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Summaries of EU Legislation

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Protecting the EU’s financial interests - fight against fraud

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Protecting the EU’s financial interests - fight against fraud

Since 1995, a convention has been in place which seeks to protect, under criminal law, the financial interests of the EU and its taxpayers. Over the years, the Convention on the Protection of the European Communities’ Financial Interests has been supplemented by a series of protocols.

ACT

Council Act of 26 July 1995 drawing up the Convention on the protection of the European Communities’ financial interests (OJ C 316, 27.11.1995, pp. 48-57)

SUMMARY

Since 1995, a convention has been in place which seeks to protect, under criminal law, the financial interests of the EU and its taxpayers. Over the years, the Convention on the Protection of the European Communities’ Financial Interests has been supplemented by a series of protocols.

WHAT DOES THE CONVENTION DO?

The Convention and its protocols

  • provide a harmonised legal definition of fraud
  • require their signatories to adopt criminal penalties for fraud.

KEY POINTS

EU countries must introduce effective, proportionate and dissuasive criminal penalties to deal with fraud affecting the EU’s financial interests.

The Convention differentiates between fraud in regard to expenditure and revenue.

  • Examples of fraud in respect to expenditure include any intentional act or omission such as:
    • the use or presentation of false, incorrect or incomplete statements or documents which has as its effect the misappropriation or wrongful retention of funds from the EU’s budget;
    • non-disclosure of information in violation of a specific obligation with the same effect;
    • or the misapplication of such funds for purposes other than those for which they were intended.
  • Examples of fraud in respect of revenue include any intentional act or omission such as:
    • the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal reduction of EU budget resources;
    • non-disclosure of information in violation of a specific obligation with the same effect;
    • or the misapplication of a legally obtained benefit (for example, the misuse of legally obtained tax payments) with the same effect.

In cases of serious fraud, these penalties must include custodial sentences that may give rise to extradition in certain cases.

The first Protocol to the Convention, adopted in 1996, differentiates between ‘active’ * and ‘passive’ * corruption of public officials. It also defines an ‘official’ (both at national and EU levels) and harmonises the penalties for corruption offences.

Liability of legal persons

Each EU country must enact legislation to allow heads of businesses or any persons having power to take decisions or exercise control within a business (i.e. legal persons) to be declared criminally liable. The Second Protocol, adopted in 1997, further clarified the Convention regarding the issues of the liability of legal persons, confiscation and money laundering.

National courts

In 1996, a Protocol conferring an interpretative jurisdiction on the European Court of Justice (ECJ) was adopted. This protocol allows national courts, when in doubt as to how to interpret the Convention and its Protocols, to petition the Court of Justice of the European Union for preliminary rulings.

Each EU country must take the necessary measures to establish its jurisdiction over the offences it has established in accordance with its obligations under the convention.

Cases of fraud involving two or more countries

If a fraud constitutes a criminal offence and concerns at least two EU countries, those countries must cooperate effectively in the investigation, the prosecution and the enforcement of the penalties imposed by means, for example, of mutual legal assistance, extradition, transfer of proceedings or enforcement of sentences passed in another EU country.

Disputes between EU countries

Where disputes arise as to the interpretation or application of the Convention, the case must first be examined by the Council. If the Council does not find a solution within 6 months, a party to the dispute may petition the Court of Justice of the European Union. The Court of Justice also has jurisdiction over disputes between EU countries and the European Commission.

SINCE WHEN HAS THE CONVENTION APPLIED?

The Convention entered into force on 17 October 2002, along with its first protocol and the protocol on its interpretation by the Court of Justice. The second protocol entered into force on 19 May 2009.

The convention and its protocols are open for signature by any country that joins the EU.

For more information, see the European Anti-Fraud Office.

KEY TERMS

* Active corruption: an offence committed by a public official who gives or promises a bribe.

* Passive corruption: an offence committed by an official who receives a bribe.

RELATED ACTS

Council Act of 27 September 1996 drawing up a Protocol to the Convention on the protection of the European Communities' financial interests (OJ C 313, 23.10.1996, pp. 1-10)

Council Act of 29 November 1996 drawing up, on the basis of Article K.3 of the Treaty on European Union, the Protocol on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities’ financial interests (OJ C 151, 20.5.1997, pp. 1-14)

Council Act of 19 June 1997 drawing up the Second Protocol of the Convention on the protection of the European Communities’ financial interests (OJ C 221, 19.7.1997, pp. 11-22)

Council Decision 2008/40/JHA of 6 December 2007 concerning the accession of Bulgaria and Romania to the Convention, drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities’ financial interests, the Protocol of 27 September 1996, the Protocol of 29 November 1996 and the Second Protocol of 19 June 1997 (OJ L 9, 12.1.2008, pp. 23-24)

last update 24.08.2015

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