Criminal-law protection of the EU's financial interests

European Union policies are financed by the Community budget. Fraud affecting the Community's financial interests is a major risk. Those interests need, therefore, to be effectively protected. The Commission has put forward a proposal for a Directive on the criminal-law protection of the Community's financial interests that is aimed at aligning national criminal laws.

PROPOSAL

Proposal for a Directive of the European Parliament and of the Council on the criminal-law protection of the Community's financial interests [Official Journal C 240 E of 28.08.2001].

Amended proposal for a Directive of the European Parliament and of the Council on the criminal-law protection of the Community's financial interests [COM(2002) 577 final - Official Journal C 71 E of 25.03.03].

SUMMARY

The Community institutions and the Member States acknowledge the importance of effective protection for the Community's financial interests. In order to combat fraud and other illegal activities affecting those interests, the Member States signed the Convention of 26 July 1995 on the protection of the European Communities' financial interests and several additional protocols which provide for measures aimed in particular at aligning national criminal laws. As these instruments have still not been ratified by all the Member States, the Commission has presented a proposal for a Directive on the basis of new Article 280 of the EC Treaty introduced by the Amsterdam Treaty, which incorporates a large proportion of their provisions.

After first defining certain key terms such as Community official, national official and legal person, the proposal requires Member States to make fraud, corruption and money laundering affecting the financial interests of the Community a criminal offence in their national law.

Fraud involving expenditure as well as revenue

Fraud affecting the Community's financial interests can involve expenditure as well as revenue. Fraud can consist of any intentional act or omission relating to:

• the use or presentation of false, incorrect or incomplete statements or documents;
• non-disclosure of information in violation of a specific obligation;
• the misuse of such funds for purposes other than those for which they were originally granted.

The acts in question must have the effect of reducing the resources of the Community budget or retaining Community funds. Member States may fix the minimum amount in order to define serious fraud. The minimum amount may not, in any event, be more than EUR 50 000.

Active and passive corruption

Passive corruption consists of the deliberate act on the part of an official of requesting or receiving advantages or accepting a promise of such an advantage as inducement to breach their official obligations and carry out or refrain from carrying out an official duty or an act in the course of their official duties in a way that damages or is likely to damage the Community's financial interests. Active corruption is the deliberate act of promising or giving an advantage of any kind to officials as inducement for them to breach their official obligations and carry out or refrain from carrying out an official duty or an act in the course of their official duties in a way that damages or is likely to damage the Community's financial interests.

In accordance with the principle of equal treatment, Member States must guarantee that acts of fraud and corruption committed by Community officials are treated in the same way as those committed by their national officials.

Money laundering

Money laundering includes acts committed deliberately in order to:

• convert or transfer property derived from criminal activity;
• conceal the source, true nature or location of goods derived from criminal activity as well as the acquisition, possession or use of the above-mentioned property.The deliberate nature of the unlawful conduct must be established on the basis of objective factual circumstances.

Criminal liability and penalties within the Union

Member States are to take the necessary measures to allow persons having power to take decisions or exercise control within a business to be declared criminally liable. They will also have to define the liability of bodies corporate as well as the criminal liability of natural persons committing, instigating or being an accessory to the unlawful act. Member States will have to provide for penalties on bodies corporate such as disqualification from engaging in business activities or placing under judicial supervision.

Member States are to take the necessary measures to impose criminal penalties for the conduct referred to above (fraud, corruption, money laundering) as well as for conduct as an accessory or instigator and, with the exception of corruption, the attempted commission of such acts. In cases of serious fraud, they must provide for custodial sentences. In the case of minor fraud (involving a total of less than 4 000), they may provide for penalties other than criminal penalties.

Member States must take the necessary measures to enable the instruments and proceeds of the unlawful conduct covered by the proposal to be seized in accordance with national law.

Final provisions

The Member States must ensure that the Commission is able to provide all the technical and operational assistance required to facilitate the coordination of investigations undertaken by the relevant national authorities.

Member States will be free to adopt or maintain more stringent provisions in order to provide effective protection for the financial interests of the Community.

Last updated: 09.03.2005