The European Union has launched a new law enforcement agency to investigate crimes such as corruption and tax fraud. Its first order of business will be to look for fraud in how the billions of dollars in EU COVID-19 relief funds are being spent.
Launched in the wake of the pandemic, the European Public Prosecutor’s Office (EPPO) faces a unique set of circumstances related to the COVID-19 crisis. In addition to pandemic-related fraud, the office will also keep watch over the €750 billion ($913 billion) that the EU has distributed to its member countries to help them recover from the crisis.
Critics have long pointed out the challenges that the EU has faced regarding its ability to safeguard the funds that it bestows upon member countries in the form of subsidies and co-financing. The EU itself estimates that about €460 million of its €159 billion budget was lost to fraud in 2019. And the difference between expected value-added tax revenue in 2018 and the amount actually collected was €140 billion—a portion of that value comes from tax evasion.
The limits of the European Anti-Fraud Office (OLAF) might help explain why—while OLAF has been historically tasked with oversight of fraud and tax-evasion investigations, the office does not have the ability to directly prosecute in cases where they find wrongdoing. It can only make recommendations to national authorities and hope those jurisdictions take the case on.
Now, the EPPO, headed by Romanian prosecutor Laura Codruța Kövesi, will work in conjunction with OLAF and other EU institutions with greater authority to pursue cases of wrongdoing. The EPPO will be directed by officials in Luxembourg who will make the charging decisions. Among the usual suspects of corrupt politicians and organized criminal enterprises, companies that receive EU stipends or pay taxes in Europe will find themselves under the watch of the new authority.
Kövesi foresees a greater amount of efficiency in being able to identify and charge criminal activity as a result of this new agency’s mandate, citing a lack of coordination between EU investigators and the national authorities tasked with determining whether to prosecute.
“These offenses suffer sometimes from a lack of coordination, and were not always the first priority of the national authorities,” Kövesi told The Wall Street Journal. “This will be changed with EPPO because EPPO is in a unique position to have a significant impact on the fight against this type of fraud.
“Until now, I have seen that there are huge discrepancies between member-states. We have member-states that investigated five or six cases in a year. Some other member-states, in one year, they investigated hundreds of cases.”
Questions of Sovereignty
The office, which officially launched in June, will work with national authorities to determine whether it is appropriate for the EU to bring charges in cases of wrongdoing. While it is unknown currently how it will work in practice, it faces some resistance from member countries of the EU who say they’re looking to preserve their sovereignty.
Denmark, Hungary, Ireland, and Poland have all opted to stay out of the new EPPO setup, citing concerns that the increased power of the EU could disrupt the sovereignty of their nations. The movement of the EU toward increased power over criminal law remains a concern for these countries.
Sweden and Slovenia have differed from the rest of the EU in how they are electing to participate, with Sweden preparing now to join by 2022 rather than immediately. Slovenia faces its own delay because Slovenian Prime Minister Janez Janša refused to sign off on his country’s two candidates for the EPPO. This move drew criticism from Kövesi, who said at the time that the lack of cooperation from the Slovenian authorities “seriously undermines the trust in the effective functioning of the management and control systems for EU funds in Slovenia.” 
Danny Flynn is assistant editor at Compliance Chief 360°.