Brussels, 11 July 2012
Questions and Answers:
Proposal to protect financial interests of the EU
Why do we need to protect the financial interests of the EU?
The EU already has legal instruments in place to protect the EU's financial interests when crimes such as fraud, corruption or money laundering are committed. However, the current rules can be strengthened even more to better protect tax payers' money. Member States still have very diverging rules on the definition of these crimes against the EU budget and hence the level of sanctions that are applied. Such differences have a negative impact on how efficiently the EU can protect its financial interests. For example, the conviction rate in cases involving offences against the EU budget varies considerably across the EU from one Member State to another, ranging from 14% to 80% (with an EU average of 41%). Stronger measures against fraud, such as defining common offences in all EU Member States, can help to deter criminal activities against the EU budget and to protect EU public money equally in all EU Member States. Putting in place a stronger system for deterring, investigating and prosecuting offences against the EU budget will better protect taxpayers' money and make it easier to recover funds.
How do definitions of crime and levels of sanction vary in EU Member States?
With respect to fraud, Member States have different definitions of this crime leading to sanctions that can vary from no minimum sentence (e.g. the UK or Ireland), a maximum of 6 months imprisonment (e.g. Austria) up to a maximum of 12 years imprisonment (e.g. Romania).
With respect to the crime of money laundering, the maximum term of imprisonment ranges between 2 years (e.g. Finland) and 20 years (e.g. Austria).
Definitions of the crime of the obstruction of public tender procedures also vary from one Member State to another, leading to sanctions as different as a mere administrative fine (e.g. Bulgaria) to 5 years of imprisonment (e.g. Germany, Luxembourg, Slovakia and Spain).
For a full overview of sanctions applied in Member States against the crime of fraud, see the table in Annex 1.
Why is the Commission proposing this Directive?
This Directive is being proposed to clarify, harmonise and strengthen Member States’ criminal law as regards offences related to the EU budget.
There are considerable differences in the level of protection of the EU budget across Member States. Since 2000, 281 out of a total of 647 cases transferred by the European Anti-Fraud Office (OLAF) to national judicial authorities were dismissed. Conviction rates for these cases range from 14% to 80% across Member States, with an EU average of 41%.The differences are largely due to a patchy legal framework.
The 1995 Convention on the protection of the European Communities' financial interests, the main legal act in the area of criminal law and protection of the EU budget, did not provide sufficient harmonisation and enforcement in the Member States.
There are several reasons to explain the different levels of protection in the EU:
offences such as obstructions of public procurement or grant procedures and misappropriations are not covered by EU law and are therefore not properly harmonised;
penalties for these crimes differ depending on the Member State in which they are prosecuted;
short statutes of limitation make legal procedures more complex and reduce the likelihood of a conviction;
criminal law is not always implemented properly.
For example, public sector service providers, officials of international organisations or elected officials are not always covered by corruption provisions. Another example is that some Member States do not provide for a minimum imprisonment period, or set a maximum sanction of a few months for these crimes.
What offences and minimum sanctions does this proposal cover?
The offences in this proposal all affect the financial interests of the European Union. They include fraud, obstruction of public procurement or grant procedures, corruption, money laundering, and misappropriation.
The proposed minimum sanction for these crimes would be 6 months imprisonment, provided that the financial damage to the EU budget was above a specific threshold laid down in the proposal. The maximum sanction would be at least 5 or 10 years imprisonment, depending on whether or not the offence was committed by an organised group.
This means the sanctions would be proportionate to the damage caused. The proposal includes a three-step approach with thresholds of damage (or advantage obtained by the offender) defined in financial terms to determine the seriousness of the crime. Member States would therefore be obliged to provide for the following sanctions for cases of fraud and misappropriation:
Proposed sanction system for fraud and misappropriation
Step 3: Damage of EUR 100 000 and above
Imprisonment from 6 months to 5 years or more
For organised crime: imprisonment from 6 months to 10 years or more
Step 2: Advantage of EUR 10 000 – 99 999
Effective, proportionate and dissuasive criminal sanctions as defined in the proposal
Step 1: Advantage up to EUR 9 999 (without particular aggravating circumstances)
Choice of either criminal or other sanctions (such as administrative sanctions or fines)
Member States could nevertheless impose more stringent provisions than those laid down in the proposal.
What does the proposal say about the statutes of limitation?
The period within which the investigation, prosecution, trial and judicial decision for the offence must take place, would have to be at least five years from the time when the offence was committed, according to the proposal. It should be extended to at least ten years if it was interrupted by investigations or prosecutions.
Currently, prescription periods vary widely, ranging from 1 to 12 years (see table in Annex 2).
How much of the EU budget is affected by fraud?
In 2010, Member States reported €617 million worth of suspected fraud cases involving EU public money, which is less than one percent of all EU expenditure and revenue concerned.
Can this proposal have an impact on the recovery of misused EU funds?
The proposed Directive would facilitate the work for police officers and prosecutors working on cases involving multiple jurisdictions. For example, a prosecutor who wanted to freeze criminals’ assets through seizure or confiscation would benefit from the existence of harmonised law in all EU jurisdictions. This would result in more effective recovery of EU money.
What is the legal basis for this proposal?
Article 325 of the Treaty on the Functioning of the European Union (TFEU) provides that Member States shall counter fraud and any other illegal activities affecting the financial interests of the EU, by taking measures that act as a deterrent and effectively protect the EU budget. The TFEU also provides a legal basis for the harmonisation and strengthening of Member States' criminal law.
The proposed Directive would replace the 1995 Convention. If adopted, this proposal would have to be implemented by all EU Member States, or they could face legal action at the European Court of Justice.
What other measures are foreseen by criminal law to protect the EU budget?
There are many legal acts in criminal law to protect EU financial interests, one of the most important being the 1995 Convention, which will be replaced by this proposal.
The Framework Decision on the European Arrest Warrant contributes to a better protection of EU financial interests by making easier the surrendering of suspects from one Member State to another. Other important legal measures are the Directive on the prevention of money laundering and terrorist financing and several Framework Decisions concerning the confiscation of crime-related proceeds.
What are the next steps towards improved protection of the EU budget?
The proposal will now be transmitted to the European Parliament and Council for discussion and adoption. This proposal feeds into the greater plan of protecting the EU's financial interests. The Commission foresees to put forward a separate proposal for a Directive on the harmonisation of procedural criminal law in the Member States in 2013. It will aim, firstly, at aligning rules for the collection and use of evidence in criminal procedures and, secondly, at better communication and cooperation between national authorities and OLAF.
See also IP/12/767
Please note that this table gives an approximate picture of the situation in Member States by December 2011