Source: EURLEX
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**COMMISSION OF THE EUROPEAN COMMUNITIES**

Brussels, 06.05.1997
COM(97) 199 final

**PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS**

**FIGHT AGAINST FRAUD**

**WORK PROGRAMME 1997/8**

_(presented_ _by the_ _Commission)_

##### **Introduction**

The present work programme strengthens presence on the ground and continues the
policy of partnership with national authorities. It also aims at strengthening antifraud
legislation to ensure compatibility of national judicial norms, and transnational
cooperation.

The efforts will focus on 6 themes:

 - _detection of irregularities;_

_•_ _recovery of the amounts concerned;_

_• fraud-prevention and proof-fraud legislation;;_

_•_ _administrative sanctions and deterrence;_

_•_ _a judicial_ _area_ _for the protection of the_ _Union's_ _financial interests;_

_•_ _the_ _preparation for enlargement and relations with non-member countries._

In each of these themes the SEM 2000 principles on financial management will be
supplemented. The accent will be put on the prevention aspect, especially the quality
and applicability of legislation as well as their correct and homogeneous application. In
the customs area, the principles identified in the "customs 2000" programme will be
implemented.

A few priorities merit to be highlighted. The European Parliament's recommendations
to strengthen custom cooperation in the transit field will be given priority. Priority will
also be given to an improvement of preferential regimes so as to better prevent and
combat fraud.

In the field of indirect taxes, strengthened cooperation with Member States at Union
level will be put in place so as to improve the functioning of VAT and excise systems in
the internal market.

Targeted anti-fraud actions will be developed in certain non-member countries, in
particular the new independent States as well as the accession candidate countries in
Central and Eastern Europe. This is particularly important in view of enlargement.

The most recent improvements in the legal framework for the fight against fraud are
essentially :

- _provisions concerning notifications_ _of_ _frauds which now cover all Community areas;_

_•_ _a regulation for the protection of the financial interests of the Community adopted in December_
_1995;_

_•_ _the on the spot checks and inspections regulation adopted in November_ _1996;_

_•_ _A_ _Convention and Protocol on the approximation of norms and strengthening of cooperation and_
_penal protection signed in July 1995 and September 1996._ These two texts remain to be ratified and
transposed in Member States.

Since 1994 some Member States have set up specialized structures for the protection of
EU finances while others have introduced provisions to strengthen cooperation with the
Commission. These are positive and encouraging signs. The success of the anti-fraud
policy relies on a continued effort by Member States in improving measures at national

level to protect financial interests more efficiently. Some aspects of action in Member
States, such as close collaboration and networking, also form part of the work

programme.

1. REINFORCING THE DETECTION POLICY AND IMPROVING ANALYSIS OF

**INFORMATION**

Combating Community fraud effectively is based on operational activity and requires a
firmer grasp of the phenomenon on the ground. It is a question of emphasizing the policy
of detecting fraud cases by improving investigative techniques in a legal framework
strengthened in particular by the adoption of EC Euratom Council regulation 2185/96.
This regulation represents an important step forward for work on the ground. It
establishes conditions for on the spot checks and inspections carried out by the
Commission in close cooperation with the competent authorities in the Member States, in
principle, in all the fields of activity of the Communities. Also, the Member States and
the Commission will from 1998 be able to use the improved mutual assistance
mechanism in the customs and agricultural fields (EC regulation 515/97) [1] which
introduces the legal base for the establishment of a database in the customs information
system.

It is now up to the Commission and the Member States to concentrate their efforts and
bring together the means which are indispensable to put into practice this new legislative
framework. These instruments and those being finalized in the framework of penal
protection will allow the investigative work carried out in the framework of the
Commission/Member State strengthened partnership to be developed. It is on the basis of
the initial results that the qualitative steps necessary for protection of the European
finances and taxpayer can finally be envisaged and realized.

The Commission and the Member States will have to do everything possible to improve
prevention, detection and cooperation and develop a common approach at Union level.

The programme presented by the Commission for the setting up of a new common VAT
system [2] and the report concerning administrative cooperation in the field of indirect
taxes [3] which point out the existing weaknesses and lacunae in the current framework for
combating major international tax frauds will serve as a framework to define the
guidelines for action.

With regard to the Commission's role, the accent will be put on the means intended to
combat more effectively major financial crime, transnational fraud and the most serious

OJL 82 of 22.03.1997.

2 COM(96)681 final : second report on article 14 for the implementaiton of regulation 218/92 on
administrative cooperation in the field of indirect taxes.

3 COM(96)328,22.07.1996.

irregularities. These are the areas of activity where the Commission is also best placed to
provide added value and support to the actions of all national authorities.

To accomplish this first set of activities, a number of initiatives must be undertaken in all
the sectors of activity of the Union:

1.1. Effective implementation on the ground of regulation 2185/96 concerning on
the spot checks and inspections with all the national authorities.

_Presentation of practical means of application of the EC Euratom Council regulation_ _n°_ _2185/96^_
_concerning on the spot checks and inspections carried out by the Commission for the protection of_
_the European Communities 'financial interests against frauds and other irregularities._

_First assessment of experience of implementation of the on the spot checks and inspections_
_regulation at the end of 1998. At this time, the Commission will envisage the possibility of_
_providing for the application of fines or Community administrative sanctions with regard to_
_economic operators who refuse the right of access to information and/or right of access to_
_premises, with a view to strengthening the "on the spot checks and inspections" regulation._

1.2. Selective establishment of Task Groups and their use in high risk sectors
where organized crime rings are involved.

_Following the example of what has been successfully achieved in the areas of olive oil and_
_cigarettes, the Commission will put in place where resources are available new Task Groups to_
_intensify action against organized networks or_ _rings,_ _in_ _particular in the alcohol sector._

**1.3. Strengthening customs cooperation instruments.**

   - Cooperation between customs investigation services.

_Joint investigation between specialized customs investigation services will be developed with the_
_help of the Commission for more effective coordination,_ _in_ _particular where there are transnational_

_aspects._

_Operational activity will be increasingly focused (mutual assistance and where necessary on the_
_spot checks and inspections regulation) on sensitive sectors and products (transit, preferential_
_origin, anti-dumping ...) both with investigations within the Community as well as with_
_investigations in non-member countries._

_The customs services will be called upon to use more effectively the computerized instruments at_
_their disposal such as the early warning system for targeted checks on sensitive goods and the_
_Customs Information System (CIS) with the technical assistance and operational aid of the_
_Commission._

_In the field of_ _transit,_ _reinforcement of the security of movements of goods will involve taking_
_measures to limit the risks of_ _diversion_ _or substitution of products and facilitating surveillance,_
_monitoring and checks on operations_ _(cf._ _point 3.3)._

   - Establishment of a Community intelligence analysis cell.

_The establishment of such a ''intelligence and forward planning" cell will enable a better_
_Coordination of risk management to be_ _ensured._ _Particularly in the sensitive textile sector, this_
_cell could make use of_ _the_ _results of_ _the_ _statistical work already undertaken (and which must be_

**4** **OJL 292** **of 15.11.1996.**

**5**

_strengthened in the future) so as to establish, on the basis of thorough analysis of the trade and the_
_anomalies detected, "warming criteria" making possible the identification of cases which should_
_be investigated. In general, the orientations resulting from this_ _cell's_ _work will also allow the_
_necessary assistance to be provided to the Task Groups._

_•_ Use of the "Early Warning System" (transit regimes).

_Having shown its effectiveness, the use of this system will be systematic to make its application_
_compulsory for transit movements involving high risk products. It will also be compulsory for_

_countries participating in the common transit system (Visegrad 4 and EFTA)_ _[5 ]_

**4**

_In the area of Community/common_ _transit,_ _future participants in the common transit system have to_
_guarantee their capacity of ensuring the proper functioning of the transit procedures and its_
_instruments of which the early warning system is an integral part._

_•_ Setting up of a central database (CIS) [6] .

_So as to improve the effectiveness of the use of information exchanged between Member States via_

_an optimized_ _AFIS'_ _network, the Council regulation on mutual assistance and the convention on_

_the use of information technology in the field of customs" provides in particular for the creation of_
_a customs information system (CIS) comprising a central database which will be managed by the_
_Commission. This will assist the Member States in the prevention, detection and prosecution of_
_operations contrary to customs or agricultural regulations by strengthening by means of a more_
_rapid dissemination of information the effectiveness of cooperation and control procedures by the_
_competent authorities._

Ic4. Increase in action in the field of direct expenditure -, in particular for the
major regional development programmes.

_See theme 6,_ _"Enlargement"._

1.5. Development of mutual assistance and cooperation between the Member
States with the help of the Commission in the field of indirect taxes.

_With regard to VAT, the Commission and the Member States must, in line with the guidelines_

_identified in the report on implementation of regulation no._ _218/92^_ _on administrative cooperation_

_in the field of indirect taxes_ _(VAT)'®,_ _must improve their efforts to develop cooperation in the_
_areas of detection and prevention of_ _fraud._ _The lack of information at Community level allied to_
_the restrictions in the current framework for handling complex international fraud cases represents_

Visegrad: Poland, Czech Republic, Slovakia and Hungary (cf point 6.5); EFTA: Switzerland,
Norway and Iceland.

6 Customs Information System.

7 Anti Fraud Information System (formerly SCENT).

8 OJ C 316 of 27.11.1995. Convention to be ratified by the Member States.

9 OJL 24 of 01.02.1992.

10 COM(96)681 final.

_a risk which must be_ _confronted._ _The Commission will continue the analytical work already_
_started,_ _together with the Member States, in_ _the_ _fraud prevention sub-committee of the Permanent_
_Committee on Administrative Cooperation._

_The Commission will continue to encourage and support contacts and cooperation between its_
_investigation services and Member States investigation services. It will facilitate and contribute to_
_the_ _fight against fiscal fraud in cases involving Community interests. The Commission will assess_
_the results of this cooperation and will take them into account where necessary in the detailed_
_examination of Community regulations (EEC Council regulation_ _n°_ _218/92 and Council Directive_
_n°_ _77/799 and_ _where_ _necessary the regulation_ _on_ _protection of financial interests) so as to improve_
_the tools and mechanisms of mutual assistance in the field of indirect_ _taxes._ _All these activities will_

_contribute to the_ _FISCALISA_ _programme as well as to the programme for the new common VAT_

_system*_ _2._

_With regard to excise, the Commission will work together with the member_ _States,_ _in the framework_
_of the high level group, particularly focusing on the movement of products subject to excise duty_
_(tobacco, alcohol), to define a_ _common_ _fraud prevention and cooperation strategy and to identify_
_improvements including possible legislative amendments at national and Community level._

1.6. Strengthening the fight against economic crime.

_Over and above areas in which own resources or Community finance are at_ _risk,_ _the Commission_
_will use all means available for cooperation between customs authorities and the other national_
_services responsible for reinforcing the fight against economic crime harmful to Community_
_interests (intellectual property, counterfeiting .., quotas, anti-dumping), in particular in sensitive_
_sectors such as for example textiles where the coherence, the very credibility of the common_
_commercial policy is largely based on the definition and implementation of an effective anti-fraud_

_strategy._

_On the basis of an assessment of legislation in these fields, legal instruments could if necessary be_

_proposed,_ _in particular in the area of action against_ _counterfeiting**_ _to strengthen with the help of_
_the Commission :_

_•_ _reciprocal information_

_•_ _cooperation between Member States_ _'_ _specialized services._

_In this context, the Commission might envisage the proposal of a legal instrument enabling_
_cooperation to be extended to cover the authorities responsible for combating economic and_
_financial crime to improve coordination at Community level of all operational activities preceding_
_the opening of judicial proceedings. This instrument could in this way contribute to strengthening_
_the fight against counterfeiting and piracy which represent an_ _evergrowing_ _scourge._

1.7. Improvement of equipment and tools for data processing; making use of
follow up of notifications and development of risk analysis.

_Cooperation_ _with_ _theJRC'^to_ _improve the use of all relevant_ _information,_ _especially to strengthen_
_methods of risk analysis. The pilot actions and use of risk analysis especially in the areas of_

11 COM(97)175 of 23.04.1997. Programme intended to improve the functioning of the internal market
provisions concerning indirect taxation.

12 COM(96)328 of 22.07.1996.

13 In particular for the protection of consumer health and safety and intellectual property.

_activity of the customs services to target better documentary and/or physical checks will be_

_continued._

_In all sectors, particularly in the area of structural policies, this action will aim to facilitate the_
_primary control work of the national authorities, follow up of cases under investigation,_
_rationalization and exploitation of information on a real time basis to_ _identic_ _trends and monitor_
_the development of sectors of interest to organized crime._

_This work will have to be carried out regularly in a concerted manner in the ad hoc and specialized_
_working groups (typology, fraud profiles, sensitive sectors, targeting of_ _checks...)._ _The Commission_
_will ensure in the specialized bodies of the advisory committee (forum for exchange of experience)_
_the promotion of methods of detection based on modern technology. Use of notifications, results of_
_risk analysis carried out by the JCR and information resulting from the work of the Court of_
_Auditors will allow the sectors in which the discovery_ _of_ _fraud is highly probable to be_ _identified._

1.8. Strengthening of the Commission/Member State [15] cooperation at all stages of
the investigation and follow up of inquiries.

_To ensure a comprehensive follow up of cases, the_ _Commission's_ _technical and operational_
_assistance will be carried out at all stages of the administrative inquiry and prosecution (cf point_
_5.5)._ _This assistance should facilitate operations involving prosecution and seizure in cases of_
_illicit traffic going beyond the single area of national sovereignty_ _(cfpoints_ _5.4_ _and_ _5.6)._

1.9. Establishment of relations between UCLAF and Europol.

_Organization of regular contacts, in particular in the area of analysis of the phenomenon of_
_economic and financial crime and its development contrary to Community interests. Pooling of_
_technical knowledge, especially in training and gathering of information, processing and analysis_
_of data._

**1.10.** Targeted training action, development of exchange of officials

_Organization of targeted training action for the authorities responsible for the fight against_

_economic and financial crime (customs, police and judicial authorities) and in the fiscal field_
_(Matthaeus-Tax_ _[16]_ _)._

_The exchange of officials should also be extended for officials of accession candidate countries in_
_the framework of the provisions on customs cooperation provided in the Europe agreements (cf._
_point 6.4)._

**2.** **FINANCIAL** **FOLLOW** **UP OF** **FRAUD** **CASES** **AND** **OTHER** **^REGULARITIES** **AND**

**RECOVERY** **OF** **MONIES**

To complement its anti-fraud strategy and develop its actions, the Commission has opted
clearly for a strengthening of financial management. The dynamic effect of operation
SEM 2000 allowed a series of measures to be undertaken to strengthen financial
management. The Commission has therefore made substantial progress in developing

14 Joint Research Centre of Ispra.

15 On the spot checks and inspections regulation, Convention and protocols concerning protection of
financial interests, CIS Convention..

**16** See "Fiscalis".

**new instruments and financial management procedures. This work is to be continued,**
**care will have to be taken with the implementation of these strengthened provisions.**

**Recovery is the logical consequence of action on the ground. It constitutes a simply**
**reparatory measure whereby the European taxpayer's money is justifiably returned.**
**Recovery is therefore an equitable measure and a fundamental element in the fight**
**against fraud. It is also one of** **the** **parameters for identifying success in the fight against**
**fraud.** **It is fully in line with the content of the horizontal regulation concerning**
**protection of the Community's financial interests** **[17]** **which establishes a general**
**framework at Union level.**

**2.1.** **Area** **of own resources**

    - _Implementation of_ _new_ _provisions of regulation 1552/89 which allows the monitoring of the_
_recovery carried out by member States of cases_ _of_ _fraud and irregularity;_

_•_ _Strengthening of the recovery provisions of regulation no. 1552/89 (cf. point 3.4)._

   - _Strengthening of mutual cooperation of recovery in the fiscal and traditional own resources_

_areas*°._

**2.2.** **Agriculture**

_Establishment of separate so-called B accounts for debts identified but not yet recovered in the_

_EAGGF-Guarantee_ _sector'^_

**2.3.** **Area of structural policies**

_Ensure better continuity of financial follow up_ _(cf_ _point 3.6);_

**2.4.** **Area of direct expenditure**

_Ensure and reinforce continuity of_ _the_ _financial follow-up of regional aid programmes to certain_
_non-member countries on the basis of a clear separation between the management structure and_
_the beneficiaries to avoid conflicts and confusion of interests; better general evaluation of the_
_impact of decentralized programmes; concentration of responsibility for the execution of projects_
_intended for multiple beneficiaries._

**2.5. Assessment of** **the** **coherence of legislative systems and recovery procedures**

**The Commission will organize a comprehensive follow up of exemplary and**
**selected cases from the stage of the inquiry up to the final financial settlement.**

17 Article 4 of EC Euratom regulation no. 2988/95 O.J. L 312 of 23 December 1995.

18 EEC Directive 76/308 O.J.L. 73/18 of 19.03.1976.

19 In the area of own resources, B accounts have existed since 1989; in this framework the Member
States have the obligation to account on the one hand for duties detected and recovered and on the
other hand duties detected but not yet recovered or not covered by guarantees. It should be noted
that this separate accounting system will allow the Commisison to check recovery of own resources
including where frauds or irregularities have been notified by the Member States. The
implementation of such a system in the EAGGF area is planned for 1997.

Comparison of these cases with the analysis of all information communicated will
allow an assessment of the need for legislative action to be carried out so as to put
in place mechanisms at national and/or Community level to avoid the confluence of
conditions favourable for the organization of the insolvency of the beneficiaries and
debtors (period of limitation, provisional measures, protective measures,
preferential credit, appeal systems, centralization of cases handled by several
Member States,...).

3. IMPROVEMENT OF LEGISLATION AND PREVENTIONS

In this context, the need to add to sectoral legislation especially in the area of checks will
be examined. In parallel, the Commission will take the provisions necessary to examine
and assess, especially by way of their actual application, legislative texts with a view to
whether they should be strengthened or simplified.

The guidelines laid down in SEM 2000 will allow measures to be taken to facilitate the
setting up of mechanisms to adapt legislation better to the risks of fraud and other
irregularities.

3.1. Practical application of the measures taken concerning assessment of
regulations

_This assessment will be carried out on the basis of ex-ante mechanisms as well as on the basis of an_
_ex-post checks system both for existing legislation_ _and_ _for new legal instruments._

_In the framework of joint initiatives, qualitative assessment of regulations will be carried out,_
_taking account of the results of inquiries (cf. point 1.7), observations of the Court of Auditors and_
_the budgetary authority (discharge). This exercise also encompasses a particular follow-up of the_
_evolution of texts from the point of view of their vulnerability to fraud including in the course of_
_negotiations with the Council and European_ _parliament._

3.2. Complete the comparative analysis on the position on application of article
209A (checks)

_In line with the request of the European_ _Council,_ _a supplementary questionnaire was_ _produced._
_The additional information refers to measures taken at national level to combat waste and misuse_
_of Community revenue and expenditure and should add to the summary report submitted to the_
_Madrid European Council by concentrating on checks and administrative sanctions implemented_
_by the member States._

_The summary of the results will give a better picture of the situation in the different Member States_
_with regard to the "checks"_ _aspect._ _On this_ _basis,_ _the provisions required to achieve the objective_
_of equivalent protection throughout the Community can be_ _envisaged._ _The results of this work will_
_be submitted to the_ _Council._

_A_ _Commission regulation concerning the financial controls to be made by the member States in the_
_area of Structural Funds based on article 23 of regulation 4253/88 will be presented to the_
_committees_ _concerned._

3.3. Reinforcement of transit regimes

_As the Commission set out in its communication entitled "Action plan for customs transit in_
_Europe_ _"_ _and with the advantage of recommendations from the Parliamentary Committee of_
_Enquiry, the Commission is undertaking a thorough-going reform of the transit regimes. In_
_addition to computerisation, which is already_ _in_ _progress,_ _the reform highlights both the legislative_

_and operational aspects of preventing and suppressing_ _fraud,_ _in particular by strengthening_
_cooperation between customs services, adopting a common approach at European level to the_
_management of risks in this area, and developing a partnership with commercial operators._
_Special attention will be paid to effective recovery from the debtors_ _concerned._ _The Commission_
_will ensure that the security of the common/Community transit regimes will be a major concern to_
_be taken into account in the context of contacts concerning enlargement_ _(cf._ _point 1.3)._

3.4. Presentation of a communication on preferential regimes

Following on from the work which it has undertaken in the fight against fraud and
irregularities, the Commission has noted that for some time the principle of mutual
trust on which preferential agreements and autonomous regimes are based is in
practice being called into question. It is important consequently for the
Commission's partners to provide a better assurance of their obligations and
responsibilities. This situation affects own resources and common policies whose
objectives are not met. Competition between Community operators is also affected.
The regimes established for the benefit of non-member countries are therefore
diverted away from their political and economic objectives.

_The Commission will present a communication on the existing situation in the area of preferential_
_agreements. This communication aims to raise awareness of economic operators on risks linked to_
_trade with non-member countries in the context of_ _these_ _agreements and to draw the attention of_
_countries which benefit from Community preferences to the obligations arising from acceptance of_
_these agreements. These initiatives will take into consideration certain elements including :_

_•_ _the_ _possibility of simplifying Community legislation;_

_**m**_ _[improvement of provisions for checks in non-member countries and procedures laid down in ]_
_preferential agreements and arrangements (conventional and autonomous regimes);_

_•_ _strengthening in the areas of_ _training,_ _provision of information and_ _follow-up_ _action;_

**•** _[putting in place means of raising awareness including the use of appropriate sanctions ]_
_(horizontal legal instrument; see_ _1996_ _anti-fraud work programme, point_ _1.6._ _5th indent)._

3.5. Production of a new proposal for amendment and strengthening of provisions
in EEC, Euratom Council regulation 1552/89 concerning the Community's
own resources system.

_This proposal will aim strengthen the regulatory mechanism allowing the Commission either to_
_grant discharge to the Member States in respect of their management of Community own resources_
_or, if necessary, to hold them financially responsible for their lack of diligence in ensuring_
_recovery of amounts due. To this_ _end,_ _it is intended to introduce a maximum time limit by which_
_the amounts not recovered exceeding a set limit are to be communicated_ _to_ _Commission._

3.6. Application of articles 23 and 24 of EEC Council regulation 4253/88

_The Commission intends to clarify the respective responsibilities of_ _the_ _Member States and their_
_competent authorities in the area of Structural Funds._

**4.** **REINFORCEMENT** **OF THE** **DETERRENCE POLICY : ADMINISTRATIVE SANCTIONS**

A coherent anti-fraud policy requires an organized system of effective sanctions to
achieve a deterrent effect. It is essential to ensure the greatest possible homogeneity in
such an effect that measures envisaged in this area take account of the objective of

**10**

equivalence laid down by the European Council. EEC Euratom Council regulation no.
298//95 [20] concerning the protection of the Community's financial interests represents an
important and concrete stage in the global and horizontal approach preferred by the
Commission. It defines and specifies the categories of person who may be considered
responsible for acts prejudicial to the sound application of Community financial
provisions and provides a general framework reference for Community legislation in the
area of administrative sanctions. On this basis, it is appropriate to develop initiatives in
all areas. Action will also be continued to approximate national enforcement instruments
to ensure greater effectiveness and homogeneity in penal sanctions (cf. point 5)

4.1. Complete the comparative study on the position concerning application of
article 209A (Sanctions)

_The summary of the results of the comparative analysis_ _(cf_ _point 3.2) will give a better picture of_
_the situation in the different Member States with regard to the aspects concerning_ _"administrative_
_sanctions". On this basis, the provisions required to achieve the objective of equivalent protection_
_throughout the Community can be_ _envisaged._ _The results of this work will be submitted to the_
_Council._

4.2. Put in place on the basis of the results of the comparative analysis
mechanisms for administrative sanctions in the area of structural policies

_The results of the comparative analysis (see points 3.2 and_ _4.1)_ _will enable the Commission to plan_
_the production of mechanisms in the framework laid down by EC Euratom regulation no. 2988/95_
_for administrative sanctions adapted to the particularities of the structural policies._

4.3. Design a system of Community administrative sanctions for direct
expenditure

// _is appropriate in the horizontal legal framework of regulation no. 2988/95 to follow a global_
_approach to be put in place together with the updating of the programmes in question in the_
_different fields_ _concerned._

4.4. Continue actions started in the area of traditional own resources to put in
place a homogeneous system of administrative customs sanctions

_The work undertaken following the "customs sanctions" study will be_ _continued._ _The Commission_
_will produce on the basis of the work of the "customs policy group" measures laying down_
_guidelines specified in the general framework of regulation no. 2988/95._

4.5. Continue activities on a regular and systematic basis in the area of the
common agricultural policy

**5.** **TOWARDS A EUROPEAN JUDICIAL** **AREA** **IN THE FIELD OF THE PROTECTION OF**

**THE** **UNION'S FINANCIAL INTERESTS**

The particular responsibility of the Community in financial matters necessitates a
rapprochement of national enforcement systems to achieve, in line with the guidelines of
the Madrid European Council of 15 and 16 December 1995, an equivalent level of

**20** **O.J.** **L** **312** **of** **23** **December 1995.**

**11**

**protection throughout the Community.** **This will allow, beyond the principle of**
**assimilation contained in EC article 209A :**

- _greater homogeneity in_ _checks-_ _and inspections;_

_•_ _a more equitable recovery of amounts evaded or unjustly_ _received;_

 - _the uniform application of Community or national penalties having an effective, proportionate and_
_dissuasive effect in all Member States._

**The level of integration of** **the** **internal market requires a corresponding development of** **a**
**coherent and integrated area in the criminal law field to allow the judicial authorities to**
**confront the challenges posed by organized crime operating on** **a** **transnational basis.**

**The recommendations of** **the** **study requested by the European parliament for a European**
**judicial area ("CORPUS JURIS") may help in deciding the approach to be followed on**
**this question. The Commission will examine the concrete conclusions to be drawn from**
**this initiative in the light of its experience of fraud on the ground in the framework of**
**judicial cooperation** **[21]** **.**

**5.1.** **Finalization of the second protocol on penal protection of financial interests**

_The debates in Council on the adoption of this protocol (responsibility of legal persons, laundering,_
_Commission assistance in criminal prosecutions) will be continued with the active cooperation of_
_the Commission so as to reach an agreement during the Dutch Presidency._

**5.2.** **Setting up of a "liaison and criminal law expertise interface" at Community**
**level**

_Establishment of_ _an_ _"ad hoc_ _cell"_ _(to_ _follow proceedings/cases) within_ _UCLAF._ _This cell must_
_fulfil_ _the_ _function of coordinating and assisting teams who carry out administrative investigations_
_as well as where necessary the national judicial authorities._ _It_ _should facilitate exchanges of_
_information and contacts between competent authorities and provide expertise._

_It will provide expertise and contribute to increased knowledge of the law and the national_
_procedures applicable. It will participate in targeted training action for judicial authorities._

**5.3.** **Finalization of** **the** **Convention on corruption**

_This Convention, which broadens the scope of_ _the_ _partnership concerning corruption linked with_
_protection of financial interests, was signed in September_ _1996._ _The mechanisms concerning the_
_Court of_ _Justice's_ _competence regarding the Convention must be_ _completed._

_This text will need to take account of the fact that the_ _Court's_ _jurisdiction will have to apply_
_equally to actions taken by Community and national officials which, over and above protection of_
_financial interests, may prove to be prejudicial to other Community interests._

21 This need is regularly highlighted by the European parliament. The result of public hearings
organized by the latter serve to mobilize opinion on these questions. In defining its objectives in this
area, the parliament starts from the acceptance that instruments of international judicial cooperation
are not adapted to the needs of combatting major financial crime. Therefore the European
parliament directs its thoughts towards the estabishment of a Community structure, as a preliminary
to a European prosecution liaison service, ensuring at the very least functions of coordination,
consultation and exchange of information on judicial cooperation.

**12**

5.4. Assessment of the need to resume work at the Council on the points which
featured in the initial Commission proposal

// _is important to identify the follow up action to be taken on certain elements of criminal law_
_protection which were withdrawn from the parent Convention and the second protocol. This_
_concerns in particular elements regarding mutual recognition of evidence, direct judicial_
_cooperation, centralization of proceedings and a fraud register._

_These_ _themes^,_ _as well as the rights and obligations concerning seizure, on_ _land,_ _at sea and on_
_the high seas, could be included in a third protocol or other appropriate instrument (cf. points 1.8_
_and_ _5.6)._

5.5. Monitoring of ratification of conventions, in particular the protection of
financial interests Convention and the additional protocols.

_In this_ _regard,_ _the Commission may provide its assistance in the preparation of acts to transpose_
_the Convention in line with the explanatory report, in particular to introduce a criminal offence_
_appropriate for the Union_ _context,_ _for the needs of the fight against fraud and for the obligation to_
_achieve an equivalent level of enforcement throughout the Community._

5.6. Optimal exploitation of international Conventions to improve the fight
against major economic crime

_So as to improve the effectiveness of investigations and prosecutions, existing international_
_instruments will be assessed to exploit further this potential; in particular, to stop illicit traffic_

_linked with navigation outside territorial_ _waters^*_ _(cfitem_ _19)._

5.7. Detailed examination of the themes covered in the "CORPUS JURIS" [24] .

_Selection of themes to be examined in detail: setting up of a common reading grid and preparation_
_of precise and oriented terms of reference for the collection of information and data indispensable_
_for the inventory; comparative analysis of the inventory in the fifteen Member States; summary_
_report for the budgetary authority (Council, European parliament); Commission proposals to the_
_Council._

6. PREPARATION FOR ENLARGEMENT AND RELATIONS WITH NON-MEMBER

COUNTRIES

With regard to actions in non-member countries, particular stress will be placed on the
development of relations with accession candidate countries. These initiatives are fully in

22 It should be noted that some of these points feature as recommendations in the parliamentary
committee of inquiry into transit.

23 see e.g. Convention of 10.12.1982 on maritime law, currently being concluded by the European
Community, COM (97) 37, 4.2.1997, on the application of Community law for activities on the high

seas.

24 Study carried out at the request of the European parliament by researchers from the association of
European lawyers for the protection of the Communities' financial interests under the aegis of the
European Commission : Towards a European judicial area. Corpus Juris introducing penal provisions
for the purpose of the financial interests fo the European Union.

**13**

line with the framework of new guidelines for the PHARE programme in the preaccession context [25] .

The preparation of candidate countries from central and eastern Europe for accession
responds to a common concern of the Community and these countries. The pre-accession
strategy is a major priority of the European Union. It is important to continue the
reinforcement of the Community acquis and Community anti-fraud provisions in this
perspective. The process of preparation of the countries of central and eastern Europe for
membership status will include assistance with putting in place institutions equipped with
efficient administrative and judicial structures and well trained staff, a pre-requisite for a
successful accession encouraging mutual trust. The initiatives aim to develop the antifraud services, training of specialized staff (officials, investigators, magistrates) in this
area and the reinforcement of systems of specific cooperation. In particular, the
provisions on customs cooperation (technical assistance) in the bilateral agreements
signed with these countries will be fully exploited and where necessary enhanced

- _to improve exchange of information_

- _to reinforce customs cooperation_

- _to develop police and judicial cooperation._

The implementation of major regional development programmes (PHARE, TACIS,
MEDA) as well as the appropriations of the European Development Fund (EDF) [26 ]

mobilize important Community budget resources for the benefit of non-member
countries. This expenditure requires specific and appropriate action, given the economic
and social situation and institutional capacity at administrative and judicial level in nonmember countries, to provide for a degree of protection which is as effective as for
expenditure within the Union.

The following initiatives will be taken in close cooperation with the services responsible
for the programmes including their financing:

6.1. Setting up of a specialized investigation body within UCLAF for anti-fraud
checks on major regional programmes.

_Strengthening of the_ _Commission's_ _assistance and operational cooperation on the_ _ground._

6.2. Establishment of contact points in the countries concerned (cf point 1.3).

_Nomination of_ _liaison_ _officers in certain non-member countries to ensure direct contact with the_
_competent authorities and institutions: development of contacts with Commission delegations and_
_networks of officials from the Member States working in these non-member countries._

25 New guidelines for the PHARE programme in the context of pre-accession assistance,
communication from Mr. VAN DEN BROEK |COM (97) 1121.

26 Appropriations allocated to humanitarian aid (ECHO) are also concerned.

**14**

6.3. Extension of customs cooperation to improve the protection of financial
interests and the fight against fraud.

_Customs cooperation will be_ _developed:_

_•_ _in the framework of protocols of mutual assistance in the Europe agreements;_

_•_ _in the framework of protocols on mutual administrative assistance in commercial agreements_
_concluded with non-member countries;_

 - _on the basis of the "origin of goods" protocols in the same agreements and analogue provisions_
_in the autonomous preferential regimes._

_This type of cooperation will have to be extended to all investigation services specialized in the_
_fight against economic crime in the countries concerned (cf point 6.6 hereafter). The Commission_
_will consider the possibility of setting_ _up_ _for this purpose a network of computerized information_
_aimed at developing structured exchanges of information in the framework of these protocols._

6.4. Targeted training actions for the authorities responsible for the fight against
fraud (customs, police, justice, ...) in the accession candidate countries.

_Promotion of training activities and exchange of officials involved_ _in_ _the fight against_ _fraud._ _In the_
_context of these actions, the guidelines in the communication on the new PHARE guidelines which_
_form part of the pre-accession assistance aimed at training officials of these countries in taking on_
_the Community acquis_ _("institution_ _building") should be taken into account. The training could_
_where_ _appropriate_ _be organized together with corresponding actions for the competent authorities_
_of the Member States._

6.5. Technical assistance for the accession candidate countries to help them to
equip themselves with administrative structures of effective financial and
judicial protection.

_The development of this assistance will allow the achievement of the objective aimed at organizing_
_a fairer share of the financial responsibilities between the Community and the non-member_
_countries_ _concerned._ _This assistance will take the form of technical support in the setting up of the_
_computer hardware and software necessary for_ _rapid,_ _operational connection into the mutual_
_assistance framework, and the extension of the early warning system (cf. point_ _1.3)._ _These actions_
_will also have to take account of the guidelines of_ _the_ _above mentioned communication so as to set_
_up the administrative structures essential for taking on the acquis_ _("institution_ _building")._

6.6. In parallel with the reinforcement of the Community acquis, the Commission
will take initiatives to improve the compatibility of legislation in the nonmember countries concerned with the objectives of legal protection of the
Communities' financial interests (pre-accession phase).

_Regular consultation on the state of national legislation, the putting in place, functioning and_
_experiences of_ _the_ _services_ _responsible_ _for the fight against fraud will be organized in an ad hoc_
_institutional framework. These contacts could take place in the appropriate fora provided for_
_association agreements where Member States, candidates countries and the Commission meet; (cf_
_informal COCOLAF)._

_In this context and_ _on_ _the basis of the Europe_ _agreements,_ _the following are to_ _be_ _planned:_

_•_ _the possibility of extending to these countries the systems of notification of cases of fraud and_
_irregularity against the Community budget which have been the subject of an initial_
_administrative or judicial report (anticipated application of notification regulations);_

**15**

_assistance in the framework of investigations carried out into irregularities or frauds along the_
_lines of the "on the spot checks and inspections" Council regulation no. 2185/96 (if necessary_
_establishment of a legal base in the framework of these regulations allowing for the possibility_
_of negotiation of cooperation protocols with all the competent authorities in the non-member_
_countries concerned)._

_the need to provide for a legal base for administrative cooperation and mutual assistance_
_between authorities in the non-member countries_ _concerned._ _Where necessary, the Commission_
_will present proposals in this direction._

**16**

###### ISSN 0254-1475

### COM(97) 199 final

# DOCUMENTS

#### EN 09 02 10 Catalogue number : CB-CO-97-206-EN-C ISBN 92-78-19619-3

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