COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 14.11.1995 
COM(95) 556 final 
PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS 
SYNTHESIS DOCUMENT 
of the comparative analysis of the reports supplied 
by the Member States on national measures taken to combat 
wastefulness and the misuse of Community resources 
COMPARATIVE ANALYSIS 
of the reports supplied by the Member States 
(presented by the Cornai ssion) 

PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS 
SYNTHESIS DOCUMENT 
of the comparative analysis of the reports supplied 
by the Member States on national measures taken to combat 
wastefulness and the misuse of Community resources 
f\.A 
The remit 
On 11 July 1994 the Council (Ecofin) asked the Commission to 'produce a 
progress report no later than the end of 1995 on the application of Article 209a of the EC 
Treaty' which enshrines the 'principle of assimilation' and aims to strengthen 'the 
principle of co-operation'. 
Subsequently, the Essen European Council on 9 and 10 December 1994 called on 
the Member States to "submit reports on the measures they are implementing to combat 
wastefulness and the misuse of Community resources', to be examined by the Council 
(Ecofin) in June 1995 and submitted to the European Council in December 1995. 
The reports were submitted for presentation to the Council (Ecofin) on 19 June. 
The Council concluded that subsequent action should proceed along three lines - national, 
Community and partnership - to increase the effectiveness of protection of the 
Community's financial interests. 
The Cannes European Council (26 and 27 June) 'took note of the Member States' 
reports' and 'requested the Commission to prepare a comparative summary for the 
European Council in Madrid' and called on *the Member States and all institutions to 
persevere in the battle against fraud and waste'. 
The methods used 
The comparative analysis accompanying this document has been prepared on the 
basis of the national reports. It takes stock of progress in applying Article 209a on 
protection of the Community's financial interests and summarizes the measures taken by 
the Member States to combat the misuse of Community resources. 
The structure is the logical sequel of the structure of the Article, which sets an 
objective (assimilation) to be attained and prescribes the means to be deployed to counter 
misappropriation of Community funds (close and regular co-operation). The very 
existence of the single market and the transnational nature and dimension of financial 
ft-7. 
crime demand counter measures transcending the national arena and proceeding from 
enhanced partnership at Community level. 
To ensure that national reports followed a standard pattern facilitating the 
comparative summary, the Commission, as requested by The Council, devised a general 
layout to be used in preparing the national reports which was approved by the Council 
(Ecofin) on 20 February. 
By and large the Member States have adhered to the proposed layout. Even so, 
their reports are highly dissimilar. Some are only a few pages long; the longest has 78 
pages. Above all, their content varies widely, as the emphasis is not placed on the same 
items. 
Some Member States highlight recent changes to their anti-fraud laws. Others 
highlight the administrative organization and distribution of functions in verifying the use 
made of funds. Some were more precise than others as to the results obtained from the 
action taken and the follow-up to checks undertaken or observations made by the 
European Court of Auditors. For example, VAT fraud was often left out even though the 
fact of having texts and information on VAT fraud would allow a comparison of the 
methods of control and recovery for this tax with those of traditional own resources. 
The explanation may lie partly in the short time available to the Member States 
for carrying out an ambitious exercise. Those responsible for compiling the reports may 
have found it impossible to gather all the requisite information and therefore concentrated 
on those items which struck them as particularly important. The Commission was unable 
to engage in the dialogue with the Member States which would have facilitated the 
exercise and yielded a:balanced set of contributions. 
This analysis follows the scheme suggested to the Member States. It contains 
comparative tables setting out the information to hand and revealing, a contrario, those 
areas where it was not possible to produce the summary. The utility of pursuing and 
amplifying the exercise in conjunction with the Member States will then have to 
investigated so that the fullest benefit of the analysis can be enjoyed. 
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Tables are given at various places in this report to summarize certain comparable 
categories of information taken from the national reports; they are designed to constitute 
an objective basis for the comparative analysis. The Commission has endeavoured to 
reproduce the national contributions as faithfully as possible, but the risk is that there may 
be gaps in what is reproduced here. Readers seeking access to exhaustive information on 
any particular point are accordingly referred to the national reports annexed to this 
summary report. 
Each part and section contains a commentary illustrating the points that appear 
most significant. In addition, guidelines or avenues to be explored reflecting the Ecofin 
Council's conclusions of July 1994 and June 1995 are offered as a means of laying a 
basis for action to pursue the fight against fraud and wastefulness and to improve the 
effectiveness of the protection of the Community's financial interests, as called for at 
Cannes. 
This synthesis is a resume of the comparative analysis, highlighting the guidance 
emerging from them and which the Commission intends to examine in response to the 
invitation of the European Council to persevere in the battle against fraud with the utmost 
vigour. 
* 
* * 
Part I: Compliance with the first paragraph of Article 209a of the 
Treaty on European Union (assimilation principle) 
The first paragraph of Article 209a EC reads: 'Member States shall take the same 
measures to counter fraud affecting the financial interests of the Community as they take 
to counter fraud affecting their own financial interests'. 
This writes into the Treaty the principle of assimilation enunciated by the Court 
of Justice in Case 68/88 Commission v Greece on 21.9.1989. The Court specified the 
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scope of the first paragraph of Article 5 of the Treaty which established the European 
Community by declaring Member States'obligations to penalize infringements of 
Community law "under conditions, both procedural and substantive, which are analogous 
to those applicable to infringements of national law of a similar nature and importance 
and which, in any event, make the penalty effective, proportionate and dissuasive'. The 
principles enunciated by the Court and by the Union Treaty, though not identical, overlap 
and amplify each other. 
The Member States' reports suggest that this is how they see their obligations and 
that they apply Article 5 as interpreted by the Court of Justice and Article 209a of the 
EC -Treaty in combination with each other. Most of them accordingly cover both the 
measures they have taken to assimilate fraud against the Community's and their own 
financial interests and the effectiveness of the penalties for which they have made 
provision. 
1.1 Description of national provisions (regulatory provisions, organisation of services) 
which satisfy the principle of assimilation 
This part aimed on the one hand to offer a panorama of national instruments to 
combat fraud against the Community budget from two angles - prevention (provisions for 
checks) and enforcement (provisions for penalties) and on the other hand to provide a 
description of the various ways in which their services are organized. 
1.1.1 Description and evolution of the legislation 
It has been found that preventive measures received little attention in the national 
reports. In some cases they are considered in the sections relating to the organization of 
services; in others they are in the section on the law, with enumerations of instruments 
presented without further comment. In most cases, however, the preventive mechanisms 
are simply ignored. 
The reports reveal that most Member States treat revenue and expenditure through 
quite separate sets of rules. The rules governing resources are usually to be found in 
specific instruments of tax or customs law. The rules governing fraud on the revenue side, 
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which are to be found in general normative provisions, only rarely make distinctions 
between different revenue categories. 
On the resource side, the assimilation principle for enforcement purposes is not 
appreciated as regards revenue categories taken individually but in terms of the legal 
frameworks for the different resources and must therefore be seen in the broad sense as 
a comparison between the framework for purely Community resources (the traditional 
own resources) and for the national resources that provide the bulk of the revenue in the 
national budgets (V.A.T., excise). 
On the expenditure side, where the reports do mention changes in the law, they 
most commonly announce the creation of new specific offences of fraud in relation to 
grants, with Community expenditure being included. It should be noted that the 
enforcement of penalties may be linked by the Member States to the existence of 
Community rules providing for specific obligations. 
Finally, in the item on historical background, money-laundering legislation, which 
provides a means of tracing money obtained fraudulently from the Community budget, 
was mentioned by some Member States. 
Progress in introducing the assimilation principle on the expenditure side has also 
to be considered in relation to the effectiveness of measures taken on the revenue side. 
The existence of areas of distortion in the efficacy of both prevention and enforcement 
(administrative and criminal penalties) should be highlighted so that standards can be 
raised where they are visibly lowest. 
Several Member States state that their general criminal law is adequate to give 
effect to the assimilation principle in legal terms. Most Member States believe that the 
ordinary criminal offences are adequately defined to protect the Community's financial 
interests. Assimilation for enforcement purposes is implied in provisions creating offences 
and penalties that are applicable in like manner to Community and national interests. 
Even so, it is clear from some of the reports that there is trend towards making fraud 
against the Community's financial interests an offence in its own right. 
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The trend has gathered momentum with the Convention on the protection of the 
Community's financial interests on which an agreement was reached at Cannes and which 
was signed on 26 July 1995. 
The objective to be achieved for some Member States in addition to assimilation 
remains the general raising of the level of protection throughout the Community. 
Differences in schemes of penalties, whether administrative or criminal, are likely to lead 
to fraudsters moving their operations to the areas where enforcement is the least severe. 
The comparative analysis highlights that only part of the data has been gathered 
and that some complementary information in particular on the prevention aspect would 
prove useful in consolidating the basis on which the fight against fraud and wastefulness 
must be waged in accordance with the wishes of the European Council of Cannes. 
Consolidation of information in this area is a fundamental requirement if the objective 
set by the European Councils of Essen and Cannes of combatting fraud with the utmost 
vigour and persevering with the action necessary to raise the level of protection of the 
financial interests of the Community is to be achieved. On the basis of this assessment 
and the information gathered it is possible to perceive a number of guidelines whereby 
the objectives set by the Council may be achieved. 
Avenues to be explored (point 1.1.1) 
What is clear from this initial stage of the comparative analysis is that most 
Member States have preferred the differentiated approach to the revenue and expenditure 
sides. This situation of fact raises questions as to the degree of assimilation of rules 
governing expenditure and revenue and their respective degrees of efficacy. Finally, the 
question arises as to how to achieve the objective set by the European Council. 
A/ In aiming for a coherent and global approach to the protection of financial 
interests, the question must be put as to whether this difference in the level of 
harmonisation can be justified. Perhaps, up to this point, insufficient account has been 
taken of the similarity in the actions and resources used by organised financial crime in 
attacking the Community budget in both the revenue and expenditure areas. This view 
is undoubtedly equally valid for the prevention aspect which remains an area not yet fully 
analysed. This falls in line with the wish for regular assessment of national control 
systems expressed in some reports. 
B/ Regarding administrative penalties, the reports suggest that national provisions 
are more sophisticated on the revenue side than the expenditure side. A clear policy of 
tougher administrative penalties on the expenditure side is an obvious necessity. It might 
be based on the common guideline adopted by the Council on 29 June 1995, in particular 
with regard to setting up schemes of penalties in the different areas of expenditure. 
C/ The Convention on protection of the Community's financial interests in the 
Member States, once transposed into national law, will provide the legal tool which the 
Member States need for creating a specific offence. Rapid attainment of this objective 
would generate a practical possibility of prosecuting individuals committing the acts 
specified by the Convention. Progress here would lay an effective basis for the 
Community institutions and the Member States to mobilize all the resources needed for 
uniform enforcement throughout the Community. 
D/ In addition to the question of the definition of the offence itself, the further 
question is raised in some reports of harmonizing the levels of penalties. Excessive 
variations produce areas of tougher and lighter enforcement and deflect business flows 
towards the "softer" Member States. The levels of penalties should therefore be more 
homogeneous to achieve satisfactory assimilation and guarantee equivalent protection 
throughout the Union territory. 
1.1.2 Brief description of departmental organization 
'Alongside the traditional control bodies, most Member States specify that they 
have specific investigation structures and some also mention the existence of 
multidisciplinary bodies with extended powers responsible for the control of all public 
funds, thereby including the protection of Community finances. 
Some Member States have specific structures responsible for all own resources. 
These structures are sometimes directed more particularly to investigation and fraud 
prevention. In general, the Member States highlight the existence of a serious level of 
protection of Community own resources ensuring a high degree of assimilation with the 
protection of their national finances. 
For the Structural Funds, the description of administrative bodies outstrips the 
structures charged with both internal or external checks and it would be extremely 
dangerous to compare the Member States' systems of management of the Structural 
Funds. Three special features may be discerned. On the one hand, internal controls 
(accounting, documentary) carried out by the body responsible for implementing 
Community programmes are predominant. On the other hand, the local administration 
has an often important autonomy which must be taken into account by the central State. 
This may result in a wide complexity and diversity of control systems in the Structural 
Funds. Finally, the participation of Member States' authorities in the financing of 
structural programmes achieves de facto assimilation which is easy to demonstrate. 
Numerous reports mention the existence of external controls carried out by control bodies 
with very broad competence (Court of Auditors, inspection bodies). 
Avenues to be explored (point 1.1.2) 
The Commission draws two main conclusions from this comparative analysis of 
the national organizations for fraud prevention. 
A/ There is a trend towards the development of multidisciplinary control structures 
with responsibility for all areas of fraud prevention and with wide-ranging investigative 
powers. In this way the Member States hope that more effective steps can be taken to 
combat organized financial crime which is not necessarily confined to one particular 
sector. 
This trend is interesting in that it indicates how national measures are being 
adjusted to combat national and Community fraud which is not confined to one particular 
sector. It takes account of the special nature of fraud prevention, which requires long, 
specialized inquiries, calling for very special operational methods and the implementation 
of significant countermeasures not available to all authorities. Such inquiries can hardly 
be undertaken by those responsible for routine controls, let alone those responsible for 
the administrative side, that is, those whose main task is to implement a programme of 
A-9 
expenditure. Inquiries of this kind must be undertaken by departments with wide 
territorial powers and specialist investigators who can establish operational links with 
their colleagues in other Member States and with the Commission's fraud prevention staff. 
B/ As regards the administrative organization of fraud prevention, the national 
reports indicate on the whole that there is a great contrast between the protection of 
revenue and the protection of expenditure. Where revenue is concerned, customs and tax 
authorities have had long experience of fraud prevention and apply to Community 
revenue the same control methods as have proved their worth in decades of use at 
national level. Both national and Community revenue may thus be said to enjoy a high 
level of protection. 
Where expenditure is concerned, the "assimilation" principle is observed in that the 
protection available to Community expenditure is the same as that for national 
expenditure. The rules on public accounts, which protect government spending in all 
Member States, also apply to Community spending, the great bulk of which is channeled 
through the national budgets. The protection given to Community interests in this case 
is, however, less satisfactory than the protection given to revenue. The organization of 
controls is often the responsibility of the fund administrators themselves or of 
departments which are relatively unfamiliar with the techniques for combating organized 
crime. According to the national reports, controls tend to be the responsibility of bodies 
whose work involves the general auditing of government departments and the verification 
of accounts rather than detailed checks on Community expenditure. 
There appears to be room for specific fraud-prevention controls carried out by 
specialists in the fight against organized financial crime, who should be independent of 
the officials administering funds and should hold wide-ranging powers of investigation. 
If the controls applicable to expenditure could be raised to the level of those currently 
applied to revenue, the protection of both national and Community finances would be 
considerably enhanced. 
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1.2. Assessment of measures taken 
The objective pursued by the Commission is not only to establish a panorama of the 
systems used by the Member States in the application of Article 209 A (texts applicable, 
organization of services) but also to assess the results of the measures adopted. 
1.2.1 Intelligence, control and investigation measures 
It is to be noted that only half the Member States have supplied statistics on checks 
undertaken. Given the difficulty in gathering these statistics and the tightness of the 
deadlines set, the figures supplied are generally incomplete without any accompanying 
analysis. The improvement in the level of the quality of the controls, when it is 
mentioned, is not based on actual figures. If reference is sometimes made to 
administrative and judicial enquiries, neither the difference nor the link between 
traditional controls and enquiries is developed. 
Some reports insist on the international dimension of fraud and emphasise that a 
strictly national fraud network has never been uncovered. 
Interest in risk analysis based on intelligence is when indicated mentioned in 
counterbalance to quantitative controls. 
1.2.2 Results: frauds and irregularities detected (statistics, case study, typology) 
The Member States have endeavoured to provide significant quantitative elements 
(statistics). On the other hand, the two other themes covered in this point (case study, 
typology) have been dealt with too succintly for any useful results to emerge from their 
analysis. The relation between the number of controls and the number of irregularities 
discovered is only made exceptionally and only in the agricultural field. 
The case which has to be taken in analysing figures on frauds discovered is well 
known. Assessments made may indicate an improvement in the notification of statistics 
or an increase in the activities of the anti-fraud services or a growth in the phenomenon 
itself. It is only with hindsight that comparative data on fraud cases can be usefully 
An 
examined. Some Member States have attempted to identify certain risk sectors but the 
production of relevant typology at Community level requires a detailed examination of 
homogeneous information which goes beyond what is shown in the periodic regulatory 
notifications. 
The production of meaningful typology requires the gathering of specific 
information on actual anti-fraud problems in particular those of a transnational nature 
which may involve organised crime so as to adapt approaches and strategy to what is 
actually needed to protect the financial interests of the Community. In this way the 
Member States and the institutions could set up and have at their disposal operational 
instruments to deal with current problems. 
Analysis based on what is happening on the ground will have to be in-depth and 
systemised by the Commission and the Member States acting in concert if we are to be 
in a position to direct the action to be taken in such a way as to take account of the 
demands linked to the particular dimension and development of the phenomenon to be 
curbed. 
1.2.3 Results: financial impact 
In terms of assimilation, recovery of Community funds must be carried out with 
the same vigour as national funds, a matter which the reports fail to confirm. With the 
occasional exception, the texts which show preferential treatment to public creditors are 
not mentioned and it is not therefore possible to establish if the Community creditor is 
treated on an equal footing with the national creditor. 
Questions on recovery procedures have therefore neither been fully answered nor 
in a uniform manner. The question of the link between services responsible for recovery 
and those responsible for investigation is not dealt with. The link would facilitate the 
financial follow up at Community level to enable the Commission to provide support. 
To avoid any discrimination in the settling of debts, the limitation periods and rules 
for their suspension should be harmonised and improvements should be effected in the 
way in which mutual assistance arrangements for recovery matters are carried out. 
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Likewise, the rules for setting up and enforcing guarantees should be specified and 
harmonised. 
Cross checks between Member States of entry or departure and Member States of 
final destination or of departure must be used to advantage to ensure a better overall 
functioning of external border controls. In this perspective, all the potential uses of 
mutual assistance in customs, agriculture and own resources must be exploited. 
In general, the links between control and investigation services and those 
responsible for recovery should be developed. The Member States have certainly in most 
cases mentioned a service responsible for recovery procedures. However, this service 
should know the outcome of any investigation as early as possible. Failing this, frauds 
and irregularities are updated but the implementation at a late stage of binding procedures 
does not allow the money to be recovered (limitation periods, debt settlement). 
As for compounding the amounts involved, the Commission has not always found 
the principle of the impossibility of compound action to be confirmed but rather items 
in the description likely to cause confusion between compounding of the amounts 
involved and compounding of penalties. 
1.2.4 Follow up measures given to cases of fraud and irregularity 
National and Community administrative penalties 
The Member States have only supplied few indications on these questions 
(competent authorities, number of cases ...). A wide variety of situations is to be found 
in the field of national administrative penalties with the result that there is no general 
system for them in the Member States. In most cases, penalties are used for the 
protection of revenue. Too great a disparity may be avoided by developing the use of 
Community administrative penalties and moving towards greater homogeneity in national 
administrative penalties, including on a systematic basis the protection of Community 
expenditure. 
Criminal penalties 
On the basis of the available information, no truly homogeneous comparison can 
be made. A number of reports agree on the need for the use of more effective statistical 
tools for the follow up of proceedings. This would enable the outcome of criminal 
proceedings (case closed, compounding, prosecution, convictions, recovery etc.) to be 
monitored and to ensure that the budgetary authority, which rightly demands this type of 
information, is correctly informed. Analysis must therefore be developed on this aspect. 
Relationship between administrative and judicial proceedings 
Some national reports justify the coexistence of administrative and criminal 
penalties which fulfil different functions, the latter penalizing serious action and the 
former ensuring sound financial management by the Community. However, the 
parallelism of proceedings and cumulation of penalties do not preclude the precedence 
of the judge. Little information is given on the connection between preliminary and 
judicial phases in the national reports. The objective is to optimize the use of means 
available in the criminal area in the fight against fraud. It is interesting to mention on 
this point that some Member States have raised in the part on co-operation the particular 
importance which they attach to the organization of collaboration between the services 
working in the preliminary and judicial stages. 
Referral of case to judicial authorities 
Some Member States have an obligation to refer cases to their judicial authorities 
while others prefer compounding. However, statistical data is absent from national 
reports. 
There is only one area in which, on the basis of the national reports, some elements 
of a comparative approach may be traced, that is the principles for compounding in the 
field of traditional own resources. Compounding in expenditure is not covered. In 
Member States which do not use compounding, knowledge of an offence leads to judicial 
action being started. 
As in the other parts of the report, little mention is made of V.A.T. in the part on 
compounding. Two Member States confirm its use in the same conditions applying for 
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traditional own resources therefore achieving assimilation of treatment for two types of 
Community resources. 
The small number of specific replies found in the national reports does not enable 
any judgment to be made on the use of compounding with regard to the principle of 
assimilation. It is impossible to conclude that Community resources and expenditure are 
subject to the same compounding procedures as national resources and expenditure. It 
can only be seen that it is necessary to improve transparency both on the principles, 
conditions of application and the extent of compounding. In the light of the results of 
the specific study under way, the Commission will return to this problem of 
compounding, in particular from the aspect of the principle of assimilation and 
effectiveness of systems of penalties, both in the administrative and penal area. 
With regard to the Commission's role in the event of criminal proceedings, some 
reports mention that it can participate in cases by indicating either that it never uses this 
possibility or that it ought to use it more frequently. Others mention the role of the 
national Treasury for asset compensation in representing the financial interests of the 
Community in criminal cases. This point should be analysed in greater depth. For the 
rest, the initiatives which the Commission could bring about are limited to the area of 
providing support in the detection and demonstration of the facts of a fraud which is the 
subject of a criminal case. 
Avenues to be explored (1.2) 
This part devoted to the results achieved in the fight against fraud is based on the 
practice put in place by the budgetary authority (the European Parliament) and the 
Commission. It is a question of using to best effect actual knowledge on the ground, 
based on information gathered and the examination of typical cases. Questions of 
principle are highlighted before deciding on the type of action to be undertaken to reduce 
the risk of fraud. 
Consideration of these results gives a first idea of the level of assimilation. 
Improvements in the standard of information are however required. It is impossible to 
judge the concrete application of Article 209 A (EC) without the relevant data for 
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analysis (results of checks and investigations, follow up action on cases established, 
recovery of sums due, administrative and judicial penalties). To complete analysis and 
provide guidelines, comparable figures of homogeneous items are needed (rates of 
recovery of different revenue and expenditure, the number and amounts of compounded 
cases, the numbers of checks and detailed investigations) relating to both national and 
Community financial interests. 
From its analysis, the Commission is able at this stage of the study to deduce three 
guidelines. 
A/ To facilitate the direction of its actions and their planning as close to the reality 
on the ground, the level of detail, the extent and the homogeneity of the information must 
be improved at all practical stages. The degree of assimilation of the Community's 
financial interests will therefore be more appropriate and the rapprochement to be 
achieved at national level will be facilitated. 
The information mechanisms and the harmonisation of the elements to be 
communicated must be improved. It is a question for the Commission of being in a 
position to develop "the exploitation of intelligence" so as to make best use of the 
information at Community level, direct anti-fraud activities and strategy, develop risk 
analysis and finally be capable of providing the budgetary Authority with all the details 
on the follow up of an investigation. 
B/ In certain areas, improvements will not only be able to be achieved by means 
of a rapprochement at Community level of .national practices. This applies in particular 
to control schemes and risk analysis methods so that an equivalent level of monitoring 
throughout Community territory is achieved, to recovery rules (limitation and interruption 
in limitation, interest for late payments, recovery by means of compensation ..), to public 
Treasury privileges applying to Community debts and to administrative penalties and the 
conditions in which they are applied. A strong and constant Community impetus is 
indispensable to achieve such progress and transpose it in concrete form into the 
appropriate framework. 
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C/ The wish for simple and effective regulations also emerges from the national 
contributions. Major financial crime slips more comfortably into the labyrinth and maze 
of over complex regulations which paradoxically provide less protection for operators of 
good faith for whom they can be source of errors and omission. The priority actions 
undertaken by the Commission to raise the level and quality of the control of Community 
finances coincide broadly with these objectives. The wish expressed by certain Member 
States to conduct regular national audits to assess national control systems could provide 
the support and the appropriate framework to enable significant progress to be made in 
the field of simplification and effectiveness of texts. 
1.3 Action to follow up Court of Auditor's reports 
The European Councils of Essen and Cannes requested the Member States and the 
institutions to set up a base on which to fight fraud relentlessly. The comparative 
analysis of the action taken to follow up the reports of the Court of Auditors, mentioned 
in the Essen declaration, seemed to be a useful complement in carrying out this exercise. 
The information supplied, while insufficient to carry out a true comparative 
analysis, does nevertheless allow the existing convergences between the follow up of the 
Court's recommendations, the Commission's missions and the Member States' tasks in the 
field of protection of Europe's financial interests to be emphasised. 
Avenues to be explored (point 1.3) 
In accordance with the Essen mandate, the institutions and the Member States must 
endeavour to follow up the recommendations of the Court which represent a useful tool 
in improving financial management. 
The achievement of this objective could undoubtedly be taken into account in 
national audits undertaken on a periodic basis to ensure the reliability of national control 
systems. Some Member States who already do this have suggested the practice be 
repeated in all Member States. 
/J-17 
Some of the approaches which the Commission intends to use to strengthen its own 
financial management could easily fit into the same partnership framework. 
Part H: Application of article 209A, second paragraph (co­
operation) 
The obligation for the Member States to combat fraud which results from the first 
paragraph of article 209A is amplified by a provision of the treaty mentioned in its 
second paragraph with the aim of implementing with the help of the Commission close 
and regular co-operation. To counter the financial crime which is developing in an 
organized manner and which has targeted the Community budget, improved co-operation 
must be established and function on a regular basis. It is in this perspective that the 
Commission set up the Advisory Committee for the Co-ordination of Fraud Prevention 
(COCOLAF) which is the appropriate body to organize this collaboration between the 
competent services. 
2.1.1 Administrative co-operation and assistance on the basis of non-Community 
instruments 
The information notified is not always comparable but does show that the 
instruments of co-operation between Member States are not left unused. Co-operation 
with third countries is sometimes the aim although this does not result strictly speaking 
from article 209A. 
Avenues to be explored (2.1.1) 
This type of co-operation which exists for the protection of national finances is a 
means of improving assimilation and making the protection more homogeneous. From 
an examination of the information provided, some guidelines emerge to direct the action 
to be carried out at Community level and improve the effectiveness of these mechanisms 
A/ Several reports recognize the need to develop co-ordination and co-operation 
between Member States. There is a need for a more structured co-operation at this level 
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where it does not already exist. It is necessary to broaden and increase the existing 
regulatory structure for co-operation to achieve the level of collaboration required by E.C. 
article 209A. Within this framework, a common solution could be sought to resolve the 
different grievances with the mutual assistance mechanisms (deadlines for answers, 
insufficient justification for the requests). 
B/ It is also necessary to improve the operational links between the services 
responsible for prosecution of serious and complex fraud, involving major organized 
financial crime, as well as the links between these same services and the Commission for 
transnational fraud cases where the current framework is inadequate. This supposes the 
implementation of procedures to develop the assistance which the Commission may 
supply to these services to realize these missions. 
CI The development of personal contacts, exchanges of officials, liaison officers, 
seems an equally effective means of achieving progress with co-operation between the 
Member States. In addition to the instruments in which contacts between experts must 
be legally introduced (to be implemented over time) the importance of results from co­
operation depends in fact also on the quality of relations between the investigators and 
other officials. 
D/ It is appropriate to examine the question raised by several Member States as to 
whether the Commission should continue or intensify its work on concluding mutual 
assistance agreements with third countries. 
2.1.2 Co-operation in criminal matters 
The provisions laid down in paragraph 2 of E.C. Article 209A are not limited to 
purely administrative co-operation. This paragraph also calls on the Member States to 
set up a broader co-operation if that proves to be necessary to combat fraud, in particular 
if the latter takes the form of organized cross border crime. 
Indeed, organized crime must not be allowed to take advantage of disparities in 
judicial treatment to organize its own immunity. The need for a thorough, effective, 
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direct and rapid co-operation is clear from the national reports even if this necessity is 
not always clearly set out. 
Although few reports have dealt with these subjects exhaustively, it is to be noted 
that police co-operation is not clearly distinguished from judicial co-operation. Several 
national reports highlight the usefulness of administrative co-operation, from the stage of 
the preliminary investigations to exchange information, on an institutional basis with the 
other Member States and the Commission and very concrete proposals are put forward 
to strengthen co-operation on penal matters such as for example the possibility of giving 
comparable powers to national investigators. 
Avenues to be explored (2.1.3) 
The items of information available show that it is imperative to make available to the 
national authorities responsible for enforcement effective means to respond to the need 
for an improved and a homogeneous protection of the Union's finances. 
AJ To improve co-operation between the competent national authorities on the one 
hand and between the latter and the Commission on the other hand, it is necessary to 
develop, from the point where initial investigations commence, exchange of information 
between the preventive services in the Member States and the competent services of the 
Commission. To this end, the Commission will continue its work and consider the 
possibility of achieving a legal instrument which is likely to extend co-operation to all 
the operational activities which precede the opening of judicial proceedings. 
B/ It would be useful to continue the examination of the resources and the control 
powers of the officials responsible for fraud prevention and to consider the possibility, 
advocated in certain reports, of giving control powers comparable to those enjoyed by all 
national investigators. 
C/ To ensure that all the elements resulting from Community action carried out in 
co-operation with the Member States are taken into account, in particular with regard to 
prosecution, it is also necessary to examine the role of the Commission and its activities 
A- 20 
with national authorities and to draw the conclusions in terms of regulations to be 
adapted. 
D/ In the field of criminal law, the measures necessary for the effective entry into 
force of the Convention on penal protection of the financial interests of the Community 
must be adopted as quickly as possible. This first step must, to achieve its full effect, be 
extended with the setting up of improved and direct judicial co-operation at Union level 
targeted at the protection of the financial interests of the Community built in particular 
on networks of magistrates and/or prosecutors. The setting up of such networks will 
facilitate the application of the principle recognized in the Convention for centralizing 
proceedings in one jurisdiction. 
2.1.3 Administrative co-operation and mutual assistance under existing Community 
instruments 
Community regulations setting up co-operation between the Member States in 
agriculture, own resources or structural actions foresee an obligation on the part of each 
Member State to provide mutual assistance on their own initiative without the 
Commission necessarily being involved. 
It seems that even if the Community co-operation instruments are used and most 
Member States have produced a satisfactory report on this type of co-operation, 
difficulties exist with regard to deadlines for replies which may slow down investigations 
and enforcement action. At the same time, all sorts of disparities (administrative, legal, 
technical) obstruct circulation of information between the Member States. 
The suggestions; put forward to improve this type of co-operation are quite 
numerous and show the interest which the Member States attach to it. The Commission 
is obliged to provide its assistance in accordance with the second paragraph of article 
209A. It must be in a position to exploit the existing potential tools of co-operation or 
to adapt them for this need. 
/• 21 
Avenues to be explored (2.1.3) 
The panoply of existing instruments at Community level is not ignored by the 
Member States even if the potential for co-operation seems not to be fully used. Given 
the central role of co-operation recognized by all the Member States, the objective to be 
pursued must be to develop existing mechanisms to raise their level of effectiveness and 
usefulness. 
A/ The information systems must evolve and be adapted to take account of the 
reality of certain constraints such as the level of priority, the presentation of information 
and the appreciation of risk. The bodies responsible for the functioning of these different 
co-operation instruments must quickly consider these questions to define clearly the 
needs and introduce appropriate rules (adaptation of texts, production of procedural 
guides, guides for access to notifications, methods of co-operation, production of files 
especially at central level). 
B/ Certain forms of co-operation highlighted in the national reports must be 
explored and developed such as for example the organization of follow up action on cross 
checks on goods in free circulation. Holding regular meetings between competent 
services as well as rapid organization of ad hoc meetings for urgent and serious cases 
must be encouraged. The development of databases including information on economic 
operators (risk criteria) advocated by some Member States which have established a 
central register (or who suggest it) must be examined at Community level. 
C/ Mutual assistance on recovery must be made more effective. The directive on 
these mechanisms must be adapted to the needs of the single market by giving the 
Member States, which are alone responsible for recovery, the legal means and the 
necessary information to accomplish their mission. The potential for mutual assistance 
in agriculture, customs or own resources should be better exploited by involving the 
Commission systematically as soon as an area of Community interest such as recovery 
arises. This interest may moreover be of a fundamental nature when a revelatory case 
is discovered showing the way a particular fraud has been organized (a textbook case) 
which must not be repeated in other parts of the Union territory. 
A 22 
D/ It is generally appropriate to ensure a full and proper application of Community 
regulations on co-operation. The Advisory Committee for the Co-ordination of Fraud 
Prevention (COCOLAF) in its specialist format must meet regularly to assess results, 
identify the possibilities of the system and, if necessary, determine rules for both 
presentation and level of detail of institutional co-operation with regard to the provision 
of uniform data. In its plenary sittings the Advisory Committee will then put forward the 
essential adjustments to be made and will provide the impetus required and where 
necessary will inform the competent bodies of its conclusions. 
Part DDE: Report on equivalence between measures to protect 
national finances and those to protect the Community's 
financial interests 
It cannot be denied that this type ot demonstration is quickly confronted with 
important methodological obstacles. However, to leave completely aside this aspect of 
the report or to limit matters to the claim that equivalence is obtained by definition, given 
that Community monies are filtered through the public purse and are therefore 
transformed into national funds or even that equivalence has always existed and goes 
even further (Community finances are better protected) since before the entry into force 
of the TEU, all of this stems from the affirmation of principle and comes back to a 
reassessment of the soundness of the initial request of the European Council. 
Compliance with the principle of assimilation has therefore been shown in most 
reports by repeating aspects considered previously in the form of conclusions. 
The absence of comparative national and Community budget fraud results makes 
any comment on the true extent of assimilation into the Union most delicate. At most 
a set of indicators may be noted. Analysis of the systems in place (texts, organization) 
gives the appearance that revenue is better protected than expenditure. In the latter area, 
agricultural expenditure seems to be better organized than expenditure on structural 
activities. In general, the Member States state once and for all that assimilation has been 
achieved but the assimilation relationship is never made from one area to another nor 
/I-23 
through comparative results. The exact measure of the degree of assimilation through 
comparative results is moreover most often absent. 
A number of considerations modify the contours of the principle of assimilation. 
It is often maintained that Community agricultural legislation on checks is so detailed that 
Community expenditure is better controlled than national expenditure (this view is 
sometimes exemplified). 
Compliance with article 209A includes adaptation of national actions to the 
demands of the protection of Community finances and the equivalence relationship, often 
set up as a theorem of equality by the Member States, must in fact be brought about 
progressively through concrete measures which have to be assessed on a continuous basis 
to make progress both in improving the Community's financial management and the 
protection of its financial interests. 
If national contributions do not always lend themselves to a full and detailed 
comparative analysis and have not always allowed all the segments of national action to 
comply with the principle of assimilation to be confirmed, they nevertheless all bring out 
avenues to work on and ways of making progress. Often moreover they coincide or 
merge in more than one report. Most national reports come to the conclusion of the need 
to progress in all aspects from prevention to enforcement including co-operation. 
The need to act at Community level to amplify in certain areas the monitoring 
systems on the basis of objective criteria to harmonise checks carried out by the Member 
States is often put forward as a priority. 
Likewise some Member States recommend the systematic and regular assessment 
of these systems to adapt constantly the level of protection of Community finances so as 
to optimize the national and Community monitoring frameworks taking account of the 
needs perceived at the time and the actual risks. On this point it is often recommended 
that an audit structure should be set up bringing together all areas of expertise. 
The wish to simplify texts is often put forward as an indispensable permanent 
feature in achieving coherent legislation which takes account of cost-benefit factors. 
/J-24 
Co-operation is adorned with numerous virtues and is often presented as the 
essential catalyst for national and Community effectiveness in countering sophisticated 
transnational fraud and organized financial crime. The need to develop its possibilities 
both in strengthening work on the ground and in optimizing the exploitation of 
information seems to be a commonly shared aim whether in improving existing 
procedures or in extending the institutional forms of co-operation beyond administrative 
assistance. 
For some the optimum position will only be achieved when the Community level 
has specific and obligatory systems of administrative penalties and adequate measures to 
raise the level of compatibility and equivalence of national legislation in penal matters. 
In any event, as the Community achieves the necessary convergence between its 
Member States' economies to enter into the decisive phase of economic and monetary 
Union and integration is further achieved by increasing financial intervention, it would 
seem surprising to make strong declarations of intent at the highest levels without 
adopting the necessary measures to translate these declarations into concrete progress in 
all the areas of protection of its financial interests. 
An improvement in the fight against fraud, in addition to actual assimilation, 
involves a voluntarist policy of prevention ensuring a more effective and equivalent level 
of control in all Member States but also by means of a stronger and homogeneous 
enforcement policy in the Union. The affirmation of the monitoring and financial control 
obligation of the collector or administrator of Community funds obviously stems from the 
main principles of management of public finances . Amplifying this obligation by setting 
up specific and obligatory rules and criteria for each area to improve monitoring and 
ensure an equivalent level of control throughout the Community remains a necessity for 
prevention. It is not enough either to bring about a rapprochement of the definitions of 
the fraudulent actions or behaviour which it is intended to combat. It is also necessary 
to make enforcement action homogeneous to counter the movement of fraudsters to lower 
risk judicial areas. The obligations set by the Court of Justice in 1989, demanding 
"effective, proportionate and dissuasive" penalties, remain an objective to be reached in 
a homogeneous manner throughout the territory of the Union to combat the development 
of organized financial cross border crime which uses its own risk analysis. 
A-2S 
The protection of the assets of the European taxpayer involves the very credibility 
of both the Union's institutions and the Member States. The Community is committed 
to improving its financial management and must logically be even more attentive to the 
complete protection of its financial interests against any misappropriation. This is the 
object of the exercise. It is on this basis that it will undoubtedly be possible to make 
progress to satisfy the mandate of the Cannes and Essen Councils. 
* 
* 
/J-26 
PROTECTION OF THE COMMUNITY'S 
FINANCIAL INTERESTS 
COMPARATIVE ANALYSIS 
of the reports supplied by the Member States 
on national measures taken to combat 
wastefulness and the misuse of Community resources 
SUMMARY 
page 
Preface 5 
The remit 
The methods used 
Part I: Application of the first paragraph of Article 209a of the EC Treaty 
(assimilation principle) 9 
1.1. National measures in the assimilation context (normative provisions, 
organization of services) 10 
1.1.1. Summary description and evolution of the legislation 10 
(a) The resources side 
(b) The expenditure side 
(c) General criminal law 
Avenues to be explored (point 1.1.1) 21 
1.1.2. Brief description (with background) of departmental organization 23 
(a) Own resources 
(b) • EAGGF Guarantee Section 
(c) Structural Funds 
(d) Provision of assistance to the Commission 
Avenues to be explored (point 1.1.2.) 36 
1.2. Evaluation of measures taken 39 
1.2.1. Intelligence, control and investigation measures 39 
1.2.2. and 1.2.3. Results: frauds and irregularities detected; 43 
financial impact 
(a) Frauds and irregularities discovered and amounts concerned 
(statistics, case study, typology) 
(b) Collection and recovery of sums due 
Recovery of own resources 
Recovery of undue expenditure 
(c) Out-of-court settlement of the amounts concerned 
1.2.4. Follow-up measures 54 
(a) National and Community administrative penalties 
(b) Criminal penalties 
(c) Link between administrative and judicial procedures 
(d) Link between preliminary and judicial stages 
(e) Referral of case to judicial authorities 
(f) Partie civile or equivalent measures 
(g) National measures taken or planned to avert risk 
of repetition 
(h) Suggestions for Community measures 
Avenues to be explored (1.2.) 62 
1.3. Action to follow up the Court of Auditors' reports 63 
Avenues to be explored (1.3.) 66 
Part II: Application of second paragraph of Article 209a of the EC 
Treaty (cooperation) 67 
2.1.1. Administrative cooperation and assistance under non-Community 
instruments 68 
Avenues to be explored (2.1.1.) 71 
2.1.2. Cooperation in criminal matters 72 
Avenues to be explored (2.1.2.) 75 
2.1.3. Administrative cooperation and mutual assistance under Community 
instruments 76 
Avenues to be explored (2.1.3.) 80 
Part III: Equivalence between measures to protect national finances and 
those to protect the Community's financial inter ests 82 
- Preface -
The remit 
On 11 July 1994 the Council (Ecofin) asked the Commission to produce a progress report 
on the application of Article 209a of the EC Treaty no later than the end of 1995. 
The first paragraph of that Article reads: ^Member States shall take the same measures 
to counter fraud affecting the financial interests of the Community as they take to counter 
fraud affecting their own financial interests'. This enshrines what has come to be known 
as the vprinciple of assimilation'. 
Article 209a has a second paragraph reading: v Without prejudice to other provisions of 
this Treaty, Member States shall coordinate their action aimed at protecting the financial 
interests of the Community against fraud. To this end they shall organize, with the help 
of the Commission, close and regular cooperation between the competent departments of 
their administrations'. 
Subsequently, the Essen European Council on 9 and 10 December 1994 called on the 
Member States to ^submit reports on the measures they are implementing to combat 
wastefulness and the misuse of Community resources', to be examined by the Council 
(Ecofin) in June 1995 and submitted to the European Council in December 1995. 
The Member States' reports were presented within the time allowed - in May 1995 - for 
presentation to the Council (Ecofin) on 19 June. The Council concluded that subsequent 
action should proceed along three lines - national, Community and partnership - to 
increase the effectiveness of protection of the Community's financial interests. 
The Cannes European Council (26 and 27 June) requested the Commission to study and 
analyse the reports. It took note of the Member States' reports on the measures they are 
implementing to combat wastefulness and the misuse of Community resources, requested 
the Commission to * prepare a comparative summary for the European Council in 
Madrid' and x callfedj on Member States and all institutions to persevere in the battle 
against fraud and waste '. 
The methods used 
This document is an interim report based on the comparative analysis of the national 
reports. It takes stock of progress in applying Article 209a on protection of the 
Community's financial interests and summarizes the measures taken by the Member 
States to combat the misuse of Community resources. 
The structure is the logical sequel of the structure of the Article, which sets an objective 
to be attained and prescribes the means to be deployed. Measures taken to give effect to 
the Article are evidence of the Member States' determination to combat Community fraud 
in the same way as purely national fraud (assimilation); and the very existence of the . 
single market and the transnational nature and dimension of financial crime demand 
counter-measures transcending the national arena and proceeding from enhanced 
partnership at Community level (cooperation). 
To ensure that national reports followed a standard pattern facilitating the comparative 
summary, the Commission, as requested by the Council (Ecofin) on 16 January 1995, 
devised a generallayout to be used in preparing the national reports. It was entitled 
v Subjects to be covered in the reports to be presented by the Member States'. It was 
discussed by the Advisory Committee for the Coordination of Fraud Prevention 
(COCOLAF) on 1 February 1995 and approved by the Council (Ecofin) on 20 February. 
By and large the Member States hâve adhered to the proposed layout. Even so, their 
reports are highly dissimilar. Some are only a few pages long; the longest has 78 pages. 
Above all, their content varies widely, as the emphasis is not placed on the same items. 
Some Member States highlight recent changes to their anti-fraud laws. Others highlight 
the administrative organization and distribution of functions in verifying the use made of 
funds. Some were more precise than others as to the results obtained from the action 
taken and the follow-up to checks undertaken or observations made by the European 
Court of Auditors. 
The explanation may lie partly in the short time available to the Member States for 
answering an ambitious survey. Those responsible for compiling the reports may have 
found it impossible to gather all the requisite information and therefore concentrated on 
those items which struck them as particularly important. The Commission was unable to 
engage in the dialogue with the Member States which would have facilitated the exercise 
and yielded a balanced set of contributions. 
The Member States give political reasons to explain the absence of certain aspects. VAT 
fraud, for instance, was left out of several reports. True, the collection of the 
Community share of the tax is an integral part of the national system, but more details 
of the problems specific to this sector would have provided a basis for comparing relative 
effectiveness in the various fields. This is particularly important in the context of the 
single market and rules of procedure which have enhanced the independence of the 
Member States' authorities. 
Lastly, the differences may be explained by differences in the remits given by the Ecofin 
Council on 11 July 1994 and by the Essen European Council. Some reports focus on the 
legal and institutional approach, demonstrating the application of the assimilation 
principle and the existence of cooperation. Others are embellished by further, more 
precise data as to the results achieved in the protection of the Community's financial 
interests. 
This report proceeds from the layout suggested to the Member States. It contains 
comparative tables setting out the information to hand and revealing, a contrario, those 
areas where it was not possible to produce the summary. The utility of pursuing and 
amplifying the exercise in conjunction with the Member States will then have to be 
investigated so that the fullest benefit of the analysis can be enjoyed. 
Tables are given at various places in this report to summarize certain categories of 
information taken from the national reports; they are designed to constitute an objective 
basis for the comparative analysis. It is obviously not possible to tabulate all the details 
supplied by the Member States. The Commission has endeavoured to reproduce the 
national contributions as faithfully as possible, but there are inevitably risks in any 
selection process. Readers seeking access to exhaustive information on any particular 
point is accordingly referred to the national reports annexed to this summary report. 
Each part and section contains a commentary illustrating the points that appear most 
significant. In addition, guidelines or avenues to be explored reflecting the Ecofin 
Council's conclusions of July 1994 and June 1995 are offered as a means of laying a. 
basis for action to pursue the fight against fraud and wastefulness and to improve the 
effectiveness of the protection of the Community's financial interests, as called for at 
Cannes. 
The first part of this report is on the application of the assimilation principle enshrined 
in Article 209a of the EC Treaty. 
The second part takes stock of the cooperation arrangements introduced by the second 
paragraph of Article 209a of the EC Treaty. 
The third part evaluates the degree of equivalence of measures to protect national and 
Community finance. 
Part I: Application of the first paragraph of Article 209a of the EC Treaty 
(assimilation principle) 
The first paragraph of Article 209a of the EC Treaty reads: ^Member States shall take 
the same measures to counter fraud affecting the financial interests of the Community as 
they take to counter fraud affecting their own financial interests'. 
This writes into the Treaty the rule enunciated by the Court of Justice in Case 68/88 
Commission v Greece [1989] ECR 2965 Gudgment given on 21.9.1989). 
This-is also known as the Yugoslav Maize case. In it the Court of Justice declared in 
relation to the Member States' obligations under the first paragraph of Article 5 of what 
was then the EEC Treaty ÇMember States shall take all appropriate measures, whether 
general or particular, to ensure fulfilment of their obligations arising out of this Treaty 
or resulting from action taken by the institutions of the Community. They shall facilitate 
the achievement of the Community's tasks') that they were under an obligation to penalize 
infringements of Community law v under conditions, both procedural and substantive, 
which are analogous to those applicable to infringements of national law of a similar 
nature and importance and which, in any event, make the penalty effective, proportionate 
and dissuasive'. 
The principles enunciated by the Court and by the'Union Treaty, though not identical, 
overlap and amplify each other. 
The assimilation principle is expressed in stronger terms in the Union Treaty, for 
Article 209a requires the Member States to take the ^same measures' and not just 
Nanalogous' measures. Its scope is broader since it concerns not only penalties for 
infringements but all vmeasures' (principal and subordinate legislation, administrative 
organization and scales of penalties) to combat fraud against the Community's financial 
interests. 
The Court, on the other hand, unlike the Treaty, sets a definite objective as to the result 
to be attained in terms of penalties (which must be effective, proportionate and 
dissuasive), which is thus part of the acquis communautaire. 
The Member States' reports suggest that this is how they see their obligations and that 
they apply Article 5 as interpreted by the Court of Justice and Article 209a of the EC 
Treaty in combination with each other. Most of them accordingly cover both the 
measures they have taken to assimilate fraud against the Community's and their own 
financial interests and the effectiveness of the penalties for which they have made 
provision. 
Following the layout suggested to the Member States, the part of this report devoted to 
progress in the application of the assimilation principle describes national measures to 
combat fraud against the Community budget (section 1.1), evaluates their results (section 
1.2) and tracks the action taken in response to the report of the European Court of 
Auditors (section 1.3). 
1.1. National measures in the assimilation context (normative provisions, 
organization of services) 
There are two types of measure - legislation (1.1.1) and departmental organization 
measures (1.1.2). 
Point 1.1.1 ought to have made it possible to offer a panorama of national instruments 
to combat fraud against the Community budget from two angles - prevention (provisions 
for checks) and enforcement (provisions for penalties). Point 1.1.2 highlights the various 
organizational approaches, distinguishing departments responsible for traditional checks 
and those responsible specifically for countering fraud which operate according to their 
own logic given their own mission. 
1.1.1. Summary description and evolution of the legislation 
The layout suggested to the Member States called for a brief description (with historical 
background) of (a) legislation, (b) subordinate instruments and (c) administrative 
instructions, circulars, etc. One Member State saw no need to describe the various 
instruments on the grounds that Article 209a is directly applicable and specific legislation 
is nugatory and that Community funds transit via the national treasury and are treated in 
the same way as national funds. 
10 
This is an isolated case. The other reports cite or reproduce the main provisions of 
principal and other legislation. 
It has been found that preventive measures received little attention in the national reports. 
In some cases they are considered in the sections relating to the organization of checks; 
in others they are in the section on the law, with enumerations of instruments presented 
without further comment. In most cases, however, they are simply ignored, as the reports 
on point 1.1.1 tend to focus on the enforcement angle. Preventive measures might 
therefore deserve studying in greater depth at a subsequent stage of the comparative 
survey. 
The reports reveal that most Member States treat revenue and expenditure through quite 
separate sets of rules. This was the approach taken when the convention on the protection 
of the Community's financial interests was approved at Cannes; it does not preclude an 
all-inclusive approach to the fight against organized financial crime but distinguishes 
fraud on the expenditure side and on the revenue side in the definitions of fraudulent 
conduct. 
The rules governing resources are usually to be found in specific instruments of tax or 
customs law (a). The rules governing fraud on the revenue side only rarely make 
distinctions between different revenue categories (b). But there is a discernible trend in 
the Member States for legislation to contain specific provisions expressly countering 
fraud against the Community's financial interests (c). 
(a) The resources side 
Provisions to counter fraud against Community revenue 
Mem 
ber 
State 
B General criminal 
offences 
Forgery, uttering 
forged documents, 
fraudulent 
conversion, 
receiving, 
laundering Specific criminal 
offences 
Customs and Excise 
(General) Act 
(sections 114, 115, 
157, 202, 237, 238, 
220, 233, 234, 
256): fines and 
custodial sentences Administrative 
penalties 
No provisions in the 
Customs and Excise 
(General) Act for 
administrative 
penalties Historical 
background 
Far-reaching reform 
of the Act by the 
Act of 27.12.1993 
with regard to the 
amount and 
enforcement of 
fines; to boost their 
deterrent effect 
11 
DK 
D 
EL 
E 
F 
IRL 
I 
L Fraud, forgery, 
uttering forged 
documents, etc. 
Forgery and false 
accounting 
(obtaining by 
deception only on 
the expenditure side) 
The information in 
the reports does not 
provide a basis for 
comparative analysis 
Crim. Code section 
349 protects public 
revenue; although 
the assimilation is 
not explicit, 
Community revenue 
is included. Also 
sections 403, 528 
(obtaining by 
deception) and 302 
(forgery) 
Offences under the 
general criminal law 
apply to Community 
revenue 
Report contains 
insufficient 
information 
No information on 
the applicability of 
provisions defining 
general offences to 
the revenue side 
Forgery, uttering 
forged documents 
and false accounting Aggravated 
smuggling offences 
(Crim. Code 
section 289). 
Penalties 
determined by 
Chapter 11 of the 
General Customs 
Code and the 
Community Imports 
and Exports Act 
Tax criminal law 
(tax fraud); 
offences formally 
extend to 
Community revenue 
Institutional Act on 
smuggling; no 
explicit assimilation 
Customs criminal 
legislation 
Legislation defining 
customs fraud 
offences applies to 
agricultural levies, 
excise duties and 
VAT 
Criminal offences 
defined by customs 
legislation (customs 
duties and 
agricultural levies) 
Customs legislation Fines set below the 
level required to 
trigger criminal 
prosecution 
Administrative 
penalties provided 
for each type of 
Community revenue 
(agricultural levies 
by reference to 
customs and tax 
legislation) 
' 
Administrative 
penalties provided 
for by Tax (General) 
Act and Tax 
Budgets (General) 
Act 
What can be 
considered 
administrative 
penalties are 
provided for by 
specific legislation 
Administrative 
penalties provided 
for by customs 
legislation 
Administrative 
penalties provided 
for by specific 
legislation None 
None 
Reforms announced 
to make 
assimilation explicit 
None 
None 
12 
NL . 
OS 
P 
SU 
sv 
UK False accounting 
(Crim. Code section 
225), relevant to all 
forms of EC fraud, 
and organized crime 
(Crim. Code section 
' 140) 
Information on 
applicability of 
criminal law not in 
report 
Forgery, obtaining 
by deception, 
fraudulent 
conversion, 
corruption 
Fraud provisions of 
Crim. Code Customs and Excise 
. (General) Act, 
section 171 and 
provisions on 
smuggling 
(sections 169 and 
170); Import and 
Export Act section 
18; Agricultural 
Produce Act 
section 12 
Tax criminal law 
applies to the three 
revenue areas 
(customs duties, 
agricultural levies, 
VAT) 
Decree-Act 376/89, 
section 21 (import 
and export 
smuggling). 
Apparently no 
specific legislation 
for agricultural 
levies. VAT 
legislation not 
supplied 
Customs Act and 
Excise Act contain 
provisions for 
criminal penalties 
Smuggling Act 
Customs and Excise 
Management Act 
1979 determines 
offences and 
penalties; Common 
Agricultural Policy 
Act 1991 with less 
severe penalties; 
VAT Act 1994 In the Import and 
Export Act and the 
Agricultural Produce 
Act 
Provided for in 
Customs Code 
No indication of 
nature of penalties 
Administrative 
penalties provided 
for by specific 
legislation Community 
Customs Code 
(1.1.1994) 
amplified by 
national legislation 
Tax legislation 
amended following 
accession 
Apparently none 
Legislation in own 
resources matters 
amended following 
accession 
Legislation relating 
to customs and 
VAT amended 
following accession 
VAT legislation 
reformed in 1994; 
no details given 
On the resource side, the problem of the assimilation principle is not appreciated as 
regards revenue categories taken individually but in terms of the legal frameworks for 
the different resources. 
13 
For the traditional Community own resources - customs duties and agricultural levies -
there is no longer a national set of rules to which the Community scheme could be 
assimilated. For VAT, as was stated at the beginning of this report, there is full 
assimilation in the way the national and Community shares are established and collected. 
Some information is given on developments since the Yugoslav Maize case and the entry 
into force of the Union Treaty. 
The Belgian Act of 27 December 1993 amending the Customs and Excise (General) Act 
toughened the criminal law components of customs law in a number of respects, and 
particularly by raising the amounts of fines, hitherto not sufficiently deterrent, quite 
substantially. 
The Luxembourg report does not state whether the tougher provisions enacted in Belgium 
were taken over in Luxembourg in the context of customs union between the two 
countries. Nor does it confirm whether Luxembourg, where there are no provisions for 
criminal offences in the VAT legislation, is planning to remedy the deficiency. 
The Member States that acceded to the Union in 1995 have adjusted their legal 
instruments to the assimilation principle. These Member States do not on the whole 
highlight changes in their criminal law for the purposes of Article 209a, but it would be 
worth studying the more recent provisions (notably criminal law provisions in Finland), 
and the national reports do point to explicit assimilation in some areas. 
Austria, for instance, has changed its criminal tax legislation to treat fraud in respect of 
Community levies and taxes in the same way as fraud in respect of the national 
equivalents. Customs legislation has been extended to cover offences committed outside 
Austria but within the Community's customs territory. The Finnish report mentions 
amendments to customs law (definition of customs offences and related penalties) 
alongside the description of its agricultural and VAT legislation. 
The question of assimilation on the revenue side (in the enforcement context) must 
therefore be seen in the broad sense as a comparison between the legal framework for 
purely Community resources (the traditional own resources) and for the national 
14 
resources that provide the bulk of the revenue in the national budgets. Another 
worthwhile comparison would be between national schemes inter se, to confirm (or not) 
the existence of distortions, notably in relation to administrative and criminal penalties, 
that might be such as to facilitate fraudulent transactions between Member, States or to 
deflect trade within the internal market, or even to prompt firms to relocate towards the 
places where the enforcement risk is felt to be lighter. 
(b) The expenditure side 
Provisions to counter fraud against Community expenditure 
Mem 
ber 
State 
B 
DK 
D General criminal 
offences 
Forgery, uttering 
forged documents, 
fraudulent 
conversion, 
obtaining by 
deception, receiving, 
laundering, 
misappropriation of 
funds 
Obtaining by 
deception, forgery, 
uttering forged 
documents, false 
statements to public 
authorities 
Obtaining by 
deception Specific criminal 
offences 
Fraud in relation to 
grants (Act of 
7.6:1994), same 
penalties as for 
obtaining by 
deception; Act of 
28.3.1975 on trade 
in agricultural, 
horticultural and 
sea fisheries 
produce (EAGGF 
Guarantee) 
No specific offence 
except in 
agriculture 
(EAGGF Guidance 
and Guarantee) 
(fines and custodial 
sentences) 
Offence of fraud in 
relation to grants 
extends explicitly to 
Community funds Administrative 
penalties 
Definitive or 
temporary 
disqualification from 
Agricultural Fund 
grants; confiscation 
of benefits received 
/ 
Interest on late 
payment; flat-rate 
surcharges 
Administrative 
penalties provided 
for explicitly by the 
legislation relating 
to agricultural 
markets Historical 
background 
Act of 7.6.1994-
specific offence of 
fraud in relation to 
grants and much 
heavier penalties 
April 1994: 
provisions for flat-
rate surcharges 
made in legislation 
relating to EAGGF 
(Guarantee) 
None 
15 
EL 
E 
F 
IRL 
I 
L Obtaining by 
deception, forgery, 
uttering forged 
documents, 
fraudulent 
bankruptcy, 
receiving etc. Act 
2172/93 imposes 
penalties for fraud 
against the 
Community's 
financial interests 
Offences against the 
Crim. Code 
(obtaining by 
deception, forgery, 
misappropriation of 
public funds) and 
fraud in relation to 
grants (section 350 
Crim. Code) ' 
Obtaining by 
deception, 
fraudulent 
conversion, forgery, 
uttering forged 
documents • 
General criminal 
law (Larceny Act 
1916; Forgery Act 
1913; Falsification 
of Accounts Act 
1875; Conspiracy to 
Defraud, Bribing & 
Corruption -
Criminal Justice Act 
1951 
No information on 
applicability of 
general criminal 
offences to fraud 
against the 
Community 
Forgery, uttering 
forged documents, 
misappropriation, 
fraudulent 
conversion, 
receiving Heavier fines for 
offences to the 
detriment of the 
public authorities, 
the European 
Community being 
explicitly included 
No. Plans to 
introduce blanket 
assimilation by 
specific offence of 
fraud against the 
Community's 
financial interests 
Specific criminal 
provisions for 
EAGGF Guarantee 
and SIGC 
No. A Bill to create 
a general offence of 
fraud against the 
Community's 
financial interests is 
in preparation 
Crim. Code section 
640 (aggravated 
deception to obtain 
public grants) and 
section 316bis 
(misappropriation 
of State funds) 
Crim. Code section 
496-1 (obtaining by 
deception) explicitly 
protects Community 
expenditure Administrative 
penalties provided 
for different 
EAGGF sectors 
(olive oil, fruit and 
veg.,sheepmeat, 
goatmeat, tobacco, 
cotton). No 
information on the 
Structural Funds 
Administrative 
penalties provided 
for EAGGF 
Guarantee, 
Structural Funds and 
Cohesion Fund in 
Budget (General) 
Act section 82; fines 
and disqualification 
from benefits 
National 
administrative fines 
- in EAGGF matters 
Administrative 
penalties provided 
for in relation to 
EAGGF Guarantee 
inter alia 
For EAGGF 
Guarantee and the 
Structural Funds Assimilation 
principle in section 
36 of Act 2172/93 
Budget (General) 
Act extended to 
Community funds 
in 1991; 
administrative 
penalties introduced 
, 
None 
Act No 142 of 
19.2.1992, 
replacing Act No 
898 of 23.12.1986, 
explicitly 
assimilates 
1993 Act extends 
Crim. Code section 
496 to Community 
fraud 
16 
NL 
P 
OS 
SU 
sv 
UK False accounting, 
forgery - Crim. 
Code sections 140 
and 215 
Forgery, obtaining 
by deception, 
fraudulent 
conversion, 
corruption 
Crim. Code 
(unspecified) 
No information on 
applicability of 
general criminal 
offences to 
expenditure 
Crim. Code 
provisions on fraud 
Common-law 
offences of 
conspiracy to 
defraud; Theft Acts 
contain provisions 
on fraud No specific offence 
in relation to 
Community 
expenditure 
Decree-Act 28/84 
of 20.1.1984 
sections 36 to 38 -
specific offences of 
fraud in relation to 
grants 
Criminal offences 
defined in 
agricultural markets 
legislation; tax 
evasion provisions 
apply to fraud in 
relation to export 
refunds 
Criminal penalties 
(up to 6 months' 
imprisonment) for 
infringements of 
Community 
agriculture 
legislation 
None CAP - penalties 
provided for by 
specific legislation; 
none for Structural 
Funds 
For the ESF 
Disqualification by 
way of national 
penalty; may be 
ordered by 
agricultural control 
authorities 
Administrative 
penalties provided 
for in Agriculture 
Act 1957 None 
None 
Criminal tax law 
amended following 
accession 
Legislation on 
agriculture and 
structural assistance 
amended following 
accession 
None 
The layout proposed by the Commission, which called for a description in each area, was 
not generally followed. A trend for each area of expenditure is given for Austria, where 
fraud in relation to export refunds has been assimilated to tax evasion by amendments to 
the agricultural markets legislation. 
Where the reports do mention changes in the law, they most commonly announce the 
creation of new specific offences of fraud in relation to grants, with Community 
expenditure being included. 
17 
Section 264 of the German Criminal Code, introduced in 1976, creates an offence of 
deliberate or negligent fraud in relation to grants; by subsection 264(6) this includes 
payments made under Community schemes. 
The Member States often make penalties subject to the existence of relevant Community 
rules imposing specific obligations. The German report raises this question and cites its 
Grants Act, which provides that penalty provisions relating to Community grants depend 
on the existence and substance of relevant Community instruments. The Council adopted 
its common position on the Commission proposal for a Regulation on administrative 
penalties on 29 June 1995, after the national reports had been produced, to meet their 
concerns in this respect. 
Since the Union Treaty came into force, Belgium and Luxembourg have changed their 
legislation to assimilate the rules governing expenditure in a comprehensive fashion. In 
Belgium, the Act of 7 June 1994 extended the scope of the Royal Decree of 1933 that 
was confined to grants from the Belgian State itself. Henceforth, the offence of fraud in 
relation to grants extends to grants from international institutions. Penalties have been 
made heavier and adjusted to the offence, reference being made in Parliament to the 
Court of Justice's decisions. In Luxembourg, legislation enacted on 15 July 1993 
extended the definition of obtaining by deception (Criminal Code section 496) to cover 
fraud in relation to grants from all sources, including grants from international 
institutions. 
In the item on historical background, the money-laundering legislation, which provides 
a means of tracing money obtained fraudulently from the Community budget, was 
mentioned by some Member States (Belgium - Act of 17.7.1990; Ireland - Criminal 
Justice Act 1994; Italy - Criminal Code section 648). 
Progress in introducing the assimilation principle on the expenditure side has also to be 
considered in relation to the effectiveness of measures taken on the revenue side. The 
existence of areas of distortion in the efficacy of both prevention and enforcement 
(administrative and criminal penalties) should be highlighted so that standards can be 
raised where they are visibly lowest. The position is the same as on the revenue side: in 
18 
addition to general assimilation, there is the objective of raising standards of protection 
throughout the Community. 
(c) General criminal law 
Several Member States state that their general criminal law is adequate to give effect to 
the assimilation principle in legal terms. 
The national Criminal Codes or equivalent bodies of legislation all make provision for 
offences that can embrace both the Community's and the Member States' financial 
interests - obtaining by deception, forgery and uttering forged documents and fraudulent 
conversion are the most important. Some Member States (the Netherlands, for example) 
list dozens of provisions to be found in a great nurrfber of separate enactments that can 
be used against fraudsters, depending on the form the fraud takes. 
Most Member States believe that the ordinary criminal offences are adequately defined 
to protect the Community's financial interests. Assimilation for enforcement purposes is 
implied in provisions creating offences and penalties that are applicable in like manner 
to Community and national interests. 
Even so, it is clear from some of the reports that the trend is towards making fraud 
against the Community's financial interests an offence in its own right. The trend has 
gathered momentum with the Convention on the protection of the Community's financial 
interests on which an agreement was reached at Cannes and which was signed on 26 July 
1995. Article 1(2) requires Member States to take the necessary and appropriate measures 
to transpose into their criminal law the provisions of Article 1(1) (defining what 
constitutes fraud against the Community's financial interests) so as to make the conduct 
described therein a criminal offence. The purpose, as is clear from the explanatory 
report, is that Member States should make fraud either a specific or an express offence 
or at least bring it within the general definition of the offence of fraud. 
There is reportedly a general blanket offence of fraud in Greece, whose report states that 
Act No 2172/93 (section 36) extends the scope of criminal penalties to cover fraud to the 
detriment of the Community. Other Member States have announced their plans to provide 
19 
for a general offence in their legislation shortly. Spain announces a Bill to amend the 
Criminal Code by providing expressly for fraud against the Community. Ireland's 
introductory report, after stating the traditional position that there is no single offence of 
fraud but a multitude of forms of fraudulent conduct, likewise announces that a Bill is 
in preparation to consolidate the existing provisions in respect of dishonesty and define 
new offences, including an offence of fraud against the Community's interests. 
Lastly, mention must be made of Italy, where fraud offences are defined by a series of 
enactments, mostly predating the Union Treaty, relating to different areas of Community 
finance. The Customs (Consolidation) Act (sections 34 and 282) establish specific 
offences of fraud in relation to Mmport and export duties, levies and other charges on 
imports and exports provided for by Community instruments'. On the expenditure side, 
sections 640bis and 316bis of the Criminal Code prohibit and penalize the unwarranted 
obtaining of grants from public funds and their misappropriation to wrongful purposes 
and have been made applicable to Community funds. Act No 55/90 already specified 
grants from the European Communities among the areas to which section 640bis 
(aggravated cases of obtaining public funds by deception). As regards section 316bis, Act 
No 181/92 puts national and Community funds on the same footing. The Italian report 
adds that administrative penalties may be imposed in addition to criminal penalties and 
that the Commission has been accorded a stronger status in criminal proceedings. 
The two tables summarizing the position on this point regarding the revenue and 
expenditure sides show that only part of the requisite information is to hand and that 
further research will be needed to consolidate the basis for pursuing the intensive fight 
against fraud and wastefulness called for by the Cannes European Council. 
Consolidating the information base is vital for a full picture of the political climate in 
which further progress is to be made towards attaining the objective set at Cannes of 
vigorously combating fraud and raising the level of protection of the Community's 
financial interests. 
Most Member States have preferred the differentiated approach to the revenue and 
expenditure sides. This approach has been confirmed at Community level by the twofold 
definition of fraud in Article 1 of the Convention on protection of the Community's 
20 
financial interests approved at Cannes and signed on 26 July 1995. It is the logical 
consequence of the differing definitions and scope of obligations in Community and 
national law. As the Spanish report stresses, the Member States are responsible for the 
bulk of the procedural rules in the law governing own resources in general and VAT in 
particular (rights and obligations of administrations and taxpayers, establishment and 
recovery procedures, limitation periods and conditions, powers and obligations, of 
inspection officers, penalties, etc.). By contrast, the bulk of the rules governing 
agricultural expenditure, representing half the budget, are enacted by the Community and 
must be applied directly by the Member States. 
This situation of fact raises questions as to the degree of assimilation of rules governing 
expenditure and revenue and their respective degrees of efficacy. The analysis should 
be continued in this direction. 
Beyond the further analysis to be based on amplification of the answers supplied by the 
national reports, four major guidelines may help to bring the objective set by the 
European Council within reach. 
/ 
Avenues to be explored (point 1.1.1) 
What is clear from this initial stage of the comparative analysis is that most 
Member States have preferred the differentiated approach to the revenue and expenditure 
sides. This situation of fact raises questions as to the degree of assimilation of rules 
governing expenditure and revenue and their respective degrees of efficacy. Finally, the 
question arises as to how to achieve this objective in response to the mandate from the 
European Council, 
A. There is good reason for wondering whether this difference in the degree of 
harmonization is truly warranted when a coherent horizontal approach to protection of 
the Community's financial interests is required, given that it does not adequately reflect 
the general similarity of the conduct and techniques of organized financial crime against 
the Community budget on both the revenue and the expenditure sides. Without doubt 
this consideration applies also to prevention which is an area which still requires analysis. 
There there is a convergence with the regular evaluation of national control systems 
suggested in some reports. 
21 
B. Regarding administrative penalties, the reports suggest that national provisions are 
more sophisticated on the revenue side than on the expenditure side. The information 
supplied in them does not indicate that there are national administrative penalties, either 
autonomous of or additional to those provided for by the Community in agriculture. A 
clear policy of tougher administrative penalties on the expenditure side is an obvious 
necessity. The common position adopted by the Council on 29 June 1995 on the proposal 
for a Regulation setting a legal basis for Community administrative penalties could 
provide a useful reference framework for this purpose, particularly as regards the 
establishment of penalties in the various expenditure areas. The memorandum produced 
by the French Presidency and Spain's scheme of administrative penalties for offences 
relating to national and Community public funds (Budget Act 1991) are also useful 
discussion material. 
C. The transposai of the Convention on protection of the Community's financial 
interests in the Member States will provide the legal basis the Member States need for 
creating at least a specific offence of fraud. Rapid attainment of this objective would 
generate a practical possibility of prosecuting individuals committing the acts specified 
by the Convention and of organizing judicial cooperation to that end. Progress here 
would lay an effective basis for the Community institutions and the Member States to 
mobilize all the resources heeded for uniform enforcement throughout the Community. 
The subjects to be gone into, apart from judicial cooperation (to be considered in Part II) 
include the liability of individuals and bodies corporate, raised by the Belgian and 
Spanish reports. There must bé a possibility for prosecuting directors and managers of 
companies and firms even where it is the company or firm that is theoretically 
responsible for the conduct constituting the offence. And where it is the company that 
enjoys the benefit of Community funds, it makes sense for the company to incur the 
penalties in the event of fraud. 
D. In addition to the question of the definition of the offence itself, the further 
question is raised by the Belgian and Italian reports of harmonizing the levels of 
penalties. Excessive variations produce areas of tougher and lighter enforcement and 
22 
deflect business flows towards the "softer" Member States. Penalties should therefore be 
more homogeneous if a satisfactory assimilation and decent degree of protection are to 
be guaranteed throughout the Union. 
* 
1.1.2. Brief description (with background) of departmental organization 
The departments whose organization is described below are responsible for applying the 
rules outlined above and for the proper management of Community funds. 
The Commission suggested a layout whereby answers would be grouped together on a 
sectoral basis. The various control structures mentioned (traditional structures, specific 
investigation structures, and horizontal or multidisciplinary structures) are analysed in 
each case. 
The description of departments occupies a large part of the Member States' reports. The 
complexity of the organizations responsible for Community funds is such that even a 
brief description will usually run to ten or more pages. For this reason a schematic 
presentation has been adopted, each section consisting of summary tables followed by 
comments. 
This report describes the control structures for each sector, treating in turn (a) own 
resources, (b) agricultural expenditure, (c) the Structural Funds and (d) the departments 
which assist the Commission with the direct execution of expenditure. 
(a) Own resources 
The following table shows the national bodies responsible for controls on own resources. 
The first column shows the (frequently separate) administrative bodies responsible for 
basic checks on traditional own resources and VAT. The second column lists the fraud 
23 
prevention bodies and the third column the multidisciplinary bodies which may intervene 
in this area. 
Bodies responsible for own resources 
B 
DK 
D 
EL 
E 
F 
IRL 
I 
L 
NL 
P 
OS Traditional control structures (for 
traditional own resources (TOR) and 
the VAT resource) 
TOR: Customs and Excise 
Administration 
VAT: not specified 
TOR: Customs and Tax 
Administration 
VAT: idem 
TOR: OFD (Regional Finance 
Directorate) - Customs and Excise 
Directorate 
VAT: special departments of the 
OFDs 
TOR: Customs Directorates of the 
Ministry of Financial Affairs 
VAT: VAT Directorates 
TOR: Government Tax Office -
Customs and Excise Department 
VAT: not specified 
TOR: DGDDI (Directorate-General 
for Customs and Indirect Taxes) 
VAT: not specified 
TOR: Customs departments of the 
tax authorities 
VAT: not specified 
TOR: Customs administration 
VAT: financial departments 
TOR: Customs and Excise 
Administration 
VAT: not specified 
TOR: Directorate-General for 
Customs 
VAT: Tax authorities and FIOD 
TOR: DGA (Directorate-General 
for Customs) 
VAT: not speicifed 
TOR: Customs Administration 
VAT: not specified Specific investigation structures 
(customs and/or taxation) 
-
-
Zollkriminalamt 
Special unit for the 
cooordination of enquiries 
(Ministry of Financial Affairs) 
General Audit Office (for 
government bodies) 
-
Investigation Bureau 
-
-
FIOD (Fiscale Inlichtingen en 
opsporingsdienst) 
Fraud Prevention Division 
(Customs Directorates) 
-Horizontal and 
multidisciplinary structures 
-
-
Court of Auditors 
Directorate for the 
Prevention of Economic 
Crime (Ministry of 
Financial Affairs) 
Inspectorate-General (of 
government bodies) - Court 
of Auditors 
IGF (Inspectorate-General 
of Finances), an 
interministerial body 
-
Guardia di Finanza 
-
ECD (Economische 
Centrale Dienst) 
Inspectorate-General of 
Finances 
Court of Auditors 
24 
su 
SV 
UK TOR: Directorate-General for 
Customs 
VAT: Directorate-General for 
Taxation 
TOR: Directorate-General for 
Customs 
VAT: National Tax Office 
TOR: HM Customs and Excise, 
which is responsible for both 
customs duties and VAT Steering Committee of the 
Customs and Tax Authorities 
-
Investigation Division Steering Committee of the 
"Project East" Working 
Group 
-
Serious Fraud Office 
In two Member States, the United Kingdom and Denmark, traditional own resources and 
VAT are handled by the same departments. In Ireland the customs are part of the tax 
authority. 
The other national reports either disregard VAT for the reasons already stated 
("assimilation" is achieved in practice if a tax is paid both to the Member State and to 
the Community) or indicate that the control of traditional own resources is distinct from 
the controls on VAT. This does riot in itself call for any observations but reference 
should be made to part 1.2 for the results obtained by such controls. 
Alongside the traditional controls applied by the administrative bodies listed in the first 
column, most Member States claim to have control and investigation structures for the 
monitoring of Community resources. 
Some of these are specific structures (listed in the second column), with responsibility 
for all own resources. Some are mainly concerned with investigations and fraud 
prevention, e.g. the FIOD (Fiscale Inlichtingen en Opsporingsdienst) in the Netherlands, 
the Zollkriminalamt in Germany or the Investigation Divisions in the United Kingdom 
and Ireland. Other bodies* are concerned with ensuring a consistent level of protection 
for Community resources, e.g. the General Audit Office of the Spanish central 
government, the Steering Committee of the customs and tax authorities in Finland or the 
Special Unit for the Coordination of Controls in Greece. 
Lastly, several Member States mention the existence of multidisciplinary bodies 
responsible for controls on all public funds, including the Community's own resources. 
Such bodies include the Inspectorate-General of Finance (France, Portugal) and the Court 
25 
of Auditors (Germany, Spain). Some multidisciplinary bodies enjoy wide powers, such 
as Italy's Guardia di Finanza, the Belgian OCDEFO and the Serious Fraud Office in the 
United Kingdom. Where revenue is concerned, these bodies also have powers to carry 
out general inspections or to initiate special large-scale investigations. 
Notice is given of similar developments in the reports from Belgium, where the Customs 
and Excise Administration is to be restructured, and from the Netherlands, where 
coordination and consultative bodies are to be set up to combat Community fraud. 
The above table shows that, in terms of organization, the Member States have 
considerable means at their disposal for the protection of Community own resources and 
that, to a great extent, this protection is equivalent to that given to their own national 
revenue. 
(b) EAGGF Guarantee Section 
The information provided in the national reports has been condensed into the following 
table, which distinguishes between traditional control structures, specific investigation 
structures and multidisciplinary structures. As a rule the Member States distinguish 
between intervention measures, direct aids and trade-related measures. To simplify 
presentation, however, the latter (which give rise to export refunds subject to separate 
customs controls) have been omitted. 
Organization of EAGGF Guarantee controls 
Member State 
B 
DK Separation of 
payment/inspection 
(traditional controls) 
Intervention: no 
Direct aids: yes 
Intervention: no 
Direct aids: -Independence and 
powers of officials 
responsible for 
traditional controls 
Intervention: yes 
(economic affairs and 
health), seem to have 
extensive powers Specific investigation 
structures 
Intervention: IMP 
(Raw Materials 
Inspectorate) 
Direct aids: -Horizontal and 
multidisciplinary 
structures 
IGE (Economic 
Inspectorate-General) 
26 
D 
EL 
E 
F 
IRL 
I 
L 
N 
P 
OS 
SU 
SV 
UK Intervention: -
Direct aids: -
Intervention: no 
Direct aids: no 
Intervention: no 
Direct aids: yes 
Intervention: no 
Direct aids: no 
Intervention: no 
Direct aids: yes 
-
Intervention: no 
Direct aids: no 
Intervention: no 
Direct aids: no 
-
-
-
Intervention: no 
Direct aids: no Intervention: yes 
(BALM) 
Direct aids: yes 
(Lander) 
Intervention: yes 
(Nomos) 
Direct aids: yes 
(Nomos) 
Intervention: yes 
(agencies) 
Direct aids: yes 
(Regional authorities) 
Intervention: yes 
(Min. of Ag.) 
Direct aids: yes 
(Min. of Ag.) 
Intervention: no 
Direct aids: yes 
(Min. of Ag.) 
-
Intervention: powers 
delegated to sectoral 
bodies 
Direct aids: yes 
(Min. of Ag.) 
Trade: yes 
(customs) 
Intervention: yes 
(agency) 
Direct aids: yes 
(Min. of Ag.) 
-
-
-
Intervention: powers 
delegated to sectoral 
bodies 
Direct aids: yes 
(Min. of Ag.) 
Trade: yes 
(customs) Inspectors employed 
by ACOFA (Agence 
centrale des 
organismes 
d'intervention dans le 
secteur agricole) 
Intervention: yes (in 
certain sectors) 
Direct aids: -
-
-
CCG (Control 
Coordination Group) 
AID 
(Inspectorate-General 
for Agriculture) 
Intervention: -
Direct aids: yes 
-
-
-
AFU (the Agency's 
Anti-fraud Unit) Special body for the 
coordination of 
controls 
IGAE 
(Inspectorate-General 
of the Central 
Government) 
Inspectorates-General 
of the Autonomous 
Communities 
Inspectorate-General 
of Finances; 
Inspectorate-General 
for Agriculture 
Guardia di Finanza 
-
PBO (Special 
investigation service) 
Inspectorate-General 
of Finances 
-
-
-
SFO (Serious Fraud 
Office) 
27 
Most of the national reports discuss trade-related measures, which essentially mean 
export refunds in the EAGGF Guarantee context. For such expenditure the control 
bodies in each Member State are independent of those responsible for examining 
applications and making payments. They form part of the customs authorities and apply 
centralized controls, operating quite separately from the payment agencies and employing 
officials who generally enjoy extensive powers. 
On the other hand, much less information is available on intervention measures or direct 
aids. 
Where direct aids are concerned, the reports from Germany, Spain, Italy and Austria 
indicate that primary controls are decentralized in these countries. Details are not 
provided on how the local administrative units responsible for such aid are supervised, 
except for references to bodies with very wide powers. In all Member States, however, 
centralized controls are applied to intervention and trade. 
Physical controls are carried out in all Member States in accordance with the Community 
rules. The quantitative targets are criticized in some reports, which place the emphasis 
on risk analysis and targeted controls rather than random checks (Netherlands report) or 
intelligence gathering (Italian report). 
Apart from the customs' role in checking export refunds, controls are usually carried out 
by the payment agency. In a typical situation the controls will be applied by a division 
or directorate responsible for internal audits or for checks within the agency making 
EAGGF Guarantee payments. Examples of this are provided by Ireland, where an audit 
department of the administrative unit concerned carries out the controls required under 
the Community rules, by Spain, where this task is performed by a control subdirectorate 
of the payment agencies such as SENPA, and by the United Kingdom, where an Internal 
Audit Unit has been set up within the payment agency, alongside the sectoral controls 
carried out by Heads of Policy Division. 
Recent developments in the Member States follow this typical pattern. In Greece a 
Presidential Decree (No 385/1994) altered the organization of the Ministry of Agriculture 
28 
by making the Directorate monitoring EAGGF Guarantee expenditure part of the 
Secretariat-General for Agricultural Policy and International Relations; at the same time, 
an internal audit division, responsible for sample checks, was set up within the 
Directorate-General for the Management of Agricultural Markets. Control programmes 
have been introduced for various sectors (olive oil, fruit and vegetables, tobacco, cotton). 
Similarly, in Portugal the special fraud-prevention services were made part of the 
Customs Administration and the National Agricultural Intervention Guarantee Institute 
in 1993. Luxembourg, for its'part, states that a start has been made on establishing a 
system of controls, which should be completed by the end of 1995. 
The French report provides useful information on staff numbers. For example, the 
physical and administrative controls carried out by the agricultural payment agencies 
require the equivalent of 200 full-time staff to deal with expenditure on price support and 
34 full-time staff to handle direct aids to farmers. Undertakings which have received 
funds from one of the payment agencies (there are ten government agencies, each 
specializing in a different production sector) are subject to checks by a central agency 
(ACOFA) which employs about thirty investigators. A comparative analysis of these 
structures could usefully be supplemented by similar data on the numbers of staff 
available to the inspectorates and the powers delegated to them. 
Some Member States have control structures which are independent of the payment 
agencies. This is the case in Belgium, where the IGE (Economic Inspectorate-General) 
monitors farms and intervention measures, working independently of the inspectorate 
employed by the BIRB (the Belgian payment agency). In Italy secondary controls are 
carried out by experts from the Guardia di Finanza, who do not however enjoy the 
wide-ranging investigative powers of the tax police. In the Netherlands a Control 
Coordination Group lays down a work programme for the Dutch customs (who deal with 
export refunds) and for the AID (the Inspectorate-General for the Ministry of 
Agriculture). 
Other bodies mentioned include the Inspectorate-General of Finances (Portugal, France), 
the Inspectorates-General of the central government and the autonomous communities 
(Spain) and the various national Courts of Auditors (Austria, Sweden). 
29 
Some Member States point out that the reform of the common agricultural policy and the 
introduction of direct aids have meant changes in the way that controls are organized. 
In France, for example, about a million files have been fed into the computerized data 
base used for the purposes of IACS (the integrated administration and control system for 
agricultural aid schemes). A special CICC training course on the EAGGF Guarantee 
Section is provided for this purpose. In the Netherlands, the controls in question are the 
responsibility of the department which implements the rules issued by the Ministry of 
Agriculture. In addition to the IACS checks, physical checks have to be made on income 
aids. In France this is done by the payment agencies and the Ministry of Agriculture, 
while in the Netherlands this task falls to the Inspectorate-General (AID). 
The organization of controls on agricultural expenditure, as described by the 
Member States, is essentially designed to achieve the quantitative targets set by the 
Community rules but the controls in question are seldom conducted independently of the 
payment agency. 
(c) Structural Funds 
The descriptions provided by most Member States were at least as detailed on the 
management of the Structural Funds as on the controls applied. The bodies administering 
the funds were described rather than the control structures (internal or external). 
No attempt will be made here to compare the various national arrangements for the 
administration of the Structural Funds; the reader is referred to the national reports, 
which vary widely. For example, the administration of the European Regional 
Development Fund (ERDF) may be centralized in a single body which allocates sums to 
each geographical area or it may be shared out among several ministries under a 
management-by-objectives scheme which determines the overall allocation to each type 
of programme, or it may be decentralized to local authorities which enjoy varying 
degrees of independence. 
The controls on the Structural Funds present three distinct features which are not so 
pronounced in the case of other Community resources or expenditure. 
30 
The first of these features is the dominant role of internal audits by the body responsible 
for implementing Community schemes. The auditing of accounting records is the most 
common of these controls. 
A second feature is the importance of the local authorities, to whom powers may have 
been delegated or decentralized. Where local authorities enjoying a degree of autonomy 
are involved in the administration of the Structural Funds, the control arrangements have 
to be adapted so that the central government respects these powers. As a result, the 
controls on the Structural Funds are governed by very complex and diverse 
arrangements. 
A third feature is that because the national authorities help to finance structural 
programmes, "assimilation" is achieved de factoT as can be easily demonstrated: if a 
programme is jointly financed, the Community share and the national share of 
expenditure are obviously subject to the same management and control principles. 
The following table provides first of all a summary of traditional control structures 
(i.e. the controls applied by the department responsible for implementing the Community 
rules and executing the budget) and provides details on three important points. The first 
of these is whether the funds, which are frequently managed at local level, are subject 
to centralized or decentralized controls. The second point concerns whether the 
administration of funds is kept separate from the controls applied. The third point 
concerns the powers held by the control officials, e.g. whether they may carry out 
physical controls on the spot and not simply checks on the accuracy of accounting 
records. The table also contains a column showing whether there are any specific 
structures for the investigation of frauds and irregularities and gives a list of horizontal 
and multidisciplinary control structures. 
Fund Traditional control structures 
Centralized or 
decentralized Separation of 
payment/inspection Physical 
controls/powers 
of officials , Specific 
investigation 
structures Horizontal and 
multidisciplinary 
structures 
31 
B 
DK 
D 
EL 
E 
F ESF 
ERDF 
EAGGF 
FIFG 
ESF 
ERDF 
EAGGF 
FIFG 
Ail 
ESF 
ERDF 
EAGGF 
FIFG 
Ail 
ESF Centralized/ 
decentralized 
5 departments 
Decentralized 
- partial 
description 
(Flanders) 
Decentralized 
Centralized 
Centralized 
Decentralized 
Centralized 
Decentralized 
Decentralized 
Centralized 
Centralized 
Centralized/ 
decentralized 
Centralized 
-
100% 
assimilation 
with nat. 
subsidy (1/10 
EEC - 9/10 
FR) No 
No 
No 
No 
No 
No 
Yes 
Yes 
Yes 
Yes Physical 
controls in most 
cases 
Physical 
controls 
Possible 
physical 
controls 
Yes, specialist 
officials 
Physical 
controls by 
intermediate 
bodies: 
sometimes 
•private firms 
under 
government 
supervision 
Special control 
structures 
Special control 
structures 
- physical 
controls 
- CICC 
(1993), 
controls and 
systems No 
' 
- officials of 
the Ministry 
of Financial 
Affairs 
- officials of 
the 
Inspection 
Directorate 
of the 
Ministry of 
Economic 
Affairs 
Financial 
Control 
Directorate and 
Ministry of 
Agriculture 
Inspectorate 
-Court of 
Auditors -
Financial 
Inspectorate in 
certain cases 
High-Level 
Control 
Committee 
Court of 
Auditors: 
accounting 
experts 
Federal Court of 
Auditors; 
Lander Courts of 
Auditors 
Court of 
Auditors, 
Ministry of 
Financial Affairs 
Court of 
Auditors 
audits 
32 
IRL 
I 
L 
N 
P 
OS 
SU 
SV 
UK ERDF 
EAGGF 
(and 5b) 
5a + 
FIFG 
All 
All 
-
ERDF 
FSE 
EAGGF 
FIFG 
All 
ESF 
EAGGF 
ESF 
ERDF 
EAGGF 
All 
ESF 
ERDF 
EAGGF regional 
prefects 
regional 
prefects 
Decentralized 
Centralized 
Decentralized 
-
Decentralized 
Decentralized 
Centralized/ 
decentralized 
Centralized, 
except 
autonomous 
regions 
Centralized 
and 
decentralized 
Very 
exhaustive 
description of 
the various 
Ministries' 
powers 
in preparation 
Centralized + 
Northern 
Ireland 
Decentralized 
Centralized No 
Yes, centralized 
-
No 
No 
Yes 
No 
No 
No Tax inspectors 
-
• 
No 
On-the-spot 
controls by 
inspectors with 
special status 
Special Audit 
Department 
(92) 
No 
No Criminal 
investigation 
and tax 
authorities 
-
AID 
(Inspectorate-
General) 1992: 
Interministerial 
Anti-fraud 
Committee 
(209a) 
-
- audits at 
ministerial 
level 
- Inspectorate-
General of 
Government 
Departments 
(Audit) 
National 
Criminal 
Intelligence 
Service 
Serious Fraud 
Office 
The table shows that in most cases the controls are essentially of the traditional kind and 
are carried out by the fund administrators themselves; the documentary checks are not 
accompanied by external on-the-spot checks. In some Member States such as Portugal, 
specific structures have been established so that controls are applied to all aspects of 
subsidized projects, up to and including payments to the recipient. The United Kingdom 
has such an audit department to deal with the ESF. In Denmark the introduction of such 
controls is being considered by an interministerial working party responsible for 
administering the Structural Funds. 
The reports from Greece, Italy and Finland indicate that in those countries the payment 
and control agencies are separated, the fund administrators at local level being subject 
to controls by a centralized authority. 
In recent years Greece has altered its central control structures. Presidential Decree 
No 394/1991 set up an Inspection Directorate within the Ministry of National Economy, 
which is quite separate from the same Ministry's Financial Control Division (ERDF 
management and payments). For the ESF Greece has established a Secretariat-General 
for the Management of Community Resources (Act No 2224/94), which includes a 
Control and Assessment Directorate responsible for physical and administrative controls. 
In the case of the EAGGF Guidance Section, the Financial Control and Inspection 
Directorate of the Ministry of Agriculture carries out specific controls if a fraud has been 
reported or is suspected. 
Italy, for its part, gives greater responsibility for controls to the Guardia di Finanza, a 
multidisciplinary body within which (according to a bill before Parliament) a special 
Community fraud prevention unit is to be set up. Community fraud prevention sections 
have already been set up at all regional centres of the tax police and have wide-ranging 
investigative powers to assist the monitoring committees in their supervision of Structural 
Fund expenditure at local level. 
Finland, which submitted a very detailed report, has set up national control bodies which 
check on compliance with the instructions issued to the district authorities on the 
management of the various Funds. The Internal Audit Office of the Ministry of the 
Interior is chiefly responsible for the ERDF, whilst the Ministry of Agriculture's Control 
and Surveillance Department handles the EAGGF Guidance Section and the FIFG, and 
34 
the Ministry of Employment deals with the ESF (a specialized department may make 
on-the-spot checks on ESF expenditure). 
Lastly, the Spanish report mentions the existence of a control agreement with the 
Commission. Such agreements, which are provided for by Article 23 of Regulation 
(EEC) No 425/88, have been concluded with other countries but Spain is the only 
recipient of aid from the Cohesion Fund which provides useful information on the 
organization of controls in this area. 
Many reports indicate that the Member States entrust external controls on the Structural 
Funds to bodies such as a Court of Auditors or an Inspectorate-General. It is unlikely, 
however, that the controls carried out by such national bodies with very wide-ranging 
powers can be as frequent and as detailed as is required. These bodies are therefore 
listed only for the record, where no specialized structures exist. Besides, there is seldom 
any mention of these high-level structures in the context of own resources or agricultural 
expenditure, although these areas do fall within their field of competence. 
(d) Provision of assistance to the Commission 
This section deals with assistance provided "when the Commission is responsible for 
certain expenditure in direct contact with the beneficiary (research, environment...)". 
Three reports provided information on this matter. 
The French report stated that the Commission would first of all have to provide relevant 
information on the expenditure to be paid directly to the beneficiary. Similarly, the 
Swedish report indicates willingness to cooperate with the Commission but asks for the 
information needed for cooperation on fraud prevention. Lastly, the United Kingdom 
report singles out three areas (training, research, overseas development) where broader 
cooperation would be desirable with a view to improving the effectiveness of direct 
35 
expenditure, with closer coordination of Community and national spending. 
Avenues to be explored (point 1.1.2.) 
The Commission draws two main conclusions from this comparative analysis of the 
national organizations for fraud prevention. 
A. There is a trend towards the development of multidisciplinary control structures 
with responsibility for all areas of fraud prevention and with wide-ranging investigative 
powers. In this way the Member States hope that more effective steps can be taken to 
combat organized financial crime which is not necessarily confined to one particular 
sector. 
There are many examples of this. In the United Kingdom the SFO (Serious Fraud 
Office) has multidisciplinary investigation teams; in 1992 the NCIS (National Criminal 
Intelligence Service) was set up to combat serious crime, including economic crimes. 
In Belgium the OCDEFO (Central Office for the Prevention of Organized Economic and 
Financial Crime) consists of members of the Criminal Investigation Department, the 
Gendarmerie and the CSC (a high level control committee) and, since the Tax Act of 
30 March 1994, officials responsible for customs, direct taxation and VAT. A general 
directive states that the Office's powers extend to all serious financial, economic or tax 
offences involving organized crime, and in particular fraud to the detriment of the 
financial interests of the European Union. 
Similarly, Italian legislation should shortly assign to the Guardia di Finanza the essential 
task of monitoring and investigating Community fraud, thus making it a key instrument 
of a policy laid down at the highest level, namely the Interministerial Committee for the 
Prevention of Community Fraud. This Committee was set up, in the spirit of 
Article 209a of the Treaty on European Union, by Act No 142 of 19 February 1992 and 
answers to the Prime Minister's own department for the coordination of Community 
policies, where the operational unit of the Guardia di Finanza established by Decree of 
the Prime Minister dated 11 January 1995 is located. 
36 
This trend, of which many other examples could be given, is interesting in that it 
indicates how national measures are being adjusted to combat national and Community 
fraud which is not confined to one particular sector, although the level of protection 
differs from one sector to another. It reflects the special nature of fraud prevention 
work, calling for large-scale investigations and employing highly specific operational 
techniques with recourse to substantial powers of coercion, which are not available to all 
levels of authority. Such lengthy investigations, which require the services of experts in 
major financial crime, frequently reveal the transnational ramifications of behaviour 
seriously prejudicial to the Community's financial interests. Investigations of this kind 
can hardly be undertaken by those responsible for routine controls, let alone those 
responsible for the administration of funds, that is, those whose main task is to implement 
a programme of expenditure. They must be undertaken by departments with wide 
territorial jurisdiction and with expert investigators who can establish operational links 
with their colleagues in other Member States and with the fraud-prevention departments 
at the Commission. Of the multidisciplinary units which now exist, several have been 
established as part of a fundamental reorganization of national government departments. 
Any such reorganization has to take account of budgetary constraints and the problems 
of resource allocation (and in particular the availability of staff). This has meant the 
redeployment of experts from the traditional control departments within the new 
multidisciplinary units. In the present context this trend is bound to provide greater 
protection for the Community's financial interests. 
B. As regards the administrative organization of fraud prevention, the national reports 
indicate on the whole that there is a great contrast between the protection of revenue and 
the protection of expenditure. Where revenue is concerned, customs and tax authorities 
have had long experience of fraud prevention and apply the same control methods to 
Community revenue as have proved their worth in decades of use at national level. Both 
national and Community revenue may thus be said to enjoy a high level of protection. 
Where expenditure is concerned, the "assimilation" principle is observed in that the 
protection available to Community expenditure is the same as that for national 
expenditure. The rules on public accounts, which protect government spending in all 
Member States, also apply to Community spending, the great bulk of which is channelled 
through the national budgets. The protection given to Community interests in this case 
37 
is, however, less satisfactory than the protection given to revenue. The organization of 
controls is often the responsibility of the fund administrators themselves or of 
departments which are relatively unfamiliar with the techniques for combating organized 
crime. The staff and the real powers available to inspectors (who are sometimes private 
bodies) are not specified. There is no information on their powers of investigation (other 
than those conferred by court order) or the action which inspectors may take on their 
findings when making on-the-spot checks. The verification of accounts and checks on 
compliance with formal requirements are more common than on-the-spot checks by 
experts, particularly in the case of the Structural Funds. It might be worth considering 
an obligation for inspection bodies to establish programmes of controls like those already 
operating in1 some areas of Community policy (e.g. foodstuffs, under 
Regulation No 4045/89), on the basis of a risk analysis, subject to Commission approval. 
There are few examples of departments responsible for the monitoring of Community 
expenditure wjiich are both independent of the administrative authorities and experienced 
in the field of fraud prevention. According to the national reports, controls tend to be 
the responsibility Of bodies whose work involves the general auditing of government 
departments and the verification of accounts rather than detailed checks on Community 
expenditure. 
Between the forces of dissuasion represented by high-level institutions, on the one hand, 
and the primary checks carried out by the administrator himself, on the other, there is 
room for specific fraud-prevention controls carried out by specialists in the fight against 
organized financial crime, who should be independent of the officials administering funds 
and should hold wide-ranging powers of investigation. If the controls applicable to 
expenditure could be raised to the level of those currently applied to revenue, the 
protection of both national and Community finances would be considerably enhanced. 
38 
1.2. Evaluation of measures taken 
The Commission's aim is not only to obtain an overview of the ways in which 
Member States apply Article 209a of the Treaty on European Union (legislation 
applicable, approach adopted to the prevention of Community fraud) but also to evaluate 
the results achieved by the measures taken. The two years following the Treaty's entry 
into force (1993 and 1994) have been used as a reference basis. 
In accordance with the layout suggested by the Commission, this report evaluates the 
intelligence, control and investigation measures adopted (1.2.1), analyses the results, 
i.e. the frauds and irregularities detected (1.2.2), examines the financial impact of these 
frauds and irregularities (1.2.3) and then considers the administrative and legal measures 
taken in response (1.2.4). 
1.2.1. Intelligence, control and investigation measures 
The following table summarizes the replies which the national reports provided 
concerning four key issues: 
- the existence of statistics on the physical or documentary controls carried out; 
- the use of risk-analysis methods for control purposes; 
- the administrative or judicial inquiries conducted into the irregularities detected by 
controls; 
- initiatives for gathering intelligence relevant to fraud prevention. 
Only half the Member States provided statistical data on the controls carried out. Given 
the difficulty of obtaining such data and the short time available, the figures provided are 
usually partial, covering only one or two sectors and not broken down in any particular 
way. They make no distinction between controls and investigations. 
In the following table the answers have been condensed to a simple yes or no to provide 
an overall picture of the situations described in the reports. In the case of Sweden and 
Finland the replies relate to national finances. 
39 
Controls, investigations and intelligence 
Member State 
B 
D 
DK 
EL 
E 
F 
IRL 
I 
L 
N 
OS 
P 
SU 
SV Statistics provided on 
physical or 
documentary controls 
No 
No 
Yes 
No 
Yes 
Yes 
No 
Yes 
No 
Yes 
No 
Yes 
Yes 
Own resources 
No Use of risk analysis 
for selection of 
control targets 
No 
Yes 
Yes 
No -
Yes 
Yes 
No 
No 
Yes 
No 
Yes 
Yes 
Customs 
administration Reference to 
administrative or 
judicial inquiries 
No 
No 
Yes 
Yes 
Structural Funds 
Yes 
Own resources 
No 
No 
Yes 
No 
No 
No 
Yes 
No 
Yes Initiatives for the 
gathering of 
intelligence 
Establishment of 
a specialized 
division 
Coordination of 
audits in the case 
of the Structural 
Funds 
Alerting of 
customs staff 
Introduction of a 
freephone 
service. 
Call for more 
exchange of 
information 
between 
Member States 
Preparation of 
sectoral profiles 
Systems audit 
Interdepartmental 
cooperation 
initiated 
whenever 
necessary 
Establishment of 
an Anti-Fraud 
Committee 
within the 
Ministry of 
Financial Affairs 
40 
UK Yes 
VAT and ESF Yes Yes Establishment of 
a National Fraud 
Working Group. 
Introduction of a 
freephone 
service 
(Customs). 
Use of informers 
(CAP) 
The Spanish report provides relatively detailed statistics not only on customs (targeting 
of controls on goods in free circulation) and agricultural matters (e.g. olive oil agencies) 
but also on the Structural Funds, which is unusual. These statistics show that between 
1993. and 1994 there was a sharp increase in the number of controls following 
implementation of the work programme laid down by the National Audit Office. The 
actual sums controlled increased by 75 % in the case of the EAGGF Guidance Section and 
more than doubled in the case of the ERDF and the ESF. 
The Portuguese report states that, to achieve greater effectiveness, a systems audit now 
precedes the application of controls, the numbers of which have also increased 
(8 000 external controls in 1993 but 10 500 in 1994, with a significant increase from 
2 000 to over 5 000 in the case of the EAGGF Guarantee Section as a result of more 
frequent checks on cereals). 
The report from the Netherlands, for its part, throws light on how traditional customs 
controls are changing. Whereas the controls which the Community rules require in the 
sphere of the common agricultural policy have remained at much the same level 
(e.g. Regulation No 386/90 stipulates that 5% of goods eligible for export refunds must 
be subjected to checks; this meant a total of 21 753 controls in 1992 and 20 552 in 
1993), the number of physical controls on imports fell by more than one third between 
1992 and 1993 (157 716 in 1992 and 94 911 in 1993). 
According to the Netherlands report, this decrease is attributable both to the 
establishment of the single market, which has reduced the total number of customs 
operations, and to wider use of risk-analysis techniques, to which the UK and 
Netherlands reports are particularly favourable, although the use of risk analysis is also 
mentioned by several other Member States (see table above). 
41 
Germany claims to have improved its control system since it introduced risk analysis with 
the Commission's assistance in 1993 (for use in the agricultural sector: export refunds, 
controls pursuant to Regulation No 4045/89). The Belgian customs now have a special 
risk-analysis division within the DNR (National Investigation Directorate). 
France and Denmark emphasize the international aspects of fraud. Denmark has altered 
its routine physical checks on goods transiting through its national territory, relying on 
closer international cooperation to keep track of individuals and companies who have 
already committed irregularities. France points out that no purely national fraud network 
has ever been discovered and has launched a campaign to raise awareness of this among 
its customs staff. 
Three other Member States (Spain, Portugal, United Kingdom) attach great importance 
to the training of inspectors, who are required to have followed a special course or to 
have a university qualification. 
Risk analysis is based on the gathering of intelligence, as is particularly clear from the 
United Kingdom report: a National Fraud Working Group has been set up to improve 
contact between the banking and financial sector, on the one hand, and investigators, on 
the other, with a view to setting up a data bank on fraud. In the customs field several 
sources of information are mentioned: the business world, informers and Commission 
contacts (SCENT messages). Customs have a specialist VAT intelligence team whose 
tasks include the analysis of new VAT registrations. In agriculture, mention may be 
made of the computerized checks on direct aids under the IACS system and the trials of 
satellite monitoring as a control tool. To sum up, it would appear that in this part of 
their national reports the Member States have been more willing to describe qualitative 
changes than to provide data on the frequency, thoroughness and planning of their 
respective controls and investigations. Although reference is occasionally made to 
administrative and judicial inquiries, the statistics do not indicate any link between 
controls and investigations. Words rather than figures are used to demonstrate that the 
quality of controls has been improved. 
The layout suggested by the Commission made a distinction between controls and 
investigations to ensure that Member States would provide a description of the methods 
42 
used in each case. For example, investigations may be initiated once controls have 
revealed irregularities (i.e. the investigation is a continuation of the control operation) or 
as a result of the processing of intelligence (i.e. direct action is taken without any 
controls intervening). 
1.2.2. and 1.2.3. Results: frauds and irregularities detected; financial impact 
In almost all the national reports these two sections of the layout proposed by the 
Commission have been treated as one. There is some logic in discussing the frauds and 
irregularities detected under the same heading as the sums involved (a), but the question 
of the recovery/collection of the amounts concerned (b) will be discussed separately from 
out-of-court settlement (c). 
(a) Frauds and irregularities discovered and amounts concerned (statistics, case 
study, typology) 
The Member States have endeavoured to provide a substantial range of statistics. The 
other two subjects (case study, typology), however, have been given such superficial 
treatment that no worthwhile conclusions have been drawn from the analysis of 
exemplary cases e.g. those presenting special problems (transnational fraud) and no 
typology has been drawn up, although this could be done on the basis of Member States' 
experience of risk analysis (identification of high-risk sectors, assessment of sectoral 
variability, offender profiles). The statistics should have accounted for only one third 
of the information provided in this section. The table below summarizes the information 
contained in the national reports. 
Statistics, typology, recovery 
Member 
States 
B Description 
of results in 
each sector 
YES Attempt at 
typology 
YES 
except 
Structural 
Funds Provision of statistics on 
frauds and irregularities 
If Yes, comparison with 
IRENE base 
YES 
except Structural Funds 
Comparable data Provision of statistics on 
collection and recovery 
If Yes, comparison with 
IRENE 
YES 
except Structural Funds 
Comparable data 
43 
D 
DK 
EL 
E 
F 
IRL 
IT 
L 
N 
OS 
P 
SU 
SV 
UK YES except 
Structural 
Funds 
YES 
YES 
YES 
YES 
YES except 
Structural 
Funds 
YES 
NO 
YES 
NO 
YES 
YES 
NO 
YES 
General 
description YES 
NO 
NO 
YES 
YES 
YES 
YES 
NO 
NO 
NO 
YES 
YES 
NO 
YES YES 
Comparable data for 
EAGGF Guarantee 
Different data for own 
resources 
YES except own resources 
Comparable data 
YES 
Identical data 
YES 
Different data 
YES 
Different data 
YES 
own resources 
Different data 
YES 
Data taken from this base 
NO 
YES (EAGGF Guarantee) 
Comparable data 
NO 
YES 
Comparable data 
YES YES 
EAGGF Guarantee 
Comparable data 
YES except own resources 
Different data 
YES 
Different data 
YES 
Different data 
NO 
YES 
own resources 
Different data 
YES 
Data taken from this base 
NO 
NO 
NO 
YES 
Different data 
YES 
Data not comparable 
NO 
YES except Structural Funds 
Comparable data NO 
YES except Structural Funds 
Comparable data for 
EAGGF Guarantee 
Different data for own 
resources 
The distinction between frauds and irregularities has not been made by the 
Member States, which treat irregularities (and notify them to the Commission) in terms 
of the sums involved rather than in terms of the seriousness of the offence and whether 
it was intentional or organized. In the EAGGF context, however, Portugal does refer 
44 
to the Commission document which points out the importance of whether the irregularity 
is intentional or not (Doc. VI/680/89). The Netherlands report also raises this point in 
connection with the Structural Funds, emphasizing that it is sometimes difficult to make 
a distinction between a fraud and an incorrect application of the rules. 
The United Kingdom, which does not record frauds separately from irregularities, 
explains its high total by the fact that most of the irregularities were minor offences 
involving small sums. The United Kingdom accounts for between 13% and 14% of all 
irregularities notified by the Twelve in 1992 and 1993: 131 of the 1028 reported in 1992 
and 180 of the 1297 reported in 1993. In terms of value, however, the proportion is 
much smaller (between 4% and 7%). 
In all other respects the descriptions provided by the Member States were less than 
complete. Cross-checks with the Commission's IRENE base (which is fed the data 
reported by the Member States) are revealing: sometimes the data are identical or highly 
comparable, although in two cases there are significant discrepancies. In the case of own 
resources the data are difficult to check because the report which the Commission 
receives on the total amounts outstanding does not provide a breakdown showing the 
sums defrauded. In the case of EAGGF Guarantee expenditure, on the other hand, 
homogeneous results are available, since the precise amounts involved have to be 
notified. Lastly, in the case of the Structural Funds, several Member States point out 
that Regulation No 1681/94, which lays down the rules for declaring expenditure to the 
Commission, came into force only recently (1 July 1994) and that, as a rule, there has 
been insufficient time to collect the relevant data. 
Where a comparison can be made between the sums defrauded (and detected) in 1993 
and 1994, the figures show a rise, ranging in some cases up to a threefold increase. 
Caution must, of course, be exercised when analysing the statistics on detected frauds, 
which might indicate an increase in the activities of fraud prevention departments or an 
improvement in the reporting of statistics rather than any real increase in fraud itself. 
The German report, for example, states that the sums involved in frauds to the detriment 
of the EAGGF Guarantee Section increased from ECU 20.3 million to ECU 33.7 million 
and that the sums defrauded from traditional own resources rose from ECU 23 million 
45 
to ECU 86.4 million. The number of cases reported was also on the increase, but it is 
reasonable to assume, like the German report itself, that these figures are attributable to 
closer targeting of controls as a result of the risk-analysis techniques introduced in 1993. 
Generally speaking, one has to allow for more accurate recording of detected fraud, as 
the higher figures are unlikely to indicate a spectacular expansion of fraudulent activities 
detrimental to Community interests. Only some years from now will it be possible to 
make any proper assessment of the fraud statistics, hence the need to present and analyse 
case studies and to record any facts on which a typology of Community fraud could be 
based. 
No link is made between the number of controls carried out and the number of 
irregularities discovered, except occasionally in relation to the agricultural sector. The 
Netherlands report states that under the national control programme for 1993/94, 
provision was made for 336 controls, of which 289 were seen through to a conclusion, 
most of them (227) involving the inspection of accounts in excess of ECU 200 000. The 
number of irregularities reported under Regulation No 595/91 was 59. The French 
report also establishes a link (in the EAGGF Guarantee context) between the controls 
carried out and the irregularities discovered: 15% of controls led to 178 firms being 
asked to make repayments; in three quarters of these cases, the amounts concerned were 
less than ECU 10 000 (1994 figures). In France the number of corrections has been on 
the decrease, falling from 274 in 1992 to 220 in 1993 and 178 in 1994. Under the IACS 
system, penalties were imposed on 13 000 beneficiaries of aids for crop-growing, i.e. a 
quarter of all the farmers inspected. One tenth of this number (1 300) were penalized 
by the total withdrawal of aid. Among livestock farmers the percentage of those 
penalized was lower (4%). 
The report from Portugal indicates that in 1994 the number of EAGGF Guarantee 
controls was higher than in 1993 (5 000 as compared with 2 000); the number of 
irregularities detected was down, however, from 193 to 103 whilst the amounts involved 
remained stable at roughly ECU 4.5 million. 
Turning from the agricultural sector, one might compare the 180 000 detailed controls 
carried out by the French customs with the number of fraud cases reported in the field 
of traditional own resources (151 cases involving ECU 27.5 million in 1993 and 221 
46 
cases involving ECU 72.4 million in 1994, although these figures include the sums 
defrauded in export refunds). 
Certain Member States (shown in the table as having attempted to provide a typology) 
identify particular types of fraud. The French report, having mentioned the main fraud 
cases in 1994, outlines a method of risk analysis which could be developed from 
objective bases such as product levies, high levels of aid, or products or neighbouring 
countries to which different tariff rates apply. The other reports mention the products 
and procedures with which fraud is particularly associated. 
The most frequent type of fraud is that involving tobacco and cigarettes. It is mentioned 
in the reports from Germany, Belgium, Spain, France, Ireland and Italy. The 
agricultural products singled out in national reports include beef (mentioned by Belgium, 
Germany, France and the United Kingdom), sheepmeat (Germany, Italy and Portugal), 
milk products (Germany, Spain, Italy and the United Kingdom), cereals (Germany and 
Portugal) and olive oil (Spain, Italy and Portugal). Industrial goods are rarely 
mentioned, with the exception of textiles. Customs offences receive the most frequent 
mention, with several reports dwelling on frauds affecting Community or international 
transit (Belgium, Spain, France and Italy). 
The Commission would have preferred closer attention being paid to typology and case 
studies so that guidelines could have been worked out for fraud prevention on the basis 
of specific cases, with explanations for any successes achieved and observations on the 
difficulties encountered and needing to be overcome. In the Commission's view, there 
is a need not only for statistics based on mandatory reports but also for accurate 
information on the real problems of fraud prevention, particularly in the transnational 
context (including organized financial crime) so that the Commission can adapt its 
strategy to the needs of the Member States and ensure that they have the appropriate 
instruments at their disposal. 
The Commission and the Member States will have to work together on this material, 
which reflects the real situation, so that a multiaimual action programme can be drawn 
up which is commensurate with the extent of the problem and takes account of trends in 
fraudulent activities. 
47 
(b) Collection and recovery of sums due 
On the basis of the national reports the Commission has drawn up two summary tables, 
one concerning the recovery of Community own resources and the other concerning the 
recovery of undue expenditure. 
• Recovery of own resources 
(all amounts are expressed in millions of ecus; conversions from national currencies to the ecu 
are based on the rate for September 1995; the data taken from the IRENE base reflect the 
situation as known at 31 August 1995; where boxes have been left empty, there has been 
insufficient accurate information to answer the questions posed) 
Recovery of own resources 
Member 
States 
B 
DA 
D 
EL 
E 
F Amounts involved in frauds and 
irregularities 
1993: 25 (115 cases involving 
over ECU 10.000) 
1994: 66.1 (138 cases) 
Revenue 
1993: 585 repayments 
demanded, totalling ECU 7.4 
million 
Checks on travellers: 7 574 
customs reports, corresponding 
to ECU 9.8 million 
Control of declarations 
1993: 24.9 repaid 
1994: 10.9 repaid 
1993: 23 (202 cases) 
1994: 86.4 (790 cases) 
1991-94: 3.2 (66 cases) 
Total duties reassessed: 
1993: 16.9 
1994: 17.2 
1993: 5 513 infringements in 
agriculture: duty involved: 14.4 
21 188 infringements relating to 
industrial goods; duty involved: 
13.1 
1994: 3 461 infringements in 
agriculture; duty involved: 25 
27 127 infringements involving 
industrial goods: 40.4 Amounts recovered (in 
brackets: rate of recovery 
according to national report) 
1993: 2.2 (8.8%) 
1994: 0.967(1.5%), for 48 
files closed 
1993: 11.1 (66%) 
1994: 10.3 (60%) IRENE base: 
amounts 
recovered in 
1991-94 (rate of 
recovery) 
8.3 (8.3%) 
2.8(41%) 
8.2 (4%) 
0 
1 (7.3) 
5 (5.5%) 
48 
IRL 
I 
L 
N 
OS 
P 
SU 
SV 
UK 1992/93: 2.4 (import duties 
evaded) 
January-June 1994: amounts 
unpaid: 0.6 
1991-94: 92.5 (408 cases) 50% of this amount was 
recovered 
40% of this amount was 
recovered 
0.7 (0.8%), corresponding to 
41 files closed 1.5(12%) 
0.7 (0.6%) 
Report states total amount of 
duty reclaimed without separate 
indication of fraud cases 0.12 (1.3%) 
1993: 1.3 
(of which 0.8 in cases involving 
over ECU 10 000) 
1994: 1.8 
(of which 1 in cases involving 
over ECU 10 000) 1993: 0.55 (42%) 
1994: 0.5 (29%) 0.74 (24%) 
1993-94 
Rate of recovery in cases 
concluded: 98.86%, 
corresponding to ECU 46.4 
million 
ECU 0.533 million (1.14% of 
final figures) was deemed 
irrecoverable and written off 1.95(1.8%) 
Meaningful comparisons are often difficult to make since the data provided are not 
homogeneous. In the case of the United Kingdom a very high rate of recovery (98.86%) 
was obtained by considering only those recovery procedures which had been taken to a 
conclusion, leaving only 1.14% of own resources deemed irrecoverable and thus written 
off. The balance has not, in fact, been recovered but is still to be recovered. On the 
other hand, the low Italian rate (0.8%) was obtained by considering the number of cases 
wound up in relation to the total amount of own resources due. Belgium, Spain, Ireland 
and Portugal, however, provide a basis for comparison between the total own resources 
to be collected and the corresponding amounts recovered. The rate of recovery falls 
short of 50% in all cases except Spain, where all reassessed duties are taken into account 
(and not simply the amounts defrauded). 
49 
The data are more reliable where the sums defrauded are in excess of ECU 10 000, for 
such cases have to be reported to the Commission every six months 
(Regulation No 1552/89), whereas there is no such obligation to report the sums actually 
recovered. 
The national reports devote only a few lines to the recovery of own resources, even 
though it is essential to the implementation of the "assimilation" principle. Traditional 
own resources must be collected with the same efficiency as national resources, but the 
reports do not demonstrate that this is so. In most cases the facts on which any opinion 
could be based have been omitted. 
No mention is made of the legislative texts which give priority to public creditors (e.g. in 
cases of fraudulent bankruptcy), with the result that it cannot be ascertained whether the 
Community creditor is treated in the same way as the national creditor (with the 
exception of the Netherlands). The assimilation principle requires, however, that 
Community tax entitlements (such as customs duties) must be given the same priority as 
entitlements that are purely national (direct taxation) or primarily national (VAT). 
The question concerning recovery procedures has thus gone unanswered. The replies 
should have given a picture of the structures responsible for recovery (indicating whether 
they were singular or dual in nature and whether identical procedures were used for 
traditional own resources and VAT). The links between the departments responsible for 
recovery and other investigative departments have not been described. If these links 
were known, it would be easier to gauge (in the course of financial monitoring at 
Community level) what stage of the recovery procedure had been reached by the Member 
State. 
To prevent the cancellation of debts, the periods of limitation and the rules on the 
suspension of time limits should be harmonized. 
Denmark, for its part, would like to see improvements in the mutual assistance 
arrangements relating to recovery, which are governed by Council Directive 76/308. 
This Directive should be amended to take account of the single market and so that 
Member States can provide mutual assistance with the recovery of own resources. 
50 
France draws attention to the active contribution which it is making to the smooth 
operation of the single market. It notifies the country of entry, which is competent to 
recover amounts and prosecute offences, of the outcome of its checks on goods in free 
circulation. This approach could be adopted by all concerned as part of the 
harmonization of recovery procedures. It helps to ensure that controls at external 
frontiers are more effective overall. 
Similarly, the rules on the lodging and forfeiture of securities should be clarified and 
harmonized. 
• Recovery of undue expenditure 
(all amounts are expressed in millions of ecus and relate to the EAGGF Guarantee Section unless 
otherwise specified; conversions from national currencies to ecus are based on the rate for 
September 1995; the data taken from the IRENE base felate to the EAGGF Guarantee Section 
and reflect the situation as known at 31 August 1995; any boxes left empty indicate that 
insufficient accurate information was available to answer the questions posed) 
Recovery of expenditure 
Member 
States 
B 
DA 
D 
EL Amounts involved in frauds and 
irregularities 
1993: 6.1 (21 cases involving 
more than ECU 4 000) 
1994: 7.1 (42 cases) 
1993: 5 (73 cases involving 
over ECU 4 000) 
1994: 3.3 (91 cases) 
EAGGF Guidance 
1993: 35 cases detected 
1994: 47 
1993: 20.3 (177 cases) 
1994: 33.7 (226 cases) 
EAGGF Guarantee and 
Structural Funds 
1991-94 figures taken from 
Commission's last annual report Amounts recovered (in brackets: 
rate of recovery as a percentage of 
the total amounts to be recovered, 
according to national report) 
1993: ECU 50.332 (0.8%), 15 files 
still open, including 12 relating to 
export refunds (5.9 at stake) 
1994: 0.250 (3.5%), 18 files closed 
1993: 52% 
1993: 3.8 for 99 cases (18.7%) 
1994: 3.3 for 109 cases (9.8%) 
EAGGF Guarantee and 
Structural Funds 
idem 
ESF - amounts recovered: 
1.2 (1990-93 programmes) 
1.8 (8%) for 69 cases (ECU 0.14) IRENE base: 
amounts 
recovered in 
1991-94 (rate 
of recovery) 
0.866 (5%) 
5.4(51%) 
12.6 (19%) 
58.3 (67.5%) 
51 
E 
F 
IRL 
I 
L 
N 
OS 
P 
SU 
SV 
UK 1992/93: 5.8 (175 ex post 
checks) 
1993/94: 28 (96 ex post checks) 
Structural Funds: 
1993: EAGGF Guidance and 
Fisheries: 0.6 (21 cases); 
ERDF: 1.9 (18 cases); ESF: 6.6 
(80 cases), 
1994: EAGGF Guidance and 
Fisheries: 2.8 (105'; ERDF: 
11.6(17); ESF: 15(397) 
Structural Funds: corrections . 
amounting to: 
1993: 26 
1994: 33 
1991-94 figures taken from 
Commission's last annual report 
1993: 4.5 (17.2 in expenditure) 
1994: 4 (5.3 in expenditure) 
Structural Funds (1994): 
ERDF: 0.51 (0.95 in 
expenditure) 
ESF: 0.06 (0.11 in expenditure) 
EAGGF Guidance: 0.02 (0.03 
in expenditure) ^ 
1991-94: 26.4 1992/93: 0.6 (10.3%) 
1993/94: 0.2 (0.7%) 
Structural Funds: 
1993: EAGGF Guidance and 
Fisheries: 0.14 (23%); ESF: 1.4 
(21.2%) 
1994: EAGGF Guidance and 
Fisheries: 0.12 (4.3%); ERDF: 1 
(8.6%); ESF: 0.3 (20%) 
1991-94 figures taken from 
Commission's last annual report 
1993: 0.7 (15.3%) 
1994: 0.5 (29%) 
Structural Funds (1994): 
ERDF: 0.27 (52.6%) 
ESF: 100% 
EAGGF Guidance: 0% 
1991-94: 12.7 (48%) 2.4 (2.9%) 
17.6(32.5%) 
2.34 (38%) 
93.3 (16.7%) 
11.4(50%) 
1.23 (8.7%) 
11.6(43.3%) 
The reports provide very little information on how expenditure unduly incurred is 
recovered. The Finnish report mentions a procedure whereby the body responsible for 
the administration of funds is given the task of recovering expenditure under the EAGGF 
Guarantee Section or Structural Funds. In Portugal the payment agencies have to call 
in the securities if an irregularity is detected before their release; otherwise the recovery 
of expenditure is delayed by the slowness of judicial proceedings. 
Broadly speaking, for the purposes of both repayment (expenditure) and recovery 
(revenue), stronger links should be developed between the departments responsible for 
controls and investigations and those responsible for repayments or recovery. Although 
52 
in most cases the Member States claim to have a department responsible for collection 
and recovery procedures, it is essential that such departments are informed of any 
investigations as soon as possible. Otherwise frauds and irregularities are detected but 
the amounts defrauded cannot be recovered because proceedings have been initiated at 
too late a date (periods of limitation, cancellation of debts). 
Information channels must be improved and the details to be provided must be 
harmonized.- The Commission, for its part, must be in a position to provide the 
budgetary authority with all the facts and figures relevant to an investigation. These 
cannot be obtained by the investigation teams alone, for they relate essentially to the 
financial consequences and the eventual fate of the amounts concerned. 
(c) Out-of-court settlement of the amounts concerned 
This type of settlement is not clearly described in all the national reports. It appears to 
have been omitted by five Member States or else treated in a wider context together with 
the question of the out-of-court settlement of penalties. 
The purpose of this section was to check whether the various national systems observed 
the principle that no compromise was possible on sums due (the settlement of penalties 
was to be dealt with below, under point 1.2.4). Several reports did deal with settlement 
at this stage, although in most cases the wording cast doubt on the scope and purpose of 
this exercise. 
Italy and Portugal were the only Member States which made it clear that out-of-court 
settlements were not part of their legal system. Finland explicitly ruled out any such 
settlement in the customs context. France, for its part, stated that one of its chief 
concerns was to safeguard the effectiveness of its existing criminal law as applied to 
customs matters, but the French report did not mention the concept of "settlement". 
Luxembourg and Belgium completely ruled out any settlement of the principal (the duty 
evaded), although this did not include fines. The Commission had hoped for 
reaffirmation of the principle that no deals could be struck on the amounts involved but 
the descriptions given in the reports indicate that confusion still reigns as regards 
settlement of the amounts concerned and settlement of the fine. To avoid any departure 
53 
from the layout proposed, further consideration will be given to these matters in 
point 1.2.4 below. 
1.2.4. Follow-up measures 
(a) National and Community administrative penalties 
The Member States did not reply to the question on national and Community 
administrative penalties. In particular, they failed to give any information on which 
authorities could impose such penalties or on the number of cases. 
According to the reports, the national authorities make effective use of Community CAP 
penalties, designed to ensure that the system of subsidies and intervention measures is 
implemented in strict accordance with the rules and in a uniform manner. However, with 
the exception of a few pieces of information in the Danish report on Community penalties 
in connection with the integrated management system, there were no statistics showing 
how widely Community administrative penalties were used in practice. 
There is a wide variety of national administrative penalties, which are simply not 
mentioned in some of the reports. However, there are administrative penalties for the 
majority of cases, most of them geared towards safeguarding revenue. 
The Spanish report mentions a system of national administrative penalties covering all 
cases of fraud concerning subsidies, whether at national or Community level. These 
penalties, provided for by the Spanish law on public spending (1991), are complemented 
by other penalties under general tax legislation. The Portuguese report also describes 
certain national penalties regarding expenditure, e.g. removal of entitlement to subsidies, 
withdrawal of approval for olive oil producers, refusal to acknowledge good repute, 
needed to qualify for assistance etc. 
The United Kingdom does not use national administrative penalties for the Guarantee 
Section of the EAGGF or the Structural Funds, but does for VAT (more specifically for 
irregularities involving small sums, failure to register, failure to present accounts etc.) 
and customs (civil penalties, provided for by the Finance Act 1994) and will start 
54 
imposing them in 1996 for breaches of customs regulations. The same goes for the 
Netherlands: when the tax is recovered, the collector or customs representative may fine 
the debtor, an amount equal to or greater than the tax due. 
There are no general systems of administrative penalties in any of the Member States. 
Instead, the rules on penalties tend, as in Belgium, to be split between a number of 
measures, each covering a specific area. 
The conclusions set out in part 1.1.1 are also true of administrative penalties. If we wish 
to prevent the various approaches to dealing with fraud from diverging too much, we 
must push for greater harmonization and homogeneity of national administrative 
penalties, ensuring that Community expenditure is systematically covered. 
(b) Criminal penalties 
According to the information available, several dozen prosecutions are brought each year 
for fraud affecting the Community budget. It is difficult to make a direct comparison 
given the diversity of the reference bases. For example, Portugal took the number of 
cases opened (34 in 1993 and 46 in 1994) and the number closed in the same years (59 
and 100 respectively). The United Kingdom took 1992 and 1993 as its reference years 
and gave figures for the Guarantee Section of the EAGGF (20 prosecutions in 1992 and 
31 in 1993) and VAT (136 and 109 respectively). Belgium provided statistics on cases 
brought by the customs authorities (47 in 1993 and 24 in 1994). In the cases which were 
settled in those years (11 in 1993 and 8 in 1994), only 1% of the total amounts in 
question were actually recovered. The Spanish report gave details of cases pending (17) 
and referred to the prison sentences passed in certain fraud cases affecting the Guarantee 
Section of the EAGGF. It also contained information on a number of cases concerning 
the Structural Funds which had been referred to the legal authorities by the relevant 
management bodies or inspectorates. The majority of reports did not refer to the 
Structural Funds in the section on follow-up measures. 
The Netherlands reported higher figures (447 in 1992 and 369 in 1993), but these 
referred to all cases brought to the attention of the public prosecutor by the tax 
information and inquiries department (customs and tax fraud, with no separate figure for 
55 
fraud affecting the Community Budget). Only the Italian report quoted a higher figure 
than this. At the end of 1993, there were 1489 prosecutions pending for fraud affecting 
the Community budget. In the course of that year, 287 verdicts had been delivered, with 
61 convictions. Following a clamp-down, 66 convictions had been secured by the end of 
the first half of 1994. The Italian and the Belgian reports both called for more effective 
statistics to help them monitor prosecutions. 
We support this idea as a way of providing information on the outcome (dismissal, out-
of-court settlement, prosecution, conviction, recovery etc.) of criminal cases of fraud 
affecting the Community budget. It would also satisfy the Budget Authority's reasonable 
requests for this type of information. A more detailed analysis is needed here. 
(c) Link between administrative and judicial procedures 
The reports reveal that, in most Member States, administrative and judicial procedures 
exist side-by-side. The UK's report gives the most detailed explanation of why both 
administrative and criminal penalties are needed: they serve different functions, with the 
former being used to ensure sound management of the Community's finances and the 
latter to punish serious offences. The French report, on the other hand, admits on the 
very first page that the co-existence of two parallel procedures is a major cause for 
concern. The Spanish report indicates quite clearly that national administrative penalties 
are not imposed in cases where criminal proceedings are brought. 
However, the fact that there are two procedures and two sets of penalties does not 
prevent the courts from taking precedence. In Luxembourg, for example, administrative 
proceedings can be suspended when a case involving financial resources is referred to 
an examining magistrate. Similarly, the Greek report reveals that administrative 
proceedings may be suspended until the criminal proceedings have been closed. 
The principle of the precedence of the courts is particularly strong in Italy. When a fine 
is not paid, the criminal court has jurisdiction over the criminal offence and the 
administrative penalty, and will adjudicate on both in a single judgment. In Germany, an 
administrative penalty imposed in a case involving customs or taxes may be contested in 
56 
the criminal court, which must suspend proceedings if a preliminary ruling is required 
from the administrative or tax courts. 
The UK report suggests that Member States be allowed under Community legislation to 
defer the imposition of administrative penalties until legal proceedings have been closed. 
This would enable them to impose a harsher administrative penalty if it was shown that 
the offence was committed with intent. 
At the other end of the spectrum, the Dutch report takes the non bis in idem principle to 
mean that it is not possible to press criminal charges against someone and impose an 
administrative fine. Consequently, tax or customs fines are lifted when criminal 
proceedings relating to the same facts are finally closed, even if the outcome is an out-of-
court settlement. 
(d) Link between preliminary and judicial stages 
The national reports contain little information in this section. In the United Kingdom 
there are no official preliminary proceedings, though the Criminal Justice Act 1987 deals 
with preliminary matters more formally. Most of the reports avoid the issue. 
The Dutch report reveals that, in 1993, notification, settlement and prosecution guidelines 
were introduced with the aim of clarifying what action should be taken in response to tax 
and customs offences. The public prosecutor and the investigation service are to 
cooperate to consider factors such as the amount involved, previous offences, forgery and 
the implications for other transfers of Community revenue. The purpose is to use the 
criminal justice system to the best effect in dealing with fraud. The Portuguese report 
describes yet another approach. Three authorities are involved when fraud is detected: 
the disbursing authority, the relevant committee within the central administration and the 
public prosecutor. 
In the section on cooperation, some Member States have chosen to stress how important 
it is for the departments involved in both the preliminary and the judicial stages to work 
together. 
57 
(e) Referral of case to judicial authorities 
The Member States divide into two categories: those which require that the case be 
referred to the legal authorities (e.g. Greece, Italy, Spain and Portugal) and those which 
encourage out-of-court settlements (e.g. Belgium, Ireland and the Netherlands). The 
reports do not give statistics, except the UK report, which discloses the amounts 
recovered through out-of-court and amicable settlements in connection with the common 
agricultural policy and own resources. The Spanish clearly states that national 
administrative penalties' are not applied when criminal proceedings are also in course. 
There is really only one area where the reports provide enough information to enable a 
rough comparison to be drawn: out-of-court settlements relating to traditional own 
resources. The results are summarized in the table below. 
Principles governing out-of-court settlements: traditional own resources 
Member 
State 
B 
DK 
D 
EL 
E 
F 
IRL 
I 
L 
NL Possibility of out-of-
court settlement for 
customs fraud 
Yes, under section 263 
of the General Customs 
and Excise Act 
Yes, for customs duties 
(not specified for 
agricultural levies) 
Point not dealt with 
Point not dealt with 
No out-of-court 
settlement allowed 
Point not dealt with 
Yes (in connection 
with own resources, 
according to report) 
No 
Yes 
Yes (through legal 
procedure) Authority responsible 
for out-of-court 
settlement 
Customs 
administration 
Customs 
administration 
Customs 
administration 
Information not 
given 
Public prosecutor Discretionary powers or criteria for 
using out-of-court settlement 
Out-of-court settlement not 
permitted for premeditated fraud or 
in case where there is sufficient 
evidence for legal action. 
Possible for amounts too small for 
prosecution under criminal or 
customs law 
Discretionary powers 
Out-of-court settlement possible for 
fine, not for amount due. 
No particular criteria (Article 167 
of the criminal code applies -
principle of appropriateness of legal 
action 
58 
P 
ô 
su 
SV 
UK No 
Point not dealt with 
No: no out-of-court 
settlement possible for 
customs 
Point not dealt with 
Yes Customs and Excise Out-of-court settlement used as 
secondary option. Legal action is 
taken wherever possible. 
Three other pieces of information can be extracted from the reports: the Dutch report 
reveals that amicable settlements are rare in the case of irregularities relating to the 
common agricultural policy; the Irish that criminal proceedings are uncommon in cases 
involving own resources and the Belgian that 5% of customs fraud cases reach the courts. 
Belgium, Denmark and the United Kingdom explain that certain criteria relating to the 
seriousness of the offence are taken into account. Out-of-court settlements are possible 
only where there was no intention to defraud or where the amounts involved were to 
small for prosecution or other legal action. 
As in other parts of the report, little mention is made of VAT cases in the section on out-
of-court settlements. Two Member States report that there is provision for out-of-court 
settlements and that the rules are the same as for traditional own resources - evidence of 
a parallel approach for two different types of Community own resources. In Denmark, 
the customs and VAT authorities use out-of-court settlements in their respective areas of 
activity where the amount in question are too small for prosecution. In the Netherlands, 
the public prosecutor may opt for an out-of-court settlement for VAT (as for customs 
duties) if legal action is deemed inappropriate. Only the UK report gives figures for the 
amount of VAT recovered through amicable settlements. These relate to 1991-94. 
The other Member States gave no reply or provided information on traditional own 
resources only, making it impossible to assess the similarities between the various types 
of own resources or to conclude whether out-of-court settlements are used for 
irregularities affecting one source of revenue more than for another. 
59 
More often than not, the reports neglected to deal with out-of-court settlements for fraud 
affecting expendimre. These are not allowed in principle under Italian, Spanish or 
Portuguese law. ïn the Netherlands, on the other hand, out-of-court settlements (which 
are themselves legal procedures) are possible for fraud affecting expenditure. The UK 
also has a procedure for making out-of-court settlements with recipients of CAP funding 
but its use by Customs and Excise is restricted to cases of administrative error. The 
Finnish authorities have discretionary powers to settle out of court but the report indicates 
that compromise solutions are rare. 
In Member States where there is no provision for out-of-court settlements, the 
responsibility for bringing legal action lies with the authority which discovered the 
offence. In the UK, which does allow out-of-court settlements, the head of the Serious 
Fraud Office may, on his own initiative, investigate cases which he thinks involve serious 
or complex fraud. He may also prosecute. 
The lack of detailed replies in the national reports makes it impossible to assess whether 
or not the rules governing out-of-court settlements for fraud affecting Community 
revenue and expenditure are the same as those for fraud affecting public funds at national 
level. The only clear conclusion that can be drawn is that there is a need for greater 
clarity and openness with regard to the guiding principles, the more detailed, practical 
rules and the scope for out-of-court settlements. In view of the results of the study, the 
Commission intends to raise the issue of out-of-court settlements again at a later date. In 
particular, it wishes to examine the principle of bringing the "assimilation principle" and 
the effectiveness of administrative and criminal penalties. 
(f) Partie civile or equivalent measures 
Italy's report points out that the Commission is entitled to be party to criminal 
proceedings and encourages it to play a more active role. The Commission enjoys the 
same right in Spain, though it has never exercised it according to the Spanish report. 
Like Spain, where the Advocate-General is party to civil proceedings in cases of fraud 
affecting the Community's financial interests, the UK also uses civil actions to recover 
funds. The motivation is financial. It should be possible to carry out a more detailed 
60 
analysis of the role of the Treasury, which represents the Community's financial interests 
in criminal proceedings. 
In other cases, the purpose of the Commission's involvement would be to help prove in 
the criminal courts that the alleged fraud had been committed. 
(g) National measures taken or planned to avert risk of repetition 
The aim here was to collect information on which to base ideas for action at Community 
level. However, the heading was often taken to refer to measures against recidivism 
(double penalty under the General Custom and Excise Act of 7 July 1994 in Belgium and 
heavier fines in Luxembourg). The target is systematic fraud, committed by people for 
whom it is their main activity. 
Italy and Portugal both draw attention to the effectiveness of precautionary measures such 
as suspending payments or restricting access to certain schemes. This approach 
presupposes that the authorities responsible for making payments are informed when a 
fraud offence has been committed so that it can stop payments to the businesses in 
question. 
The UK reports that it has undertaken a study on the methods used by the perpetrators 
of fraud. Information on VAT and customs-fraud techniques has been distributed within 
the relevant departments to help them with prevention. Liaison officers working on tax 
fraud have been sent on exchanges to Belgium, France and the Netherlands. 
(h) Suggestions for Community measures 
The • measures suggested by the Member States can be broken down into three basic 
groups, summarized by three words: simplification, harmonization and cooperation. 
Legislative simplification is mentioned in a number of reports (e.g. France, Luxembourg 
and the Netherlands). Exactly what such simplification should entail has yet to be 
specified - separately for each area no doubt. For example, the Spanish report refers to 
the need for further reforms to agricultural rules in order to arrive at a simple, uniform 
61 
system of offences and penalties. The Dutch report suggests paying greater attention to 
problems with implementation, monitoring and application. It recommends that the 
Commission launch study programmes to examine the application of standards (including 
an examination of the cost of application as a proportion of the overall cost of a policy) 
and, at the same time, assess programmes already implemented. This suggestion ties in 
with the Dutch authorities' idea of carrying out regular audits to measure the 
effectiveness of Community arrangements. Taking part in these national activities would 
be one way for the Commission to become involved in assessment. 
Harmonization is called for in a number of areas: harmonization of penalties to ensure 
that the perpetrators of fraud are dealt with in the same way in all Member States 
(Belgian report) or to ensure that intra-Community tax fraud is dealt with in a uniform 
manner (UK report) and harmonization of prevention measures - the French report 
suggests that the Community adopt a regulation on monitoring of the Structural Funds 
and standard administrative penalties, and raises the issue of uniform status of inspectors 
arrangements. The UK also suggests considering the possibility of giving investigators 
similar powers. 
There is actually a separate section of the report on cooperation but we will summarize 
the suggestions made in this part of the report. Portugal wanted to see stronger links 
between the national authorities and the Commission, especially UCLAF, in the shape 
of exchanges of information on businesses, training at Commission level on Community 
regulations and risk analysis techniques, and exchanges between the Member States. 
Greece called for the creation of special investigation and prosecuting units in all the 
Member States. These would be in direct contact with the relevant Commission 
departments. Spain wanted controls on Community transit operations to be more 
coordinated and called for greater coordination between national and Community 
controls. 
Avenues to be explored (1.2.) 
This section on the effectiveness of anti-fraud measures is based on the practices 
established by the budgetary authority (Parliament) and the Commission. The aim is to 
extract the maximum benefit from the knowledge we have of the field based on 
62 
information collected and studies of model cases. We must first deal with the questions 
of principle before putting forward ideas on the type of measures which might be taken 
to reduce the risk of fraud. 
The Member States report an increase in the figures for fraud between 1993 and 1994, 
the two reference years, though it is hard to say whether the figures reflect a genuine 
increase in fraud, better statistics, more effective controls or improved detection. There 
is also evidence of a growing awareness of the transnational character of fraud, with 
many of the Member States citing this as the motivation behind the measures they are 
taking (transit controls in Denmark, checks on goods in free circulation in France, 
exchange schemes for tax liaison officers in the UK etc.) 
The results give a broad idea of the level of assimilation. Better information is needed 
however. It is impossible to assess how well Article 209a is being implemented in 
practice without certain key data, such as the number of controls carried out in each area, 
the number of in-depth inspections carried out following on from the controls (or as a 
result of information from other sources), without the results of the controls and 
investigations (into simple irregularities and cases of fraud) and without the most basic 
information as to the measures taken (e.g. recovery and appropriate administrative and 
legal penalties). The Community is quite obviously only part-informed at present; it needs 
to know about all the links in the chain before it can measure the effectiveness of the 
anti-fraud measures taken and assess alterations as they are made. 
The Commission's thoughts on these findings, at this stage of the study, can be broken 
down into three strands. 
A. To make it easier to plan measures and tailor them as closely as possible to the 
situation on the ground, a greater amount of more detailed information is required and 
we need better statistics on the results of anti-fraud measures at every stage from controls 
to recovery and ordering of penalties. This will make it easier to assess the level of 
assimilation of the Community's financial interests with the nations' and this, in turn, 
should prompt the national authorities to make the necessary adjustments. To improve 
the quality of the analysis even further, we need information which will enable us to 
compare recovery rates for the various types of tax revenue, the number of out-of-court 
63 
settlements and the amounts involved, the number of controls and in-depth investigations 
relating to national finances on the one hand and Community finances on the other. 
B. In certain areas the only way of making improvements is to alter national practices 
to make them more similar at Community level. This goes for controls (comparable level 
of monitoring throughout the Community), recovery rules (time-limits, interruption of 
time-limits, interest on late payments, recovery through offsetting etc.), privileges granted 
to the national treasuries in respect of Community debts, administrative penalties and 
rules governing their imposition. The Commission agrees with the view expressed in 
some of the national reports that the Community must provide a strong and steady 
impetus if the above improvements are to be made and incorporated into the regulatory 
framework. 
C. The national reports reveal a desire for simpler, more effective rules. The 
Commission feels exactly the same way. A maze of excessively complex regulations just 
makes it harder to root out fraud. They actually provide less protection for honest 
traders, who can be lead into errors and omissions by them. The measures taken by the 
Commission to improve the quality of financial management are largely geared towards 
dealing with these problems. And the Commission has made better management of the 
Community's finances a priority. Some Member States mentioned the desirability of 
regular national audits to assess national control systems. This idea could provide a good 
foundation for decisive progress on the road to simpler and more effective instruments. 
1.3. Action to follow up the Court of Auditors' reports 
The European Council meetings in Essen and Cannes called on the Member States and 
the Community institutions never to let up in the fight against fraud and the comparative 
study of the action taken in response to the reports from the Court of Auditors (referred 
to in the Essen conclusions) seemed to be a useful complement to the Commission's 
work. 
The third sub-section gave the Member States an opportunity to inform the Commission 
of its reactions to the Court of Auditors' reports and the follow-up measures taken. It was 
felt that, in addition to the Council's regular analyses of the Court's annual and special 
64 
reports, it would be useful to assess the action taken by the Member States in response 
to the Court's comments relating directly to them. Clearly, the comments of an 
experienced outside audit are to be welcomed as a way of filling any gaps in the control 
system. 
The sheer scale of the exercise probably explains why the results were somewhat 
disappointing. Leaving aside the three new Member States which joined in 1995 and to 
which this section did not apply, four Member States either omit to deal with the matter 
entirely or give only general replies (on the follow-up measures or the national audit 
body). Not enough information is given fora comparative table. 
Some of the Court's comments are criticized for being irrelevant or are played down. 
The German report criticizes the timing of an inquiry into the Guarantee Section of the 
EAGGF, which coincided with a general reorganization of the agricultural payment 
agencies. The Belgian authorities are unhappy because the preliminary reports were not 
sent out or were sent out too late. Most of the reports make do with general comments 
to the effect that appropriate follow-up measures have been taken, or cite a few carefully 
chosen examples to show how zealously they are implementing the Court of Auditors' 
recommendations. 
The UK report is exceptional in answering all 35 of the criticisms made in the Court's 
annual reports for 1992 and 1993 and the five special reports. Some of the Court's 
findings are challenged but, apart from a few inevitable differences of opinion, the UK 
has clearly heeded the Court's comments and, where necessary, taken appropriate action 
(for example, it has made changes to the systems of ESF controls and improved the 
methods of identifying beef and veal and agricultural control techniques). 
Some other reports also contain interesting information, albeit less systematically. Ireland 
reports on the measures it had taken to make controls on customs entries more effective 
and to tighten up post-clearance document controls. It has also simplified procedures for 
goods in free circulation (in response to the 1992 and 1993 reports). Denmark has also 
made changes to its system of post-clearance controls on imports and exports, raising the 
number of inspection visits and introducing new methods to show up high-risk cases (as 
requested by the Court in 1994). The Netherlands were also asked to improve their 
65 
method of establishing import duties and, following the comments made in 1992 and 
1993, drew up instructions for more detailed customs inquiries. Spain reports that it has 
developed new tools (particular date-processing tools) to help it monitor Structural Funds 
audited by the Court. 
Avenues to be explored (1.3.) 
The Essen conclusions require the institutions and the Member States to do their best to 
act on the recommendations of the Court of Auditors, which constitute a very valuable 
tool in the drive to improve financial management. 
The measures taken to achieve this objective could be assessed as part of the national 
audits carried out periodically to monitor the reliability of national controls. Some of the 
Member States which already do this have suggested that the others should join them. 
Some of the guidelines the Commission intends to draw up to tighten up financial 
management in cooperation with the Member States, could be included in the same 
framework. 
66 
Part II: Application of second paragraph of Article 209a of the EC Treaty 
(cooperation) 
The second paragraph of Article 209a of the EC Treaty as amended by the Treaty on 
European Union reads as follows: 
'Without prejudice to other provisions of this Treaty, Member States shall coordinate 
their action aimed at protecting the financial interests of the Community against fraud. 
To this end they shall organize, with the help of the Commission, close and regular 
cooperation between the competent departments of their administrations.' 
In addition to requiring the Member States to take the same measures to counter fraud 
affecting the financial interests of the Community as they take to counter fraud affecting 
their own financial interests (see the first paragraph of Article 209a) the EC Treaty 
contains this provision aimed at bringing about close and regular cooperation with the 
help of the Commission. 
This provision is particularly aimed at international fraud. Financial crime is increasingly 
an organized activity and one of the targets is the Community budget, which cannot be 
defended by the individual Member States acting alone. Better and more regular 
cooperation is needed if the Community's interests are to be properly protected. 
The second paragraph of Article 209a is confirmation that the fight against fraud is 
primarily the Member States' responsibility. To carry out this task, they need to 
cooperate more as partners, with the Commission's help. It was with this in mind that 
the Commission set up the Advisory Committee for the Coordination of Fraud Prevention 
(COCOLAF) to organize cooperation between the relevant departments - a move 
welcomed by the Council (Economic and Financial Affairs) on 11 July 1994. 
The Commission asked the Member States to comment on three types of cooperation; the 
first two arranged by the Member States on a non-Community footing, i.e. administrative 
cooperation (2.1.1) and cooperation in criminal matters (2.1.2), and the third based on 
Community instruments (2.1.3). 
67 
2.1.1. Administrative cooperation and assistance under non-Community instruments 
All the reports quote non-Community cooperation instruments. The table below gives a 
summary of the various cooperation activities mentioned in the national reports, dividing 
them into the five general categories suggested by the Commission. 
Administrative cooperation and assistance under non-Community instruments 
B 
DK 
D 
EL 
E 
F 
IRL Inventory of 
cooperation measures 
(and legal bases) (a) 
Naples Convention 
Reference to 
administrative 
cooperation on fraud 
affecting the 
Structural Funds 
Council of Europe 
Conventions 
12 bilateral 
agreements (3 new 
MSs(*), 9 non-
member countries 
Naples Convention 
Contacts on basis of 
national instruments 
Role of General Audit 
Office of State 
Administration 
Customs cooperation 
with MSs (83%) and 
non-member countries 
(17%) 
Naples Convention 
CCC recommendation 
No specific bilateral 
agreements Assessment of 
results (b) 
1993 and 1994: 
requests received: 
1797 
transmitted: 1010 
1993: 
requests received: 
1912 
transmitted: 299 
(detailed breakdown 
by country). Results 
generally positive 
Examples of good 
cooperation 
(Lebanon, Cyprus) 
19 instances of 
cooperation 
(Poland, Argentina) 
Increase in 
cooperation: 16% 
offences detected 
following 
information 
exchange 
1992 and 1993: 
requests received: 
16 
transmitted: 12 
(non-member 
countries) Problems 
encountered (c) 
Time taken 
sometimes 
excessive, 
insufficient 
justification for 
requests and number 
of requests 
Difficulties with 
some countries 
(Kuwait, Bulgaria) 
Problem with 
authenticity of 
documents from 
non-member 
countries 
Powers of customs 
officials differ 
between countries suggestions/reasons 
for placing on 
Community footing 
Personal contact 
useful 
Conclusion of 
MA(*) agreements 
de facto 
Gradually transfer 
to Community 
More exchanges 
for officials and 
more vigorous 
approach to 
implementation of 
agricultural MA 
Support for 
conclusion of MA 
agreements by 
Community 
68 
I 
L 
NL 
P 
0 
SU 
SV 
UK Naples Convention 
Bilateral agreements. 
(Member States and 
non-member 
countries) 
Informal cooperation 
Naples Convention 
Benelux Convention 
1959 Convention on 
Mutual Assistance in 
Criminal Matters 
Schengen agreements 
Naples Convention 
Benelux Convention 
Bilateral agreements 
(Scandinavian 
countries) 
CCC recommendation 
CCC recommendation 
Bilateral agreements 
with Morocco 
Bilateral agreements 
with non-member 
countries (US, 
countries of central 
and eastern Europe) 
17 bilateral 
agreements (MSs and 
non-member 
countries) 
CCC recommendation 
Nairobi Convention 
Bilateral agreements 
with MSs and non-
member countries 
Naples Convention 
CCC recommendation 331 instances of 
cooperation with 
non-member 
countries 
1992-93 
requests received: 
502 
transmitted: 192 
(detailed breakdown 
by country) 
1993 and 1994 
requests received: 
15 
transmitted: 14 
No record of MA 
requests Occasional failure to 
respond to requests 
Evidential value of 
documents received 
No problems to 
report 
/ 
* More spontaneous 
cooperation 
Support for 
conclusion of MA 
agreements by 
Community 
Present situation 
satisfactory. No 
suggestions. No 
reason to put on 
Community footing 
No reason to put 
on Community 
footing, unless 
problems arise in 
direct contacts 
between MSs and 
non-member 
countries 
Support for 
conclusion of MA 
agreements by 
Community 
Need to involve 
customs 
administrations of 
non-member 
countries 
Cooperation 
projects with 
countries of central 
and eastern Europe 
(VAT) 
Support for 
conclusion of MA 
agreements by 
Community 
MA arrangements 
essential in fight 
against fraud 
(*) MS: Member State; MA: mutual assistance 
69 
With the exception of the Austrian and French reports, which did not deal with the three 
types of cooperation separately, and the Danish report, which covered administrative 
cooperation on fraud affecting the Structural Funds only, the reports provided sufficient 
information on non-Community administrative cooperation. 
A number of reports gave figures - sometimes very detailed - on requests for inquiries 
into offences. While it was hard to draw any comparison between these figures, they at 
least show that the cooperation mechanisms are used. Information is exchanged 
frequently. The importance of spontaneous and personal contact with the relevant people 
and agencies in other countries is often highlighted, especially in the Belgian, German 
and Portuguese reports. Such contacts are facilitated by databases (Belgium), training 
(Portugal) and a mutual-assistance information centre set up by the Member States (UK). 
The cooperation dealt with in this section (2.1.1) relates primarily to customs matters -
the Naples Convention for cooperation between the Member States and recommendations 
of the Customs Cooperation Council (CCC) and bilateral customs cooperation agreements 
for cooperation with non-member countries. 
However, the requests for information do not all relate to own resources. Some of them 
concern other areas of the Community's activities. The Benelux countries have a 
cooperation agreement providing for administrative assistance on matters going beyond 
customs cooperation. 
The attention devoted to cooperation with non-member countries varies from one report 
to another. In most cases it is based on bilateral agreements and is more common in 
some Member States, such as Germany, than others. Strictly speaking, the second 
paragraph of Article 209a does not require cooperation with non-member countries, only 
cooperation between the Member States. But this form of cooperation does help achieve 
assimilation where there are similar bilateral agreements to protect the Member States' 
national interests. Agreements with non-member countries also help to achieve a standard 
level of protection at the Community's external borders. 
The Member States have adopted no new cooperation instruments since the Union Treaty 
entered into force, but have continued to use existing instruments. Many Member States 
70 
mention the 1967 Naples Convention, which is part of the acquis communautaire which 
all Member States must accept. Sometimes figures are given too. The Naples Convention 
contains provisions covering areas outside the Community's jurisdiction, similar to those 
found in Regulation (EEC) No 1468/81 on mutual assistance (see point 2.1.3 below). The 
fact that the Convention is mentioned in the reports suggests that the two instruments are 
sometimes used simultaneously for a single exchange of information or that the 
Convention is invoked instead of the Community regulation. 
Avenues to be explored (2.1.1.) 
The reports reveal how important cooperation instruments are for the Member States. On 
the basis of the information in the reports, we have formulated some ideas as to what 
action needs to be taken at Community level and what can be done to make cooperation 
mechanisms more effective. 
A. A number of reports acknowledge the need to increase the level of cooperation 
between the Member States. A more structured approach is required where structures do 
not yet exist. The existing regulatory framework for cooperation must be extended in 
order to achieve the level of cooperation required by Article 209a. Perhaps there is scope 
for a common approach to solving the various problems mentioned in connection with 
the mutual assistance mechanisms (e.g. time taken to reply and insufficient justification 
for requests). 
B. Closer operational links must be developed between the various departments 
responsible for prosecuting the perpetrators of serious and complex fraud (part of the 
phenomenon of large-scale organized financial crime). The links between these 
departments, combating international fraud, and the Commission also need to be 
strengthened in certain areas where the existing framework is inadequate. For example, 
new procedures must be devised to enable the Commission to develop the support which 
it can give these departments in carrying out their duties. 
C. Building up personal contacts and increasing the number of exchanges for officials 
and liaison officers are also good ways of strengthening cooperation between the Member 
States. The effectiveness of cooperation depends not only on the instruments providing 
71 
for contacts between experts (with the long-term in mind), but also on the quality of 
relations between investigators and other officials. 
D. Some consideration must be given to the question raised by a number of Member 
States as to whether the Commission should continue or indeed step up work leading up 
to the conclusion of mutual assistance agreements with non-member countries. 
2.1.2. Cooperation in criminal matters 
The second paragraph of Article 209a is not confined to purely administrative 
cooperation. It requires the Member States to engage in wider-ranging cooperation where 
that is necessary to counter fraud against Community revenue and expenditure, especially 
where transnational organized crime is involved. 
Organized financial crime cannot be allowed to exploit divergences in enforcement 
facilities as a means of securing impunity for itself. The need for deep-seated, effective, 
direct and rapid cooperation is clearly revealed by the analysis of the national reports, 
even if it is not always explicitly stated as such. 
To gain an overview of the reality here, the question of police and judicial coordination 
was to be considered in terms of the following topics: legal basis (conventions, bilateral 
agreements, exchanges of letters, informal approaches); description of procedure, 
channels and time factor; inventory of the number of police cooperation cases relating 
to fraud in the two reference years; results, evaluation, difficulties encountered, limits 
to this type of cooperation and suggested improvements. 
Few of the reports deal with these topics exhaustively. The information they yield is set 
out in summary form in the table below. 
Cooperation in criminal matters 
Mem 
ber 
State 
B (a) Police 
cooperation 
Cooperation with 
UCLAF mentioned (b) Judicial 
cooperation (c) Difficulties 
encountered (d) Suggestions 
Item not covered; reference to Third Pillar 
72 
DK 
D 
EL 
E 
F 
IRL 
I 
L 
NL 
P 
OS 
SU 
SV Existing agreements listed 
Existing agreements (Schengen) 
Extradition and judicial cooperation 
agreements 
Bilateral contacts -Third pillar 
mentioned 
Cf. Table 2.1.1 
Not covered 
- Conventions and Treaties listed 
- Reference to informal cooperation via UCLAF 
Ad hoc cooperation 
under Schengen Existing agreements 
listed 
35 requests for 
judicial cooperation 
(customs) received Further work within 
Council (Third 
pillar) desired 
Neutral remark 
about further work 
within Council 
(Third pillar) 
- Occasional hold-ups as between 
administrative and criminal approaches (ref 
to Third pillar) 
- Delays with letters rogatory 
Not covered 
Cf. Table 2.1.1 
Cf. Table 2.1.1 
National 
Investigation Bureau 
coordinates 
Police cooperation 
needs no specific 
basis; is based on 
legislation of 
country concerned - Existing 
agreements listed 
- Specific 
legislation on 
investigation 
jurisdiction and 
procedures -
detailed description 
given 
- Existing 
agreements listed 
(with national 
transposai 
legislation) 
- Foreign Ministry 
centralizes * 
Legislation on 
judicial cooperation 
is pending 
73 
UK - Cooperation based on European 
Convention on judicial cooperation in 
criminal matters 1959 (Protocol of 1978) 
- Interpol Central Bureau (in the National 
Criminal Intelligence Service) coordinates 
- European Extradition Convention signed Delays; refusal of 
certain Member 
States to extradite 
their own nationals 1. Registers of 
companies and 
firms 
2. Stronger 
procedures for 
cooperation 
between central 
authorities 
3. Changes to 
banking secrecy 
legislation; tougher 
legislation against 
laundering 
4. Prioritize 
investigations 
It can be seen that there is little difference between police cooperation and judicial 
cooperation. Existing legal bases apply specifically to judicial cooperation whereas police 
cooperation is handled either on an ad hoc informal basis or under the judicial 
cooperation arrangements. There can be hold-ups at both levels, as is clear from the 
report on the Netherlands, where there is both an administrative approach and a criminal 
law approach to enforcement coordination. 
Several national reports highlight the value of administrative cooperation beginning at the 
initial investigation stage so that information can be exchanged on an institutionalized 
basis between Member States and between them and the Commission. Such is the case 
of the Belgian OCDEFO, which is empowered to maintain contacts with counterpart 
services in other Member States and the Commission. Greece supports the establishment 
of investigative and enforcement agencies maintaining contacts with each other and with 
the Commission. Ireland, Portugal and the United Kingdom take a similar view. 
However, none of the reports looks at the relationship between fraud against the 
Community budget and police cooperation in any precise fashion. Apart from figures as 
to the number of requests for investigation received by the Dutch customs, no data on 
cooperation on the enforcement side are given. 
The United Kingdom is the only Member State to offer practical suggestions for stronger 
cooperation in enforcement, such as the possibility of conferring comparable powers on 
national investigators (this idea is shared by France), developing new tools such as 
74 
information files and meetings between relevant services, giving priority to criminal 
investigations and easing access to bank data. 
Most reports deal with the question by listing existing instruments, which commonly 
include the European Extradition Convention 1959 (and the additional protocols of 1975 
and 1978), the European Convention on judicial cooperation in criminal matters 1959 
(and the additional protocol of 1978) and the Schengen Agreement of 1990. Only two 
reports mention Third pillar cooperation in the Council. 
The conclusion must be that on the enforcement side most Member States have not been 
at pains to show that they are willing to give priority to the duty to cooperate of their 
own motion. The Commission will have to pursue its work in order to provide the 
Member States with the assistance required by the second paragraph of Article 209a in 
developing the tools needed for effective cooperation in the fight against fraud. The 
Ecofin Council on 11 July 1994 confirmed the Commission's role in operational action 
and in coordinating investigations, notably in areas that are particularly vulnerable to 
transnational fraud. 
Avenues to be explored (2.1.2.) 
The information to hand reveals the vital importance of equipping the national 
enforcement authorities with efficient means of meeting the need for a high and uniform 
level of protection for the Community's finances. 
A. To improve cooperation between national authorities and between them and the 
Commission, there is a need to develop facilities for exchanging information between 
national enforcement authorities and the relevant Commission departments at the initial 
investigation stage. The Commission will accordingly pursue its work of looking into the 
possibilities and bringing about a legal instrument to extend cooperation to the full range 
of pre-litigation activities. 
B. It would be worth pursuing the investigation of the means and powers available to 
fraud investigators so as to consider at a later stage the possibility suggested by some of 
the national reports of conferring comparable powers on all national investigators. 
75 
C. To ensure that all findings from action undertaken by the Community with the 
Member States are used to full effect, notably in the event of criminal proceedings, it will 
also be necessary to review the Commission's role and its activities in relation to the 
national authorities and to see what action must be taken in terms of adjustments to the 
arsenal of legal instruments. 
D. As for the criminal law itself, the measures needed to transpose the Convention on 
the protection by the criminal law of the Community's financial interests must be taken 
as quickly as possible. This first step on the road will be fully effective only if 
accompanied by enhanced judicial cooperation operating direct at Community level, 
targeted on the protection of the Community's financial interests and based on networks 
of courts and prosecutors. The implementation of such networks will facilitate the 
application of the principle enshrined in the Convention of centralizing proceedings at a 
single court. 
2.1.3. Administrative cooperation and mutual assistance under Community 
instruments 
A number of Community regulations impose a cooperation obligation on Member States. 
They are: 
- in the field of own resources, Regulations 1468/81 and 218/92 (VAT); 
- in the agricultural field, Regulations 4045/89 and 595/91; 
- for Structural Funds, Regulations 1681/94 and 1831/94. 
Specific provisions in these regulations require individual Member States to assist each 
other, acting on their own initiative and without the Commission necessarily being 
involved. Member States must, for instance, exchange any facts in their possession. 
Such exchanges cover matters such as the findings of inspections in multinational firms, 
information about specific operations or suspected or established cases of fraud where, 
to quote the regulations applying to agriculture and strucmral operations, "it is feared that 
they may very quickly have repercussions outside its territory". 
76 
As the regulations are directly applicable in the Member States, fairly comprehensive 
coverage of this aspect could have been expected in the national reports (with the 
exception of the three new Member States, which as yet have no practical experience in 
the matter). Three Member States, however, mention none of the regulations and five 
of them omit at least three of the seven cited by the Commission. Some Member States 
also mention others; Denmark and the Netherlands quite rightly refer to the difficulties 
in cooperation on recovery (Directive 76/308). 
However, some reports contain sufficient information for a comparative analysis as 
summarized in the following table. 
Administrative cooperation and mutual assistance under Community instruments 
Member 
State 
B 
DK 
D 
EL Inventory of bilateral or 
multilateral cooperation 
activities 
1468/81: 1993: 122 
mutual assistance messages 
received; 1994: 114 
received 
4045/89: 1993: 4 requests 
received and 3 sent; 1994: 
6 received and 5 sent 
1468/81: 1993: 114 
mutual assistance requests 
received, 4 sent; 1994: 65 
requests received, 23 sent 
218/92: Tax cooperation 
Requests based both on 
Regulation 1481/81 and on 
the Naples Convention. 
No separate statistics; total 
1993: 4 316 received, 
4 668 sent 
4045/89: 8 requests sent in 
1993, 44 in 1994 
No data Results and evaluation of 
these cooperation activities; 
identification of practical 
difficulties 
Results of cooperation 
dependent on personal 
contacts between Member 
States' officials 
No reply in some cases, 
which can be an obstacle to 
court proceedings 
Difficulties in taking part 
in the inspections of other 
Member States (problem of 
foreign inspectors) 
Problem with time taken 
for replies 
Cooperation with 
Commission departments 
and national authorities is 
improving Any suggestions for 
improvements to this type 
of cooperation 
Maintenance and 
intensification of contacts 
between officials 
Development of data bases 
Legal basis satisfactory, 
but faster and more 
elaborate information 
exchange system desirable. 
Improvements required in 
the field of recovery 
(Directive 76/308) 
Impose time limits for 
replies in the regulations 
Closer cooperation with 
the Commission 
On-going training and 
exchanges of officials 
77 
E 
F 
IRL 
I 
L 
N 
OS 
P 
SU 1468/81: 1993: 62 mutual 
assistance requests 
received, 22 sent; 1994: 
59 received, 68 sent 
No data 
1468/81 (SCENT) 
1992: 167 mutual 
assistance requests 
received, 182 sent; 1993: 
90 received and 162 sent 
1468/81: 1 004 cases 
218/92: 21 
Instruments mentioned: 
1468/81 (customs) 
218/92 (indirect taxation) 
1468/81: 1992: requests 
received: 81; 1993: 256 
1992/93: 75 items of 
information supplied to 
other Member States 
Directive 76/308 on 
recovery 
Instruments mentioned: 
1468/81, bilateral 
agreements with a number 
of Member States 
1468/81: 1993: 88 
requests received (44 
requests satisfied) 
30 requests sent 
1994: 137 requests 
received (112 requests 
satisfied) 
28 requests made 
4045/89: 1994: 8 requests 
received, 11 sent Cooperation and mutual 
assistance very positive 
Problem of availability of 
information required for 
judicial proceedings 
Checks on products in free 
circulation, the results of 
which are sent to the 
Member States concerned 
Use of the Scent network 
to inform the Commission 
of the findings of 
enquiries. Smooth 
operation, good spirit of 
cooperation 
Positive trends: cooperation 
resulting in the 
identification of fraud or 
attempted fraud against the 
Community budget 
Establishment of fraud or 
irregularities in certain 
cases. Because of their 
number and content mutual 
assistance messages could 
not be handled with 
sufficient attention. 
Recoverv : no emergencv 
measures to guarantee 
recovery; no simultaneous 
recovery measures in 
different Member States 
Difficulties in obtaining 
information involving 
personal data 
Practical difficulties: 
language problems, time 
lag and differences in 
computerized systems Cooperation to be 
extended 
Generalisation of 
cross-checks 
Cooperation activities to 
be brought to the notice of 
UCLAF (possibly via 
Scent) 
Mutual assistance reports 
should be reserved for 
complex fraud cases 
Harmonization of the areas 
covered by the various 
authorities in order to 
facilitate cooperation 
Harmonization norms in 
the field of risk assessment 
78 
SV 
UK Instrument applicable: , 
1468/81 (customs) 
1468/81 
77 requests for 
information handled; 138 
requests concerning own" 
resources (outside CAP) No compulsory 
transmission of findings 
Dual customs and VAT 
agency involvement 
Lack of common entry 
processing systems across 
Community 
Time taken to respond to 
mutual assistance requests 
Differences in legislation . 
Community-wide Installation in each 
Member State of national 
intelligence and research 
centre for commercial 
fraud 
Notification by 
Commission of specific. 
cases and legal decisions 
on current issues 
Request for regular 
meetings with other 
Member States and 
specific meetings 
(particular urgent 
problems) 
The Community cooperation instruments are clearly not ignored and Member States find 
this type of cooperation satisfactory. 
The main difficulties mentioned concern the response times, which can slow down 
investigations and judicial proceedings, and differences of all kinds (administrative, legal, 
technical) which hamper the movement of information'between Member States. 
It is also noted that the mutual information arrangements under Regulations 595/91 in 
agriculture and 1681/94 for the Structural Funds are hardly ever mentioned, which could 
indicate that no real use is being made of them. 
A fairly substantial number of suggestions are made to improve this type of cooperation 
and demonstrate the interest that Member States have in it. They are summarized in the 
right-hand column of the table above and taken up in part in the "avenues io be 
explored". The relevant sections of the national reports show that new requirements are 
emerging in the Member States for combating fraud, in particular a basic requirement 
for rapid information on transnational fraud. It was stressed that fraud rarely developed 
in isolation in a single country. The Commission is required by the second paragraph 
of Article 209a to provide its aid. It must therefore be placed in a position to make dse 
of the potential of the existing cooperation tools or to adapt them to this requirement. 
The Council (Ecofin) of 11 July 1994 called on the Commission to step up its operational 
role and its role of coordinator of Member States' investigations, in particular for 
79 
transnational operations. It also called for greater cooperation with the organization of 
suitable procedures between the Commission and the Member States to enable the 
Commission to provide assistance in the field of recovery. 
Avenues to be explored (2.1.3.) 
The panoply of instruments available at Community level has not been neglected by the 
Member States, even though it would appear that the potential of this cooperation has not 
been used to the full. Given the key role of cooperation, recognized by all the 
Member States, the objective must be to develop existing mechanisms to make them more 
efficient and so increase the use made of them. 
A. The information systems must develop and be adapted to reflect the reality of 
certain constraints such as the level of priority, the presentation of information and the 
assessment of risk. The.cooperation forums provided for in the operating rules for all 
these instruments must consider these matters quickly in order to produce a clear 
definition of requirements and introduce appropriate rules (redrafting of instruments, 
production of guides to procedures, access to reports, cooperation methods, and creation 
of files at central level). 
B. Certain forms of cooperation spotlighted in the national reports need to be explored 
and developed, an example being the organization of action to be taken on cross-checks 
on goods in free circulation. Regular meetings between the relevant departments must 
be encouraged, as must the rapid organization of ad hoc contacts on urgent and serious 
cases. Thought should be given at Community level to the development of databases 
containing information about economic operators (risk criteria) recommended by certain 
Member States which already have a central register (or which suggest that one be 
created). 
C. Mutual assistance in recovery must be made more effective. The directive relating 
to these mechanisms must be adapted to the needs of the single market by giving the 
Member State, which has exclusive responsibility for recovery, the legal resources and 
the information required to perform its task. Better use must be made of the potential 
for mutual assistance in agricultural, customs or own resources matters by systematically 
80 
associating the Commission whenever a Community interest is involved, as is the case 
in recovery matters. This interest may not, in fact, be immediately apparent when a case 
arises revealing the organization of a fraud system which must be prevented from 
spreading to other areas of the Union. 
D. Generally speaking, the Community regulations on cooperation must be applied 
properly and fully throughout the Community. The Advisory Committee for the 
Coordination of Fraud Prevention (COCOLAF) must meet regularly in its specialized 
formations to evalute results, develop the full potential of the system and if necessary lay 
down rules for the presentation and degree ôf detail of institutional cooperation in order 
to secure uniform data. The full committee will then recommend the necessary 
adjustments, will provide the necessary impetus and will submit any conclusions it 
reaches to the appropriate authorities. 
81 
Part III: Equivalence between measures to protect national finances and those to 
protect the Community's financial interests 
Member States were asked to ascertain, by a comparative analysis of the controls applied 
and the administrative and judicial measures taken in the event of irregularities, whether 
the measures to protect the Community's financial interests were in fact equivalent to 
those taken to protect national finances. 
Inevitably, such an exercise quickly encounters serious methodological problems. On the 
one hand, it cannot be based exclusively on quantitative data, the accuracy of which can 
hardly be guaranteed in any case. On the other hand, a clear distinction cannot always 
be made between the protection of national and Community interests. 
It would be presumptuous, however, and might even be tantamount to questioning the 
validity of the European Council's original request, if one were totally to neglect this 
aspect of the report or simply to claim that equivalence is guaranteed by definition, since 
Community funds are channelled through national accounts and thus become national 
funds, or to claim that equivalence has always been guaranteed or even that Community 
funds receive better protection and indeed enjoyed such protection even before the Treaty 
on European Union came into force. 
Most of the reports in fact make no attempt to demonstrate that equivalence has been 
achieved. As can be seen from the following table, little or no precise information has 
been provided on the staff allocated to control duties or on the administrative and judicial 
action taken in response to irregularities. 
Equivalence between the" protection of national and Community financial interests 
Member 
State 
B 
DK 3.1. Controls/measures 
Powers of the Belgian Court of Auditors 
aligned on those of the European Court 
of Auditors 3.2. Administrative follow-up 3.3. Judicial 
follow-up 
No meaningful information 
No details given Problem of recording 
court decisions on 
frauds against the 
Community budget 
82 
D - increase in staff (20% in 6 years) and No details given 
resources available for control 
purposes 
EL No details given 
E No meaningful information 
F No details given (number of staff allocated to agricultural controls: see 1.1.2) 
IRL EAGGF Guarantee: 90 full-time fraud No meaningful information 
prevention officials. 
More controls than for national revenue 
(tobacco, beer). 
Same number of officials (500) 
responsible for traditional own resources 
as for national resources (500), although , 
the latter are 7 times greater 
1 Nô meaningful information 
L No details given 
N Evidence to show that such an exercise is impossible and pointless. 
P Not discussed (conclusion: 
point 3) 
OS 5 800 customs officials Not discussed. 
SU EAGGF Guarantee: EEC controls (5%) Not discussed, 
more intensive than national controls 
0%) I 
SV No meaningful information 
UK HM Customs and Excise (traditional No meaningful information, 
own resources): 21 man/years assigned 
to investigation duties and 59.5 to 
control duties (1993/94) 
Most of the reports thus repeat the answers given earlier, but this time in the form of 
conclusions to demonstrate that the country concerned complies with the "assimilation" 
principle. The Irish report is the exception here, since it provides a comparative analysis 
of the staff assigned to control duties (point 3.1). 
Since no comparative figures are given for fraud against the national and Community 
budgets, it is difficult to comment on the true degree of assimilation within the Union. 
At most, the reports provide some clues to the real situation. An analysis of the existing 
arrangements (legislation, organization) indicates that revenue is better protected than 
expenditure and that agricultural expenditure is more closely supervised than expenditure 
on structural measures. As a rule, the Member States simply assert that assimilation has 
been achieved, although the degree of assimilation in this or that sector is not specified 
or borne out by a comparison of results. Besides, in most cases there are no comparable 
results by which the degree of assimilation could be accurately measured. 
83 
A number of factors tend to blur the meaning of "assimilation". It is often claimed that 
the Community's legislation on controls in the agricultural sector is so detailed that 
Community expenditure is more closely monitored than national expenditure (and in some 
cases this has been shown to be true). It is also frequently claimed that the proper use of 
risk analysis can achieve more than an increase in the number of inspectors; theoretically 
this should apply irrespective of the nature (Community or national) of the resources or 
expenditure concerned. 
These are valid suggestions, but one must not lose sight of the fact that efficient 
protection presupposes both adequate levels of controls and the prosecution of any 
infringements discovered. This point, which was made in the Yugoslav maize case, is 
essential to any assessment of how far Member States are prepared to go to ensure full 
assimilation. 
What is the point of expanding departments and developing control procedures, in full 
compliance with the assimilation principle, if this is followed at the recovery and penalty 
stages by the tacit acceptance of differences in treatment? One wonders how far 
assimilation has actually progressed when Member States react to fraudulent import 
transactions by implementing the VAT recovery procedures without any thought for 
traditional own resources. 
Compliance with Article 209a means that national behaviour has to take account of the 
need to protect the Community's financial interests and that full equivalence, which 
Member States often claim to have achieved, must in fact be gradually brought about by 
specific measures which should be subject to continuous assessment, so that the 
improvement in the management of Community finances goes hand in hand with better 
protection of its financial interests. 
* 
* * 
Although the national reports do not always lend themselves to a detailed and exhaustive 
comparative analysis and although they do not always indicate that the assimilation 
principle is being observed in all areas of national life, they do suggest avenues to be 
explored and ways in which progress could be achieved. Moreover, the points made in 
one report are often similar or identical with those made in another. 
Most of the reports reach the conclusion that progress needs to be made on all fronts, 
with cooperation at all stages from prevention to prosecution. 
84 
In many cases the reports recommend that priority should be given to action at 
Community level so that in" certain areas the monitoring arrangements oould be 
strengthened on the basis of objective criteria, with a view to harmonizing the controls 
carried out by Member States. 
Similarly, some Member States recommend the systematic and regular evaluation of these 
arrangements so that constant adjustments can be made to the level of protection afforded 
to Community finances, thus making for optimum national and Community supervision 
and reflecting the needs of the moment and the real risks involved. One frequent 
suggestion is for the introduction of auditing structures combining all levels of expertise. 
Ongoing simplification of the rules is often said to be essential if the legislation is to be 
consistent and take account of the cost-effectiveness aspects. 
Numerous virtues are ascribed to cooperation, which is in many cases seen as the 
necessary catalyst for effective national and Community action to counter sophisticated 
transnational fraud and organized financial crime. All seem to agree on the need for 
greater cooperation so that more effective work is done in the field and the intelligence 
available is fully utilized. This might entail improvements to existing procedures or 
institutional cooperation which went beyond mere administrative assistance. 
/ 
Some take the view that the optimum arrangement would be for the Community itself to 
* 
apply a mandatory system of set administrative penalties and for appropriate measures 
to be taken to improve the compatibility and equivalence of national systems of criminal 
law. 
Be this as it may, the Community is currently endeavouring to achieve the necessary 
convergence between the economies of its Member States so that it can enter into the 
decisive phase of economic and monetary union and is currently stepping up the volume 
of financial assistance for such integration. In this context it would be surprising if firm 
declarations of intent were made at the highest levels but the necessary steps were not 
then taken to translate these declarations into specific improvements in the protection of 
the Community's financial interests. 
Improvements in fraud prevention require not just "assimilation" but also a voluntarist 
policy of stronger preventive measures so that all Member States apply more effective 
and equivalent controls. Improvements will also require the application of stricter 
penalties within the institutional framework of the Union. It is obviously a basic 
principle of the management of public finances that those collecting or administering 
Community funds have an obligation to ensure surveillance and financial control. 
Fulfilment of this obligation must, however, go hand in hand with the adoption of clear 
85 
and binding rules and criteria for each sector, to provide a more solid foundation for 
surveillance work and to achieve equivalent levels of control throughout the Community. 
Nor is it sufficient to have greater compatibility in the types of fraudulent activity or 
behaviour which one hopes to combat. It is also necessary to harmonize enforcement 
action to counter fraudsters who move from one Member State to another in order to take 
advantage of less stringent laws. In 1989 the Court of Justice held that penalties must 
be made "effective, proportionate and dissuasive", and this remains the objective which 
must be achieved homogeneously throughout the Union if we are to halt the expansion 
of organized and transnational financial crime, the exponents of which carry out their own 
risk analysis. 
The property of the European taxpayers must be protected if the institutions and Member 
States of the Union are to maintain their credibility. The Community, which has taken 
steps to improve its financial management, must logically take even greater care to ensure 
that its financial interests are fully protected against all forms of abuse. Such is the 
purpose of the exercise. It is surely on this basis that progress can be made towards 
satisfying the.requirements of the Essen and Cannes European Councils. 
86 

ISSN 0254-1475 
COM(95) 556 final 
DOCUMENTS 
EN 09 
Catalogue number : CB-CO-95-605-EN-C 
ISBN 92-77-96236-4 
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