforts to establish a European Public Prosecutor’s Office, which would investigate such cases. Public procurement fraud cases have also been included in the scope of this law. Moreover, additional safeguards will ensure that further legislative action could be taken in three years’ time if needed.

Harmonising criminal law to fight fraud

This piece of legislation is the first step towards harmonising criminal law in Europe in order to fight fraud against the EU budget. It establishes a maximum penalty of at least four years of imprisonment for PIF offences committed by natural persons, which will be harmonised across the Union and will apply to cases involving damages or advantages of at least 100,000 euro. The maximum penalty and the threshold are binding for all Member States.

All these measures will make it more difficult for potential perpetrators to move across the European Union to find judicial systems that best suit their illegal intentions

The directive also defines prescription periods and deadlines for the enforcing of judgements, of five years. All these measures will make it more difficult for potential perpetrators to move across the European Union to find judicial systems that best suit their illegal intentions. The PIF Directive is therefore a vital tool and an important first step towards strong protection of the EU’s financial assets, and of the European taxpayers who contribute to them.

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