# IMMC.EESC-2018-04019-AC.ENG.xhtml.EESC-2018-04019-00-00-AC-TRA-EN.docx

EN

European Economic and Social Committee

European Economic and Social Committee

INT/869

INT/869

EU Anti-Fraud Programme

EU Anti-Fraud Programme

OPINION 


  European Economic and Social Committee


  Proposal for a Regulation of the European Parliament and of the Council establishing the EU Anti-Fraud Programme

  [COM(2018) 386 final - 2018/0211 (COD)]

OPINION

European Economic and Social Committee

Proposal for a Regulation of the European Parliament and of the Council establishing the EU Anti-Fraud Programme

[COM(2018) 386 final - 2018/0211 (COD)]

Rapporteur: Giuseppe GUERINI

Rapporteur: Giuseppe GUERINI

Referral

| Referral | Commission, 18/06/2018 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| | |
| Section responsible | Single Market, Production and Consumption |
| Adopted in section | 02/10/2018 |
| Adopted at plenary | 17/10/2018 |
| Plenary session No | 538 |
| Outcome of vote
  (for/against/abstentions) | 193/0/4 |

Referral

Commission, 18/06/2018

Commission, 18/06/2018

Legal basis

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Section responsible

Single Market, Production and Consumption

Single Market, Production and Consumption

Adopted in section

Adopted in section

02/10/2018

02/10/2018

Adopted at plenary

Adopted at plenary

17/10/2018

17/10/2018

Plenary session No

Plenary session No

538

538

Outcome of vote
  (for/against/abstentions)

Outcome of vote
  (for/against/abstentions)

193/0/4

193/0/4

1.Conclusions and recommendations

1.

Conclusions and recommendations

1.1The EESC supports the European Commission's proposal to establish a new anti-fraud programme designed to protect the EU's financial interests and foster mutual administrative assistance between the Member States' customs authorities.

1.1

The EESC supports the European Commission's proposal to establish a new anti-fraud programme designed to protect the EU's financial interests and foster mutual administrative assistance between the Member States' customs authorities.

1.2The Committee welcomes the fact that the new anti-fraud programme is based on the previous Hercule III programme and seeks to enhance its performance in the light of the implementation practice adopted since then, in particular as regards a more extensive analysis of available data and with reference to effectively combining the Hercule system with the AFIS and IMS systems.

1.2

The Committee welcomes the fact that the new anti-fraud programme is based on the previous Hercule III programme and seeks to enhance its performance in the light of the implementation practice adopted since then, in particular as regards a more extensive analysis of available data and with reference to effectively combining the Hercule system with the AFIS and IMS systems.

1.3The EESC hopes that the EU will promote international anti-fraud cooperation, so as to develop an effective and coordinated response to activities that now go beyond state and even continental borders; to this end, effective methods of global cooperation between the relevant authorities need to be developed.

1.4The EESC recommends that the Commission make sufficient investment in the new anti-fraud technologies, starting with artificial intelligence, which could deliver significant improvements that would facilitate the efforts to combat these illegal activities.

1.5These investments must be accompanied by proper training for public authority staff involved in the fight against fraud. It is crucial that the updated response to developments in trafficking involve a combination of using new technologies and properly training the people involved on this front.

1.6Given the strategic importance of technology in combating fraud, the EESC suggest that, in addition to the performance indicators set out in the Commission proposal, further indicators be added in relation to measuring progress as regards tax authorities' capacity to adopt new digital technologies, and in relation to artificial intelligence for combating fraud affecting the interests of the EU.

1.7From a political perspective, the EESC considers that the European institutions' efforts to combat fraud could also be enhanced by making additional efforts to harmonise the laws and tax rules that apply within the different national jurisdictions. It is in fact possible that the excessive discrepancies between the laws and tax rules in effect across the Member States within the internal market may be leading to the adoption of unlawful practices in order to exploit the existing regulatory differences (e.g. VAT carousel fraud), which may be detrimental, directly or indirectly, to the EU budget or, more generally, to the consolidation of the European single market.

2.Commission proposal

2.1The current system to combat fraud detrimental to the EU budget comprises the following measures: i) the Hercule III spending programme which targets fraud, corruption and any other illegal activities affecting the EU's financial interests; ii) the Anti-Fraud Information System (AFIS) which consists of a set of customs IT applications managed by the Commission under Regulation (EC) No 515/97; and iii) the Irregularity Management System (IMS) which is an electronic communications tool that facilitates the Member States' obligation to report detected irregularities.

2.2The new EU anti-fraud programme, which is the subject of this opinion, will largely be based on the previous Hercule III programme, with some improvements such as the option of funding new initiatives – for instance on data analysis – and combining that programme more effectively with the AFIS and IMS systems.

2.3The anti-fraud programme will have two general objectives: i) protecting the financial interests of the EU; and ii) supporting mutual assistance between the administrative authorities of the Member States, as well as cooperation between these authorities and the Commission, in order to ensure that customs and agricultural legislation is applied properly.

2.4The programme will also have three specific objectives, directly linked to the general objectives: i) preventing and combating fraud, corruption and any other illegal activities affecting the financial interests of the EU; ii) supporting the reporting of irregularities, including fraud, with regard to the shared management and pre-accession assistance funds of the EU budget; and iii) providing tools for information exchange and support for activities in the field of mutual administrative assistance in customs and agricultural matters.

2.5The funding to be allocated to the programme for the period 2021-2027 amounts to EUR 181 207 million, distributed as follows: i) EUR 114 207 million for preventing and combating fraud, corruption and any other illegal activities affecting the financial interests of the EU; ii) EUR 7 million for supporting the reporting of irregularities, including fraud, with regard to the shared management and pre-accession assistance funds of the EU budget; and iii) EUR 60 million for providing tools for information exchange and support for operational activities in the field of mutual administrative assistance in customs and agricultural matters.

2.6The new programme will be implemented against the backdrop of a new legal framework that has seen significant changes, in particular with the establishment of the European Public Prosecutor's Office (EPPO). The EPPO is set to play an important – and hopefully effective – role, which, in combination with the implementation of Directive (EU) 2017/1371 on combating fraud by means of criminal law, should ensure that the financial interests of the EU and Europeans are better protected.

2.7The regulation for the anti-fraud programme was drawn up following a stakeholder consultation carried out by the Commission – and also taking into account the suggestions of a group of experts – and has a sound legal basis in the Treaties (Articles 325 and 33 TFEU).

3.General and specific comments

3.1The EESC fully supports the European Commission's proposal to establish a new anti-fraud programme designed to protect the EU's financial interests and foster mutual administrative assistance between the Member States' customs authorities.

3.2Articles 325 and 33 TFEU must be implemented by means of suitable instruments and proper coordination between national and European authorities, as has been shown by the measures taken in recent years, which have resulted in large amounts of money going back into the EU budget, although the Commission notes that it is difficult to quantify the exact amount of the sums recovered.

3.3Market globalisation, the increasing mobility of people and goods, and the ever-growing use of new communications technologies are fostering exponential growth in cross-border transactions and e-commerce. While this creates great opportunities for growth and market development, it also entails the need to rapidly and constantly update the techniques used to combat illegal activities and the legislation aimed at combating fraud and the various ways in which customs checks are circumvented.

3.4It is therefore crucial that the response of public authorities to ever more sophisticated forms of fraud moves with the times both as regards the effectiveness of enforcement, and in terms of technology and effective cooperation between the various national authorities, whose activities should be coordinated and in synergy.

3.5Given the cross-border nature of fraud and the increasing ease (facilitated by technology) with which illegal practices can be rapidly developed – such as the ease with which money gained from illegal activities can be moved – ever closer cooperation needs to be developed between authorities worldwide. The EESC hopes that the EU will promote international anti-fraud cooperation, so as to develop an effective and coordinated response to activities that now go beyond state and continental borders.

3.6The Committee welcomes the fact that the new anti-fraud programme is based on the Hercule III programme and seeks to build on previous experience in the light of the implementation practice adopted since then, in particular as regards a more extensive and accurate analysis of available data and with reference to effectively combining the Hercule system with the AFIS and IMS systems.

3.7At this stage, thanks to the Customs Union, which falls under the exclusive competence of the EU in accordance with Article 3 TFEU, significant results have been achieved as regards the harmonisation of rules, the effectiveness of controls and the deterrent effect of sanctions. It is important to build on these results by taking effective measures to protect the EU's financial interests, and this requires, inter alia, that ever more intense efforts should continue to be made to step up customs cooperation between the Member States with the close involvement of the Commission.

3.8With the new anti-fraud programme, efforts to combat illegal activities affecting the financial interests of the EU will also be bolstered by simplifying and speeding up the control procedures, through the introduction of new customs technologies. In this regard, the EESC recommends that sufficient investment be made in the new anti-fraud technologies, starting with artificial intelligence, which is considered to offer significant potential for enhancing the work of public authorities.

3.9These investments must be accompanied by proper training for public authority staff involved in the fight against fraud. It is crucial that the updated response to developments in trafficking involve a combination of using new technologies and properly training the people involved in combating the fraud and other illegal activities, who will require ongoing training and updating as the technology to counter illegal activities develops.

3.10The EESC endorses the general and specific objectives of the new anti-fraud programme, but suggests introducing a new specific objective as regards combating customs fraud, corruption and illegal activities carried out by electronic means and with the use of new technologies, in order to develop a customs policy to combat digital fraud.

3.11It is important to emphasise that adapting customs policy and anti-fraud policies to technological developments is not merely a matter of updating the tools and physical equipment available to the authorities, but must take the form of a fully-fledged long-term strategy based on specific goals, targets and methods.

3.12The Commission did not consider it necessary to carry out a prior impact assessment, in that the new anti-fraud programme is largely a continuation of the previous programme, regarding which ex-post assessments
  1
  have already been carried out, which have deemed it effective. While it understands the choice not to carry out a prior impact assessment and considers the ex-post assessments mentioned by the Commission to be sound in principle, the EESC deems it important that the EU's policies on preventing and combating fraud be based on specific and verifiable data. In the absence of a prior impact assessment, it therefore becomes imperative that the new anti-fraud programme be backed up by ongoing monitoring, assessment and reporting providing an accurate picture of the state of play and progress achieved over time.

3.13The EESC endorses the three indicators set out in the proposal for monitoring progress on the specific objectives set by the new anti-fraud programme, i.e.: i) user satisfaction rate and percentage of Member States receiving support in preventing and combating fraud, corruption and any other illegal activities affecting the financial interests of the Union; ii) user satisfaction rate for the use of the Irregularities Management System; and iii) the quantity of mutual assistance information made available and the number of supported mutual assistance-related activities.

3.14In line with its request set out above to add a specific objective concerning the need to implement a customs and anti-fraud strategy for the digital economy, the EESC also suggests introducing indicators in relation to measuring progress as regards tax authorities' capacity to adopt new digital technologies, and in relation to artificial intelligence for combating fraud affecting the interests of the EU.

3.15To ensure that the anti-fraud programme works well, the measures introduced should be properly backed up in terms of the funding allocated. The EESC therefore supports the Commission's proposal for the programme to be implemented under both direct and indirect management.

3.16The EESC endorses the proposal to provide funding to the Member States – deeming this consistent with the overall approach of the regulation on the new anti-fraud programme – to cover the costs of installing and maintaining the technical infrastructure, and of the logistical, office automation and IT resources needed to coordinate joint customs operations and other operational activities. In line with this, the EESC also endorses the possibility of funding expenditure relating to the acquisition, study, development and maintenance of computer infrastructure (hardware), software and dedicated network connections for preventing and combating fraud.

3.17In the light of the previous point, the EESC encourages the Commission to make the coordination mechanisms – which it proposes to put in place to ensure the efficiency and interoperability of all the equipment purchased with EU funds – effective and stringent, in order to combat fraud and illegal practices detrimental to the EU budget in increasingly effective and coordinated way.

3.18From a political perspective, the EESC considers that the European institutions' efforts to combat fraud could also involve additional efforts to harmonise the laws and tax rules that apply within the internal market. It is in fact possible that the excessive discrepancies between the laws and tax rules in effect across the Member States within the internal market may be leading to the adoption of unlawful practices in order to exploit the existing regulatory differences (e.g. VAT carousel fraud), which may be detrimental, directly or indirectly, to the EU budget or, in more general terms, to the consolidation of the European single market.

Brussels, 17 October 2018

Luca JAHIER
  The president of the European Economic and Social Committee

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