COMMISSION STAFF WORKING DOCUMENT Executive summary of the Impact Assessment Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the protection of the financial interests of the European Union by criminal law
Date: 2012-07-11
Institutions: European Commission
Subjects: Community budget, criminal court, economic offence, fight against crime, financial control, financial loss, judicial inquiry, penalty

EUROPEAN COMMISSION 

Brussels, 11.7.2012  
SWD(2012) 196 final 

COMMISSION STAFF WORKING DOCUMENT 

Executive summary of the Impact Assessment 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council 

on the fight against fraud to the Union's financial interests by means of criminal law 

{COM(2012) 363 final} 
{SWD(2012) 195 final} 

EN 

   EN 

 
 
 
 
  
 
1. 

2. 

3. 

4. 

4.1. 

4.2. 

4.3. 

Problem definition........................................................................................................ 3 

Analysis of the subsidiarity principle........................................................................... 4 

Main policy objectives ................................................................................................. 4 

Policy options............................................................................................................... 5 

Assessment of the policy options' impacts................................................................... 6 

The preferred option..................................................................................................... 7 

Monitoring and evaluation ........................................................................................... 8 

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1. 

PROBLEM DEFINITION 

The  EU  and  the  Member  States  have  an  obligation  to  counter  fraud  and  any  other  illegal 
activities  affecting  the  financial  interests  of  the  Union.  This  obligation  is  laid  down  in  Art. 
310(6) of the Treaty on the Functioning of the European Union (TFEU). Article 325 TFEU 
further requires the adoption of measures which should act as a deterrent and afford a level 
playing field. 

The EU already has a set of legal instruments requiring Member States to establish minimum 
criminal law rules for the protection of EU financial interests (in particular the Convention on 
the  protection  of  the  Communities'  financial  interests  of  1995,  on  fraud,  and  protocols  on 
corruption  and  money  laundering).  Nevertheless,  those  instruments  have  proved  insufficient 
for achieving the desired protection, thus affecting EU's credibility in its budgetary restraint 
efforts. In particular, they only cover a limited sub-section of illegal conduct at the expense of 
EU financial interests, therefore missing out on many relevant phenomena which have been 
regularly encountered in practical experience. 

The current framework is not yet strong enough to curb the loss of taxpayer money allocated 
to the EU, both on revenue and expenditure side. A good example of this fact is that a total of 
13,631 cases of illegal activities involving EU funds (so-called "irregularities") took place in 
2010. These reported cases caused a cumulated volume of wrongfully collected and spent EU 
public money of approximately € 2 billion. 

The various deficiencies in the means of protecting EU public money relate to the following 
aspects:  

•  insufficient deterrent effect of provisions protecting EU financial interests;  

•  enforcement  gaps  of  existing  prohibitions,  stemming  from  low  detection  capacities  of 
criminal activities and low follow-up levels, as the outcomes of judicial proceedings are on 
avarage remarkably modest; and  

•  low recovery rates of money gone astray.  

From  a  substantive  criminal  law  perspective,  the  underlying  causes  of  the  abovementioned 
problems are varied.  

•  Firstly, there is an insufficient breadth of existing criminal offences aimed at protecting EU 
financial  interests,  in  terms  of  determining  who  is  subject  to  liability  and  the  necessary 
jurisdictional rules to prosecute crimes committed abroad.  

•  Secondly,  the  set  of  criminal  offences  is  incomplete,  not  only  due  to  an  insufficient 
implementation of existing definitions, but also to an insufficient number of offences at all 
defined at EU level, which can lead even to a total lack of protection against certain types 
of illegal conduct. 

•  Thirdly,  the  types  and  levels  of  sanctions  are  often  too  low,  and  in  any  event  strongly 
diverging across the Member States. In addition to the resulting lack of deterrence and the 
unfairness of sanctioning discrepancies, the lack of level playing field also reduces mutual 

3 

 
 
 
 
 
 
 
trust  of  judicial  authorities  who  need  to  cooperate  to  solve  cross-border  cases  relating  to 
EU financial interests. 

•  Finally, there are excessive impediments to the application of criminal law. In particular, 
despite the complex financial investigations which justify the time taken for prosecution, 
cases have become time-barred and had to be closed while trial was already ongoing.  

The financial interests of the EU have been negatively affected because money due to the EU 
is not collected for it, or is misallocated in breach of legal rules. Illegal activities are serious 
and frequent enough to warrant additional safeguards. 

For all the reasons described above, a resolute response is required in order to set a common 
and proportionate level of protection by deterrence. This will strengthen the effectiveness of 
EU budgetary and financing rules and ultimately benefit the overall credibility of EU finance, 
and criminal justice, by setting a level playing field throughout the EU. 

2. 

ANALYSIS OF THE SUBSIDIARITY PRINCIPLE 

The EU financial interests relate to assets and liabilities managed by or on behalf of the EU. 
As they are by nature,  placed at EU level, they cannot reasonably be protected by the 
Member States alone. Anti-fraud is a shared responsibility of the EU and the Member States. 

The EU is best placed to evaluate which measures are needed and proportionate to protect its 
financial interests, taking into account the specific EU rules which apply in this field.  
This applies also to the extent that criminal law provisions for the protection of EU financial 
interests are to be harmonised. Only the EU is in a position to develop a level playing field 
through  binding  legislation  with  effect  throughout  the  Member  States,  and  thus  to  create  a 
legal  framework  which  would  contribute  to  overcoming  the  weaknesses  of  the  current 
situation.  
The particular added value of EU provisions on criminal law in this area could reside in the 
novelty of defining relevant additional offences and sanction types and levels, which would 
apply  equivalently  throughout  the  Member  States,  thus  completing  and  learning  the  lessons 
from monitoring the implementation of the Convention on the protection of the Communities' 
financial interests. 

3. 

MAIN POLICY OBJECTIVES 

Based on the problems identified, a series of general, specific and operational objectives may 
be identified: 

General objectives: 

(cid:131)  To prevent and reduce loss of money for the EU 

(cid:131)  To increase credibility of EU budgetary responsibility 

Specific objectives: 

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(cid:131)  To  appropriately  increase  deterrence  of  prohibitions  relating  to  the  EU  financial 

interests, in compliance with the EU Charter of Fundamental Rights 

(cid:131)  To  better  enforce  the  prohibitions  of  certain  conducts  illegally  affecting  EU  public 
money  by  improving  investigation  results,  including  identification  of  suspects  and 
detection of beneficiaries of illegal transactions, in compliance with the EU Charter of 
Fundamental Rights 

(cid:131)  To adequately improve levels recovery of EU public money subject to illegal acts, in 

compliance with the EU Charter of Fundamental Rights 

(cid:131)  To  ensure  equivalence  and  fairness  of  provisions  protecting  EU  financial  interests 

across the EU  

(cid:131)  To contribute to increasing mutual trust between the Member States' judiciaries 

(cid:131)  To increase awareness of the rules governing the protection of EU financial interests 

among investigators and potential perpetrators 

Operational objectives:  

(cid:131) 

(cid:131) 

(cid:131) 

It  should  provide  sufficiently  wide  scope  to  cover  the  groups  of  perpetrators  which 
most seriously and/or frequently damage EU public money 

It should adequately enlarge the number of offences so as to cover the most seriously 
damaging and/or frequent types of conduct affecting EU pubmic money 

It  should  provide  for  sanction  types  and  levels  sufficient  to  ensure  fairness  in  the  
protection of EU public money everywhere in the EU, whilst ensuring proportionality 

(cid:131) 

It should contain clear and appropriate flanking rules to facilitate enforcement  

4. 

POLICY OPTIONS 

Five options have been considered in detail:   

Option  1:  Retention  of  the  status  quo  (base-line  scenario)  as  combined  with  a  continued 
monitoring of the implementation of existing instruments. 

Option  2:  Non-legislative  action  to  raise  awareness  of  relevant  provisions  among  potential 
perpetrators and practitioners, and facilitate their understanding and application including by 
an exchange of best practices and case information. 

Option  3:  A  legislative  instrument  converting  the  PIF  Convention  and  its  protocols  into  an 
instrument  under  the  new  Treaty  rules,  while  improving  consistency  of  the  provisions 
contained therein. 

Option 4: A legislative instrument requiring Member States to approximate their criminal law 
rules with a view to appropriate expansion of the scope, introduction of specific new offence 
types, strengthening of minimum sanction types and levels for the protection of EU financial 
interests. 

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Option  5:  A  legislative  instrument  with  directly  applicable  substantive  criminal  law 
provisions  for  the  protection  of  EU  financial  interests,  including  precise  sanction  brackets 
(with minimum and maximum levels). 

4.1. 

Assessment of the policy options' impacts 

Option  1:  The  effectiveness  of  this  option  in  meeting  the  purported  objectives  is,  however, 
very  low,  if  not  inexistent.  This  policy  option  is  not  expected  to  impact  upon  fundamental 
rights,  the  domestic  justice  systems,  or  the  economic  and  financial  fields  more  than  the 
current legal framework.  

Option 2: The effectiveness of this option is deemed to be low because additional deterrence 
and  enforcement  effects  cannot  be  created  where  criminal  law  now  does  not  apply.  The 
impact  on  fundamental  rights  is  expected  to  be  low  to  medium.The  economic  and  financial 
impacts  are  estimated  to  be  +  €  37  million  at  EU  level  due  to  more  efficient  follow-up  of 
cases  by  Member  State  judiciaries  leading  to  better  recovery  levels,  with  €  3  million  extra 
costs, in particular  for  training measures, for the  Commission.  This  policy  option fulfils the 
proportionality requirement.  

Option  3:  This  policy  option  is  only  modestly  effective  and  is  not  expected  to  impact  upon 
fundamental rights, nor on the domestic justice systems, substantially more than the current 
framework. A positive impact on EU budget of an estimated € 17 million as a result of better 
enforcement and recovery in return for an estimated € 3 million cost of the legislative process 
at  Member  States  level  can  be  estimated.  Balancing  the  great  structural  relevance  for  the 
integrity, spending capacity and reputation of the EU and the minimal additional intrusiveness 
compared to the existing framework, it is possible to assert that the measure is proportionate 
to the objective pursued. However, its added value for the protection of the taxpayer’s money 
is very limited. 

Option  4:  This  option  can  be  expected  to  have  medium  to  high  effectiveness  in  reducing 
losses  of  EU  money  and  in  restoring  credibility  of  budgetary  restraint  efforts,  without 
however  taking  all  theoretically  possible  criminal  law  measures  nor  fully  harmonising  the 
sanction types and levels. Wider definitions of existing offences improve equivalence of the 
sanctioning playing field across the EU, mutual trust between the judiciaries is improved and 
thus  facilitate  enforcement  and  recovery  in  cross-border  cases.  Defining  broader  and  new 
relevant  criminal  offence  types,  as  well  as  and  more  stringent  sanction  types  and  levels 
concerning the losses of EU financial resources, will mean that deterrence from such acts is 
likely to be very high. These common definitions and minimum sanction rules also improve 
equivalence of the sanctioning playing field across the EU and thus mutual trust between the 
judiciaries, which facilitates enforcement and recovery in cross-border cases.  
The  option  would  have  a  medium  impact  on  fundamental  rights  ,  in  that  new  criminal 
offences  and  extended  scope  of  application  for  existing  offences  are  defined,  while  the 
minimum  sanction  types  and  levels  are  being  strengthened.  These  measures  serve  to  meet 
objectives of general interest recognised by the Union (see Article 52 para. 1 of the Charter), 
and in particular to provide effective and deterring measures for the protection of EU financial 
interests. In the context of increasing amounts of irregularities and fraud suspicion and in light 
of the ineffectiveness of the current measures under the PIF Convention, the measures do not 
go beyond what is necessary to achieve this objective.  
A high return of € 471 million  at EU level is estimated due to better deterrence (reducing the 
money lost), enforcement and recovery (increasing the money returned), for a relatively low 

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organisational  and  administrative  cost  of  €  29  million,  in  particular  for  legislative  work,  at 
Member State level.  
Given the weighing between the great structural relevance of protecting EU public money for 
the  integrity,  spending  capacity  and  reputation  of  the  EU,  on  one  hand,  and  the  adequate 
increased coverage by criminal offence definitions and credible minimum sanction levels, on 
the other hand, the proportionality criterion is respected. 
As  this  policy  option  considerably  impacts  on  deterrence,  enforcement  capabilities  and 
recovery levels, it is deemed to have medium to high effectiveness. 

Option  5:  The  effectiveness  of  this  option  is  considered  to  be  as  high  as  option  4  in  that  it 
would  apply  broader  and  new  definitions  of  offences,  provide  for  sufficient  sanctions  types 
and  levels  and  contain  rules  facilitating  application  of  the  criminal  offences.  This  would 
considerably positively impact upon deterrence, enforcement capabilities and recovery levels. 
The  impact  on  fundamental  rights  and  criminal  justice  systems  of  this  policy  option  is 
medium  as  for  option  4,  with  the  additional  impact  that  an  EU  legislation  as  such  would  
become directly applicable for criminal prosecution and conviction.  
The domestic justice systems  would  be substantially impacted upon, since national criminal 
justice  authorities would need to directly implement EU criminal law Offences.  
Economic and financial impacts are expected to similar as for option 4. 
Given the weighing between the great structural relevance of protecting EU public money for 
the  integrity,  spending  capacity  and  reputation  of  the  EU,  on  one  hand,  and  the  adequate 
increased coverage by criminal offence definitions and credible minimum sanction levels, on 
the  other  hand,  the  proportionality  criterion  should  be  complied  with,  although  the 
intrusiveness  and  fundamental  rights  impact  is  higher  than  in  Option  4  for  no  noticeably 
higher positive financial impact. 

4.2. 

The preferred option 

A comparative assessment of the impacts mentioned above leads to the conclusion that both 
Options 4 and 5 are effective in achieving all the general and specific objectives. In terms of 
efficiency, however, option 4 is less intrusive with respect to Member States' judicial systems.  

→ The main difference between option 4 and option 5 lies in the varying leeway for Member States, 
who under option 4 may largely maintain for PIF offences their normal criminal law system and 
text, 
drafting 
whilst  option  5  is  characterised  by  exhaustive  rigidity  of  the  EU  rules,  which  would  have  to  be 
applied as such by the Member States' prosecutors and criminal courts 
Policy Option 4 

Policy Option 5 

approach 

surpass 

severity 

and 

EU 

the 

the 

of 

•  Directive 

•  Regulation 

•  would  ensure  widened  protection,  whilst 
allowing Member States to go further 

•  would  provide  minimum  definitions  of 
offences,  on  which  Member  States  can 
expand,  for  instance  by  adding  serious 
cases or liability for negligent conduct 

•  would provide a single, immovable set of 
rules on the criminal law protection of EU 
financial interests 

•  would  impose  exhaustive  definitions  of 

the offence types covered 

•  would 

contain  minimum 

rules  on  •  would lay down rigid sanction types and 

7 

 
 
 
 
 
 
sanction types and levels 

levels 

•  would  contain  ancillary  provisions  to  be 
in 

transposed  by 
keeping with their legal traditions 

the  Member  States 

•  Member  States'  prosecutors  and  courts 
would  apply  the  national  transposing 
criminal 
measures 
legislation 

the  national 

in 

•  would contain an exhaustive and isolated 
set of ancillary provisions, in some cases 
possibly  different  from  national  criminal 
legislation  traditions,  and  to  be  found 
elsewhere  than  in  the  national  criminal 
code 

•  Member  States'  authorities  would  apply 
the provisions of the Regulation directly 

Therefore, option 4 is the preferred option.  

The  preferred  option  would  increase  the  protection  of  EU  financial  interests,  both  by 
expanding  criminal  law  protection  into  areas  of  serious  and/or  particularly  harmful  illegal 
activities which are not now covered by the PIF Convention, and by providing for appropriate 
minimum  sanction  levels  applicable  for  both  the  existing  and  new  offence  types,  thus 
ensuring a level playing field and clarity of legislation across the EU. 

Option  4  is  proportionate  in  relation  to  its  legitimate  objectives,  as  none  of  the  alternative 
options  display  an  equal  level  of  efficient  combination  of  limited  costs  and  effectiveness  in 
reaching the objectives identified in section 3 above. Whilst the preferred option of legislative 
action is likely to require a number of Member States to introduce changes to their criminal 
laws in order to implement the Directive, there does not appear to be another equally effective 
means of achieving the general and specific policy objectives.  

4.3.  Monitoring and evaluation 

Potential risks to implementation by Member States in keeping with the transposition period 
are set out and addressed in an implementation plan accompanying the proposal. 

An  adequate  monitoring  and  evaluation  mechanism  is  envisaged,  whereby  Member  States 
would be required to report on the effective implementation of legislative or non-legislative 
measures based on the nature of the proposed changes. Data provided by the Member States 
(in  accordance  with  Article  325(5)  TFEU)  Eurostat,  Eurobarometer,  the  future  European 
Criminal Records System (ECRS)  and the Council of Europe will enable the formation of a 
useful baseline for monitoring the situation, and allow ex post assessment of the impact of this 
initiative  by  comparison  to  figures  reported  by  Member  States  before  its  entry  into  force. 
Besides  quantitative  data  provided  by  Member  States,  other  possible  sources  of  qualitative 
information on legislative and practical compliance will be gathered from the Member States 
reporting on fraud, the Justice Forum, The European Anti-Fraud Office (OLAF) and Eurojust.  
A  specific  empirical  study  with  emphasis  on  data  collection  will  be  carried  out  by  the 
Commission, one to three years from the date of implementation of the proposal.  

8