Every Euro Counts ... and So Does Every Second

• Date: 10 October 2022
• Year: 2022
• Author: Nicholas Franssen
• Pages: 44
• DOI: https://doi.org/10.30709/eucrim-2022-014

I. Introduction

The European Public Prosecutor’s Office (EPPO), a relatively new European body that started its operational activities on 1 June 2021, has mainly been set up to address a law enforcement gap, certainly one perceived strongly by the European Commission and OLAF,¹ in relation to the protection of the financial interests of the EU. Members of the current European Commission, such as Vice-President for Values and Transparency, Věra Jourová,² and Commissioner for Justice, Didier Reynders,³ as well as former Vice-President Viviane Reding of the previous Commission,⁴ have, on various occasions, highlighted the need for perpetrators of EU fraud to be brought to justice. Moreover, and equally importantly, the principle that every single euro in the EU budget be well spent and respectively received as a contribution to that budget in the first place, is paramount. Its importance was again recently emphasized by Commissioner for Budget and Administration Johannes Hahn.⁵ The same principle is also supported by the European Parliament.⁶ Furthermore, the Commissioners have underlined that if, for some reason, perhaps inherent to the criminogenic nature of the system of EU subsidies,⁷ perpetrators were to use these funds for less legitimate purposes, the money involved should then somehow be fully recovered, if need be with the assistance of the EPPO. It goes without saying that this principle equally applies to fraud cases related to other financial interests of the Union, for instance relating to its traditional own resources.⁸ Particularly where recovery through administrative means may have proven impossible to achieve, the EPPO could act as an instance of last resort. Laura Codruţa Kövesi, the European Chief Prosecutor, highlighted the important role the EPPO fulfills in this respect in a recent interview with Die Presse.⁹ As a matter of fact, the EPPO College has recently adopted a decision to establish the Asset Recovery and Money Laundering Advisory Board in order to underline that an effective and harmonised asset recovery approach is of critical importance to the EPPO.¹⁰ The acute awareness of the need to effectively tackle EU fraud has increased strongly following approval of the new multi-annual financial framework (MFF) 2021-2027 and of the Recovery and Resilience Facility by the European Council in July 2021.¹¹ The staggering amounts¹² involved would make it naïve if not foolish to do anything other than step up the efforts in this field. Europol,¹³ OLAF,¹⁴ and the European Court of Auditors¹⁵ have all publicly drawn attention to the considerable risks of fraud at stake.

According to the EPPO’s first annual report covering the first seven months of its operation:¹⁶

“81 recovery actions took place in 12 of the participating Member States (Italy, Belgium, Germany, Romania, Czechia, Croatia, Finland, Latvia, Luxembourg, Spain, Lithuania, Portugal). In total, the EPPO requested more than €154 million to be seized, and the seizure of more than €147 million was granted. This represents over three times the budget of the EPPO in 2021.”

The annual report does not specify quite how much of the aforementioned amounts were actually related to cross-border investigations but, given the nature of complex EU fraud schemes, particularly VAT fraud, one may very well assume that a considerable percentage is concerned. Again, quoting from the EPPO’s annual report on 2021:¹⁷

“[T]he first seven months of operations also amply demonstrated that the EPPO brings a decisive advantage to law enforcement in cross-border investigations. Without cumbersome mutual legal assistance formalities, organising coordinated searches or arrests across borders has been a matter of weeks, instead of months. Unprecedented access to operational information through its Case Management System allowed the EPPO to establish connections between different investigations (and subsequently merge them), to identify more evidence to be secured and assets to be seized. In the first seven months, European Delegated Prosecutors assigned altogether 290 assisting measures to each other.”

Evidently, the idea behind the ambition to ensure that every euro counts closely follows the old adage that crime does not pay,¹⁸ or, perhaps better put from a policy perspective: crime should not pay, which is particularly appropriate in this context, given the fact that the average taxpayer would indeed expect that all money from the EU budget is in fact correctly spent. Whether criminals are actually deterred by an active confiscation and asset recovery policy has yet to be empirically established, though.¹⁹ For many years now, OLAF has been unable to indicate to what extent its financial recommendations to Directorates-General in the Commission, to national authorities, and to other stakeholders have actually led to the money involved being fully recovered. OLAF is still trying to gain a better picture, which begs the question of how effective the recovery efforts are, a concern also expressed by the European Court of Auditors back in 2019.²⁰ Assuming, though, for the sake of argument, that an effective recovery policy does actually deter criminals, conventional wisdom in the law enforcement community²¹ tends to be: the sooner the goods or property of suspects are seized, the more likely that (following their final conviction) the authorities can actually recover the perpetrators’ illicit gains.²² This approach is considered to be preferable to, for example, starting a potentially fruitless post-conviction search, using lengthy and cumbersome mutual legal assistance procedures, in order to locate proceeds of crime in an exotic location perhaps best known for its facilities to launder money or to locate them online in the impenetrable domain of servers in obscure locations. Worse still, all the proceeds of crime may already have been spent by that point in time. In her critical analysis of EU cross-border financial asset recovery policy, Ariadna Helena Ochnio therefore rightly points to the importance of securing continuity throughout the entire process preceding actual recovery, which necessarily starts with the timely identification of assets and freezing them so as to avoid their concealment.²³ After all, if carried out properly as part of the investigation before trial and conviction, this will make the actual execution much easier and ultimately more effective.

In this article, I will explore the legal framework for cross-border cooperation in relation to freezing and seizing under the auspices of the EPPO. I will argue that a number of lacunae may give rise to problems in practice and could perhaps best be solved by applying relevant existing EU instruments on cross-border seizure and freezing by analogy. In so doing, I will also list several issues that need to be addressed by the EU legislator following the evaluation of Regulation 2017/1939 as foreseen under Art. 119 of said Regulation. Although it is slightly tempting to do so, this article will neither endeavour to discuss cross-border cooperation in this field between the EPPO and non-participating Member States or between the EPPO and third countries²⁴ nor will it deal with confiscation following a conviction, this being a task that lies outside the mandate of the EPPO and is thus left to national authorities.²⁵

II. Legal Framework for Cross-Border Investigations in the EPPO Regulation

Regulation 2017/1939 does not contain a specific provision on the mechanism for cross-border seizing or freezing within the realm of the 22 Member States participating in the EPPO. It does have a more general provision on cross-border cooperation within the EPPO, be it that this provision is closely linked to the previous article in the Regulation on investigation and other measures. That general provision is Art. 31, the first two paragraphs of which read as follows:

Article 31 Cross-border investigations

1. The European Delegated Prosecutors shall act in close cooperation by assisting and regularly consulting each other in cross-border cases. Where a measure needs to be undertaken in a Member State other than the Member State of the handling European Delegated Prosecutor, the latter European Delegated Prosecutor shall decide on the adoption of the necessary measure and assign it to a European Delegated Prosecutor located in the Member State where the measure needs to be carried out.

2. The handling European Delegated Prosecutor may assign any measures, which are available to him/her in accordance with Article 30. The justification and adoption of such measures shall be governed by the law of the Member States of the handling European Delegated Prosecutor. Where the handling European Delegated Prosecutor assigns an investigation measure to one or several European Delegated Prosecutors from another Member State, he/she shall at the same time inform his supervising European Prosecutor.

The first sentence of Art. 31(2) refers to Art. 30 of Regulation 2017/1939 and thus creates a point of entry to bring freezing measures under the arrangement of cross-border cooperation within Art. 31 of the Regulation:

Article 30 Investigation measures and other measures

1. At least in cases where the offence subject to the investigation is punishable by a maximum penalty of at least 4 years of imprisonment, Member States shall ensure that the European Delegated Prosecutors are entitled to order or request the following investigation measures: (….)

(d) freeze instrumentalities or proceeds of crime, including assets, that are expected to be subject to confiscation by the trial court, where there is reason to believe that the owner, possessor or controller of those instrumentalities or proceeds will seek to frustrate the judgement ordering confiscation.

Interestingly, Art. 30(1)(d) does not explicitly mention seizure as one of the measures European Delegated Prosecutors are authorised to order or request...