By Isabella, Renuka, Thomas, and Yutong
Increasing anti-fraud enforcement: the need to tackle fraud on a broader level
The European Union is a very complex structure, with a budget of a little less than EUR 190 billion for 2023. This could present an ideal environment for fraudsters, who may take advantage of this to commit and mask their crimes. We can give you an example: imagine you sit at one of the highest positions in the European Parliament, and you are approached by certain countries’ representatives willing to pay you so you can lobby in their favour at Parliament’s meetings. That is fraud and it – unfortunately – happened in real life, as seen in Qatargate.
Although Qatargate involved bribes paid to MEPs, constituents of an EU institution, it was not investigated by EU bodies, but by national authorities from Belgium. Therefore we formulated to research the case in-depth and the anti-fraud framework within the EU with the aim of providing an understanding as to why EU anti-fraud bodies, especially the European Anti-Fraud Office (OLAF) and European Public Prosecutor’s Office (EPPO), have not been directly involved in Qatargate.
Although the importance of these institutions in the EU cannot be overstated, the effectiveness of their power is subject to limitations. Firstly, their competencies, whilst broad, do not fully encapsulate the various forms that European financial fraud may take, and secondly, their relationship with the relevant national competent authorities. This was evidenced by the manner in which the investigation into Qatargate was conducted.
Anti-fraud enforcement in the EU: OLAF and EPPO
As already mentioned before, OLAF and EPPO are the two main bodies established to fight fraud in the EU; and even though both bodies pursue a common objective, significant differences exist between the two.
For OLAF, the investigation powers can be classified into external (concerning the area of the Member States and other countries) and internal investigations (focused within the EU institutions), however, it does not have any sanctioning powers. Because of that, there are concerns about its lacking of sufficient criminal enforcement and judicial materialisation of OLAF’s recommendations caused by national prosecutors in certain Member States, who narrow down their investigations to national aspects.
Unlike OLAF, EPPO is granted shared competence to investigate and prosecute offences with an EU dimension which are related to fraud that has a direct impact on the EU finances/budget. Furthermore, EPPO exercises its competence only via an investigation or by deciding to use its right of evocation. If the latter applies, EPPO will determine whether it wants to take over the case initiated by the Member State(s) after deliberation with the respective national authorities. In that case, the national authorities are required to confer the proceedings to EPPO.
Qatargate: a scandal in the EU Parliament and the EU’s anti-fraud enforcement
Currently, Qatargate has only been investigated at the national level, by the Belgian authorities, instead of by OLAF and EPPO, but that does not mean they have not been kept busy. At approximately the same time which Qatargate took over the news, OLAF and EPPO were involved in another investigation into the Parliament.
In December 2022, OLAF issued an investigative report regarding a “suspicion of fraud detrimental to the EU budget, in relation to the management of the parliamentary allowance”, specifically regarding money paid to parliamentary assistants. It is interesting to point out that, as clarified by OLAF Director-General Ville Itälä, “there is no link between the issues investigated by OLAF and the issues under investigation in the ‘Qatargate’. When it comes to the so-called Qatargate, OLAF is following the matter very closely, in line with its investigative experience and analytical expertise. We are in contact with the Belgian authorities on the matter”.
Based on what we have discussed above, the inner logic of such clarification is the fact that, unlike EPPO, OLAF does not have any sanctioning powers. This means that OLAF does not possess the power to conduct criminal investigations and prosecutions; so without a request from national authorities, it cannot initiate an investigation, and can only provide limited information support. Currently, OLAF shows the willingness to support the investigation into Qatargate, but it does not seem to be actively engaged in Qatargate.
The most notable fact is that OLAF is a non-prosecutorial body, and is reliant on the individual Member States for their cooperation. For example, in 2015, Hungarian authorities refused to comply fully with an investigation into bid tenders related to the disbursement of funds under the Economic Operative Programme. In such instances, OLAF cannot compel a Member State to assist in its investigations other than to request the National Competent Authorities (NCAs) do so themselves or for the European Parliament. Progress in this regard has been made, with OLAF and the Office of the Prosecutor General of Hungary, its NCA, signing a cooperation agreement last year to protect EU funds from fraud and embezzlement in the country by strengthening the closeness of its investigations.
A similar problem exists for EPPO, in that Member States retain an ‘opt-out’ from the Area of Freedom, Security, and Justice (AFSJ). Currently, Hungary, Poland, and Sweden have not joined EPPO, with Denmark and Ireland maintaining the opt-out on a case-by-case basis. While negotiations remain ongoing with Denmark and Ireland as to the level of cooperation EPPO can expect from their NCAs, this highlights the issue EPPO, and OLAF, face in an inability to force Member States to cooperate if it simply wishes not to comply.
Having explained why OLAF is not directly involved, EPPO’s reasoning is different. EPPO’s main focus is the protection of the EU budget, and because of that, as there is no evidence, so far, that the wrongdoings investigated in Qatargate have an impact on EU finances, this body – even though it has the power to conduct judicial investigations – was not involved. Yet.
Overlaps between OLAF and EPPO
In addition to the matters raised in the section above, there is another aspect that needs to be considered. Given OLAF and EPPO’s similar roles, there can often be unintentional overlap in the investigations they carry out, see the graph below.
To ensure there are no conflicts, EPPO’s Regulation expressly directs the organisation to maintain a close relationship with OLAF based on mutual cooperation, information exchange, and complimentary support. However, EPPO does not have to inform OLAF of its investigations, per Article 8(1) of the OLAF Regulation, creating a potential lack of communication and duplication of investigative resources. EPPO is only required to consider doing so where there is suspected illegal conduct relating to the financial interests of the EU. This may have occurred with Qatargate given OLAF was investigating Eva Kaili’s parliamentary assistants before EPPOs publication of its investigation.
OLAF and EPPO are considerable investigative forces in the EU, but due to the factors discussed in this blog post, might be possible that fraudulent practices that hurt the EU’s and its citizens’ interests go undetected and unprosecuted, given that fraud is unavoidable to a degree in a Union so large. Therefore, expanding the strength of their investigative and prosecutorial powers and increasing their cooperation, will, in the authors’ opinion, decrease the overall levels of financial mismanagement and fraud in the EU.
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