REPORT on the Commission's 1996 Annual Report (COM(97)0200 - C4-0230/97) and its Work Programme for 1997/98 on the protection of financial interests and the fight against fraud (COM(97)0199 - C4-0231/97

26 September 1997

Committee on Budgetary Control
Rapporteur: Mr Herbert Bösch

By letters of 7 May 1997 and 12 May 1997 the Commission forwarded to Parliament its annual report for 1996 and the work programme for 1997/98.

At the sitting of 29 May 1997 the President of Parliament announced that he had forwarded these reports to the Committee on Budgetary Control as the committee responsible, and to the Committee on Legal Affairs and the Committee on Civil Liberties for their opinions.

At its meeting of 29 May 1997, the Committee on Budgetary Control appointed Mr Herbert Bösch rapporteur.

At its meeting of 22 July and 25 September 1997, it considered the Commission reports and the draft report.

During the last meeting, it adopted unanimously the motion for a resolution.

The following took part in the vote: Tomlinson (acting chairman); Blak (vice-chairman); Bösch (rapporteur); Bardong, Brinkhorst (for De Luca), Colom I Naval, Fabra Vallés, Garriga Polledo, Holm, Kjer Hansen, McCartin (for Kellett-Bowman), Mulder, Rack, Sarlis, Wemheuer and Wynn.

The opinion of the Committee on Civil Liberties is attached. The Committee on Legal Affairs decided on 21 July 1997 not to deliver an opinion.

The report was tabled on 26 September 1997.

The deadline for tabling amendments will be indicated in the draft agenda for the relevant partsession.

A MOTION FOR A RESOLUTION

Resolution on the Commission's 1996 Annual Report (COM(97)0200 - C4-0230/97) and its Work Programme for 1997/98 on the protection of financial interests and the fight against fraud (COM(97)0199 - C4-0231/97)

The European Parliament

- having regard to the Commission's 1996 Annual Report (COM(97)0200 - C4-0230/97) and its Work Programme for 1997/98 on the protection of financial interests and the fight against fraud (COM(97)0199 - C4-0231/97),

- having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Civil Liberties (A4-0287/97),

. whereas, according to the Commission, detected irregularities totalling Ecu 1.3 billion affected the 1996 budget, though the true figure for losses resulting from fraud is inherently difficult to estimate and is probably much higher,

. whereas the largest single area of loss resulting from fraud against the EC budget is in traditional own resources, a problem which, owing to the nature of Community financial provisions, directly impacts on the national budgets of Member States,

. whereas a relatively small number of large-scale frauds, usually the work of organised crime, account for the bulk of the losses sustained by the EC budget each year,

. whereas a series of recent high-profile cases highlight the risk of corruption occurring in the Commission's own ranks and the inadequacy of provisions for dealing with it,

. whereas the Commission's 1997 Work Programme does not address the issue of internal corruption,

. whereas none of the Member States have yet ratified the Convention on the protection of Community financial interests or the first protocol on corruption,

. whereas the complexity and opacity of much Community legislation, together with the dispersal of responsibility for expenditure through a huge range of public and private organisations whose accountability cannot be guaranteed, renders the EC budget particularly vulnerable to fraud,

. whereas, in the resolution of 17 July 1997 on Court of Auditors' Special Report No 1/96 on the MED programmes, it considered it essential for the Community to have an independent anti-fraud unit which would, pending the establishment of a European prosecution body to deal with fraud and corruption cases involving the Community budget, liaise with national courts and inform them of the facts concerning offences or crimes discovered in the course of its inquiries,

1. Welcomes the Commission's simultaneous publication of its annual report on the fight against fraud for 1996 and its Work Programme for 1997 as requested by the European Parliament; notes however that it did not respond to Parliament's request to incorporate in its annual report a precise evaluation of the implementation of last year's Work Programme and asks it to do so without fail next year;

1. Notes with disappointment that losses to the EC budget from fraud remain unacceptably high and have shown no signs of decreasing over recent years; notes in this context the assessment of the Council's High Level Working Group that fraud prevention measures consistently lag "one step behind" organized crime and major economic and financial crime;

1. Believes that, just as international fraudsters act unimpeded by borders within the EU, so the EU must have at its disposal investigative services able to deal with fraud against the EC budget on a supranational basis and that, in order to ensure full political supervision of such services, they must be established within the framework of the EC institutions;

1. Questions whether, at present, UCLAF represents the optimum basis for the development of such an investigative service able to carry out inquiries at its own initiative throughout the territory of the European Union in defence of the financial interests of the Community; reaffirms in this context recommendation 2 of the Committee of Inquiry into the Community Transit System;

1. Welcomes the initiatives announced in the 1997 Work Programme to establish a "Community intelligence and forward planning cell" and a centralised intelligence database in the customs field; notes that these proposals respond to recommendation 3 of the Committee of Inquiry into the Community Transit System; asks that similar initiatives be taken in respect of the expenditure side of the budget in the Commission's 1998 Work Programme;

1. Welcomes the creation of a "liaison and criminal law expertise interface" within UCLAF aimed at assisting and coordinating prosecutions of cross-border fraud cases; notes that this proposal responds to recommendations 15 and 18 of the Committee of Inquiry into the Community Transit System;

1. Supports all initiatives aimed at establishing anti-fraud structures in the applicant countries with a view to transposition of the 'acquis communautaire'; welcomes the establishment of a separate unit within UCLAF to monitor development programmes in third countries;

1. Calls on the Commission to ensure that UCLAF is sufficiently staffed and resourced to meet its new tasks, in particular by ensuring that suitably qualified legal experts are available to it in order to assist prosecution services in all Member States;

1. Emphasises that the new "liaison and criminal law expertise interface" represents only a preliminary solution to the difficulties of bringing prosecutions in cross-jurisdictional cases of fraud against the interests of European Community, above all in those where fraud occurs within the EU institutions, over which no judicial authority currently has automatic criminal jurisdiction;

1. Considers that judicial cooperation should be stepped up and urges the Member States to do so;

1. Believes that internal fraud and corruption in EU institutions can only adequately be addressed by an independent European judicial authority able, on its own responsibility and without the impediment of official immunity, to direct investigations and bring prosecutions as appropriate;

1. Calls on the Commission and the other Community institutions to refer all cases of suspected fraud or corruption involving its officials automatically to the competent national judicial authorities, pending the establishment of an independent European judicial authority;

1. In order to ensure a more effective and credible response to cases of internal corruption, and more effective cooperation with the relevant judicial authorities, calls on the Commission to present to the European Parliament a formal consultation document in preparation for proposals to ensure full independence for UCLAF on the basis of an interinstitutional agreement within the Commission, in particular by:

- granting agents of UCLAF a special separate statute within the Community staff regulations in order to guarantee their protection from pressure,

- granting greater budgetary independence to UCLAF within the Commission section of the budget,

- reviewing the chain of accountability in cases of alleged internal corruption and fraud, with a view to making UCLAF directly answerable to the European Court of Justice,

1. Calls on the Commission, in its next annual Work Programme, to address measures to be taken to improve the means by which alleged cases of corruption are investigated internally, referred to UCLAF and to enhance the transparency of the procedure for waiving immunity at the request of the judicial authorities, taking into account the views of the European Parliament;

1. Calls on the Community institutions affected by the alleged irregularities in the award and implementation of security contracts covering European institution buildings to refer such matters immediately to the competent national judicial authorities;

1. Calls on the Commission, to carry out a comparative law analysis of the technical and constitutional feasibility of the European prosecution body provided for in the Commission's 'Corpus Juris' proposal being incorporated into the judicial systems of the Member States;

1. Continues to believe that a genuine single criminal law space is a prerequisite for the adequate defence of the financial interests of the Community and for an effective fight against international fraud of all sorts; in this respect calls on the Commission and the Member States to cooperate with it with a view to full implementation of Article 209a of the EC Treaty which, pursuant to the Amsterdam Treaty, provides for the introduction of effective and equivalent protection of Community finances in all the Member States; proposes to this end that future initiatives be based on the proposals in 'Corpus Juris', if they prove to be technically and constitutionally compatible;

1. Demands that the Member States to ratify and fully transpose without delay the Convention on the protection of the financial interests; considers that Member States which fail to do so are failing to meet their obligations under Article 209a of the Treaty and therefore deserve, in accordance with recommendation 13 of the Committee of Inquiry into the Community Transit System, to forfeit a proportion of the 10% of traditional own resources retained by national administrations;

1. Instructs its president to forward this resolution to the Commission and the Council.

B EXPLANATORY STATEMENT

Introduction

Fraud is fashionable. This is true not only in the sense that a lot of it is committed, but also in the more novel sense that it is working its way up the political agenda of the European Union. Periods of heightened political interest have occurred before, usually to wane in the face of the awkward political realities which emerge when the action needed to implement ringing declarations of antifraud intent become clear. (Ironically, it is often the most critical voices which are most reluctant to consider the necessary measures.) It is a good time therefore to spell out some key facts about anti-EU fraud and the ways it can be countered.

This report is thus not intended to be an academic study of fraud against the European Community budget. Instead, it draws on a wealth of existing work in order to present in as simple terms as possible the rapporteur's view of where the EU currently stands in terms of fraud against its own interests.

Though the present report concerns fraud affecting the financial interests of the European Community, it is largely an artificial distinction which separates this subject from the general problem of international fraud. Though the EC budget has certain characteristics which call for specific fraud prevention methods, the techniques, fraudsters and possible countermeasures are broadly the same whether the victim of fraud is the European budget or some-one else.

How much fraud is there?

Estimating the amount of fraud committed against the EC budget is a notoriously inexact science, and one which lends itself to manipulation by those with a political, practical or professional interest in either exaggerating or understating the figures. Moreover, it suffers from the fact that no universally agreed definition of fraud exists, nor any reliable global reporting mechanism. The response of UCLAF is to give figures for "irregularities" either reported by Member States under the relevant agricultural or structural fund regulations or otherwise detected by the Commission in cooperation with Member States. The resulting "headline" figure of Ecu 1.3 billion is therefore to be considered a minimum taking no account of unreported or undetected fraud. If the experience of the Committee of Inquiry into the Community Transit System (henceforth the "Committee of Inquiry") is indicative, actual fraud levels are far higher than those reported to the Commission through official channels. Furthermore, only detected fraud can be reported and, if the consultant Deloitte and Touche is right, only about 30% of fraud is detected at all, even by its victims.[1]

Nevertheless, working on the rather unsafe assumption that all reporting is equally inefficient, the Commission's figures do yield some interesting conclusions.The following input did not match an INSPEC description:

The graph above shows the amounts of fraud either notified by the Member States or detected independently by the Commission (UCLAF) in cooperation with the law enforcement services of Member States in specified budgetary areas in the 1994-1996 period.

The first and most obvious conclusion is that known fraud on the income side is by far the largest figure. Ironically, this fraud affects the EC budget least. In Community finance, traditional own resources not collected are automatically compensated by the fourth (GDP) resource, i.e. financed directly by national taxpayers. This is one reason that Member States should note this figure. Another is that the loss to the Community budget is in all likelihood matched (and probably far exceeded) by losses to national exchequers in the form of VAT fraud.[2]

The second interesting point is the relationship between the number of cases reported and the amounts involved. The cases reported by Member States are in general much smaller than those discovered by UCLAF. The average value of traditional own resources irregularities in 1994-6 communicated by Member States was Ecu 58,000, while that uncovered by UCLAF and national investigation bodies was Ecu 3.1 million. Similar differences exist in the other areas. The reason for this difference is the subject of speculation, but may be connected with the "local" nature of cases reported by Member States' administrative authorities, while UCLAF, by virtue of its very position, tends to alight on the large-scale international cases. What is clear is that the conventional reporting systems are less good at picking up the big frauds.

What is the nature of the fraud?

Who?

The Commission's 1996 report states unambiguously that UCLAF concentrates its efforts on "largescale organised international fraud". All authorities which have looked into the subject agree that the larger frauds committed to the detriment of the EC budget, accounting for the bulk of the losses sustained, are the work of organised crime, or, as the director of UCLAF once memorably put it, well-organised crime. This is an important distinction, as large international fraud often involves ad hoc cooperation between disparate criminal groupings on an opportunistic basis. Such was certainly the finding of the Committee of Inquiry, which observed that major cigarette smuggling operations brought together various criminal organisations in a single "package", with different groups taking on different geographical and functional roles (transport, distribution, documentation, accounting, etc.), with due remuneration, just as legitimate businesses might cooperate on a deal.

Though obviously not all fraud committed to the detriment of the EC is the work of criminal organisations and networks (small, piecemeal fraud is rife in some areas of the budget), the larger and most damaging frauds are, hence UCLAF's special attention to this area.

How?

The question of who commits fraud is subsidiary to the question of how it is done. There is however a connection between the two, as the resources available to the criminal affect the means employed. Talking about international fraud in general, Interpol implicitly makes this link:

"Developments in the past few years seem to indicate that international economic crime is more and more pervaded with criminal "professionalism": use of computers and advanced telecommunications facilities, sophistication of cover-ups, internationalisation, setting up of infrastructures, increase in the respective numbers of criminals involved, etc."[3]

Sophistication in a range of fields is thus the determining characteristic of the large-scale fraudster:

- technological: the exploitation of the latest information and communications technology,

- financial and accounting: the masking of financial operations and money laundering through complex transfrontier transactions, frequently making use of tax havens and countries with strong banking secrecy laws,

- legal: high-powered legal support and advice,

- logistical: the ability to arrange complex, long-distance operations making use of various modes of transport, warehousing and storage facilities, mobilising large numbers of persons,

- administrative: awareness of all administrative requirements and the ability to produce correct and/or well-forged documentation.

Sophistication alone does not however in itself guarantee success. For this, the criminal needs to apply his sophistication to weaknesses in the system. In the EC context, such weaknesses can be identified because of certain common threads observable in cases of EC fraud.

Fragmentation of jurisdiction

Substantial frauds very often have a cross-border dimension, both within the EU and between EU countries and others. The internal market allows free movement of persons, goods, services and money within the EU without allowing a matching freedom to law-enforcement agencies. Crossborder movements in a fraudulent operation are thus one easy way for the fraudster to gain an advantage over the authorities. This advantage firstly lies in the additional practical obstacles placed in the way of the detection, investigation and prosecution of any criminal act, but also exploits differences in legislation, administrative practices, etc. The least the fraudster gains is time, as the authorities of different countries, even with good cooperation mechanisms in place, cannot act quickly, while the benefits can at times add up to near impunity.

Whatever the constraints on effective action within the EU, those existing where third countries are involved are even greater. Examples abound: fraud in preferential systems flourishes on the back of slow, ineffective cooperation with beneficiary countries, financial transactions are inaccessible because they are routed through offshore tax-havens, organised crime in the former Soviet bloc exploits poor organisation in the distribution of EU assistance, fraudsters even reside openly and with impunity in non-EU Western Europe because legal cooperation does not extend to "fiscal" offences.[4]

Poor and vulnerable legislation

The point it scarcely bears repeating, but it remains a fact that the complexity of much European legislation - the fruit of doubtless necessary compromise - renders it highly vulnerable to fraud. When this vulnerability is combined with underlying policies which often (rightly or wrongly) swim against the economic tide (production subsidies, price support, export refunds, preferential import tariffs, etc.) it can seem an incitement to defraud the budget.

The fact is that, for all the declarations of intent to the contrary, EU legislation is still drafted with far too little attention to fraud proofing.

Weak and/or overburdened administration

The administration of the EU budget is probably unique in falling under the responsibility of a central authority (the Commission) but in fact being almost entirely managed on the ground by a vast array of different authorities, public and private, in fifteen Member States and a large number of third countries. The number of spending projects and programmes is correspondingly enormous. This extreme dispersal of Community money, the large number of hands through which it passes and the sometimes unclear lines of accountability and attribution of responsibility militate against transparency and controllability, above all in the allocation of relatively small amounts.

Corruption

Another weakness in the EU system is human weakness. Several recent cases of fraud have highlighted the issue of corruption amongst EU and national officials. In combination with the often impenetrable legislation mentioned above, an individual or small group can wield disproportionate power over the allocation of Community funds. More simply, public officials can at times simply be bribed to "look the other way" when illicit dealings are afoot.

Slowness of response

The simplest means for the fraudster to stay ahead of the law is to act quickly. The Committee of Inquiry in particular noticed a huge imbalance between the speed of the systems employed by customs authorities to detect fraud and the time it took fraudsters to make their money and their getaway. So great indeed was this imbalance that, in some cases, dozens of identical fraudulent operations could be carried out before the authorities even became aware of a problem.

The same problem extends to investigation, where the procedures for requesting and obtaining assistance from law enforcement agencies in other Member States are such that they leave fraudsters ample time to cover their tracks. Though in fairness it should be pointed out that national authorities have produced some notable successes in joint operations, this has often been achieved through bypassing conventional procedures, frequently with the help of UCLAF.

Inadequate and inconsistent penalties

The ultimate calculation made by any fraudster or potential fraudster is "is it worth the risk?". The current system of penalties tends to provide an affirmative answer to this question, especially if the fraudster is able to choose where his case comes to court. As things stand, there is not even always agreement on what is an offence (for example, in some Member States it is not an offence to bribe public officials of third countries), let alone on the penalties to be applied for those offences.

In any case, as the Committee of Inquiry found, a common view that fraud against the state or the EU is essentially "victimless" (a view graphically refuted by that Committee) can be reflected in a tendency to treat even major economic offences relatively leniently. It also discovered that the obstacles to effective cross-border prosecution are so serious that many customs and prosecution services preferred to take the route of administrative penalties or recovery alone, rather than risk hard-pressed resources on a full-scale prosecution with an uncertain outcome.

The Union's response to fraud

What kind of response is necessary?

The answer to this question is defined by the nature of the problem and can be put simply: keeping up with the bad guys. This means matching the fraudster in all departments, while eliminating as many of the weaknesses in the system as possible. Though this idea points to a potential "arms race", it is one the Union and its taxpayers literally cannot afford to lose. To summarise, it needs:

- Sophistication on a par with the fraudster: information and communications technology, quick access to intelligence information, responsive legal and administrative machinery, financial expertise, etc.

- Union-wide law enforcement: a "level playing field" for law-enforcement and fraudsters within the EU, overcoming the impediments and inefficiencies placed in the way of investigators and prosecutors by fragmented jurisdiction.

- Effective cooperation with third countries: functioning agreements on legal, administrative and investigative cooperation.

- Simple, enforceable legislation: a greater attention to fraud-proofing of European legislation.

- Transparent, accountable administration: clear allocation of responsibilities in EU programmes, simplification of procedures, effective control and monitoring.

- Effective tools to fight corruption: reduction of the opportunities and temptations which lead to corrupt practices, greater dissuasive measures, more objective and incisive investigation.

- Speed: acceleration of procedures for detection and investigation.

- Adequate sanctions and recovery: increase the downside calculation for the fraudster.

How has the Union responded?

The following section will attempt a brief stock-take in each of the various areas outlined above. The overall aim is to answer the basic question of whether the Union is, as this report put it, keeping up with the bad guys. On the face of it the answer to this question is no.

"... effective means of preventing and repressing these [i.e. organised[ criminal activities are developing at a slow pace, almost always one step behind. If Europe is to develop into an area of freedom, security and justice, it needs to organise itself better, and to provide strategic and tactical responses to the challenge facing it."[5]

"One step behind" is therefore the considered view of the Council's experts. It is worth looking at the detail behind this assessment in the key areas identified above.

Sophistication

The problem with discussing the technical and legal sophistication of the Union's response to fraud against its own budget is that there exists no single response, but one provided collectively by the law enforcement bodies, judiciaries and administrations of Member States. A satisfactory assessment would be based not only on the sophistication of single services, but the extent to which this sophistication is shared at a European level. This issue is thus tightly bound up the question of the degree to which law-enforcement works Union-wide.

It is however, possible to comment also on the degree of sophistication possessed by single services.

It is clearly the case that all Member States have highly professional and well-equipped services at their disposal in priority areas. The picture is however rather patchy and the priorities of individual States obviously divergent from those of the EU. A striking example of this is the German customs service. The Committee of Inquiry found that, in a country which processes a third of all transit operations and whose economy disproportionately suffers the consequences of related fraud, the customs service was not computerised even at a domestic level. Perhaps worse was the fact that the German authorities, maybe because of a corresponding lack of information, were the most reluctant of all Member States to recognise the scale of the fraud problem and the need to act to deal with it.

At a Community level, transit also serves as an excellent example of how the sophistication of the administrative authorities fails to match the nature of the risk. The reliance on a paper-based system to manage massive volumes of own resources beggars belief, while the tardiness of the Commission in meeting the challenge of computerisation deserves (and has received) the strongest criticism.

The legal field also offers examples of how even single services only partially meet the challenge of modern fraud. In practice, the laws, lawyers and courts of Member States are often poorly adapted to deal with complex fraud cases, especially where they take on an international dimension and/or affect Community financial interests. As, for one, the Committee of Inquiry detected in the course of its work[6], there is a deficit of both appropriate national legislation and legal expertise which can seriously undermine the ability of the authorities to bring fraudsters to book.

Union-wide law enforcement

The Union's ability to respond to fraud at a European level is the heart of the entire issue, and is the politically most sensitive area of discussion. The question includes the gathering, sharing and distribution of information and intelligence, the investigation of specific offences, the bringing of prosecution in cases which cross borders and the application of administrative and penal sanctions.

As this report has already implied, the co-existence of a single market in Europe with 15 separate national jurisdictions represents a logical contradiction which demands action. Such action is currently firmly on the agenda of the Member States and is conceived according to two separate approaches: cooperation between national bodies and supranational action.

Cooperation is the less contentious of the two approaches, as it does not have serious implications for national sovereignty. It is thus by far the better developed of the two. The relative ease of proposing cooperation measures is reflected in the plethora of cooperation instruments which already exist and the emphasis placed on further developing such measures in the future, both by Council, its "High Level Group" and indeed UCLAF, in its 1997 Work Programme. The rapporteur cannot but support measures which attempt to bring quicker and more effective cooperation between the investigative services and judiciaries of Member States - any improvement in this direction is useful, especially when a "facilitator", in the shape of UCLAF, exists to oil the wheels of cooperation.

However, there is a degree to which cooperation measures ultimately fail to address the fundamental difficulties standing in the way of an effective fight against fraud, and it is here that the political balance tends to tip away from taking the necessary action. For example:

• national agencies share criminal intelligence information with EU counterparts except where it runs up against national data protection rules, which in some cases is almost immediately;

• investigative forces are willing to carry out investigations, searches, seizures, etc. at the request of other Member States, but often only if and when operational pressures permit;

• judicial cooperation is available, but only after hugely time-consuming procedures and if it proves possible to overcome incompatibilities in legislation and procedures.

Cooperation between a multiplicity of different systems cannot function as effectively as a single system, with one set of rules and procedures, a single set of priorities and Union-wide resources and powers based on an objective assessment of need. While though the anti-fraud logic of this statement is clear, political logic continues to dictate that legal and law-enforcement systems will continue in the shorter term to be organised on a national basis. One example of facing up to this reality is provided by the Committee of Inquiry whose final report was obliged to back off from the its "logical conclusion that the EU needs a single customs service" and instead recommend that national customs services act as if they were one.[7] Much the same is true of national legal systems, where the eminently reasonable proposals contained within Corpus Juris (a framework for EU-wide penal legislation commissioned at the request of the European Parliament) for the defence of Community financial interests "may help in deciding on the approach to be followed on this question".[8]

Notwithstanding the political difficulties, the Community must press for the measures necessary to defend its own interests and point at how it is that it is prevented from doing so effectively. The logic of a supranational approach to fighting fraud is at its most convincing in the context of the Community budget and if assured by bodies within the Community institutional framework where democratic political supervision at the appropriate level can be assured. The rapporteur for one will therefore continue to use all his influence to pursue an enhanced role for UCLAF and the development of a European judicial area, at least in the field of fraud against the EC budget.

Effective cooperation with third countries

In many cases instruments for investigative and legal cooperation with third countries exist; the problem lies in their application, owing to lack of time and resources, clear mechanisms for communication, and, sometimes, obstructionism or even corruption. In these latter circumstances, the EU is in any case usually unwilling to use the sanctions at its disposal, such as the option to exclude a beneficiary country from preferential treatment.[9]

Simple, enforceable legislation, transparent, accountable administration and effective tools to fight corruption

These three areas tend to be different facets of the same problem. They are also three areas where, if a disturbing series of recent cases are indicative, worryingly little progress is being made by the EU institutions, a fact which clearly undermines their right and practical ability to give lessons to Member States. The rapporteur would put great emphasis on this area, not only for its inherent importance, but also because it is the one where the EU can take direct action to put its own house in order.

You can't, to coin a phrase, legislate for good legislation and, obviously, the legislator must be free to draft and revise texts in accordance with democratic principles. The impetus behind good, fraudproofed legislation is thus political rather than technical, whatever efforts have been made formally to incorporate "fraud considerations" into the deliberative process. In this respect, the EU institutions all bear a responsibility for failing to understand (i) the extent to which complex and obscure legislation contributes to fraud and (ii) how much fraud undermines not only the image of the Union, but also its policies. It is a responsibility in which they all currently fail. In the European Parliament, the institution the rapporteur knows best, the extent to which fraud and mismanagement of expenditure is seen as a "specialist" interest is remarkable, as is the way that interest in obtaining budgetary funding for particular policy areas is matched by apparent indifference to what happens to it in practice. Political authorities must thus also learn to take their share of responsibility for the level of fraud suffered by the EU.

SEM 2000[10] offers the most immediate hope that the Commission is taking action to achieve better financial management in the Commission, in terms of structures, financial rules, training of personnel and indeed of priority and status for financial management. Improvements in the quality, transparency and accountability of financial management will help remove the opportunities for the fraudster, both within and outside the organisation, accruing from obscure and labourious administration, in which only few people can understand the procedures, let alone control them.

The SEM 2000 process has however a very long way to go, not only within the Commission, but outside it, as recent Court of Auditors reports have shown.[11] A grave problem lies in the loss of control and accountability which occurs when outside organisations (public, commercial, or nonprofit-making) are contracted to take over Commission financial competences.

A series of recent cases have focused attention on how a relatively lax financial culture within the Commission has allowed cases of corruption to occur within its ranks, and, perhaps even more worryingly, go uninvestigated for considerable lengths of time. Colleagues in the Committee on Budgetary Control are currently investigating some of these cases thoroughly, so there is no need to go into detail here. However, one common thread does deserve attention: namely the capacity of the Commission to act swiftly and effectively to detect, investigate and punish these occurrences.

At the moment, UCLAF is responsible for tackling internal corruption cases, once irregularities detected in the various directorate generals are referred to it. It is then the Secretary General of the Commission, on the advice of UCLAF, who must decide whether to refer a matter to the relevant judicial authorities, while the Commission itself establishes whether to waive the immunity of officials.

UCLAF's position in this system is inappropriate. As a general principle, an investigative body it should be independent of the organisation it is investigating. At present this is not the case. At the same time, the fact that UCLAF operates with the authority of the Commission vis-à-vis the outside world is useful in other cases. With this in mind, the position of UCLAF within the Commission has to be reconsidered in such a way as to guarantee its operational independence. Given the nature of UCLAF's job, such reconsideration includes above all the status of its personnel and the political accountability of the organisation as a whole. It is logically inconsistent that UCLAF personnel should have the status of regular Commission officials (thus finding themselves within the Commission's overall career structure) and be accountable to the Secretary General of the Commission, when part of its task potentially brings it into conflict with the short-term political interests of the Commission and important individuals within it.

Though a general report of this nature is not the place to explore such arguments exhaustively, it is a point which should be raised , especially as the Commission itself does not include any reference either to corruption or to the internal status of UCLAF in its 1997 Work Programme, in spite of the topicality of the issues concerned.

Sanctions

The "bottom line" for the fraudster is what he can earn and what he risks. When the victim is today's EU, for many of the reasons outlined above, this bottom line is far too often positive. The question of sanctions is closely tied to the subject of legal harmonisation between Member States: agreement on definitions of fraud, the admissibility of evidence, accelerated procedures for cooperation, etc. In present circumstances, where ratification of the Convention on the protection of Community financial interests seems as far off as ever, progress in the field of sanctions is probably a forlorn hope.

Conclusion - the 1997 Work Programme

The rapporteur's intention in this report has been to take stock of where the Union stands with respect to fraud against its own budget. The conclusions are somewhat depressing and broadly political - a fact reflected in the motion for a resolution.

Nevertheless, specific points arise in connection with both the contents of UCLAF's 1997 Work Programme and what has been left out. These too are taken up in the motion for a resolution.

• [1]  "Fraud without Frontiers" §4.8 (Quoting Dutch Central Bureau of Investigation)
• [2]  See Report of Committee of Inquiry into the Community Transit System (4.2)
• [3]  Statement to UK House of Commons Home Affairs Committee (16.11.94) quoted by Deloitte and Touche in "Fraud without Frontiers" (§3.159)
• [4]  The signature of a new mutual assistance agreement with the Swiss authorities on 9 June 1997 represents progress here but does not remove underlying legal problems.
• [5]  High Level Group: Action Plan to combat organised crime - 21.4.97 (C4-0199/97)
• [6]  Committee of Inquiry into the Community Transit System (Vol. I, chs. 8 & 15)
• [7]  Report of Committee of Inquiry (Vol. I - §14.4.3.1. and recommendation no. 1)
• [8]  UCLAF Work Programme: Section 5 (rapporteur's italics)
• [9]  See Council Regulation 3281/94 Art.9 (OJ L348 of 31.12.94)
• [10]  "Sound and Efficient Management 2000"
• [11]  See for example: Special reports 1/96 (MED Programme), 3/96 (Tourism), 3/97 (Phare) and 6/97 (Tacis - Ukraine)

AVIS

(Article 147 du règlement)

à l'intention de la commission du contrôle budgétaire

sur le rapport annuel 1996 de la Commission européenne consacré à la protection des intérêts financiers de la Communauté et à la lutte contre la fraude (COM(97)0200 - C4-0230/97)

ainsi que

sur le programme de travail 1997/1998 de la Commission européenne en matière de protection des intérêts financiers de la Communauté et de lutte contre la fraude (COM(97)0199 - C4-0231/97) (Rapport de M. Bösch)

Commission des libertés publiques et des affaires intérieures

Lettre du président de la commission à Mme Diemut Theato, président de la commission du contrôle budgétaire

Bruxelles, le 3 septembre 1997

Madame le Président,

Au cours de sa réunion des 2 et 3 septembre 1997, la commission des libertés publiques et des affaires intérieures a examiné le sujet mentionné sous rubrique.

Au cours de cette dernière réunion, elle a adopté les conclusions suivantes:

En ce qui concerne le rapport annuel 1996, nous avons l'impression que la Commission a, globalement, bien mis en évidence les aspects les plus importants et les plus problématiques qui, du point de vue de la commission des libertés publiques et des affaires intérieures, peuvent se résumer ainsi:

a) l'existence d'une grande criminalité transfrontalière, agissant par des réseaux internationaux aussi bien pour organiser les fraudes communautaires les plus importantes [1] que pour blanchir les capitaux occasionnés par des activités illicites, en faisant recours à différents instruments tels que la constitution de sociétés écran, l'exploitation des places financières les plus favorables et des moyens technologiques les plus avancés, à l'intérieur et à l'extérieur de l'Union; par ailleurs, la corruption active et passive tient une place importante comme passage presque "nécessaire" de l'activité frauduleuse;

b) la difficulté de lutter efficacement avec un cadre juridique inadéquat. Si, d'un côté, la Communauté s'est dotée d'instruments utiles, tels le règlement sur les contrôles et vérifications sur place[2] ou le règlement "Liste noire"[3], l'arsenal normatif réservé à la tutelle pénale des intérêts financiers (dénominations, descriptions des crimes, procédures, preuves, sanctions) est encore inactif, faute des ratifications nécessaires, de la part des Etats membres, à l'entrée en vigueur des conventions et protocoles conclus au titre du 3ème pilier sur la simple base de la coopération intergouvernementale. Les textes de la législation communautaire, comme le note justement la Commission, doivent être améliorés pour les rendre "imperméables" à la fraude et les appareils pénaux des Etats membres (qui présentent actuellement des sérieuses divergences) doivent être rapprochés;

c) à part le fait que le montant du préjudice estimé dû aux fraudes est en dessous de la réalité, difficile à déterminer avec précision et en tout cas très élevé par rapport au budget communautaire, la situation des recouvrements pour les fraudes détectées est déficitaire, même s'il faut prendre acte que, pour des montants importants, des poursuites judiciaires sont en cours. La centralisation des informations et l'informatisation des échanges entre les autorités douanières, par ailleurs déjà partiellement entamée, nous paraissent importantes, pour accélérer les procédures administratives et judiciaires, dont la lenteur compromet très souvent les résultats de l'action de recouvrement et pour mieux homogénéiser les contrôles aux frontières extérieures de la Communauté. La Commission reconnaît ne pas disposer de chiffres complets et fiables en ce qui concerne les recouvrements: se fixer l'objectif de corriger rapidement ce défaut nous paraît prioritaire;

d) l'analyse de la Commission est à partager en ce qui concerne la nécessité d'une "approche intégrée" au phénomène de la fraude communautaire: la commission des libertés publiques croit en la nécessité d'impliquer les autorités nationales (administratives, judiciaires, etc...), de doter tous les acteurs responsables de la lutte contre la fraude, aussi bien au plan communautaire que national, d'expertises pluridisciplinaires et d'une formation adéquate et de faire en sorte que le partenariat entre les services de la Commission et ceux des Etats membres soit mieux codifié et renforcé[4], ce qui a été déjà envisagé par la création de services spécialisés dans certains Etats membres.

En général, la commission des libertés publiques et des affaires intérieures tient beaucoup à ce que tous les efforts et les moyens aillent dans la direction de l'efficacité sans complaisance et du rapprochement des systèmes juridiques et judiciaires nationaux, dans la perspective de la création graduelle d'un espace européen de justice, qui nous semble être le corollaire nécessaire du marché unique. De ce point de vue, on n'insistera jamais assez sur l'urgence de l'entrée en vigueur des accords qui ont été déjà conclus (tout particulièrement, la convention sur la protection des intérêts financiers du 26 juillet 1995, le deuxième protocole à la convention sur la protection des intérêts financiers du 19 juin 1997 et le protocole portant sur le rôle de la Cour de Justice du 29 novembre 1996).* * *

Pour ce qui est du programme de travail 1997/1998, trois volets appellent une considération particulière de la part de la commission des libertés publiques et des affaires intérieures.

En premier lieu, les travaux annoncés dans le domaine de la législation, tendant à en améliorer la qualité, la lisibilité, l'applicabilité, devraient pouvoir être menés avec un souci de simplification en associant étroitement le Parlement européen qui a, depuis le début, dénoncé l'inefficacité d'une discipline éparpillée dans plusieurs textes. Il est à peine le cas de rappeler que la commission des libertés publiques et des affaires intérieures contestait la distinction artificielle des compétences en matière de protection administrative et de protection pénale des intérêts financiers, la première confiée aux organes et aux instruments législatifs communautaires, la deuxième demeurant de la responsabilité des Etats membres.

En deuxième lieu, la commission des libertés publiques et des affaires intérieures se réjouit de ce que la Commission ait déclaré vouloir s'attaquer en particulier à la lutte contre la criminalité économique et financière qui sont de plus en plus impliquées dans des affaires qui portent préjudice aux intérêts communautaires. Pour ce faire, le projet d'établir des contacts entre l'UCLAF et l'Europol nous semble hautement intéressant, ainsi que la poursuite de l'examen des propositions contenues dans le Corpus Juris pour le rapprochement des systèmes nationaux dans le domaine pénal. La commission des libertés publiques tiendrait beaucoup à ce que, dans son prochain rapport annuel, la Commission fasse état du fonctionnement de ces nouvelles expériences, en particulier des actions réalisées pour améliorer la coopération judiciaire à l'intérieur de l'UE entre les Etats membres (création de l'interface pénal dans le cadre de l'UCLAF, échanges de magistrats et d'autres fonctionnaires).

En dernier lieu, les efforts d'assistance pré-adhésion de la Commission aux pays candidats nous paraissent à soutenir, notamment pour venir à l'encontre des besoins en formation du personnel des administrations des affaires intérieures et judiciaire, besoins qui ont été déclarés à haute voix par les représentants des parlements des PECO, réunis avec notre commission en 1996, notamment en relation à la lutte contre la criminalité organisée([5]).

Veuillez agréer, Madame le Président, l'expression de mes sentiments distingués.

(s.) Hedy d'Ancona

• [1]  D'après le rapport de la Commission (p. 2), "à un petit nombre de cas (d'irrégularité) (2 à 3%) correspondent les affaires les plus importantes et la majorité des montants en jeu (plus de deux tiers).
• [2]  Règlement (Euratom, CE) nΊ 2185/96 du Conseil, JO L 292 du 15.11.1996.
• [3]  Règlement (CE) nΊ 1469/95 du Conseil.
• [4]  Voir l'exemple du protocole technique d'entente signé entre l'UCLAF et la Guardia di Finanza (I).
• [5] (1)Etaient présents au moment du vote les députés d'Ancona, président; Reding, Vinci et Wiebenga, vice-présidents; Andersson, Berger, Bontempi, Cederschiöld, Colombo Svevo, De Esteban Martin, Deprez, Donnelly B., Elliott, Ford, Goerens, Lambraki, Lambrias, Lindeperg, Lucas Pires, Matikainen-Kallström, Mohamed Ali, Nassauer, Oostlander, Palacio Vallelersundi, Pinel, Pirker, Posselt, Pradier, Sauquillo Pérez del Arco, Schaffner, Schulz, Stewart-Clark, Terrón i Cusí, Van Lancker et Zimmermann.