Sunday

17th Oct 2021

EU Commission blocks anti-fraud funds without explanation

  • Laura Codruţa Kövesi is the head of the new European Public Prosecutors Office (EPPO). It is unclear why the EPPO is not allowed to hire the financial experts it says it requires (Photo: European Commission)
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The European Commission has blocked the recently-created European Public Prosecutor's Office (EPPO) from using their budget to hire the specialised personnel they need.

The EPPO has been created to prosecute financial crimes (bribery, money laundering, tax fraud) committed with European taxpayer money throughout the EU.

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Crucially, the EPPO is now tasked with safeguarding the €800bn pandemic recovery funds against fraud.

To help do that, the European Parliament and the European Council upped the budget of the agency by a further €7.3m in December 2020 to recruit "financial analysts as well as IT experts."

These experts are needed to track international criminal money flows. But according to a source - who requested to remain anonymous - the EPPO is not allowed by the commission to spend that money.

This has been confirmed to EUobserver by the budget chair of the European Parliament, Monika Hohlmeier.

"The commission has refused the EPPO to hire contract agents to allow the EPPO to fulfil its mandate. I do not understand nor try to understand any justification for this behaviour by the Commission."

As of Friday (17 September) the commission has not responded to multiple requests by EUobserver as to why it has denied EPPO authorisation to hire the financial experts it has asked for.

€800bn pandemic fund a 'big risk'

There have already been warnings that the recovery funds are especially vulnerable to fraud.

According to Ville Itala, director-general of anti-fraud agency Olaf, the EU faces a "big risk" of abuse in its unprecedented €800bn post-pandemic recovery fund. "It's such a huge amount of money - prevention is important."

And because it is a novel tool, that has to be distributed at high speed during a crisis, there is a higher risk of misallocation and opportunities for duplicity.

It may therefore prove detrimental to deny EPPO the financial experts it needs - because it is the only agency that can prosecute international financial crime.

Unlike the Olaf, the EU prosecutor's office has the authority to start its own investigations, and it has the power to directly prosecute cases in 22 of the bloc's member states. Denmark, Ireland, Poland and Hungary do not yet participate. Sweden is expected to join next year.

Previously prosecutors from member states had to go through a lengthy process to prosecute crimes committed outside of their borders. EPPO reduces this process from months to weeks, raising the bar for criminals who previously outpaced law enforcement.

Since its creation on 1 June, the EPPO has already opened 300 investigations, representing damages worth up to €4.5bn to the EU budget, the institution reported on Tuesday.

That seems a fast start for an agency that is not yet three months old - but most of these investigations are existing cases that have been taken over from the member states.

But much remains to be done - for example, in 2018, the difference between expected VAT revenue and the amount actually collected was €140bn. And that is just one form of fraud the agency is pursuing.

While it is still uncertain how significant the caseload will be, the agency expects to launch at least 2,000 cases a year, which already is more than the current team can handle.

"There is a backlog of 3,000 cases, which must be processed and 1,000 more cases which must be investigated in due time," Hohlmeier told EUobserver.

The commission allocated €37.7m for 2021, while the EPPO requested €56m. The top-up of €7.3m brought the total budget to around €44m. By denying the allocation of €7.3m already approved by the council and parliament, the commission appears to be hampering EPPO's ability to track and prosecute financial crimes and guard the recovery fund that is especially at risk of misuse.

"The request is clear: the EPPO must be able to recruit the experts it needs to fight corruption, fraud, conflict of interest, and other misuses of European taxpayer's money," said Hohlmeier.

'There are no clean countries', EU chief prosecutor says

"For the first time, the offenses against the financial interest of the EU will be investigated in an integrated strategic manner by a prosecutorial body with supranational jurisdiction," EU chief prosecutor Laura Kövesi said.

Slovenia causing headaches for new EU anti-graft office

Slovenia was supposed to nominate a delegated prosecutor for the new European Public Prosecutor Office, in charge of cracking down on corruption of EU funds. Ljubljana finalised procedures in December but has yet to send nominations, causing headaches.

Cyprus: a heavy caseload for new EU prosecutors office

The new European Public Prosecutor's office will become operational in March. It is tasked to carry out criminal fraud investigations of the EU budget. But of the 140 required European delegated prosecutors, only nine have so far set up office.

EU chief prosecutor accuses Slovenia of interference

Europe's chief prosecutor Laura Kövesi warned that the EU budget might not be safe because Slovenia continues to delay naming delegated prosecutors to the agency. "We have to work as if our office does not exist in Slovenia," she said.

Fraud against EU dropped 20% last year

There were a total of 1,056 fraudulent irregularities in 2020, with a combined financial impact of €371m. Currently, Cyprus, Denmark, Finland, Germany, Ireland, Netherlands, Slovenia and Spain do not have domestic anti-fraud plans.

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