Communication from the Commission - Protection of the Communities' financial interests - The fight against fraud - For an overall strategic approach
Date: 2000-06-28
Institutions: European Commission
Subjects: European Union, cooperation policy, financial control, fraud, public finance

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 28.6.2000
COM(2000) 358 final

COMMUNICATION FROM THE COMMISSION

Protection of the Communities’ financial interests

The fight against fraud
For an overall strategic approach

TABLE OF CONTENTS

For an overall strategic approach........................................................................................ 3

1.

First challenge: an overall anti-fraud legislative policy.............................................. 6

1.1. Develop a culture of prevention and strengthen regulations ................................... 6

1.1.1.

1.1.2.

1.1.3.

Involving the European Anti-fraud Office in prevention ............................... 7

Involving the national authorities in anti-fraud actions.................................. 7

Involving professional circles in a policy of transparency ............................. 8

1.2.

Strengthening means of detection, controls and sanctions ...................................... 8

1.2.1.

1.2.2.

1.2.3.

Defining precisely irregular conduct and illegal activities ............................. 8

Extending information exchanges and control measures ............................... 9

Extending Community administrative penalties ............................................ 9

1.3. Ensure a more effective management of administrative and financial follow-up ..... 9

1.4 . Clarifying cooperation rules ................................................................................ 10

1.4.1.

1.4.2.

1.4.3.

The protection of financial interests............................................................ 10

The protection of Community interests connected to the fight against fraud 10

Strengthening cooperation with applicant

countries and non-member

countries 11

2.

Second challenge: a new culture of operational cooperation ................................... 11

2.1. Enhanced exploitation and analysis of intelligence .............................................. 11

2.2. For a new operational partnership with the Member States: a Community platform
of services.................................................................................................................. 12

2.3. For strengthened cooperation with the applicant countries .................................. 13

2.4. A policy of permanent evaluation of anti-fraud actions ........................................ 13

3.

Third challenge: An interinstitutional approach to prevent and combat corruption 14

3.1. Develop a culture of cooperation at all levels....................................................... 14

3.1.1.

3.1.2.

3.2.

3.3.

The Commission departments and the other institutions, bodies and agencies14

Appropriate training and permanent awareness-raising among staff............ 14

Transparency, duty to communicate..................................................................... 15

Independent administrative investigations; fair and effective penalties................. 15

4.

Fourth challenge: The enhancement of the penal judicial dimension ..................... 15

4.1. Current legal framework...................................................................................... 16

4.2.

Scope and means for Community action............................................................... 16

Prospects............................................................................................................................. 17

Towards the creation of a European Public Prosecutor for protection of financial interests

* * *

2

This communication follows up the conclusions of the Heads of State or Government who
met in Helsinki on 10 and 11 December 1999 under the point “the fight against fraud”1
according to which “The establishment of the European Anti-Fraud Office constituted an
important new step in the fight against fraud. The Commission will present at the latest by
June 2000 a communication on the development of the overall strategy which should allow
the financial interests of the Community to be protected”.

The protection of financial interests is the business of everyone, the institutions and their
members on a political level, the European public service as well as national civil services and
their officials in the performance of their daily missions. It is a concern which takes shape
from the stage of drawing up Community policies and is observed at all stages of the process
of their implementation, in particular at the level of their budgetary or financial consequences.

To be in line with the conclusions of the Helsinki European Council, the orientations of this
communication are complementary to the measures already taken to ensure good, sound and
rigorous financial management of the different policies of the European Union and to prevent
the risks of irregularities or misappropriation of funds. The White Paper on the reform of the
Commission2 made this objective a permanent concern for all the services of the institution
required to implement these policies or to ensure their control and follow up. This concern
must be in line with a dynamic to improve constantly existing measures on the basis of the
regular evaluation of their effectiveness. The Commission has, moreover, in the framework of
this reform, already begun a profound revision of its methods of financial management and
audit as well as its administrative practices (amendment of the staff regulations of officials
and servants of the Community, strengthening of disciplinary procedures etc.). In very
concrete terms, the revision of the financial regulation, the establishment of an internal audit
service and a central financial service in particular represent so many elements which come to
strengthen protection of financial interests3.

This communication is in line with the same process of strenghtening public finance and
represents more particularly the approach which the Commission intends to present to the
Council and the European Parliament on the fight against fraud, corruption and any other
illegal activity detrimental to the Communities’ financial interests. It relies on the new
institutional framework and the complementarity of the work of the Member States and the
institutions.

FOR AN OVERALL STRATEGIC APPROACH

Community public finance is governed by provisions included in the EC Treaty.4 The
preparation, implementation and protection of the Community budget is the responsibility of
the European institutions and the Member States. The European Parliament and the Council,
as well as the Commission, have particular responsibilities in this area. The European
Parliament and the Council, as the budgetary authority, decide on the budget and it is for the
Parliament to state for each exercise that it has been finally adopted. The European Parliament

1

2

3

4

Conclusions of the Helsinki European Council of 10 and 11 December 1999; Point 24.
White Paper on Reforming the Commission. COM (2000) 200 final of 5 April 2000.
These actions proper to the reform, outlined in detail in the White Paper, have been the subject of a
specific action plan. They are not raised as such in this communication which intends, for its part, to
complete the activity of all the services which work together to protect financial interests.
Articles 274 to 280 of the EC Treaty.

3

follows the Council in examining the accounts and the financial summary. It gives discharge
to the Commission on the implementation of the budget. Moreover, the Court of Auditors
examines the legality of revenue and expenditure and ensures sound financial management.

The new Article 280 of the EC Treaty sets an objective of effective and equivalent protection
throughout the Community. It requires all the responsible authorities in the Member States to
organise close and regular cooperation with the Commission. It introduces a new legal base to
allow the European Parliament and the Council to adopt by codecision procedure the
measures to prevent and combat attacks on the Communities’ financial interests.5 Article 280
of the EC Treaty calls finally for a policy of permanent evaluation and transparency which
must be implemented on the basis of the Commission’s annual report drawn up in cooperation
with the Member States.

SIGNIFICANT AND SENSITIVE FINANCIAL ISSUES FOR THE INSTITUTIONS AND THE MEMBER STATES

In the course of European construction, the Union’s expenditure has developed considerably
and represents

93 billion for 2000.

€

financial

interests include all

Over and above the budgetary aspects concerned with Community income and expenditure,
the assets held or managed by the
the Communities’
Communities. These Community financial
in
particular cross-border crime, and it is important for national and Community authorities to
cooperate on a close and regular basis to ensure their protection. In this way they also
participate in ensuring the balance of competition conditions between economic operators and
equality of treatment between Member States. The confidence of European citizens and
economic operators in their institutions will henceforth be strengthened.

interests may also be exposed to crime,

THE CURRENT INSTITUTIONAL AND LEGISLATIVE FRAMEWORK

Since 1994, the Community approach for the protection of financial interests and the fight
against fraud had been based on a dynamic6 aiming to develop the legislative framework to
cover all the areas of protection of financial interests7 and to increase the experience of the
Commission on the ground in compliance with fundamental rights and data protection.8
Regarding the criminal law protection of financial interests, the legal framework will be
completed once the Convention on protection of financial interests and its protocols have
been ratified.9 This pragmatic step undertaken after Maastricht has led with the Treaty of
Amsterdam to significant changes clarifying the shared responsibilities between the
Community and the Member States (Article 280 of the EC Treaty).

5

6

7

8

9

Under Article 280 the European Court of Auditors also participates in the legislative process by giving
its opinion.
The significant results obtained were presented in the Commission’s annual reports and the summary
report drawn up in 1996. Most recently: COM (1999) 590 final, 17.12.99; COM (97) 200 final, 6.5.97.
Council Regulation (Euratom, EC) No 2988/95 relating to the protection of the financial interests (OJ L
312, 23.12.95);. Council Regulation (Euratom, EC) No 2185/96 relating to on-the-spot checks and
inspections carried out by the Commission (OJ L 292, 15.11.96); sectoral regulations on reporting and
control obligations.
Article 286 of the EC Treaty and EC Directive 95/46 (OJ L 281, 23.1.95).
Convention of 26.7.95, 1st protocol of 27.9.96, second protocol of 19.6.97, protocol on interpretation by
the CJEC of 29.11.96 and Convention on corruption of 25.5.97.

4

In May 1999, the Community already drew the conclusions10 from the entry into force of
Article 280 of the EC Treaty by adopting an ambitious reform of the fight against fraud and
corruption, marked by the establishment of the European Anti-Fraud Office (OLAF).11 The
White Paper on the reform of the Commission completes these initiatives by mobilising the
Commission services to improve protection of the Communities’ financial interests. This is
why the Commission will encompass in its strategic approach the reinforcement of actions
already undertaken by its services, which imply significant staff resources, to make financial
management more rigorous, in particular through the decentralisation of the financial control
function and the setting up of an internal audit service as well as through the establishment of
working groups and mixed teams involving the Office and all the Commission departments.

A CHANGE OF DIMENSION AND NEW OBLIGATIONS

The request of the European Council of Helsinki comes at the time when Europe enters a
turning point in its history. The work on the Intergovernmental Conference (IGC 2000), the
planned enlargement to new countries, the overall dimension of Community objectives, from
the internal market to monetary Union, fall within an economic area which is freeing itself
progressively from national barriers. Nevertheless,
legal borders
complicates the task of the police or the courts without hindering the activity of the criminals.

the maintenance of

The Amsterdam Treaty set the objective of the progressive establishment of an area of
freedom, security and justice. The priorities and the timetable for achieving this were
specified by the Tampere European Council of October 1999. It is important until this new
area is established to follow an approach based both on the first and third pillars12 to prevent
and combat fraud, corruption and any other activity harmful to the Communities' financial
interests. It is in this way that the terms “fraud” or “corruption” included in the remainder of
the document should be understood.

THE FOUNDATIONS AND OBJECTIVES OF A NEW OVERALL AND INTEGRATED APPROACH

To satisfy the objectives of the EC Treaty (Article 280), the new approach13 must be based on
a strengthened culture of cooperation between the national and Community levels. It must
include at the same time a prevention policy and an effective financial follow up and sanction
policy. This step requires the mobilisation of all the administrative as well as the judicial
resources.

Action at national and Community level must be complementary. The Commission should
highlight and concentrate its efforts on a number of topics or actions, ensuring the
convergence of the national and Community effort, both on the operational ground and in

10

11

12

13

Economic and Financial Affairs Council of 25 May and Cologne European Council of June 1999.
Commission
service, operationally independent, monitored by a Supervisory Committee (See
Commission decision of 28 April 1999; EC Euratom Regulations Nos 1073/1999 and 1074/1999, OJ L
136, 31 May 1999).
Community initiatives (1st pillar) to be amplified via a cross-pillar approach by actions undertaken
under the EU Treaty (3rd pillar).
The summary report on the application of the former article 209a of the EC Treaty, the annual reports
and the work undertaken by the Commission in the field of criminal-law protection of financial
interests, the conclusions of the Committee of Independent Experts, the Dehaene, von Weiszäcker and
Simon report on the institutional implications of enlargement and the work of the institutions, in
particular Parliament, the Council and the Court of Auditors, constitute the bases for the reflections
undertaken to define this new approach.

5

legislation, either in the first or third pillar. The Commission approach will also encompass
the added value of strengthened cooperation with candidate countries in the pre-accession
strategy and non-member countries in particular
in the context of trade policies and
development aid.

THE MAIN LINES OF THE OVERALL STRATEGIC APPROACH

To put this global strategy project
in a longer term context and achieve tangible and
the Community and the Member States will have to act with
measurable results,
determination and plan their efforts in a multi-annual strategy (2001 to 2005) around four
main strategic guidelines:

• an overall legislative anti-fraud policy; (the development of the regulatory system towards

more effectiveness and coherence)

• a new culture of operational cooperation; (full participation and concerted commitment of

the national and Community authorities on the ground)

• an inter-institutional approach to prevent and combat corruption; (the strengthening of the

credibility of the European institutions)

• enhancement of the penal judicial dimension (adaptation of national criminal prosecutions

to the new obligations of the Treaty).

The main lines of this strategy represent major challenges to be faced around which will have
to be organised all the initiatives and priorities to be implemented in the annual programme.

1.

FIRST CHALLENGE: AN OVERALL ANTI-FRAUD LEGISLATIVE POLICY

Under the terms of its anti-fraud policy, the Commission has endeavoured since 1994 to
follow a horizontal and cross-pillar legislative approach. To be complete and overall, the fight
against fraud must include prevention (1.1), detection (1.2), follow up (1.3) and cooperation
(1.4) aspects by integrating all the sectors where fraud and corruption may take place. It must
in particular for
be given concrete expression with the drawing up of specific rules,
information exchanges, controls and close and regular cooperation between the Member
States and between the latter and the Commission. This cooperation is an essential element to
strengthen mutual trust. It is still far from perfect. It must be stepped up amongst others in the
area of regulations to enable everyone to fulfil their obligations more effectively.

1.1.

Develop a culture of prevention and strengthen regulations

To be permanently effective, a policy of defence of public interests and funds must rely on
clear legislation, easily applicable and including provisions likely to strenghthen sound
financial management and effective control of Community policies. These provisions must be
sufficiently dissuasive to deter irregular action as far as can be done. In addition, it is
important on the basis of a permanent evaluation of the difficulties encountered and the reality
on the ground to be able to improve the legislative texts regularly to anticipate the risk of non-
compliance with or abuse of the rules. Such an approach must begin with the drafting of
Community legislation and policies and continue throughout the legislative process. The
protection of Community financial interests is a matter for all the Commission departments,
the services responsible for drawing up Community policies and regulations but also the

6

management services responsible for their implementation and the control of the sound
application of the rules.

The Commission, in its internal reform, will strengthen the accountability of management
services and be organised in such a way that the audit capacity and the financial control
function of Directorates-General will be more effective. In this perspective, each Director-
General will express in a declaration in her/his annual activity report that adequate internal
controls have been put in place and that resources have been used for the intended purposes.
internal audit
Internal control standards will be defined. In this context, an independent
service and a group specialising in financial errors which do not constitute irregularities have
just been set up. The responsibility of officials will also be strengthened.

The topic of crime prevention remains a major concern for the Commission; it was also
covered by the conclusions of the Tampere European Council recognising the need to pursue
a cross-pillar approach.

Moreover, to help the departments responsible for drawing up Communities policies or the
management services in their mission of protection of financial interests, the Commission will
ensure the setting up of cooperation systems to draw the necessary conclusions from the
results obtained in the areas of the fight against fraud and corruption to ensure the best
possible level of proofing against fraud or corruption and to improve the management
procedures and measures.

1.1.1.

Involving the European Anti-fraud Office in prevention

It is therefore important to mobilise the Commission departments and the legislator to plan,
propose and adopt economic and financial legislation which is fraud proof in all areas. In
accordance with the objectives of the reform, the Commission will ensure that the Office may
be consulted at the stage of preparation and at the various stages in the decision making
process of all the legislative initiatives which have a direct or indirect
impact on the
protection of the Community’s financial interests to ensure a better proofing against fraud and
corruption by exploiting the lessons drawn from a good knowledge on the ground and the
results of operational work.

1.1.2.

Involving the national authorities in anti-fraud actions

The experience of national authorities must be mobilised to strengthen protection of
Community policies, including with regard to their financial incidence. The Commission has
for this purpose the appropriate bodies with a sectoral mission in all the areas of Community
policies. Regarding more specifically the protection of financial
interests, the Advisory
Committee for the Coordination of Fraud Prevention (Cocolaf), which has a horizontal
mission, gives the possibility of an overall view of the problem of the fight against fraud. It
brings together high-level representatives of the Member States, must be more closely
involved in long-term reflection. The Decision establishing Cocolaf will be amended to take
account of the changes linked to the anti-fraud reform. The Committee will be able to meet in
a specific composition to find concrete solutions. The Commission will be thus better placed
to make proposals for the necessary initiatives by integrating the added value arising from the
work of the experts.

7

1.1.3.

Involving professional circles in a policy of transparency

The way in which criminal organisations split their tasks, make light of borders and mix legal
and black economy activities, in particular by using different firms involved in the market or
transporters, wholesalers… liberal
certain professions (warehousing firms, processors,
professions, advisers and auditors, legal and accounting experts …) as well as brass plate
firms located in areas where enforcement is light, makes an overall grasp of the criminal acts
and identification of the whole criminal structure difficult. Given organised crime's ability to
exploit legal structures to carry out fraudulent activities, the fight against fraud must be the
concern of everyone. The Commission will undertake a reflection and act
to raise the
awareness of the most vulnerable economic sectors. Apart from the existing regulations in the
agricultural area14 which have hitherto been sources of difficulty at operational level, it might
be worth encouraging the professions concerned to draw up their own regulations, subject, if
necessary, to public supervision making it possible to sanction weaknesses in the systems thus
set up. This exercise could be undertaken in the light of the work carried out in the framework
of the charter with the professional associations.15

1.2

Strengthening means of detection, controls and sanctions

The protection of the Communities’ financial interests presupposes from the start a sound
application of Community regulations as well as sound management of Community policies
and funds. These principles represent an essential concern for all
the Commission
departments responsible for the implementation of these policies who thus participate in the
prevention effort.

It is important in the first instance to complete the management effort and the existing control
provisions in the different areas of Community policies by more specific measures. The
effectiveness of the fight against fraud and corruption, particularly in the most sensitive
sectors, requires the strengthening of means and legal instruments of detection, controls and
sanctions. It is important
in particular to improve the legal framework for information
exchange.

1.2.1. Defining precisely irregular conduct and illegal activities

When launching its anti-fraud policy, the Commission endeavoured to define the concepts of
irregularity, abuse of law, fraud, corruption and laundering. This approach must be continued.
As regards the definition of criminal offences, the fact that there are so many different legal
systems and the fact that instruments have not been ratified mean that there are always great
differences in the definition of activities which contribute to fraud or corruption. The creation
of common definitions will facilitate information exchanges and cooperation. It will boost the
effectiveness of the application of penalties. This is why the Commission announced in its
work programme for the year 2000 a legislative proposal to include certain of the provisions
of the Convention and the related protocols on protection under criminal law of financial
interests. With regard to the question of investigations inside the Community institutions,
bodies or agencies (internal investigations), it will be especially important to define irregular
conduct more tightly in particular so that effective administrative inquiries can be carried out.

14

15

EC Regulations Nos 1469/95 and 745/96, OJ L 145, 29.6.95, and L 102, 25.4.96, which provide for
different measures to be taken against certain beneficiaries of operations financed by the EAGGF
Guarantee Fund. Commission report on the state of application of these regulations planned.
The charter with the professional associations to combat organised crime of 27 July 1999

8

1.2.2.

Extending information exchanges and control measures

In the framework of its anti-fraud policy, the Commission has developed a specific legal
framework for information exchanges16 and control measures. Today, all areas of the
Community budget are covered. On the basis of the summary included in its annual report,
the Commission will draw conclusions
if necessary.
Complementary initiatives are already under way in connected or especially vulnerable
sectors such as for example in the area of money laundering17, public procurement18 or the
granting of subsidies.

improvements

and propose

1.2.3.

Extending Community administrative penalties

To avoid the development of irregular actions and strengthen compliance with Community
legal provisions, it is necessary to add to the administrative control provisions a system of
administrative penalties. This system of administrative penalties, which should in theory exist
at national level and does exist in certain sectors such as agriculture at Community level, is of
course without prejudice to the existing national legal provisions with regard to guilty actions
liable to lead to criminal proceedings.

A system of administrative penalties19 is essential as an instrument of deterrence,
to
accompany a policy of detection and controls. The Commission will take the initiative to
extend administrative penalties to the most sensitive sectors,
in accordance with the
framework established by Council Regulation No 2988/95, in the light of the existing system
for the common agricultural policy.

1.3.

Ensure a more effective management of administrative and financial follow-up

As the European Parliament and the Court of Auditors have emphasised on several occasions
and in accordance with the guidelines in the Commission White Paper on reform, actions will
be undertaken to improve the recovery of unduly received or evaded amounts. Apart from the
legislative measures that need to be taken for this purpose, the Commission, in line with the
guidelines in the White Paper, will strengthen cooperation between the services concerned. It
is important in fact to recover from the fraudsters the sums unjustifiably granted or evaded

16

17

18

19

See in particular Regulations Nos 1150/2000 (OJ L 130, 31.5.2000), 515/97 (OJ L 82, 22.3.97), 595/91
(OJ L 67, 14.3.91), 1681/94 and 1381/94 (OJ L 178, 12.7.94, and L 191, 27.7.94).
The proceeds of fraud are recycled through laundering networks, a sine qua non for crime which it
cannot organise itself on a large scale without it. Dismantling a network without destroying its financial
resources is pointless. The fight against laundering must therefore be a full component of the fight
against fraud. Whereas the regulations impose obligations as to the exchange of information between
the Commission and the Member States on fraud, there is currently no provision with regard to
operations of laundering of the proceeds of Community fraud. The Commission, in its proposal for
amendment of the money-laundering Directive, incorporated a provision allowing the Commission to
be involved in the information system. The links between laundering and the principal offences to
which it is attached will facilitate the identification of networks and will make it easier to trace the
principals and thus seize and confiscate assets. The Commission will examine the possibility of
amplifying the system.
Public procurement is vulnerable to fraud and corruption. The proposed consolidated directive on
public procurement adopted by the Commission in May 2000 provides that a tenderer who has been
finally convicted of certain types of offence may be excluded from such contracts. Moreover, a
development of information exchanges would also make it possible to have provisions to eliminate
candidates or operators posing a threat to the proper running of the tendering process from access to
Community subsidies. This identification would therefore allow the tendering authorities to eliminate
these candidates in compliance with the right of appeal and the data-protection rules.
With regard to disciplinary sanctions, see the third challenge under 3.3.

9

before reverting where appropriate to the procedures bringing into play, according to the
specific provisions laid down for this purpose in the different Community policies, the
financial responsibility of the Community or the Member States.

In this context, the Community has financial correction instruments with regard to Member
States. These corrections must be applied in particular with the aim of motivating Member
States to put in place effective national control systems.20

These financial corrections do not have the aim of replacing a policy of recovery or of
administrative penalties with regard to economic operators when irregularities are detected.
The Commission, in the annual summary drawn up in cooperation with the Member States in
accordance with Article 280 of the EC Treaty, will ensure the proper application of
administrative penalties which already exist at Community level in the Member States.

1.4.

Clarifying cooperation rules

the Commission has
In the internal market and the different Community policies,
progressively developed administrative cooperation rules with the national authorities which
allow for a better application of economic and financial rules. Article 280 of the EC Treaty
advocates strengthening cooperation between the national authorities and the Commission.
Specific provisions which will be decided in the area will have to allow the development of
anti-fraud cooperation in a legally well founded framework based on an overall approach
where Community interests are threatened by certain types of transnational or organised
crime.

1.4.1.

The protection of financial interests

As regards cooperation and on-the-spot checks involving the national authorities with staff
from the Commission services, the existing provisions in Community legislation are adapted
to the specific nature of each sector. It proves that in the area of the fight against fraud, the use
by the staff of the Office of these different
legal bases has not always contributed to
facilitating cooperation with the authorities responsible for the fight against fraud; it could
affect the reliability of operational work and the administrative, financial or criminal-law
consequences that it entails. A reflection will be started on the possibility of establishing a
single base to simplify and clarify rules on cooperation or participation in national anti-fraud
or anti-corruption investigations, without prejudice to retaining these different legal bases
which the other Commission departments are required to use for the protection of the
Communities’ financial interests.

1.4.2.

The protection of Community interests connected to the fight against fraud

In certain areas (agricultural and customs policies21) the regulations provide a complete
system in the area of cooperation and mutual assistance between the Commission and the
Member States to combat fraud and irregularities. The Commission will examine the
possibility of extending or providing an analogous system to make less random the support of
the Office to improve the fight against organised crime, and in particular transnational crime

20

21

Clearance of accounts of EAGGF Guarantee Section expenditure, area of own resources. Preparation
under way of detailed implementing rules in the area of the Structural Funds in line with Regulation No
1260/99 (OJ L 161, 26.6.94).
The Commission will evaluate with the customs authorities of the Member States any possibility of
extending customs cooperation on the basis of Article 135 of the EC Treaty.

10

affecting Community interests connected to the fight against fraud or corruption. Experience
gained in the field of protection of financial interests could also be put to use to improve
cooperation with the Member States, in particular targeted fields where the Commission has
already developed a Community policy or basic legislation.22

1.4.3.

Strengthening cooperation with applicant countries and non-member countries

The policy of enlargement, as is the case for Community development aid policies or trade
policy, may also be exposed to risks of misappropriation from its primary objectives, in
particular where significant funds are involved. It remains therefore essential to improve the
level of cooperation with the authorities of the countries concerned.

the Commission will
To facilitate information exchanges and the necessary checks,
systematically examine the possibility of concluding administrative cooperation agreements
or memoranda of understanding with all the responsible authorities23 to ensure the proper
application of legislation and check on the eligibility and the correct use of funds in these
countries. These agreements should include specific provisions and amongst other things
provide the possibility for the Office to carry out anti-fraud checks on the spot.

To improve Community policies targeted at non-member countries, in particular with regard
to development aid and trade policy,
the Commission will pursue an approach in this
direction, graded according to the priorities which will be defined, with the European Union’s
other partners.

2.

SECOND CHALLENGE: A NEW CULTURE OF OPERATIONAL COOPERATION

In the operational area, the objective pursued is to bring the resources together to encourage a
more proactive orientation of action on the ground. To respond to this second challenge, the
Commission will have to have an overall view of the economic and criminal environment
(2.1) and thus be in a position to develop a new culture of cooperation with the national
authorities (2.2). This second challenge also concerns cooperation with the authorities in the
applicant countries (2.3). The attainment of these objectives must be inspired by a perspective
of transparency and permanent evaluation (2.4).

2.1.

Enhanced exploitation and analysis of intelligence

Effective action against fraud and corruption inside numerous countries presupposes the best
possible knowledge of their economic and criminal environment. The complexity and
sophistication of illegal activities, their transnational dimension and their clandestine nature
make them more difficult to detect.

To have a specialised anti-fraud service which is effective and proactive at transnational level,
it is essential to extend gradually the range of sources of available information and to ensure
that the specific data the Office needs to do its job are accessible to it or are transmitted to it24

22

23

24

See work under way for protection of the euro and the action to combat piracy and counterfeiting (EC
Regulations Nos 3295/94 and 1367/95) in OJ L 341, 30.12.94, and L 133, 17.6.95).See Green Paper on
the fight against counterfeiting and piracy in the internal market (COM(98) 569 final).
Such arrangements are already in place in the agricultural sector (SAPARD programme).
From the Commission departments, other institutions, organs or agencies (ECB, Court of Auditors, etc.)
national authorities or other bodies such as Europol, Interpol, the WCO, the WTO, the World Bank, the
IMF, the OECD. This activity will be backed up by the work done under the customs 2002 programme

11

in agreement with the institutions or bodies which have it. The technology and the technical
means for gathering, storing and exploiting information must moreover be developed in the
light of best practice. The detailed arrangements for the realisation of this project will have to
be assessed taking account of the provisions concerning data protection , in particular in
Articles 287 and 296 of the EC Treaty. The gathering and processing of data on persons will
be carried out under the control of the independent body referred to it in article 286 of the EC
Treaty.

To enjoy an overall relevant vision, two levels may be distinguished as regards intelligence.
While requiring different specialities, these two levels must be capable of being interlinked in
a single service equipped with the necessary means and resources.

By developing its knowledge of circumstances which are favourable to fraud or corruption,
the Community will acquire genuine strategic intelligence. Close attention must be paid to
information on the economic, administrative, social and legal environment at national,
Community and international level. This work must extend to all the available information,
statistical data, trade, accounting data, transactions involving Community finance and the
results of the checks and audits carried out in this field by other services, authorities or
institutions. This information will, of course, have to be analysed in the light of its impact on
the Communities’ financial interests.

Crime relies on the existence of persons and networks, structured or not, whose activity has to
be known about if it is to be prevented. The operational intelligence function consists in
gaining familiarity with fraud mechanisms and the structure of fraud networks whether or not
they involve organised crime. Information in the area comes from open sources or more
limited sources such as police or intelligence services or authorities who have elements of
information covering illegal activities affecting the Communities’ financial interests.

The combined processing of two levels of information, strategic and operational, is necessary
to facilitate an orientation to establish operational priorities.

The Commission will ensure that the Office is in a position to serve as a crossroads for
gathering and analysing information and data to become a true “observatory of fraud and
corruption”, so as to supply the logistical support to Member States and institutions. For its
part, the Office will ensure the services concerned are informed of the results of operational
work to allow where appropriate the measures or procedures of management, control or
follow up aimed at preventing irregularities, frauds or corruption to be improved.

2.2.

For a new operational partnership with the Member States: a Community
platform of services

The fight against fraud and corruption is a shared responsibility. In the area of internal
policies and external actions, the Commission, which has direct management responsibility,
will arrange to take all the requisite measures to prevent and combat fraud or corruption. In
the other areas it must be the constant concern of all the partners concerned (the institutions,
the political, administrative and judicial authorities of the Member States and non-member
countries, representatives of the professions, and economic and financial operators ).

on risk analysis applied to customs controls as well as, in the area of the common agricultural policy, by
the controls in the framework of the integrated administration and control system (IACS) and the
Geographical Information System (GIS).

12

To follow up Article 280 of the EC Treaty and in accordance with Article 1 of Regulations
Nos 1073/1999 and 1074/1999, the Office is to provide the Commission's support to the
Member States,
in organising close and regular cooperation between their responsible
authorities to coordinate their action aimed at protecting the Communities' financial interests
against fraud. With the resources available to it and the prerogatives assigned to it by the
Commission and the legislator, the Office will organise its functions to represent a true
platform of services. In this way, it will be in a position to provide services in all the areas of
its expertise by making its know-how and multidisciplinary experience available to all the
national bodies or authorities responsible for the fight against fraud or corruption. This
platform of services will facilitate new operational cooperation in all the areas of the fight
against fraud or corruption on a regular, sure and flexible basis. Member States will thus be
able to adapt their organisational structure or take the necessary measures to ensure greater
synergy with the Office.

Of course, the performance of this task by the Office does not affect the responsibility of the
other Commission departments to control or follow up the application of the Communities'
economic and financial policies and to ensure sound financial management. The Commission
will aim to facilitate the task of the Office so that it can integrate the action of these services
in particular the
which participate in protection of the Communities financial
in
internal audit service, to improve the added value brought by the Community level,
particular by setting up working groups or mixed teams involving the Office and all the
services in protection of the Communities’ financial interests.

interests,

2.3.

For strengthened cooperation with the applicant countries

Crime is not confined to the territory of the Community. The European Union must bring its
assistance to the candidate countries to ensure the same level of protection of Community
interests. This is a priority set by the Commission in the framework of negotiations with the
candidate countries who must take account of the specific character of the fight against fraud
for the protection of Community interests. In the framework of the pre-accession strategy,
Poland has given concrete expression to this approach by establishing a multi-disciplinary
structure similar to the European Anti-Fraud Office25 which will be able to serve as a model
to other applicant countries.

Beyond the applicant countries, cooperation with non-member countries and certain
international organisations will be strengthened.

2.4.

A policy of permanent evaluation of anti-fraud actions

A policy for the permanent evaluation of the result of the actions of the Community and the
Member States will be conducted to measure the progress achieved. It will be based on
to the institutions and the
scoreboards established. The Office’s periodic reports
Commission’s annual report (Article 280 of the EC Treaty) will be the favoured instruments
of this policy. Moreover, it is important to recall that the Commission and the legislator have
set up a Supervisory committee responsible for exercising a regular monitoring of the
implementation of the operational function of the Office. This committee is regularly
informed of the Office’s activities, investigations, their results and the follow up given to

25

A central and multidisciplinary structure (customs, police, justice) under the auspices of the Prime
Minister of Poland is being set up for the protection of Community interests. It will enjoy support
during the launch period (at least 2 years) from a team of experts from the Member States designated by
the European Anti-fraud Office. This structure was co-financed under the Phare programme.

13

them. The committee produces at least once a year a report which it addresses to the
is
institutions. The Commission expects the Member States to fully inform it of what
undertaken at national level. Partnership in communication must be a two-way exercise in a
spirit of mutual trust in order to achieve the objectives of the Treaty.

3.

THIRD CHALLENGE: AN INTERINSTITUTIONAL APPROACH TO PREVENT AND
COMBAT CORRUPTION

The strengthening of the credibility of Community policies by ensuring a better protection of
the integrity of the European public service and the members of the institutions is the third
challenge to be faced.26 The Community legislator has accordingly conferred on the Office an
interinstitutional mission to protect the European public service against the risks of influence
liable to affect the legitimacy of Community decisions, opinions or legislation. This mission
is defined in Regulations Nos 1073/1999 and 1074/1999, in the Commission Decision of 28
April 1999 and in the interinstitutional agreement of 25 May 1999 and will be carried out in
the spirit of the reform being undertaken by the Commission. The Office will have to
cooperate closely and regularly with the Community institutions, bodies and agencies and
contribute to training actions (3.1). It must also encourage transparency and the duty to
communicate (3.2). Administrative investigation missions must be amplified by fair and
effective penalties (3.3).

3.1.

Develop a culture of cooperation at all levels

3.1.1.

The Commission departments and the other institutions, bodies and agencies

To be effective, action in preventing and combating serious acts liable to affect
the
Communities’ financial interests and the credibility of the institutions, bodies and agencies
must be based on loyal cooperation between the institutions, bodies and agencies. It
is
therefore essential to ensure the consistency of the duties of the members and officials of
public bodies, though individual rights must, of course, be respected.

In accordance with the obligations resulting from the new legislation,27 the Office must
consolidate close relations with all Commission departments and those of the other
institutions, bodies or agencies. The evaluation of the results of the reform will be the subject
of a detailed reflection within the Commission in the follow up to the White Paper to
determine their scope and relevance.

3.1.2.

Appropriate training and permanent awareness-raising among staff

The training and awareness-raising activities both at national and European level will have to
concern all staff from entry into service and throughout their career. They will address more
particularly the services responsible for the management procedures for procurement or
granting subsidies. It must be integrated into the programmes drawn up by the Commission
departments. This will make it possible to promote a system of values on which the
administration of the institutions will be able to rely. The Commission will develop rules on
ethics and conflicts of interests to aim for transparency and security so as to avoid
Community decisions being affected by irregular influences.

26

27

Of course, activity in this area is linked to preventive actions and legislative initiatives referred to in the
framework of the first challenge and involving all the Commission departments.
In particular, Article 4(6)a of (EC, Euratom) Regulations Nos 1073/1999 and 1074/1999.

14

3.2.

Transparency, duty to communicate

The objective is to have a working environment where every official at every level is in a
position to be aware of his responsibilities, in particular with regard to the obligation of
irregularities.
loyalty to the institutions and the obligation to cooperate to prevent
the new anti-fraud mechanism adopted on 25 May 1999 has been
Consequently,
supplemented by internal decisions by the institutions, bodies and agencies for
the
implementation of the new regulations and the interinstitutional agreement in accordance with
the calls by the Council of 25 May 1999 and the Cologne European Council.28

3.3.

Independent administrative investigations; fair and effective penalties

The legislator has given the Office the task of conducting administrative investigations within
the Community institutions, bodies and agencies with a view to “bringing to light serious
situations relating to the discharge of professional duties which may constitute a failure to
comply with the obligations of officials and servants of the Communities liable to result in
disciplinary or, in appropriate cases, criminal proceedings, or a failure to comply with the
analogous obligations of the members, managers or members of staff not subject to the Staff
Regulations”. The actions of the Office will have to aim for the objective of “zero tolerance”
recommended in the Commission reform. However, not being required by its mission to carry
out systematic controls which are the responsibility of other services, the effectiveness of the
Office will rely on compliance with the information obligations which apply to all the
members and agents of the institutions, bodies or agencies in accordance with their duty of
loyalty. For its part, the Office will notify the findings of its investigations in accordance with
the obligations which arise from the new system to the institutions, bodies or agencies. The
Community institutions, bodies or agencies will have to give the Office’s investigations the
their own
appropriate disciplinary or
responsibilities to conduct administrative investigations falling outside the Office’s remit.

follow up. They retain nevertheless

judicial

The revision of the rules in the Staff Regulations concerning disciplinary proceedings,
including a clarification of Staff’s rights and obligations, as proposed in the White Paper on
Reforming the Commission29, should enable the share of responsibilities to be clarified and a
fair and effective follow up of the Office’s investigations by the European institutions to be
ensured.

4.

FOURTH CHALLENGE: THE ENHANCEMENT OF THE PENAL JUDICIAL DIMENSION

The developments of crime as well as the development linked to the economic, social or
political situation in the countries are important factors which play a far from negligible role
in the process of drawing up or adapting national criminal legislation. It is not surprising in
these conditions that the emergence of specific types of crime in a political context which
goes beyond the solely national framework calls for the strengthening of action to integrate
better the judicial dimension in the criminal law area into the definition of an overall strategic
approach and thus prevent and combat fraud harmful to Community interests and corruption.

The adaptation of national criminal policies to the new obligations of the EC Treaty (Article
280) and the support of the European institutions to improve the cooperation mission of the

28

29

At this stage, certain differences in the implementation of the interinstitutional agreement of 25 May
1999 by the different institutions, bodies or agencies have been noted.
COM (2000) 200 final of 5 April 2000.

15

Office with the judicial authorities constitute the fourth challenge of this strategic approach. It
is through the existing legal framework (4.1) and the means which it has with the Office (4.2)
that the Commission intends to carry out new and reinforced action.

4.1.

Current legal framework

The initiatives undertaken since 199530 have allowed an overall legislative dynamic for
protection of the Communities’ financial interests to be launched. The inclusion in the Treaty
of Amsterdam of Article 280, the Regulations adopted in May 1999 under the co-decision
procedure, the interinstitutional agreement and the establishment of the European Anti-Fraud
Office bring about in a tangible manner the integration of the national judicial dimension in
the fight against fraud and corruption. The significant mechanism put
in place by the
Convention on criminal-law protection of financial interests and the three protocols to it31 will
complete the construction.

The instruments already exist at Community level to improve the detection of offences and to
provide the national judicial authorities with the additional means to process cases of fraud
under the criminal law.32 The use of these instruments will again come up against certain
obstacles. It is these difficulties which it will be necessary to remove. They are most often
linked to the non-compatibility of national legal systems, the handling of complex cases, the
lack of resources or even special technical and linguistic features. They lead the national
authorities to rely on the solely national aspects available to them whereas it is the overall
grasp of the facts, thanks to a better overall vision and close and regular cooperation, which
can allow these obstacles to be overcome and move towards a global system better adapted to
protection of the Communities’ financial interests.

4.2.

Scope and means for Community action

The scope of the Community system has been set by the Community legislator under the
codecision procedure. The areas of responsibility mainly cover the protection of financial
interests and the fight against corruption.33 All the forms of crime are concerned wherever the
financial interests are affected in one or more Member States or even non-member countries34
or institutions are involved. The scale of this scourge has been well known for the ten years
during which the Commission has been developing its action in this area and its powers are
determined by the legislation.

30

31

32

33

34

See in particular (EC Euratom) Regulations Nos 2988/95 and 2185/96, Convention on the criminal-law
protection of financial interests and its protocols.
See in particular Articles 7 et seq. of the second protocol, expressly providing for the Commission’s
(Office’s)
technical and operational support with prosecution authorities and the exchange of
information between the latter and the Commission (Office); see explanatory report of the second
protocol: OJ C 91, 31 March 1999.
Beyond the aspects concerned with detection of irregularities or cooperation, the legislator has provided
for Community investigation reports to have evidential status in criminal proceedings under the same
terms as national investigation reports.
By the Commission Decision of 28 April 1999 establishing the European Anti-fraud Office (OJ L 136,
31.5.1999), this includes the protection of the Community’s interests where they are threatened by
unlawful conduct likely to lead to administrative or criminal proceedings.
External actions or commercial policy.

16

As for means for action, as early as 1996 the Commission was given major powers to carry out
investigations and the Office acts35 to provide an added value to the national action in the
detection of facts relating to fraud likely to lead to prosecution for criminal offences. The
prosecution of these acts remains however governed by the law of the Member States, that is
to say fifteen different national laws. To retain the objective of equivalent protection in the
Member States, it
is consequently essential to improve the means for cooperation and
coordination using a pragmatic approach to overcome the weaknesses and lacunae of the
current instruments of judicial assistance which are not yet adapted and do not correspond to
the transnational and often organised dimension of fraud against the Community’s financial
interests and or to the illegal activities which attack the Communities financial interests.

Although the final solution to this problem of criminal proceedings lies in harmonisation of
specific criminal offences for activities attacking Community financial interests and the
establishment of appropriate criminal procedural rules, practical action must be taken without
delay with the means currently available, and in particular the support and aid of the Office, to
improve the conditions in which judicial assistance is provided. If cooperation is to be carried
out on concrete, uniform and sound bases, it will be essential to produce a guide to good
practice for cooperation between the Office and the judicial authorities of the Member
States.36 This pragmatic approach will support the process of mutual trust which is developing
in particular through the establishment of a European judicial network37 in which the
Commission takes part. To strengthen this approach, the European Anti-Fraud Office will
develop its mission of liaison and penal judicial expertise to bring practical support for the
attainment of objectives in the fight against fraud and corruption. In doing this, it will
improve its role of advice, assistance and coordination to support and supplement national
action in the area of criminal prosecutions of serious offences harmful to the Communities’
financial interests.

PROSPECTS

Meeting these four challenges will allow the Community to improve in a significant way the
level of protection of the Communities’ financial interests. The actions undertaken in this
regard will be complementary to the efforts made for the sound application of regulations and
for a sound and rigourous financial management in accordance with the objectives of the
reform. In doing this, the implementation of these strategic orientations will allow the control
provisions and the audit capacity of the Commission departments to be strengthened overall
with the twin aim of effectiveness and transparency. The overall attainment of these
objectives corresponds to the recurring request from the Heads of State or Government38 that
the measures necessary to ensure an
the institutions and Member States should adopt
equivalent high level of protection of financial interests throughout the Community and to
fight fraud or corruption unrelentingly and with the utmost vigour.

35

36

37

38

It acts or reacts, in theory, to information from various sources, in particular the national authorities
concerned.
On the basis of Article 280 of the EC Treaty, the new regulations and the Convention on criminal-law
protection of financial interests, in particular the second protocol to it
Joint action of 29 June 1998, OJ L 191, 7.7.1998.
Cf. also the resolutions of the European Parliament on protection of financial interests and on the
European Anti-fraud Office, the report of the Committee of Independent Experts, the opinions of the
Supervisory Committee of the Office and the Dehaene, Von Weizsäcker and Simon Report on the
institutional implications of enlargement.

17

It is on the basis of experience on the ground, results obtained, means of technical and
operational assistance and implementation of these new prerogatives that the Commission and
the legislator will then be able to develop the current status of the European Anti-Fraud
Office.

Towards the establishment of a European Public Prosecutor for the protection of financial
interests

With the strengthening of European integration, a political entity is developing progressively
in such a way as to constitute a true “community of values” and an emerging community
public order. When calling for a Charter of Fundamental Rights, the Cologne European
Council stressed this new reality.

For their part, the European Parliament and the Commission have both already referred the
matter to the Intergovernmental Conference (IGC 2000) in a resolution and an opinion to
amend the Treaty so as to enable the establishment of a European public prosecutor
responsible for the protection of the Communities’ financial interests. This objective also
responds to the opinion of the European Court of Auditors, whose contribution to the IGC
underlines the problems affecting the protection of financial interests in the absence of
harmonisation of national legislation and of adequate cooperation instruments for the national
judicial authorities.

the territory of the European Community,

Establishing the office of European Public Prosecutor would be a step forward to ensure the
this
coherence of investigations throughout
coherence being all the more difficult to ensure in the context of a significant increase in the
number of Member States. It would enable the credibility of the institutions to be
strengthened and the integrity of the members and officials of the institutions, bodies or
agencies in the performance of their duties to be guaranteed against any external illegal act
liable to influence Community decisions. Finally, it will strengthen the rights of the individual
up to now guaranteed in a different way by way of national criminal law, by raising to the
same level, that is to say Community level, the strengthening of judicial guarantees and the
jurisdiction on a permanent basis of the investigation activity.

The Commission, with support from the Office, will ensure without delay the development of
a solid acquis on which a future European judicial body will over time be able to rely for the
protection of Community interests. To achieve this objective of the establishment of a
European public prosecutor, the Community and the Member States sill need the support of
public opinion. It is appropriate to raise the awareness of public opinion to this change.

* * *

18