(1)

Article 325 of the Treaty on the Functioning of the European Union requires the Union and the Member States to counter fraud, corruption and any other illegal activities affecting the financial interests of the Union. The Union should support activities in these fields.

(2)

Past support for such activities through Decision No 804/2004/EC of the European Parliament and of the Council (3) (Hercule programme), amended and extended by Decision No 878/2007/EC of the European Parliament and of the Council (4) (Hercule II programme), repealed and replaced by Regulation (EU)  No 250/2014 of the European Parliament and of the Council (5) (Hercule III programme), has made it possible to enhance the activities undertaken by the Union and the Member States in terms of countering fraud, corruption and any other illegal activities affecting the financial interests of the Union.

(3)

Supporting the reporting, by the Member States and candidate and potential candidate countries, of irregularities and fraud affecting the financial interests of the Union through the Irregularity Management System (IMS) is a requirement of sectorial legislation for the European Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development (6), the European Regional Development Fund, the European Social Fund, the Cohesion Fund, and the European Maritime and Fisheries Fund (7), Asylum, Migration and Integration Fund and the instrument for financial support for police cooperation, preventing and combating crime, and crisis management (8), the Fund for European Aid to the Most Deprived (9) as well as the pre-accession assistance (10) regarding the programming period 2014-2020 and onwards. IMS is a secure electronic communications tool which facilitates the Member States’, as well as candidate and potential candidate countries’ obligation to report detected irregularities and which supports the management and analysis of irregularities.

(3a)

It is necessary to compensate for the diversity of the legal and administrative systems in the Member States in order to overcome irregularities and combat fraud. The fluctuation in the number of irregularities can be linked to the progression of the multiannual programming cycles and late reporting. All of this requires the establishment of a uniform system for collecting data on irregularities and cases of fraud from the Member States in order to standardise the reporting process and ensure the quality and comparability of the data provided. [Am. 1]

(3b)

The importance of the prevention activities of the Commission and the European Anti-Fraud Office (OLAF) is undisputable, as are the strengthening of implementation of the Early Detection and Exclusion System (EDES) and the Anti-Fraud Information System (AFIS) and the completion of the national anti-fraud strategies. In the context of those activities, it is necessary to draw up a framework for the digitalisation of all processes in the implementation of Union policies (including calls for proposals, application, evaluation, implementation and payments) to be applied by all Member States. [Am. 2]

(4)

Council Regulation (EC) No 515/97 (11) and Council Decision 2009/917/JHA (12) provide that the Union is to support mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission, to ensure the correct application of the law on customs and agricultural matters.

(5)

That support is provided to a number of operational activities. This includes the Anti-Fraud Information System (AFIS), an information technology platform which consists of a set of applications operated under a common information system managed by the Commission. IMS is also operated under the AFIS platform. Such a system requires stable and predictable financing over the years to ensure its sustainability.

(6)

Union support in the fields of the protection of the financial interests of the Union, of irregularity reporting, and of mutual administrative assistance and cooperation in customs and agricultural matters should be streamlined under a single programme, the EU Anti-Fraud Programme (the ‘Programme’), with a view to increasing synergies and budgetary flexibility, and to simplifying management without prejudice to an effective control by the co-legislators of the programme implementation . [Am. 3]

(7)

The Programme therefore combines a component along the lines of the Hercule programme, another component ensuring the financing of IMS, and a third one that finances the activities tasked to the Commission under Regulation (EC) No 515/97, including the AFIS platform.

(7a)

The protection of the Union’s financial interests should target all aspects of the Union budget, both on the revenue side and on the expenditure side. In this context, due consideration should be given to the fact that the Programme is the only one specifically to protect the expenditure side of the Union budget. [Am. 4]

(8)

The AFIS platform includes several information systems, including the Customs Information System (CIS). The CIS is an automated information system which aims at assisting Member States in preventing, investigating and prosecuting operations which are in breach of customs or agricultural legislation, by increasing, through more rapid dissemination of information, the effectiveness of the cooperation and control procedures of their customs administrations. The CIS covers both administrative and police cooperation cases under a single infrastructure. For administrative cooperation purposes, the CIS is established by Regulation (EC) No 515/97, adopted on the basis of Articles 33 and 325 of the Treaty on the Functioning of the European Union.

For police cooperation purposes, the CIS is established by Decision 2009/917/JHA, adopted on the basis of Articles 30(1)(a) and 34(2)(c) of the Treaty on the European Union. The police cooperation dimension of the CIS can technically not be dissociated from the administrative one as both aspects are operated under one single information technology system. Considering that the CIS itself is only one of several information systems run under AFIS and that the number of police cooperation cases is lower than the number of administrative cooperation cases in the CIS, the police cooperation dimension of AFIS is deemed accessory to its administrative one.

(9)

This Regulation lays down a financial envelope for the entire duration of the Programme, which is to constitute the prime reference amount, within the meaning of [reference to be updated as appropriate according to the new inter-institutional agreement: point 17 of the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management (13)], for the European Parliament and the Council during the annual budgetary procedure.

(10)

Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union apply to this Regulation. These rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, and provide for checks on the responsibility of financial actors. Contracts financed in whole or in part by the Union budget under the Programme are thus subject, inter alia, to the principles of transparency, proportionality, equal treatment and non-discrimination, while grants are in addition subject to the principles of co-financing, non-cumulative award and no double financing, non-retroactivity and no-profit. Rules adopted on the basis of Article 322 of the Treaty on the Functioning of the European Union also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective EU funding. [Am. 5]

(11)

The types of financing and the methods of implementation under this Regulation should be chosen on the basis of their ability to achieve the specific objectives of the actions and to deliver results, taking into account, in particular, the costs of controls, the administrative burden, and the expected risk of non-compliance. This should include consideration of the use of lump sums, flat rates and unit costs, as well as financing not linked to costs as referred to in Article 125(1) of the Financial Regulation.

(11a)

The maximum rates for co-financing for grants under the Programme should not exceed 80 % of the eligible costs. In exceptional and duly justified cases, defined in the work programme, such as cases concerning Member States exposed to a high risk in relation to the financial interests of the Union, the maximum co-financing rate should be set at 90 % of eligible costs. [Am. 6]

(12)

In order to ensure continuity, under the Programme, in the financing of all the activities tasked to the Commission under Regulation (EC) No 515/97, including the AFIS platform, Annex I provides an indicative list of the activities to be financed.

(12a)

The Commission should adopt the work programmes in accordance with article 110 of the Financial Regulation. The work programmes should contain a description of the actions to be financed, an indication of the amount allocated to each action, an indicative implementation timetable and the maximum rate of co-financing for grants. When preparing the work programme, the Commission should take into account the European Parliament’s priorities as expressed within the framework of its annual evaluation of the protection of the financial interests of the Union. The work programme should be published on the Commission’s website and transmitted to the European Parliament. [Am. 7]

(12b)

Actions should be eligible on the basis of their ability to achieve the specific objectives of the Programme provided for in Article 2. These may include the provision of special technical assistance for the competent authorities of Member States, such as providing specific knowledge, specialised and technically advanced equipment and effective information technology (IT) tools; ensuring the necessary support and facilitating investigations, in particular the setting up of joint investigation teams and cross-border operations; or enhancing staff exchanges for specific projects. Moreover, eligible actions may also include the organisation of targeted specialised training, risk analysis workshops as well as, where appropriate, conferences and studies. [Am. 8]

(13)

The purchase of equipment through the Union instrument for financial support for customs control equipment (14) may have a positive impact on the fight against fraud affecting the financial interests of the EU. There is a joint responsibility on the Union instrument for financial support for customs control equipment and the Programme to avoid any duplication in the Union support. The Programme should essentially target its support to the acquisition of types of equipment which do not fall under the scope of the Union instrument for financial support for customs control equipment, or equipment for which the beneficiaries are authorities other than the authorities targeted by the Union instrument for financial support for customs control equipment. Moreover, there should be a clear link between the impact of the funded equipment and the protection of the financial interest of the Union. Avoiding overlaps as well as establishing synergies between the Programme and other relevant programmes in areas such as justice, customs, and home affairs should be notably ensured in the context of the preparation of the annual work programmes. [Am. 9]

(13a)

The Programme supports cooperation between administrative and law enforcement authorities of the Member States and between the latter and the Commission, including OLAF, as well as other relevant Union bodies and agencies, such as the Agency for Criminal Justice Cooperation (Eurojust), the European Union Agency for Law Enforcement Cooperation (Europol), with a view to ensuring a more effective protection of the financial interests of the Union. It will also support cooperation with the European Public Prosecutor’s Office (EPPO) in this regard, once that office assumes its tasks. [Am. 10]

(14)

The Programme should be open to participation by countries of the European Free Trade Association (EFTA) which are members in the European Economic Area (EEA). It should also be open to participation by acceding countries, candidate countries and potential candidates candidate countries , as well as countries covered by the European Neighbourhood Policy, in accordance with the general principles and general terms and conditions for the participation of those countries in Union programmes established in the respective framework agreements and Association Council decisions, or similar agreements. The Programme should also be open to other third countries provided that they have an association agreement or enter into a specific agreement covering their participation to Union programmes. [Am. 11]

(15)

Taking into account past evaluations of the Hercule programmes and in order to strengthen the Programme, the participation of legal entities established in a third country which is not associated to the Programme should be exceptionally possible without a need for those entities to bear the cost of their participation.

(15a)

In particular, the participation of entities established in countries which have an association agreement in force with the Union should be encouraged, with a view to strengthening the protection of the financial interests of the Union through cooperation relating to customs and exchange of best practices, particularly as regards ways of combating fraud, corruption and other illegal activities affecting the financial interests of the Union and as regards facing challenges relating to new technological developments. [Am. 12]

(16)

The Programme should be implemented taking into account the recommendations and measures listed in the Commission communication of 6 June 2013 entitled ‘Stepping up the fight against cigarette smuggling and other forms of illicit trade in tobacco products — A comprehensive EU Strategy’ (15), as well as the progress report on the implementation of this communication of 12 May 2017 (16).

(17)

The Union ratified the Protocol to Eliminate Illicit Trade in Tobacco Products to the World Health Organisation Framework Convention on Tobacco Control (the Protocol) in 2016. The Protocol should serve to protect the Union's financial interests insofar as it concerns the fight against cross-border illicit tobacco trade, which causes revenue losses. The Programme should support the Secretariat of the World Health Organisation Framework Convention on Tobacco Control in its functions related to the Protocol. It should also support other activities organised by the Secretariat in connection with the fight against illicit tobacco trade.

(18)

In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council (17), Council Regulation ( EC, Euratom, EC) No 2988/95 (18), Council Regulation (Euratom, EC) No 2185/96 (19) and Council Regulation (EU) 2017/1939 (20), the financial interests of the Union are to be protected through proportionate measures, including the prevention, detection, correction and investigation of irregularities, including fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions.

In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96 the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office (EPPO) may investigate and prosecute fraud and other criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council (21). In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, to grant the necessary rights and access to the Commission, OLAF, the EPPO and the European Court of Auditors and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights.

(19)

Third countries which are members of the EEA may participate in Union programmes in the framework of the cooperation established under the EEA agreement, which provides for the implementation of the programmes by a decision under that agreement. Third countries may also participate on the basis of other legal instruments. A specific provision should be introduced in this Regulation to grant the necessary rights for and access to the authorising officer responsible, OLAF as well as the European Court of Auditors to comprehensively exert their respective competences.

(20)

(21)

Pursuant to [reference to be updated as appropriate according to a new decision on OCTs: Article 94 of Council Decision 2013/755/EU (22)], persons and entities established in overseas countries and territories are eligible for funding subject to the rules and objectives of the Programme and possible arrangements applicable to the Member State to which the relevant overseas country or territory is linked.

(22)

Pursuant to paragraph 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016 (23), there is a need to evaluate this Programme on the basis of information collected through specific reporting, namely on performance, monitoring and evaluation requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the Programme on the ground. An independent evaluator should carry out the evaluation. [Am. 13]

(23)

In order to supplement this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to develop the provisions for a monitoring and evaluations framework adopt the work programmes. In addition, in order to amend this Regulation, the power to adopt acts in accordance with Article 290 of the Programme Treaty on the Functioning of the European Union should be delegated to the Commission as regards the indicators set out in Annex II to this Regulation . It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. [Am. 14]

(24)

Article 42a(1) and (2) of Regulation (EC) No 515/97 provide for the legal basis for financing AFIS. This Regulation should replace that legal basis and provide for a new one. Article 42a(1) and (2) of Regulation (EC) No 515/97 should therefore be deleted.

(25)

Regulation (EU) No 250/2014 establishing the Hercule III programme covered the period from 1 January 2014 to 31 December 2020. This Regulation provides for a follow-up to the Hercule III programme, starting from 1 January 2021. Regulation (EU) No 250/2014 should therefore be repealed,