The authorities in EU member states aren’t showing enough of an appetite to claw back the tens of billions in funds lost to fraud each year, according to the head of the EU’s financial crime agency.
Laura Kövesi, chief prosecutor at the European Public Prosecutor’s Office (EPPO), told Euronews that EU tax authorities are failing to collect an estimated €130 billion in VAT each year, with between €30 billion and €60 billion of that lost to fraud or “simply stolen” from the country’s coffers.
“If I were a finance minister, I would probably be losing sleep over it,” she said. “Especially in the current economic context when inflation is very high.”
Kövesi was speaking to Euronews as the EPPO celebrates its first anniversary, having officially launched its operations in June 2021.
The independent public prosecution office, based in Luxembourg, is tasked with investigating crimes that harm EU-wide budgets, including fraud, corruption and money laundering.
Headed by a group of European prosecutors from each of the 22 participating EU states, it takes cases of financial crime forward in the relevant national courts. One of its biggest benefits is that it can investigate crimes across borders, while national authorities are confined to their own territory.
During its first year of activity, the EPPO opened 929 investigations, issued 28 indictments and obtained four convictions, in addition to securing court orders to freeze €259 million in assets.
Yet despite these supposed successes, Kövesi laments that she still needs to convince certain EU leaders of the importance of the EPPO’s work. “Too often,” she told Euronews, “we are confronted with a rather limited understanding of the implications for any economy of criminal organisations being able to inflict such damages with VAT fraud alone.”
Both during the EPPO’s inception and after launch, Kövesi says, there were instances of governments not taking its work seriously, whether they participated in the agency or not.
One of the most notable examples was Slovenia, which drew harsh criticism from senior EU officials for repeatedly failing to send the EPPO any European Delegated Prosecutors (EDPs) – the “boots on the ground” that conduct the investigations in the member states.
Kövesi slammed the Slovenian government over the matter at various intervals, accusing national authorities of a “manifest lack of sincere cooperation” with the EPPO and setting a “dangerous precedent” by interfering with its proper functioning.
The Slovenian government finally nominated its EDPs in November, before causing further ire in January when it proposed a law change to reduce the amount of time it would allow to prosecute white-collar crime cases.
This wasn’t the only country to throw an early spanner into the EPPO’s works. Earlier in the year, Spanish and EPPO prosecutors were at loggerheads over who should investigate alleged corruption tied to a COVID-era face mask deal signed by Madrid’s regional government.
Poland, which doesn’t participate in the EPPO but is required to recognise it as a competent authority, has also repeatedly rejected the agency’s requests for cooperation. Kövesi contrasted this with Hungary, another non-EPPO country that has replied to all the agency’s requests.
Currently, the only thing the EPPO can do to try and bring misbehaving countries into line is to refer the matter to the European Commission, which it has already done in the case of Slovenia and Poland.
In the case of Spain, where there is a difference in interpretation of EU law, Kövesi said the matter should go to the European Court of Justice. “We will continue to do this when we identify troubles and issues in cooperation between the EPPO and the national authorities,” she said.
An “elite” team of crime busters
One of the biggest obstacles the EPPO has faced during its first year in action is handling the 22 different criminal codes and legal systems it works across.
These differences have led to huge discrepancies in the amount of financial crime identified in each country, according to Kövesi, with some detecting lots of complex cases and others “very few, or even zero”.
“It’s about the will of the authorities to identify and detect crimes and report these crimes to the EPPO,” she said. “We don’t know, we’re trying to find the answer, as to how to address this.”
The differences also throw up problems over when the EPPO can even start an investigation. Legislation in some countries, for example, allows the agency to look into smuggling cases, and in others does not.
Kövesi said one way she wants to bring prosecutorial policy into line is by creating an “elite” team of EPPO investigators working in each country.
“In some member states, we already have support teams inside the EPPO, such as financial investigators and police officers,” she said. “This should be a standard in all member states.”
In general, Kövesi said, the EPPO’s first year in action has been “challenging” but the agency has started off well. Her focus for the next year is to consolidate the work done so far. “We are working in the interests of European citizens and protecting their money. Those who have to be scared are the criminals.”