Category Archives: Fight against Fraud

Protecting the financial interests of the European Union (EU) is a priority for the European institutions. The EU combats fraud with a series of legislative acts that relate to currency counterfeiting, violations of intellectual property rights and corruption – both in Europe and internationally. A specialised anti-fraud office (OLAF) is tasked with conducting anti-fraud investigations. The legal basis for the fight against fraud is Article 325 of the Treaty on the Functioning of the European Union.

Anti-fraud offices
European Anti-Fraud Office (OLAF), COCOLAF, Court of Auditors
Protecting the European Union’s financial interests
Internal controls, Criminal-law protection, Administrative cooperation, Agreements with non-EU countries
Fight against counterfeiting
Protecting the euro against counterfeiting, Respecting intellectual property rights, The role of customs
Fight against corruption
European Union policy against corruption, United Nations Convention

Anti-fraud offices

Anti-fraud offices

Outline of the Community (European Union) legislation about Anti-fraud offices

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

Anti-fraud offices

The European Anti-Fraud Office (OLAF) is the core component of the fight against fraud. OLAF is part of the European Commission and conducts fraud investigations in all European Union (EU) countries and within the European institutions themselves. It can also conduct investigations in non-EU countries with which it has agreements.

  • European Anti-Fraud Office (OLAF)
  • European Technical and Scientific Centre (ETSC)
  • Advisory Committee for the Coordination of Fraud Prevention (COCOLAF)
  • The Court of Auditors of the European Union

Advisory Committee for the Coordination of Fraud Prevention

Advisory Committee for the Coordination of Fraud Prevention

Outline of the Community (European Union) legislation about Advisory Committee for the Coordination of Fraud Prevention

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

Advisory Committee for the Coordination of Fraud Prevention (COCOLAF)

Document or Iniciative

Commission Decision 94/140/EC of 23 February 1994 setting up an advisory committee for the coordination of fraud prevention [See amending acts].

Summary

The sound management of Community finances requires that fraud against the Community budget be effectively opposed. The Member States, in close cooperation with the Commission, are responsible for adopting specific measures to afford effective protection to the Community’s financial and other interests. The Commission also has responsibilities arising from its task of ensuring that the Community budget is properly implemented.

This decision sets up an Advisory Committee for the Coordination of Fraud Prevention (Cocolaf) The Committee is chaired by a representative of the Commission. It consists of two representatives from each Member State, who may be assisted by two representatives of the competent national authorities, as well as representatives from the Commission departments concerned. Working parties may be set up by the Committee in agreement with the Commission.

The Chairman may invite any person with special expertise to take part in the proceedings.

If necessary, the Commission may specify a time by which the Committee must deliver its opinion.

The Committee may be consulted by the Commission on any matter relating to:

  • the prevention and prosecution of fraud and all other illegal activities adversely affecting the Community’s financial interests;
  • cooperation between Member States or between Member States and the Commission to protect the Community’s financial interests;
  • protection of the financial interests of the Union including protection of the euro both note and coins against counterfeiting;
  • the legal protection of the financial interests of the Community, including the police and judicial aspects of the fight against fraud.

The members of the Committee may ask the Commission for the Committee to be consulted on any matter falling within its terms of reference. The Committee is convened by the Commission.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Decision 94/140/EC 1.3.1994 Official Journal L 61 of 4.3.1994
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Decision 2005/223/EC 17.3.2005 Official Journal L71 of 17.3.2005

European Anti-Fraud Office

European Anti-Fraud Office

Outline of the Community (European Union) legislation about European Anti-Fraud Office

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

European Anti-Fraud Office (OLAF)

Acts

Commission Decision 1999/352/EC, ECSC, Euratom of 28 April 1999 establishing the European Anti-Fraud Office (OLAF).

Operating modalities:

Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF).

Council Regulation (EURATOM) No 1074/1999 of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF).

Interinstitutional Agreement of 25 May 1999 between the European Parliament, the Council of the European Union and the Commission of the European Communities concerning internal investigations by the European Anti-Fraud Office (OLAF).

Summary

This Decision establishes the European Anti-Fraud Office (OLAF), which is part of the European Commission with a special independent status for conducting anti-fraud investigations. Two Regulations and an Interinstitutional Agreement stipulate how it is to operate.

OLAF’s competences

The Commission Decision establishes OLAF and sets out its powers, which are to:

  • carry out external administrative investigations as part of the fight against fraud, corruption and any other illegal activity that adversely affects the Community’s financial interests and for the purpose of combating fraud involving any other act or activity in breach of Community provisions;
  • carry out internal administrative investigations for the purposes of:
    1. combating fraud, corruption and any other illegal activity that adversely affects the Community’s financial interests,
    2. investigating serious situations relating to the discharge of professional duties that may constitute a failure to comply with the obligations of officials and servants of the Communities liable to result in disciplinary or, where appropriate, criminal proceedings, or a failure to comply with the analogous obligations of the members of the institutions, bodies, offices or agencies or their staff who are not subject to the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the European Communities,
  • carry out investigative assignments in other areas at the request of Community institutions and bodies;
  • help strengthen cooperation with the Member States in the field of fraud prevention;
  • develop strategies for the fight against fraud (preparing legislative and regulatory initiatives in the areas of activity of the Office);
  • set in motion any other operational activity in the fight against fraud (developing infrastructure, collecting and analysing information, providing technical support);
  • maintain direct contact with the national law enforcement and judicial authorities;
  • represent the Commission in the field of fraud prevention.

OLAF’s external investigative powers are mainly those that were conferred upon the Commission under Regulations (EC, Euratom) Nos 2988/95 (the European Communities’ financial interests) and 2185/96 (on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests). Furthermore, OLAF works on the basis of Regulation (EC) 515/97 on mutual administrative assistance.

How OLAF goes about its investigations

The two Regulations on investigations by OLAF, one applying to the EC and the other to Euratom, restate the Office’s main functions and define the practical arrangements for carrying out the administrative investigations for which it is responsible.

The checks and verifications OLAF carries out externally (in the Member States and in certain non-member countries with which the Community has cooperation agreements) and internally (inside the institutions and bodies established by or on the basis of the Treaties) do not affect the powers of the Member States in the area of criminal prosecution.

The Director of OLAF launches and directs investigations on his own initiative or at the request of a Member State with an interest in the matter (in the case of external investigations) or of the institution or body concerned (in the case of internal investigations).

As part of its external investigations, OLAF carries out the on-the-spot checks for which the Commission is responsible under Regulations (EC, Euratom) Nos 2988/95 and 2185/96.

For its internal investigations, OLAF has the right of immediate and unannounced access to any information held by the Community institutions, bodies, offices and agencies. It may also ask anyone concerned for oral information, and carry out on-the-spot checks on economic operators.

Where the Office discovers, in the course of an internal investigation, that a member, manager, official or other servant may be personally involved, it informs the institution, body, office or agency to which that person belongs, unless divulging such information is incompatible with the need to maintain complete strict confidentiality for the purposes of the investigation or a possible national investigation.

At the request of OLAF or on their own initiative, the Member States, institutions, bodies, offices and agencies are required to provide the Office with any document or information they hold that relates to an investigation under way.

All information passed on to the Office will be properly protected.

On completion of an investigation, OLAF draws up a report including recommendations as to the action to be taken. The report is sent to the Member States in the case of external investigations and to the institutions, bodies, offices and agencies in the case of internal investigations.

Information may also be sent to the competent authorities in the Member States and to the institutions, bodies, offices and agencies concerned, while an investigation is still under way (the Office is in direct contact with the national law enforcement and judicial authorities).

OLAF’s operational independence is protected by a Supervisory Committee consisting of five independent outsiders appointed by common agreement of the European Parliament, the Council and the Commission. Furthermore, if the Director considers that a measure taken by the Commission calls his independence in question, he is entitled to bring an action against it before the Court of Justice.

Any member of the staff of a Community institution, body, office or agency who feels that his interests are adversely affected in the course of an internal investigation may submit a complaint to the Director of OLAF or bring an action before the Court of Justice.

Interinstitutional Agreement between the Parliament, the Council and the Commission

The object of the Interinstitutional Agreement between the European Parliament , the Council and the Commission is to guarantee that internal investigations can be carried out under equivalent conditions in the three institutions and in all the other Community bodies, offices and agencies, including the European Investment Bank (EIB) and the European Central Bank (ECB).

To bring this about, the three institutions have agreed to adopt an internal decision based on the standard model annexed to the Agreement, and to call on the other institutions, bodies, offices and agencies to accede to the Agreement.

The model decision requires the Secretary-General, departments and all members of staff of the institution, body, office or agency concerned to cooperate fully with OLAF’s agents and to supply all useful information.

Where there is a presumption of fraud, corruption or any other illegal activity detrimental to the Communities’ interests:

  • any member who becomes aware of such evidence must without delay inform his Head of Service or Director-General or, if he considers it useful, his Secretary-General or OLAF directly;
  • the Secretary-General, the Directors-General and the Heads of Service or managers must transmit to OLAF without delay any evidence from which the existence of irregularities may be presumed;
  • members of the institutions, bodies, offices or agencies must inform the President or, where appropriate, OLAF directly.

Where it becomes clear during an internal investigation that a member, manager, official or other servant is involved, the person concerned is informed rapidly. He/she will be called upon to give his/her views on the matters concerning him/her. The invitation may be deferred where necessary for the purposes of the investigation or any subsequent national judicial inquiries.

OLAF delivers an opinion on any request for a waiver of immunity from the police or judicial authorities in a Member State, if the request relates to a manager, official or other servant of an institution, body, office or agency. If a request concerns a member of an institution or body, the Office is informed.

Background

The EC Treaty provides an explicit legal basis for operations by the Community and the Member States to combat fraud and other unlawful activities that are damaging to the Community’s financial interests (Article 280). The entry into force of the Amsterdam Treaty has given the Community much more substantial means for combating fraud and stamping out economic and financial crime.

The Commission’s Task Force for the Coordination of Fraud Prevention was thus replaced by the European Anti-Fraud Office (OLAF), which, in addition to carrying out investigations, is responsible for devising and preparing legislation for the protection of the Community’s financial interests and the fight against fraud. OLAF enjoys greater independence than its predecessor in conducting investigations.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Decision 1999/352/EC, CECA, Euratom

28.4.1999

OJ L 136 of 31.5.1999

Regulation (EC) No 1073/1999

1.6.1999

OJ L 136 of 31.5.1999

Regulation (Euratom) No 1074/1999

1.6.1999

OJ L 136 of 31.5.1999

Interinstitutional Agreement

1.6.1999

OJ L 136 of 31.5.1999

Related Acts

Proposal for a European Parliament and Council Regulation amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) [COM(2006) 244 final – Not published in the Official Journal].

In substance, the proposal has the following main objectives:

  • Governance, cooperation between the institutions and the Supervisory Committee. The Commission sees a need for political governance regarding priorities related to investigative activities. It proposes regular meetings between the Supervisory Committee and the other European institutions as part of a structured dialogue, without interfering in the investigative activities.
  • Guarantee of the rights of persons implicated. The Commission proposes including in the Regulation a detailed provision on the procedural guarantees to be respected in the conduct of internal and external investigations.
  • Improved monitoring of investigations. Monitoring that ensures the specific procedures are followed should be improved and the possibility of requesting an opinion should be introduced. A review adviser is provided for to fulfil such a role.
  • Improving the information flow. With this proposal, the Commission intends to improve the flow of information between OLAF and European bodies and institutions, between OLAF and the Member States, as well as between OLAF and whistleblowers.
  • Strengthening OLAF’s operational efficiency. The Commission is proposing measures that will allow OLAF to concentrate on its priority actions. For example, the opening and closing of investigations need clarification.
  • Improving the effectiveness of OLAF’s investigations. The Commission proposes to clarify OLAF’s powers of investigation in the context of external investigations involving economic operators receiving Community funds on the basis of contracts, agreements or grant awards (direct expenditure).
  • Term of office of the Director-General. A non-renewable term of office should be introduced for the OLAF Director-General in order to strengthen independence.

Codecision procedure (COD/2006/0084)

Activity reports:

Report of the European Anti-Fraud Office – Eighth Activity Reportfor the period 1 January 2007 to 31 December 2007 [Not published in the Official Journal].
This eighth activity report substantiates the principal trends of previous years. The volume and quality of information received by OLAF has steadily increased in the past years, confirming the public’s confidence in the Office. In the course of 2007, OLAF opened more cases than in 2006. Similarly, the number of cases closed increased as well, as opposed to previous years that have been characterised by a declining number of closed cases. Furthermore, the amount of “own investigations” OLAF carries out has exceeded the amount of investigations in which it merely provides assistance to national authorities. The average duration of cases increased slightly in 2007, due to the complexity of the cases the Office faces nowadays and to the necessity of involving Member States or outside partners in the investigations. OLAF has actively continued its cooperation with Member States, EU bodies in charge of police and judicial cooperation and international partners in the fight against fraud.

Report of the European Anti-Fraud Office – Seventh Activity Reportfor the period 1 January 2006 to 31 December 2006 [Not published in the Official Journal].

This report follows on from the sixth activity report. In it, the Commission assesses the irregularities committed and presents the most important measures taken in 2006 by the Member States and by itself to improve fraud prevention and the fight against fraud. The report also describes in detail the way OLAF decides to open an anti-fraud investigation and explains how cases are managed.

Report of the European Anti-Fraud Office – Sixth Activity Reportfor the period 1 July 2004 to 31 December 2005 [Not published in the Official Journal].

Evaluation report: Commission Report of 2 April 2003 – Evaluation of the activities of the European Anti-Fraud Office (OLAF) [COM(2003) 154 final – Official Journal C 76 of 25.3.2004].

Decisions by the institutions:

Council Decision 1999/394/EC of 25 May 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Official Journal L 149 of 16.6.1999].

As laid down in the Interinstitutional Agreement, this Decision states that the Council is to cooperate with the Office and keep it informed; it also requires the Security Office to assist OLAF’s staff in their work. In return, OLAF is required to inform anyone implicated in one of its investigations.

Commission Decision 1999/396/EC of 2 June 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Official Journal L 149 of 16.6.1999].

As laid down in the Interinstitutional Agreement, this Decision states that the Commission is to cooperate with the Office and keep it informed; it also requires the Security Office to assist OLAF’s staff in their work. In return, OLAF is required to inform anyone implicated in one of its investigations.

Decision of the European Parliament of 18 November 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [European Parliament Rules of Procedure, Annex XI – Official Journal L 44 of 15.2.2005].

As laid down in the Interinstitutional Agreement, this Decision states that the European Parliament is to cooperate with the Office and keep it informed. The Decision obliges Parliament’s Security Office to assist OLAF staff in their work. It also obliges OLAF to inform anyone who is implicated in one of its investigations.

Decision 1999/726/EC of the European Central Bank of 7 October 1999 on fraud prevention – [Official Journal L 291 of 12.11.1999].

The Decision seeks to provide adequate protection against fraud and other illegal activities at the European Central Bank (ECB), while maintaining the distribution and balance of responsibilities between the ECB and the European institutions.
Accordingly, the Decision sets up an anti-fraud committee to be responsible for monitoring the independence and functioning of the ECB Directorate for Internal Audit. The anti-fraud committee is also responsible for relations with the Supervisory Committee of OLAF. These relations are governed by the principles established by an ECB decision.

Decision of the Court of Justice of 26 October 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Not published in the Official Journal].

In accordance with the provisions of the Regulations setting up OLAF, this Decision requires the Court to cooperate with the Office and to keep it informed. It also lays down the procedures to be followed by OLAF staff when carrying out internal investigations. In line with the principle of confidentiality, it denies OLAF access to documents held in connection with legal proceedings that are in progress or have been terminated.

Judgment of the Court of Justice of 10 July 2003 setting aside Decision 1999/726/EC of the European Central Bank on fraud prevention and protection of the Communities’ financial interests (Case C-11/00).

The Court of Auditors of the European Union

The Court of Auditors of the European Union

Outline of the Community (European Union) legislation about The Court of Auditors of the European Union

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

The Court of Auditors of the European Union

Document or Iniciative

Rules of Procedure of the Court of Auditors of the European Union [Official Journal L 103 of 23.04.2010].

Summary

These Rules of Procedure, which entered into force on 1 June 2010, lay down the internal workings of the Court, the rules on nominating the President and the decision-making procedure. It is the Court itself that establishes its own Rules of Procedure, subject to the approval of the Council acting by qualified majority.

Role

Article 287 of the Treaty of the Functioning of the European Union (TFEU) defines the role and prerogatives of the Court of Auditors.

The Court therefore audits the legality of the revenue and expenditure of the EU and its bodies. The audit completed by the Court is carried out with the aim of both improving financial management, as well as making European citizens aware of how public funds are used.

The audit carried out by the Court shall be:

  • based on records and, if necessary, performed on the spot in the other European institutions;
  • performed on the premises of any body which manages revenue or expenditure on behalf of the EU;
  • performed in the Member States, including on the premises of any natural or legal person in receipt of payments from the European budget.

In its role as auditor, the Court shall cooperate with the national services and the European institutions. Moreover, it is able to request any information required to successfully complete its task from the EU institutions and bodies, organisations in receipt of payments from the European budget or from national audit institutions.

In respect of the European Investment Bank’s activity in managing expenditure and revenue, the Court’s rights of access to information held by the Bank shall be governed by an agreement between the Court, the Bank and the Commission.

The Court of Auditors must notify the relevant authorities of any irregularity. To this end, it shall work closely together with the European Anti-Fraud Office (OLAF).

Despite its name, the European Court of Auditors has no judicial powers and therefore no power to impose sanctions. After the close of each financial year it shall draw up an annual report to be published in the Official Journal. This report concerns the management of the European budget by the competent institutions. It is a fundamental part of the European Parliament’s decision-making process regarding the granting of the budget discharge to the Commission.

The Court of Auditors also provides the Council and the Parliament with a statement of assurance concerning the reliability of the accounts and attesting that the European budget has been used well. In addition, the Court may also, at any time, submit observations, particularly in the form of special reports, on specific questions and deliver opinions at the request of one of the other European institutions.

Composition of the Court

Articles 285 and 286 of the Treaty on the Functioning of the EU establish rules regarding the composition of the Court of Auditors.

The College shall be the main decision-making body of the Court. It shall comprise one Member from each Member State of the EU. Members shall be appointed by the Council acting by qualified majority following consultation of the European Parliament, on the basis of proposals from the Member States. Members eligible for appointment by the Member States must belong to an external audit body in their own country or possess a specific qualification for this post. They shall carry out their duties at the Court of Auditors entirely independently. Their term of office is six years and may be renewed.

The Members of the Court shall elect the President of the Court by secret ballot. The candidate who, in the first round of voting, obtains a two-thirds majority of the Members’ votes shall be elected President. If this majority is not reached, the candidate must obtain the majority of votes in the second round of voting. The term of office is three years and may be renewed. The President’s duties shall be to:

  • draw up the agenda;
  • call and chair meetings of the Court;
  • ensure that discussions run smoothly;
  • ensure that the Court’s decisions are implemented;
  • ensure that the departments of the Court operate properly and that its various activities are managed soundly;
  • appoint an agent to represent the Court in litigation;
  • represent the Court in its external relations and in its relations with the other European institutions, etc.

The Court shall appoint the Secretary-General of the Court, who shall be responsible for the Court’s Secretariat, by secret ballot. In addition, chambers and committees shall be set up. The chambers have the task of preparing opinions and reports adopted by the Court. The committees shall deal with matters not covered by the chambers.

The Court shall decide in formal session, by the majority of its Members, on the adoption of the annual report, special reports and opinions. The Court’s meetings shall not be public, unless the Court decides otherwise. The Court may also decide, on a case-by-case basis, to adopt decisions by the written procedure.

Origins of the Court

The Court of Auditors was founded by the Treaty of Brussels, which was signed on 22 July 1975 and entered into force in October 1977. The Treaty of Maastricht (1992) gave the Court the status of a full institution. The seat of the Court is in Luxembourg.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Rules of Procedure of the Court of Auditors of the European Union

1.6.2010

OJ L 103 of 23.4.2010

Overall strategic approach

Overall strategic approach

Outline of the Community (European Union) legislation about Overall strategic approach

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Overall strategic approach

Document or Iniciative

Commission communication of 28 June 2000 – Protection of the Communities’ financial interests – The fight against fraud – For an overall strategic approach [COM (2000) 358 final – Not published in the Official Journal].

Summary

Given that the protection of the Community budget is the responsibility of the European institutions and the Member States, the Commission’s aim in this communication is to develop an overall strategic approach based on coordination, the key concept of Article 280 of the EC Treaty, with a view to affording effective and equivalent protection of financial interests Community-wide.

Since 1994, the Community approach to the fight against fraud has been pro-active and designed to develop a legislative framework covering all areas of protection of financial interests. This framework includes:

  • the convention on the protection of the European Communities’ financial interests (1995) and its Protocols of 1996 and 1997;
  • the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (1997);
  • the Regulation relating to the protection of the European Communities’ financial interests (1995) and the Regulation concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (1996);
  • the establishment of the European Anti-Fraud Office (OLAF) in 1999.

In addition, the Commission, in response to its White Paper on reform, has decentralised the financial control function, set up an internal audit service and established working groups involving OLAF and all Commission departments.

Enlargement, the area of freedom, security and justice referred to in the Treaty of Amsterdam and the gradual abolition of national borders call for an overall and integrated approach based on a strengthened culture of cooperation.

Strategic guidelines

As part of this overall approach, the Commission is proposing a multiannual strategy around four main strategic guidelines to meet the principal challenges.

The first of these relates to an overall legislative anti-fraud policy in four parts:

  • prevention by means of clear and easily applicable legislation and including sufficiently dissuasive provisions. The Commission also hopes to increase the accountability of officials and is proposing that OLAF, the national authorities and professional circles be involved in prevention;
  • 0detection by strengthening the means and legal instruments for detection, controls and sanctions. The Commission therefore recommends continuing the effort to define precisely irregular conduct and illegal activities with a view to facilitating cooperation and the effective application of penalties. At the same time, it advocates extending information exchanges and control measures, in particular in connected or especially vulnerable sectors such as money laundering, public procurement and the granting of subsidies. This is to be backed up by an extended system of administrative penalties;
  • follow-up by ensuring more effective management of administrative and financial follow-up in order inter alia to improve the recovery of unduly received or evaded amounts. The financial correction instruments at the Community’s disposal should also be applied with the aim of motivating Member States to put in place effective national control systems;
  • cooperation in order to establish a single legal basis for combating fraud with a view to simplifying and clarifying the rules on participation in national investigations. Provision also needs to be made for a cooperation and mutual assistance system to fight fraud that is similar to that which already exists in certain areas such as the agricultural and customs policies, while cooperation with applicant countries and non-member countries needs to be strengthened.

The second challenge is to create a new culture of operational cooperation. The Commission is attempting to become more pro-active in its activities on the ground. This involves having an overall view of the economic and criminal environment and enhancing the exploitation and analysis of intelligence. For that purpose, technology and the information sources available must be improved and, in particular, OLAF must serve as a crossroads for gathering and analysing information and as a Community platform of services. Strengthened cooperation with the applicant countries is mentioned again. Lastly, the Commission undertakes to pursue a policy of permanent evaluation of anti-fraud action in order to measure the progress made.

The third challenge is to adopt an inter-institutional approach to prevent and combat corruption. The credibility of Community policies must be strengthened by safeguarding the integrity of the European public service and of the members of the institutions. OLAF must:

  • cooperate closely on the basis of loyal cooperation and consistency of the duties of each of the participants in the fight against fraud;
  • contribute more to training measures focusing on training and awareness-raising activities involving all staff, in particular those responsible for procurement or grants and providing a system of values;
  • encourage transparency and the duty to communicate;
  • complement its task of conducting administrative investigations with fair and effective penalties. Office action will have to be geared to the objective of “zero tolerance” and compliance with information obligations will be crucial for its effectiveness.

The fourth and last challenge is to enhance the criminal judicial dimension. National criminal policies should be adapted to the new Treaty provisions and assistance sought from the European institutions to improve the cooperation function. The Community already possesses the legal instruments to improve the detection of offences and provide the national judicial authorities with the means to process cases of fraud under criminal law. However, they are often not used because of obstacles such as the non-compatibility of national legal systems or technical specifications.

Lastly, in order to resolve problems arising from the various national systems regarding criminal offences linked to fraud, the conditions under which judicial assistance operates must be improved. OLAF must therefore develop its liaison and expertise function in this area.

Related Acts

Commission report to the European Parliament and the Council of 6 July 2007 – Protection of the European Communities’ financial interests – Fight against fraud – Annual report 2006 [COM(2007) 390 final – Not published in the Official Journal].
This report, which has been produced by the Commission in cooperation with the Member States, presents the measures taken in 2006 to meet the obligations provided for in Article 280 of the EC Treaty. It contains statistics concerning irregularities reported by Member States and gives an account of the measures taken and results obtained in preventing and fighting fraud and in recovering amounts not collected or wrongly paid. In particular, the report covers four specific areas: risk analysis and management; debarment and early-warning databases; warning systems involving internal informers; and mechanisms for recovery by offsetting.

Commission report to the European Parliament and the Council of 12 July 2006 – Protection of the Communities’ financial interests – Fight against fraud – Annual report 2005 [COM(2006) 378 final – Not published in the Official Journal].
In this report the European Commission evaluates its overall strategic approach for the protection of the Communities’ financial interests in the five years 2001-2005. Overall, implementation of the programmed objectives and actions was satisfactory. The report summarises the statistics on fraud and other irregularities notified by the Member States and records the measures taken by the Member States in 2005 and the Commission’s efforts to improve the effectiveness of OLAF. It also contains a section on improving the recovery of amounts not levied or wrongly paid out. The report also covers the issue of certifying the accounts.

Commission report to the European Parliament and the Council of 19 July 2005 – Protection of the European Communities’ financial interests – Fight against fraud – Annual report 2004 [COM(2005) 323 final/2 – Not published in the Official Journal].
This report presents the activities of the European Community and its Member States in combating fraud. To make the report easier to read, Community and national measures are now set out in parallel by topic (rather than in two separate parts). The report covers the salient features of the year’s activities, such as enlargement of the EU and the reform of OLAF. It sums up the statistical situation regarding irregularities reported and the position as regards public information on the fight against fraud. Part of the report is devoted to mutual assistance in customs and agricultural matters. And the Commission presents measures to improve the recovery of sums not collected or paid unduly.

Action Plan 2004-2005

Action Plan 2004-2005

Outline of the Community (European Union) legislation about Action Plan 2004-2005

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Action Plan 2004-2005

Document or Iniciative

Communication from the Commission of 9 August 2004 on Protecting the Communities’ financial interests – Fight against fraud – Action Plan for 2004-2005 [COM(2004) 544 final – Not published in the Official Journal].

Summary

The 2004-2005 action plan corresponds to the second stage of implementation of the overall strategic approach adopted in June 2000. It testifies to the Commission’s ongoing commitment to the fight against fraud and constitutes one of its responses to the new challenges linked to the development of the Union in 2004 and 2005.

The action plan draws its legitimacy from Article 280 EC introduced by the Amsterdam Treaty. On that basis, on 15 May 2001 the Commission adopted a first action plan that saw a highly satisfactory rate of implementation.

Over the period 2001-2003, the legal framework for protecting the Community’s financial interests and fighting fraud and all other illegal activities adversely affecting those interests was supplemented in order to enable effective action to be taken in the fields of fraud prevention and fraud-proofing of legislation, protecting the euro, making public procurement procedures more secure and setting up coordination structures in the ten new Member States and the candidate countries. Cooperation between the relevant administrations was enhanced, thanks in particular to the capacity for analysis of fraud and irregularities and the magistrates unit set up within the European Anti-Fraud Office (OLAF); such cooperation is assessed each year in the report provided for by Article 280 of the EC Treaty. In addition to various measures to prevent and counter corruption, the Commission performed an evaluation of OLAF’s activities and put forward seventeen recommendations for reinforcing its structure and operations, while the Court of Justice confirmed on several occasions the legality and consistency of the inter-institutional framework for internal investigations. The criminal-law protection of the Community’s financial interests was strengthened with the entry into force in October 2002 of the first Convention instruments for the fight against fraud. Major steps were also taken towards setting up a European Public Prosecutor’s Office, and the objective was written into the constitutional treaty.

The new action plan follows the four main lines of action laid down in 2000 for the ensuing five years:

  • an overall anti-fraud legislative policy: making regulations more effective and consistent;
  • a new culture of cooperation: full participation of and collaboration between national and Community authorities;
  • an inter-institutional approach to preventing and fighting corruption: making the European institutions more credible;
  • strengthening the criminal-law dimension: adapting the legal and judicial framework for the protection of the financial interests of the European Union.

It also takes into account the new guidelines set out in the progress report on the activities of OLAF and the measures announced in the State of the Union Address delivered by the Commission President before the European Parliament on 18 November 2003.

In the context of an overall anti-fraud legislative policy, the action plan provides for the development of a culture of prevention and the tightening-up of legal texts through the following measures:

  • defining OLAF’s objectives and reinforcing its legal framework in order to consolidate its structure;
  • stepping up cooperation with the Member States, with special reference to money laundering and VAT fraud;
  • assessing the black list mechanism in the EAGGF Guarantee Section;
  • definitively setting up the European Technical and Scientific Centre (ETSC) for protecting the euro against counterfeiting;
  • continuing and adapting the Pericles programme.

Still within the same context, the aim is also to strengthen means of detection, controls and sanctions. To that end, the Commission plans to:

  • clarify fraud investigation powers at Community level, particularly in the area of direct expenditure;
  • extend the administrative penalty system, in particular to the areas of customs, the Structural Funds, direct expenditure and OLAF investigations;
  • issue technical guidelines to national authorities wishing to supervise the authentification of euro coins in their territory.

Lastly, the plan is aimed at ensuring more effective management of administrative and financial follow-up, and thus provides for the following action:

  • proposing amendments to the Regulation on the financing of the CAP in order to improve the recovery of sums wrongly paid under the EAGGF Guarantee Section;
  • clearing the backlog of cases concerning irregularities reported before 1999.

As part of the second line of approach, which focuses on a new culture of cooperation, the intention is to enhance the use and analysis of information (“intelligence”). The Commission aims to establish better operational cooperation between customs administrations and to simplify the procedure for notifying irregularities in the areas of the Structural Funds, the Cohesion Funds and the EAGGF Guarantee Section.

In addition, to develop a closer partnership with Member States and non-member countries, the Commission plans to:

  • strengthen relations with Member States by updating the Decision establishing the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF);
  • improve information from Member States on the follow-up given to OLAF’s investigations;
  • enhance synergy by drawing up an inventory of the services that the Commission and OLAF can provide to the institutions and Member States and implementing the multidisciplinary service platform;
  • help the new Member States to reinforce their capacity for fighting fraud;
  • reinforce anti-fraud coordination services in candidate countries;
  • conclude negotiations with Switzerland on the fight against fraud;
  • negotiate international agreements on mutual assistance in customs matters with non-member countries;
  • include anti-counterfeiting clauses in cooperation and association agreements.

Rounding off this second line of approach, the Commission will evaluate anti-fraud measures on an ongoing basis through an inventory of new measures at Community and Member State level.

The third line of action, an inter-institutional approach to prevent and combat corruption, includes the following measures aimed at developing a culture of cooperation at all levels:

  • examining the usefulness of adopting a memorandum of understanding between OLAF and the Commission and between the Commission and the other institutions;
  • re-examining the memorandum of understanding between OLAF and the Investigation and Disciplinary Office (IDOC);
  • setting up a high-level interdepartmental group to improve transparency and the flow of information between OLAF and other directorates-general.

To improve the legal framework for administrative investigations, the Commission intends to amend certain provisions in the interests of clarity and harmonisation.

The fourth and last line of approach focuses on enhancing the criminal-law judicial dimension. Here, the Commission plans to:

  • draft a White Paper on strengthening the effectiveness of criminal prosecutions by establishing a European Public Prosecutor ;
  • bring out a report on implementation of the Convention on the protection of the European Community’s financial interests by the Member States;
  • conclude a protocol with Europol;
  • draw up with the Member States a practical guide for cooperation with criminal prosecution authorities.

To sum up, the new action plan highlights three top-priority objectives:

  • reinforcing the regulatory framework of May 1999 for OLAF’s activities and competencies;
  • improving the flow of information between the Member States and the Commission;
  • developing the criminal-law protection of the Community’s financial interests with the Member States, following the proposal to create a European Public Prosecutor with competence for protecting the financial interests of the Union.

The measures planned for the period 2004-2005 take into account the findings of the progress report on the activities of OLAF and comprise actions that were not completed in the previous period as well as measures designed to respond to specific needs and reinforce OLAF’s legal framework, in particular in the light of the weaknesses revealed by the Eurostat case.

In the document, the Commission also assesses the overall results of the 2001-2003 action plan, which can be regarded as positive.

 

Anti-tax fraud measures

Anti-tax fraud measures

Outline of the Community (European Union) legislation about Anti-tax fraud measures

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Anti-tax fraud measures

Document or Iniciative

Commission Communication, dated 31 May 2006, to the Council, the European Parliament and the European Economic and Social Committee concerning the need to develop a coordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 – Not published in the Official Journal].

Summary

This communication seeks to trigger a debate based on lines of reflection regarding the factors to be taken into account in the context of developing a coordinated strategy at European level to improve the fight against fiscal fraud.

Administrative cooperation between Member States

With a view to improving administrative cooperation between Member States, the Commission proposes to:

  • strengthen not merely the legislation but also the practical measures employed regarding cooperation in the field of direct and indirect taxation and assistance in the recovery of taxes;
  • improve risk management so as to enable Member States to focus their inspection efforts on the sectors and companies considered to represent a major fraud risk;
  • create a permanent Forum for administrative cooperation at Community level for all direct and indirect taxes.

Cooperation with third countries

Given that tax fraud does not stop at the external borders of the European Union (EU), the Commission is proposing the adoption of a Community approach to cooperation with third countries.

Modifications to existing VAT and excise systems

With a view to reducing the cases of fraud, the Commission is launching a debate on possible modifications that could be made to the existing common VAT and excise systems.

Among the potential avenues to be explored in the VAT sector are the possibility not only of strengthening the principle of joint and several liability for the payment of VAT but also of extending the use of the reverse charge mechanism. In all the cases cited, the Communication lays down the conditions to be met by the new VAT system.

In the excise sector, thought is being given to the current tobacco taxation structure.

Other avenues to be explored

The Commission is also proposing that the discussions should include a range of more specific measures such as:

  • increasing tax declaration obligations for companies considered to represent a risk;
  • reducing these obligations for companies which obtain an authorisation by entering into a partnership with the tax authorities;
  • using standardised, high-performance IT tools for the rapid exchange of information.

BACKGROUND

In 2004, tax revenues (total tax take plus compulsory social security contributions) represented 39.3% of GDP (gross domestic product) in the EU. Tax fraud accounts for approximately 2 to 2.5% of GDP, i.e. between 200 billion and 250 billion. Tax fraud constitutes an obstacle to the smooth operation of the internal market inasmuch as it leads to significant distortion of competition among taxpayers.

Related Acts

Commission Communication, dated 25 October 2005, to the Council and the European Parliament – The Contribution of Taxation and Customs Policies to the Lisbon Strategy [COM(2005) 532 final – Not published in the Official Journal].

This Communication launches a plan for EU-wide taxation and customs measures that would help the EU to achieve its Lisbon objectives. The Commission is in favour of a more concerted and coordinated approach at Community level so as to enable the Member States to combat tax fraud more efficiently.

Commission Communication, dated 27 September 2004, to the Council and the European Parliament on preventing and combating corporate and financial malpractice [COM (2004) 611 final – Not published in the Official Journal].

This Communication seeks to provide a global method for reducing the risk of corporate and financial malpractice, combining in equal measure the fiscal, judicial and law enforcement dimensions.

Proposal for a Regulation of the European Parliament and of the Council of 20 July 2004 on mutual administrative assistance for the protection of the financial interests of the Community against fraud and any other illegal activities [COM(2004) 509 final – Not published in the Official Journal] [COD/2004/0172 procedure].

Amended by:

Amended Proposal for a Regulation of the European Parliament and the Council on mutual administrative assistance for the protection of the financial interests of the European Community against fraud and any other illegal activities [COM(2006) 473 final – Not published in the Official Journal] [COD/2004/0172].

Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92 [Official Journal L 264, 15.10.2003].

This Regulation establishes a common system of administrative cooperation and exchange of information between the competent authorities of the Member States to ensure proper application of VAT and to combat fraud.

Decision No 1152/2003/EC of the European Parliament and of the Council of 16 June 2003 on computerising the movement and surveillance of excisable products [Official Journal L 162, 1.7.2003, p. 5].

Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments [Official Journal L 157, 26.6.2003].

The ultimate aim of this Directive is to enable savings interest received in one Member State by natural persons who are resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.

Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums [Official Journal L 336, 27.12.1977].

With a view to combating international tax evasion and avoidance, this Directive strengthens collaboration between the Member States’ tax administrations, while at the same time facilitating the exchange of information that appears relevant for the correct assessment of taxes on income and on capital.

 

A common legal framework for combating fraud in Community policies

A common legal framework for combating fraud in Community policies

Outline of the Community (European Union) legislation about A common legal framework for combating fraud in Community policies

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

A common legal framework for combating fraud in Community policies

Document or Iniciative

Council Regulation (EC, EURATOM) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests.

Summary

This regulation establishes provisions to combat fraud against the financial interests of the European Communities. It provides for homogenous checks in all Member States and administrative measures and penalties concerning irregularities with regard to Community law.

Irregularity: an economic operator prejudices the Community budget

“Irregularity” means any infringement of a provision of Community law resulting from an act or omission by an economic operator that has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.

Economic operators are considered to be natural or legal persons and other entities on which national law confers legal capacity and to whom penalties are applied when they commit an irregularity. Penalties can also apply to those who have been involved in an irregularity, as well as those who are under a duty to take responsibility for or to ensure the non-commission of an irregularity.

Establishing a set of legal rules for all areas covered by Community policies

More than half of Community expenditure is paid to beneficiaries via Member States. This decentralised administration and monitoring of the use of the expenditure are governed by detailed rules that are subject to specific provisions depending on the Community policy concerned. This regulation establishes a set of legal rules for all areas covered by Community policies to protect the financial interests of the European Communities, notably through checks and administrative measures and penalties.

Member States are responsible for taking the necessary measures to ensure the regularity and reality of the transactions involving the Communities’ financial interests. Measures regarding checks must be in proportion to the objectives pursued so as not to entail excessive economic constraints or administrative costs and must take account of Member States’ administrative practices and structures.

The European Commission has responsibility for checking that:

  • administrative practices conform with Community rules;
  • the necessary substantiating documents exist and that they concord with the Communities’ revenue and expenditure;
  • financial transactions are carried out and checked in appropriate circumstances.

In addition, the European Commission may carry out checks and inspections on the spot.

Withdrawal of the wrongly obtained advantage

In general, any irregularity will result in the withdrawal of the wrongly obtained advantage with, where appropriate, interest determined on a flat-rate basis. This may consist of:

  • an obligation to pay or repay the amounts due or wrongly received;
  • the total or partial loss of the security provided in support of the request for an advantage granted or at the time of the receipt of an advance.

Intentional irregularities or irregularities caused by negligence may lead to administrative penalties, such as:

  • payment of an administrative fine;
  • payment of an additional sum, which may not exceed the level strictly necessary to constitute a deterrent;
  • total or partial removal of an advantage granted, even if the operator wrongly benefited from only a part of that advantage, or exclusion from or withdrawal of the advantage for a period subsequent to that of the irregularity;
  • other penalties of a purely economic type provided for by Community law.

General principles

Administrative checks, measures and penalties must be effective, proportionate and dissuasive. They must take account of the nature and seriousness of the irregularity, the advantage granted or received and the degree of responsibility.

An administrative penalty may only be imposed if, prior to the irregularity, a Community act has made provision for it.

The limitation period for proceedings is four years, starting from the date on which the irregularity was committed. For continuous or repeated irregularities, the limitation period runs from the date on which the irregularity ceases. In the case of multiannual programmes, the limitation period runs until the programme is terminated.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Regulation (EC, EURATOM) No 2988/95

26.12.1995

OJ L 312, 23.12.1995

Convention on the protection of the European Communities' financial interests

Convention on the protection of the European Communities’ financial interests

Outline of the Community (European Union) legislation about Convention on the protection of the European Communities’ financial interests

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Convention on the protection of the European Communities’ financial interests

Document or Iniciative

Council Act of 26 July 1995 drawing up the Convention on the protection of the European Communities’ financial interests [Official Journal C 316 of 27.11.1995].

Summary

With this act, the Council has drawn up a convention to tackle fraud affecting the financial interests of the European Communities. Under the convention, fraud affecting both expenditure * and revenue * must be punishable by effective, proportionate and dissuasive criminal penalties in every European Union (EU) country.

The convention requires each EU country to take the necessary measures to ensure that the conduct referred to above, as well as participating in, instigating, or attempting such conduct, are punishable by effective, proportionate and dissuasive criminal penalties. In cases of serious fraud, these penalties must include custodial sentences that can give rise to extradition.

Each EU country must also take the necessary measures to allow heads of businesses or any persons having power to take decisions or exercise control within a business to be declared criminally liable, in accordance with the principles defined by its national law, in cases of fraud affecting the European Communities’ financial interests.

Each EU country must take the necessary measures to establish its jurisdiction over the offences it has established in accordance with its obligations under the convention.

If a fraud constitutes a criminal offence and concerns at least two EU countries, those countries must cooperate effectively in the investigation, the prosecution and the enforcement of the penalties imposed by means, for example, of mutual legal assistance, extradition, transfer of proceedings or enforcement of sentences passed in another EU country.

In the event of disputes between EU countries as to the interpretation or application of the convention, the case must first be examined within the Council. If the Council has not found a solution within six months, a party to the dispute may petition the Court of Justice of the European Union. The Court of Justice also has jurisdiction over disputes between EU countries and the Commission.

Background

Adopted under Title VI of the Treaty on European Union (following the entry into force of the Treaty of Lisbon on 1 December 2009, the provisions now fall under Title V of the Treaty on the Functioning of the European Union), the convention and its protocols are aimed at creating a common legal basis for the criminal-law protection of the European Communities’ financial interests.

The convention entered into force on 17 October 2002, along with its first protocol and the protocol on its interpretation by the Court of Justice. The second protocol entered into force on 19 May 2009. The convention and its protocols are open for signing by any country that joins the EU.

Key terms used in the act
  • Expenditure fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; the misapplication of such funds for purposes other than those for which they were originally granted.
  • Revenue fraud: any act or deliberate omission involving the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect; misapplication of a legally obtained benefit, with the same effect.

Related Acts

Council Act of 19 June 1997 drawing up the Second Protocol of the Convention on the protection of the European Communities’ financial interests [Official Journal C 221 of 19.7.1997].
This protocol is aimed at the liability of legal persons, confiscation, money laundering and cooperation between EU countries and the Commission for the purpose of protecting the European Communities’ financial interests and personal data related thereto. This protocol entered into force on 19 May 2009.

Council Act of 29 November 1996 drawing up, on the basis of Article K.3 of the Treaty on European Union, the Protocol on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities’ financial interests [Official Journal C 151 of 20.5.1997].
This protocol allows national courts to petition the Court of Justice for preliminary rulings interpreting the Convention on the protection of the European Communities’ financial interests and its Protocols. It entered into force on 17 October 2002.

Council Act of 27 September 1996 drawing up a Protocol to the Convention on the protection of the European Communities’ financial interests [Official Journal C 313 of 23.10.1996].
This protocol focuses on the definition of the concepts of “official” and “active and passive corruption”, as well as on the harmonisation of penalties for corruption offences. An explanatory report to this protocol was adopted on 19 December 1997. The protocol entered into force on 17 October 2002.

Council Decision 2008/40/JHA of 6 December 2007 concerning the accession of Bulgaria and Romania to the Convention, drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities’ financial interests, the Protocol of 27 September 1996, the Protocol of 29 November 1996 and the Second Protocol of 19 June 1997 [Official Journal L 9 of 12.1.2008].
With this decision, Bulgaria and Romania acceded to the convention and its protocols.

Reports

Second Report from the Commission – Implementation of the Convention on the Protection of the European Communities’ financial interests and its protocols [COM(2008) 77 – Not published in the Official Journal].
Following up the first report, drawn up in 2004, the Commission examines the progress made by the 27 EU countries in ratifying and implementing the instruments for protecting the European Communities’ financial interests. The report highlights the problems arising from the frequent delays in ratification and cases of incorrect implementation.

Report from the Commission – Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols [COM(2004) 709 – Not published in the Official Journal].
This report focuses on the implementation of the convention and its protocols by the 15 EU countries prior to the enlargement of 1 May 2004. It considers that progress has been made in the criminal-law protection of the European Communities’ financial interests thanks to the national legislation adopted in EU countries, but regrets that none of them have taken all the measures needed to fully comply with the convention. The Commission recommends that the Council invites EU countries to step up their efforts to strengthen national criminal legislation and ratify the second protocol without delay.

On-the-spot checks and inspections on the premises of economic operators

On-the-spot checks and inspections on the premises of economic operators

Outline of the Community (European Union) legislation about On-the-spot checks and inspections on the premises of economic operators

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

On-the-spot checks and inspections on the premises of economic operators

Document or Iniciative

Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to detect fraud and irregularities affecting the European Communities’ financial interests.

Summary

1.The Regulation applies to the on-the-spot checks and inspections carried out by the Commission in order to counter fraud, in particular where there are grounds for suspecting that irregularities * have been committed against the Community budget by economic operators *. The regulation, which establishes additional general provisions to Regulation (EC, Euratom) No 2988/95, applies to all areas of the Community’s activities. It does not affect the Member States’ powers to prosecute criminal infringements under national law.

Carrying out on-the-spot checks and inspections

The European Commission is to carry out on-the-spot checks and inspections on the premises of economic operators:

  • to investigate possible serious or cross-border irregularities or irregularities involving economic operators acting in several Member States;
  • to reinforce on-the-spot checks and inspections in a Member State in order to protect the Community’s financial interests more effectively and ensure an equivalent level of protection within the European Union;
  • at the request of a Member State.

Prior to the on-the-spot checks and inspections the Commission is required to inform the Member State(s) concerned in good time in order to obtain all the assistance required. The on-the-spot checks and inspections are to be prepared and carried out by the Commission in close cooperation with the competent authorities of the Member State concerned. They will be carried out under the authority and responsibility of “Commission inspectors”, i.e. duly authorised officials or other staff, who will comply with the rules of procedure in the Member State concerned.

The economic operators must allow the inspectors access to their premises, land and other places used for business purposes, and means of transport. If an economic operator resists an on-the-spot check or inspection, the Member State concerned will give the Commission’s inspectors such assistance as they need to allow them to discharge their duty. This assistance will be given by the competent authorities of the Member State in compliance with national law.

In the interests of efficiency, the Commission will ensure that similar checks and inspections are not carried out at the same time in relation to the same matters on the premises of the economic operators concerned under sectoral rules. It will take into account inspections that are being or have been carried out by the Member State under national law.

Ensuring access to the necessary information and documentation under national law

Commission inspectors are to have access, in compliance with national criminal procedure law, to all the information on the operations concerned which are required for the proper conduct of the checks and inspections. They may avail themselves of the same inspection facilities as national administrative inspectors and in particular copy relevant documents.

On-the-spot checks and inspections may concern, in particular:

  • business books and documents such as invoices, lists of terms and conditions, pay slips, statements of materials used and work done, and bank statements,
  • computer data;
  • production, packaging and dispatching systems and methods;
  • physical checks as to the nature and quantity of goods or completed operations;
  • the taking and checking of samples;
  • the progress of works and investments for which financing has been provided, and the use made of completed investments;
  • budgetary and accounting documents;
  • the financial and technical implementation of subsidised projects.

Where necessary, it will be for the Member States, at the Commission’s request, to take the appropriate precautionary measures under national law, in particular in order to safeguard evidence.

Information acquired in relation to the on-the-spot checks and inspections is covered by professional secrecy and by the Community provisions on data-protection.

The Commission inspectors’ reports constitute admissible evidence in administrative or judicial proceedings of the Member State in which their use proves necessary.

Key terms used in the act
  • economic operator means: natural or legal person or any other entity on which national law confers legal capacity (Article 7 of Regulation No 2988/95);
  • “irregularity”: any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure (Article 1(2) of Regulation No 2988/95).

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2185/96. 18.11.1996 OJ L 292 of 15.11.1996