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EU budget fraudsters to face tougher criminal penalties

CONT LIBE Press release - Justice and home affairs / Budgetary control20-03-2014 - 11:12

Rules on prosecuting and punishing fraud against the EU budget were voted by the Budgetary Control and Civil Liberties committees on Thursday. In amendments to a draft anti-fraud law, MEPs clearly defined the offences for which member states would have to introduce criminal penalties, such as fraud, passive and active corruption, money laundering or dishonest bidding for public procurement contracts. Fraud costs the EU budget an estimated €600 million each year.

Fraud against the EU budget currently includes cases where applicants provide false information in order to obtain funding for agriculture or regional development or where national officials accept money in return for awarding a public contract, in breach of procurement rules.

The draft directive as amended by MEPs clearly defines offences against the EU budget: it covers not only fraud as such, but also other fraud-related offences, including passive and active corruption, misappropriation of funds, money laundering and obstruction of public procurement procedures. The draft rules also lay down periods within which it would remain possible to investigate and prosecute offences, so as to avoid cases being dropped.

EU-wide penalties

The maximum penalty for these crimes would be at least 5 or 10 years’ imprisonment, depending on whether or not the offence was committed by an organised group. EU officials are included in the scope of the draft law.

The damage thresholds (or value of the advantage obtained by the offender) above which prison sentences kick in are defined in financial terms (€100,000 or more). For crimes committed by natural persons, MEPs lowered the proposed threshold from €10,000 to €5,000. For offences below this amount, EU member states could impose non-criminal penalties, such as fines. For legal persons, penalties may include temporary or permanent exclusion from EU tender procedures, MEPs added.

MEPs rejected the Commission proposal for a minimum penalty of 6 months’ imprisonment by 24 votes to 23, in line with their position on the draft directive on the protection of the euro and other currencies against counterfeiting in criminal law. MEPs who opposed minimum penalties argued that they do not respect the diversity of legal systems and the need for judicial discretion.

VAT fraud included

MEPs backed the Commission proposal to include Value Added Tax (VAT) fraud in the scope of the directive. They also widened the definition of “EU financial interests” to include assets and liabilities as well as borrowing and lending activities.

What rules are currently in place?

Interpretations of what constitutes fraud against the EU budget currently differ from one EU country to another, as do penalties. Penalties for fraud vary from no mandatory sentence to 12 years’ imprisonment. The periods within which it is possible to investigate and prosecute offences also vary widely, from 1 to 12 years. Conviction rates vary from 14% to 80% (with an EU average of 41%).

Next steps

The draft law is to be put to a first-reading vote by Parliament as whole in April, in order to consolidate the work done so far and hand it over to the next Parliament. This ensures that the MEPs newly elected in May can decide not to start from scratch, but instead build on work done during the current term.

Result of the vote: 44 votes in favour,2 against and 5 abstentions

In the chair: Juan Fernando López Aguilar (S&D, ES)

REF. : 20140317IPR39133
Updated: ( 20-03-2014 - 12:32)