Clifford Chance

On 1st June 2021, the European Commission (EC) launched the European Public Prosecutor’s Office (EPPO) based in Luxembourg and marking an important milestone on the way to a deeper cooperation between EU member states concerning white-collar crime.

The foundation for the EPPO was established in the Directive (EU) 2017/1371 on the fight against fraud to the Union’s financial interests by means of criminal law (PIF Directive) which harmonises the implementation and enforcement of criminal law across twenty-two participating member states and providing common definitions, sanctions and limitation periods of criminal offences affecting the EU's financial interests.

Member states were required to transpose the PIF Directive into their national laws by 06 July 2019 and the EPPO was subsequently established by Regulation (EU) 2017/1939 of 12 October 2017 (the EPPO Regulation). EPPO is the first supranational public prosecution office in charge of conducting criminal investigations, prosecuting and bringing to judgment crimes against the EU budget, so called "PIF offences" including but not limited to offences like corruption, fraud, money laundering and misappropriation.

EPPO structure

The EPPO is funded from the EU budget and will operate on two levels. A centralised level will be led by the European Chief Prosecutor, Laura Codruța Kövesi, supported by a College of Prosecutors comprising one European Prosecutor from each of the twenty-two participating member states, whilst a decentralised level will see investigations and prosecutions conducted independently by a number of European Delegated Prosecutors (EDP's), located in each member state, prosecuting through national courts in accordance with the EPPO Regulation and any applicable national laws and procedures.

EPPO responsibilities

The EPPO is responsible for the enforcement of the PIF Directive across twenty-two participating member states and will conduct its investigations and prosecutions with full independence from the EC, other EU institutions and bodies, as well as from member states, prosecuting fraud and other crimes affecting the EU's financial interests, including:

• fraud relating to expenditures and revenues;
• fraud relating to VAT (if it involves two or more Member States and is worth at least EUR 10 million);
• money laundering of assets derived from defrauding the EU budget;
• active and passive corruption or misappropriation that affects the EU's financial interests;
• participation in a criminal organisation if the focus of its activities is to commit crimes against the EU budget.

The EPPO will also investigate and prosecute any other illegal activity that is ‘inextricably linked' to an offence against the EU budget such as corruption and money laundering. However, the EPPO Regulation does not give a clear definition of the notion of “inextricably linked offences” so it is expected that its interpretation will become a controversial legal issue.

Since 1st June 2021, EPPO started to investigate and prosecute crimes affecting the Union’s financial interests that were committed after 20 November 2017. Anyone who has reasonable grounds to suspect that a criminal offence has been committed against the financial interests of the EU, must report it to the EPPO. The ability to make a report is open to everyone, including national authorities, EU citizens, non-EU citizens, private individuals and legal entities.

Impact

It is envisaged the EPPO will have a significant impact on criminal investigations as it will operate directly across all participating member states, allowing for direct action and immediate information exchange, coordinated police investigations, fast freezing and seizure of assets and ordering of arrests across the EU.

The national authorities must inform the EPPO of any fact that may constitute an offence under EPPO's scope. Furthermore, anyone can report an offence to EPPO as long as it concerns the relevant "PIF offences". Having investigative powers, the EPPO is also able to proactively gather information from open sources and other parties or whistle-blowers.

This is a departure from the investigative approach taken by the European Anti-Fraud Office (OLAF) which was limited to conducting administrative investigations with no powers of law enforcement and was not in charge of prosecutions at the national level. However, in December 2020 new rules strengthened OLAF's role setting out how it will complement the work of the EPPO. Whilst the EPPO will only cover twenty-two member states, OLAF on the other hand, will continue to operate across the entire EU, with a wider focus that includes investigating non-criminal cases affecting the EU`s financial interests as well as serious misconduct in the European institutions. The EPPO will continue to cooperate with other EU bodies and agencies such as Eurojust and Europol and will look to establish working arrangements with national authorities in non-participating member states. Entities in non-participating member states will continue to be under OLAF's remit and be subject to its administrative investigations.

The EPPO is expected to eventually be investigating approximately 3,000 cases per year, although the EU expects that figure to rise as according to the latest Annual Report on the protection of the Union's financial interests, approximately EUR 460 million were lost due to fraudulent irregularities in 2019, so there is much work to be done. The EPPO has already commenced investigations and can actively investigate crimes dating back to November 2017 when the EPPO Regulations came into force. But only time will tell if the EPPO is successful in its objectives with the first review of the implementation and impact of the EPPO Regulation scheduled in five years.