The European Public Prosecutor’s Office: a new player in the fight against white-collar crime

December 2022  |  SPECIAL REPORT: WHITE-COLLAR CRIME

Financier Worldwide Magazine

December 2022 Issue

Companies based or conducting activity in a European Union (EU) member state must take into account the existence of a new player in the fight against white-collar crime at a European level.

With an initial caseload of 3000, the European Public Prosecutor’s Office (EPPO) became operational on 1 June 2021 as an independent prosecution office of the EU, created to protect and defend the financial interests of the bloc with the aim of increasing efficiency in detecting fraud and recovering damages.

This newly created body combines European and national law enforcement efforts, thus allowing for more expedient and direct action, particularly in cross-border cases and complex financial investigations across all participating member states.

Its ability to access all information in cases registered in participating member states allows the EPPO to further investigate and trace assets that otherwise could not be identified or would take too long to find, owing to the often cumbersome and inefficient mechanism of mutual legal assistance.

Although the EPPO was not operational until June 2021, it may exercise its competence with regard to criminal offences committed after 20 November 2017. This means that the EPPO may take over investigations which are already underway before national authorities.

Material competence

The EPPO is competent to investigate and prosecute crimes against the financial interests of the EU as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law (PIF Directive).

The PIF Directive aims to harmonise the definitions, sanctions and limitation periods of criminal offences affecting the EU’s financial interests, thus facilitating member states’ enforcement of the existing mechanisms which protect the EU’s budget.

Under articles 3 and 4 of the PIF Directive, the EPPO is competent to investigate: (i) cross-border VAT fraud resulting in total damages of at least €10m, when connected with the territory of two or more member states; (ii) other fraud affecting the EU’s financial interests; (iii) active or passive corruption that damages the EU’s financial interests; (iv) misappropriation of EU funds or assets by a public official; (v) money laundering involving property derived from these criminal offences; and (vi) organised crime, where the focus of the criminal organisation is on committing one of these offences.

The EPPO’s remit is further broadened under article 22(3) of the Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (Regulation), which extends its material scope of competence to any other criminal offence that is inextricably linked to one of the offences set out in the PIF Directive.

However, there are certain limits to the EPPO’s material competence. According to article 25(2) of the Regulation, where a criminal offence involves a damage to the financial interests of under €10,000, the EPPO may only exercise its material competence if the case has repercussions at a EU level or involves EU officials.

Territorial competence

As regards the EPPO’s territorial competence, article 26(4) of the Regulation establishes that, as a general rule, a case shall be initiated and handled by the member state where the focus of the criminal activity takes place, or, if several connected offences within the competences of the EPPO have been committed, the member state where the majority of the offences has been committed.

However, the Regulation also provides for an exception to this rule: a different member state that has jurisdiction for the case may initiate an investigation where a deviation from the previous rule is duly justified, taking into account the following criteria, in order of priority: (i) the location of the habitual residence of the person under investigation; (ii) the nationality of the person under investigation; (iii) or the place where the main financial damage has occurred.

These provisions must be interpreted in a broad manner according to recital 64 of the Regulation, which establishes that the EPPO should exercise its competence as broadly as possible so that its investigations and prosecutions may extend to offences committed outside of member states’ territory. This means that the EPPO may investigate and prosecute cases even if they were committed outside participating member states’ territory as long as a connection can be established to the financial interests of the EU.

Member states

To date, 22 out of the 27 EU member states are currently participating in the EPPO. Ireland, Sweden, Hungary, Poland and Denmark have decided not to join the EPPO so far. However, this number may increase in the coming years since it is possible for member states to join at a later stage.

Cooperation with non-participating member states and third countries

A question that still remains to be answered is how the EPPO will interact with the competent prosecuting authorities of non-participating EU member states and third countries. Although still at an early stage, working arrangements are being established with the five non-participating EU member states to define how the EPPO will cooperate with them, and a working arrangement has already been signed with Hungary.

Moreover, the EPPO has established working arrangements to facilitate cooperation with the relevant authorities of third countries, such as Ukraine and Montenegro. Most notably, on 26 July 2022 the EPPO signed a working arrangement with the US Department of Justice (DOJ) and the US Department of Homeland Security to share information and evidence and facilitate cooperation in investigations and prosecutions relating to criminal offences within their respective competences.

With regard to the UK, the relationship between the EPPO and UK authorities has yet to be determined. In a letter dated 15 April 2021, the minister for future borders and immigration stated that the UK will treat any mutual legal assistance requests from the EPPO on a case by case basis, as with requests from any other relevant competent authorities.

The EPPO has also signed working arrangements with other European institutions to ensure a swifter and smoother exchange of information in the fight to protect the EU’s financial interests, such as the European Commission (EC), Eurojust, Europol, the European Anti-Fraud Office (OLAF), the European Court of Auditors, the European Investment Bank and the European Investment Fund.

A look at the EPPO’s future

According to the EPPO Annual Report 2021, the EPPO investigated €5.4bn worth of losses to the EU budget in its first seven months of activity. In its first year of operations, the EPPO has registered and analysed more than 400 crime reports from participating EU member states and private parties, opened over 900 investigations, made 28 indictments, leading to four convictions, and granted freezing orders amounting to €259m as of June 2022.

One of the most notable cases so far includes a cross-border VAT evasion scheme which resulted in a €23m tax loss and led to the conviction of three individuals by a German court in May 2022. In the framework of the investigation, enforcement authorities carried out searches, arrests and seizures worth €23m in the Czech Republic, Romania and Slovakia. On 14 October 2020, the EPPO announced that it had opened an investigation into the acquisition of coronavirus (COVID-19) vaccines in the EU.

Based on these numbers, it looks like the EPPO will become a key player in the EU’s fight against transnational crime, likely increasing its caseload in the years to come as it starts to operate at full capacity. Nonetheless, as a new actor, the EPPO will undoubtedly face numerous challenges, particularly from non-participating member states and third countries reluctant to forgo their jurisdiction and, especially, in the framework of cross-border investigations.

 

Edurne Álvarez is an associate at Pérez-Llorca. She can be contacted on +34 91 423 7039 or by email: ealvarez@perezllorca.com.

© Financier Worldwide

BY

Edurne Álvarez

Pérez-Llorca

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