Changes from report parliamentary committee draft to plenary report

Added11. Notes that the number of cases of fraud and irregularities reported by the competent EU and national authorities – 12 455 in total – slightly increased in 2022 compared to 2021; observes that the affected financing related to these cases in 2022 decreased to EUR 1.77 billion (from EUR 2.05 billion in 2021); believes that these numbers are still extremely high and represent a significant loss for the EU budget;

12. Is aware that the year-to-year comparison of the reporting of irregularities does not always offer a reliable analysis of trends and patterns because of the multiannual cycle of implementation of numerous programmes; considers that the comparison with a five-year average is more suitable for identifying real-time situations; appreciates in this context that, in the PIF Report 2022, reference is frequently made to the results of the 2018-2021 period;

Change 11

Removed9. Believes that involvement of civil society and the private sector in the efforts to combat fraud would enhance prevention and detection, and that this implies support to confidential channels and/or whistleblowers and investigative journalists, and that the latter can be effective insofar as access is given to information on projects, beneficiaries and payments;

Added13. Believes that involvement of civil society in tackling fraud is crucial to enhance prevention and detection, and that this implies support to investigative journalism which can be effective insofar as it is given easy and adequate access to information on projects, beneficiaries and payments; stresses, in particular, the important role played by the media and investigative journalists in the fight against corruption; reiterates that enhanced and consistent levels of protection for journalists and whistleblowers across the Union helps to counter the spread of a subculture of impunity, silence and conspiracy; notes, having regard to media pluralism and media freedom, that the most recent results of the Media Pluralism Monitor (MPM 2022) registered a slight deterioration of the indicator relating to the protection of journalists and that news media concentration retains a very high risk level across the continent; takes the view that safeguarding the media from political pressure and influence, as well as guaranteeing the right of access to information held by public authorities, are essential to protect the media’s independence, its role of the watchdog of democracy and the sound management of resources;

Change 12

Changed10.14. Welcomes the joint communication from the Commission and the High Representative of the Union for Foreign Affairs and Security Policy of 3 May 2023 on the fight against corruption (JOIN(2023)0012), acknowledging the seriousness of corruption, as it undermines the efficiency of public spending, the effectiveness of the single market and the sustainability of economic growth; points out that the fight against corruption is one of the most important commitments of the Union, on a par with transparency and integrity; stresses that the phenomenon of nepotism with regard to state-owned entities and procurement for EU funds also poses a great risk to sound management and the EU’s financial interests; welcomes, therefore, the new proposal for a directive on combating corruption;

15. Is concerned about the fact that it is difficult to estimate the extent to which organised crime is benefiting illegally from the EU’s finances with any great precision; maintains that a common approach to assess the impact of organised crime on EU funds and to evaluate the effectiveness of the measures taken to tackle the problem is needed across the Member States; calls on the Commission to swiftly launch all necessary actions to pursue this harmonisation;

Change 13

Removed12. Maintains that the lack of efficient transposition of national legislation in many Member States offers opportunities to organised crime for a number of illegal cross-border activities in areas affecting the Union’s financial interests; reiterates, therefore, its previous calls for the revision of Council Framework Decision 2008/841/JHA on the fight against organised crime;

Added16. Highlights the importance of an impact assessment which evaluates the economic and social impact of fraud on the EU’s financial interests and on its citizens; calls for an analysis of how the resources allocated for fraud prevention compare to the potential losses prevented;

Removed13. Observes that the EU Strategy to tackle Organised Crime 2021-2025 aims to set out the tools and measures to disrupt the business models and structures of criminal organisations across borders, both online and offline; calls on the Member States to contribute on the Commission’s efforts and to establish regional cooperation networks for sharing information on cases and strategies to combat fraud perpetrated by organised criminals; recalls, in this regard, the importance of the proposed new Directive on Asset Recovery and Confiscation whose effective implementation would provide authorities with better tools to deprive organised crime groups of the financial means to carry out further criminal activities;

Added17. Maintains that the lack of efficient transposition of national legislation in many Member States and the lack of harmonisation of national legislation offer opportunities to organised crime for a number of illegal cross-border activities in areas affecting the Union’s financial interests; reiterates, therefore, its previous calls for the revision of Council Framework Decision 2008/841/JHA on the fight against organised crime and for the introduction of a new common definition of organised crime, taking into account, in particular, the use of corruption, violence, threats or intimidation to obtain control of economic activities or procurement;

Added18. Observes that the EU Strategy to tackle Organised Crime 2021-2025 aims to set out the tools and measures to disrupt the business models and structures of criminal organisations across borders, both online and offline; calls on the Member States to contribute on the Commission’s efforts and to establish regional cooperation networks for sharing information on cases and strategies to combat fraud perpetrated by organised criminals; recalls, in this regard, the importance of the proposed new Directive on Asset Recovery and Confiscation whose effective implementation would provide authorities with better tools to deprive organised crime groups of the financial means to carry out further criminal activities; recalls, furthermore, that in the fight against cross-border organised crime, the exchange of best practices and development of common and coordinated strategies are pivotal;

19. Points out that in relation to corruption cases, the EPPO reported 87 investigated offences at the end of 2022 (compared to 40 cases investigated in the first seven months of operational activities in 2021); remarks that in the Irregularity Management System (IMS), from 2018-2022, 30 cases were reported by 10 Member States, 5 relating to agriculture, 22 to cohesion and 3 to pre-accession with an overall financial impact estimated at about EUR 50 million;

20. Stresses once again that corruption, particularly high-level corruption, including in EU institutions, is a particularly serious crime with the potential to extend across borders, affecting the Union’s financial interests and the EU economy as a whole, and undermining citizens’ trust in democratic institutions in the EU and in the Member States; reiterates that within the EU institutions there must be a zero-tolerance policy towards corruption; supports mainstreaming anti-corruption into EU policy design;

Change 14

Removed16. Welcomes the fact that the Commission has included a specific section on anti-corruption in its report on the rule of law in order to provide an in-depth comparative analysis of the approaches, procedures and tools used by the Member States in their fight against corruption and to help to assess which areas are most at risk;

Added21. Is concerned about the reports that OLAF’s investigation into corruption and conflicts of interest concerning Member of the European Parliament has been obstructed by the lack of access to their offices and work devices; calls on its President to grant OLAF access to the premises and all of the necessary information required for the sake of investigations;

Removed17. Observes that, via IMS, in the period 2018-2022, 375 cases related to conflicts of interest were reported, which is often detected in environments similar to those where corrupt practices occur; underlines that the large majority of reported cases of conflicts of interest are linked to the implementation of cohesion policies (86 % compared to 9 % for agriculture and 5 % for pre-accession), involving almost EUR 117 million overall for this period; underlines that the reported conflicts of interest mainly point to relations between recipients of the funds and their contractors and sub-contractors, while only 7 % of cases refer to conflicts of interest during the stage of awarding and/or evaluating projects, thereby involving members of evaluation committees;

Added22. Points out that the EPPO has an ongoing investigation into the acquisition of COVID-19 vaccines by the Commission;

Removed18. Believes that this could be an indicator of the positive impact and deterrent effect of the amendments to the financial rules, which have been made applicable to all national authorities handling EU funds, together with the fact that one third of the cases were detected through sources external to the management and control system, including whistleblowers and investigative journalists, which suggests an adequate level of transparency and accessibility and contributions from civil society;

Added23. Stresses the obligation of every EU institution, Member State and public or private recipient of Union funds to disclose all relevant documents, including information on the preliminary negotiations conducted by the Commission, upon an official request of the ECA as part of an ongoing audit; recalls Parliament’s recommendation, in its 2020 discharge resolution (Section III – Commission), related to access to the text messages exchanged with a pharmaceutical company regarding the purchase of a COVID-19 vaccine;

Removed19. Is also aware that the overall occurrence of cases of conflicts of interest is higher than reported in the IMS, as indicated by the additional information received by the Commission’s Directorates-General for Regional and Urban Policy and for Employment, Social Affairs and Inclusion about conflict of interest cases and related recoveries in public procurement in the European Social Fund, Cohesion Fund and European Regional Development Fund, reported directly from the Member States via the EU’s fund management system (known as the SFC, which in 2014-2020 presented 31 additional cases related to 16 programmes in 11 Member States with an impact of EUR 3.4 million);

Added24. Highlights that the zero-tolerance policy towards corruption must be mainstreamed and properly communicated in the context of the European elections, to increase voter turnout and citizens’ trust in public institutions;

Added25. Welcomes the fact that the Commission has included a specific section on anti-corruption in its annual report on the rule of law in order to provide an in-depth comparative analysis of the approaches, procedures and tools used by the Member States in their fight against corruption and to help to assess which areas are most at risk; asks the Commission to always include recommendations and follow-up observations for Member States for all sections of the rule of law report; reiterates the importance of fully addressing country-specific recommendations relating to corruption; calls on the Member States to take into account the findings of the the rule of law report when developing their anti-corruption policies; calls on the Commission to intervene and support the Member States in addressing structural challenges regarding their anti-corruption capacity;

Added26. Points out that the 2022 Eurobarometer surveys on corruption show that corruption remains a serious concern for EU citizens and businesses in the EU, with a large part of European citizens believing that corruption is widespread in their country (68 %) and that the level of corruption has increased (41 %); appreciates that almost all Member States currently have anti-corruption strategies in place, which are regularly evaluated and revised, and recalls that not only a robust legal framework but also effective implementation are needed to eradicate corruptive practices and that preventing such practices also requires transparent and accountable governance and integrity frameworks; welcomes, in this context, the anti-corruption proposals presented by the Commission, which follow the calls from Parliament to step up the fight against corruption; notes that the Commission intends to integrate the prevention of corruption into the design of EU policies and programmes, and to actively support Member States’ efforts to put in place strong anti-corruption policies and legislation; commends the will to tackle the cross-border dimension of corruption by criminalising corruption offences and harmonising penalties across the EU in coordination with the High Representative’s proposal to establish a dedicated common foreign and security policy sanctions regime in order to target serious acts of corruption worldwide;

Added27. Emphasises that corruption and money laundering are intrinsically linked, and that money laundering is one of the most important enablers of organised crime’s illegal activities by which criminals transfer the proceeds of their crime into the legal economy, and is aware that fraud against the EU budget may also be a predicate offence precursor to money laundering; stresses that the transnational dimension of these crimes makes them difficult to prevent, detect and counter as a result of heterogeneous legal systems; welcomes the progress on the establishment of the new Anti-Money Laundering Authority, following the proposal from the Commission in July 2021, the political agreement achieved in Council on 29 June 2022 and its position agreed on 7 December 2022 on the single rulebook, and the mandate to enter trilogues granted by Parliament’s Plenary on 17 April 2023; regrets that the authority will not be fully operational until 2026;

Added28. Observes that, via IMS, in the period 2018-2022, 375 cases related to conflicts of interest were reported, which can also be detected in environments similar to those where corrupt practices occur; underlines that the large majority of reported cases of conflicts of interest are linked to the implementation of cohesion policies (86 % compared to 9 % for agriculture and 5 % for pre-accession), involving almost EUR 117 million overall for this period; underlines that the reported conflicts of interest mainly point to relations between recipients of the funds and their contractors and sub-contractors, while only 7 % of cases refer to conflicts of interest during the stage of awarding and/or evaluating projects, thereby involving members of evaluation committees;

Added29. Believes that this could be an indicator of the positive impact and deterrent effect of the amendments to the financial rules, which have been made applicable to all national authorities handling EU funds, together with the fact that one third of the cases were detected through sources external to the management and control system, including whistleblowers and investigative journalists, which suggests a basic level of transparency and accessibility and contributions from civil society;

Added30. Notes also with concern that the overall occurrence of cases of conflicts of interest is higher than reported in the IMS, as suggested by the additional information received by the Commission’s Directorates-General for Regional and Urban Policy and for Employment, Social Affairs and Inclusion about conflict of interest cases and related recoveries in public procurement in the European Social Fund, Cohesion Fund and European Regional Development Fund, reported directly from the Member States via the EU’s fund management system (known as the SFC, which in 2014-2020 presented 31 cases related to 16 programmes in 11 Member States with an impact of EUR 3.4 million);

Added31. Reiterates its call to make the annual PIF report more holistic, in order to provide a comprehensive overview of the synergies between all relevant actors, identify best practices and address shortcomings; welcomes, in this regard, the inclusion in the PIF Report 2022 of findings from the EPPO and OLAF annual reports; calls for the further improvement of this holistic approach, aiming at providing a clearer, more complete and more concrete picture of the overall state of play of the protection of the Union’s financial interests, encompassing the entirety of anti-fraud action, both at national and EU level;

Added32. Calls for the provisions on conflicts of interest to be applied in a way that ensures legal certainty, to be based on a clear and proportionate assessment of the risks and allow a practical application by the competent authorities; calls for the Commission guidelines to provide clarity to applicants and decision-making bodies, to avoid unnecessary administrative burdens and to respect the principle of proportionality;

Revenue

Change 15

Changed20.33. Observes that, in 2022, the overall number of fraudulent and not fraudulent irregularities related to Traditional Own Resources (TOR) (4 661) was 7.6 % higher compared to the five-year average (2018-2022); notes with concern that the overall amounts affected by such irregularities, as estimated and established by Member States, also noticeably increased (by 47 %, reaching EUR 783 million); highlights, on the same issue, that the overall recovery rate in 2022 for both fraudulent and non-fraudulent cases was only 48 % (compared with 54 % in 2021) and that the figure for fraudulent cases was only 25 %, which was distributed across Member States very heterogeneously; asks the Commission to put greater efforts into the swift recovery of abused funds;

34. Points out that, in 2022, for only 19 new write-off reports submitted to the Commission by six Member States, the Commission considered that it had been satisfactorily demonstrated that TOR had been lost for reasons not imputable to the Member States in question and that they were not financially responsible for the loss, while in 82 cases amounting to almost EUR 39 million, the Commission considered that the Member States had not satisfactorily demonstrated that TOR had been lost for reasons not imputable to them and they were kept financially responsible for the loss (the Commission assessed 135 cases totalling EUR 76.8 million in 2022); encourages the Commission to retain this effective mechanism of revising the write-off cases in order to foster the effectiveness of national administrations’ recovery actions;

35. Notes that, again in 2022, inspections by anti-fraud services and post-release controls were the most successful detection tools for fraudulent and non-fraudulent irregularities, respectively, combined, increasingly, with tax audits and release controls; stresses that in 2022, smuggling, incorrect value and incorrect classification and misdescription of goods were the main modi operandi in fraudulent cases, with a particular increase in reported cases of cigarette smuggling;

Change 16

Added36. Welcomes OLAF’s role in detecting and investigating fraud against the EU’s TOR; takes note of a slight decrease in the number of open investigations in the field of own resources in 2022 and calls on the Commission to ensure that OLAF is provided with adequate resources to fully and effectively exercise its mandate;

▸4 unchanged paragraphs

37. Notes that, in monetary terms, China remained the major country of origin of goods affected by irregularities, the United States and Vietnam being second and third, and that textiles and footwear were the goods most affected, in terms of both the number and the value of the cases detected and reported;

38. Reiterates its call to mitigate the VAT gap by addressing the lack of resources, the limited digital efficiency in tax administrations and the legislative loopholes which limit the efficacy of the measures to counter tax evasion and tax avoidance; recalls that strengthening administrative cooperation is the most effective way to counter cross-border VAT fraud;

39. Highlights that the EPPO has the competence to investigate serious offences against the common VAT system, connected with the territory of two or more Member States and involving total damage of at least EUR 10 million; is concerned about the data reported in the EPPO annual report for 2022, indicating that 16.5 % of its active investigations (185) were linked to VAT fraud, but that these account for 47 % of the estimated damage (EUR 6.7 billion);

40. Welcomes the Commission’s second report, published on 16 September 2022, on the implementation of the PIF Directive (COM(2022)0466), but regrets the fact that the Commission refrained from intervening on the revision of the threshold of EUR 10 million, which has a major impact on the EPPO’s activities in VAT fraud cases; stresses that the recurrent and still pending questions on the different interpretations of the methods applied to calculate the threshold (whether the damage occurring in several Member States should be aggregated, whether the countries included in the calculation should be confined to those participating in the EPPO) make the situation unclear; strongly believes that the current threshold limits dissuasiveness, allows perpetrators to seek out the weakest jurisdiction to evade the EPPO and has a detrimental effect on investigations, as the national authorities often do not have a full picture of the magnitude of the criminal activities at the initial stage of the investigation; calls on the Commission to reconsider its position in the next PIF Directive transposition report and remove the threshold, or substantially lower it, while in the meantime providing adequate guidance on the calculation method;

Change 17

Added41. Underlines that effective cooperation between OLAF and the EPPO is a prerequisite for the sound management and protection of the financial interests of the EU budget, both on the expenditure and the revenue side; considers, in this context, that such strengthened cooperation can lead, on the revenue side, to an increase in the collection of revenue to the EU budget, thereby decreasing the GNI-based contribution of Member States, and on the expenditure side, to ensure that taxpayers’ money is adequately spent;

Added42. Stresses the importance that OLAF and the EPPO should maintain operational independence;

Added43. Welcomes the statement of the President of the Commission Ursula von der Leyen that the EU needs to safeguard money being spent according to the purpose intended for it and in line with the rule of law principles, and to ensure that funds are protected;

Expenditure

44. Observes that the number of fraudulent and non-fraudulent irregularities reported as affecting the rural development implementing actions increased in the period 2018-2022, mainly owing to the increased detection rate in respect of actions within the programming period 2014-2022; points out, however, that the number of fraudulent cases detected and reported is still lower than expected, and that this calls for increased monitoring of the situation;

Change 18

Changed28.45. Remarks that even if in 2022 the fraudulent irregularities reported under support to agriculture increased in comparison with 2021, the detection rates for rural development were noticeably higher than for support to agriculture; notes that within support to agriculture, the highest level of fraud was reported forby marketthe measuresMember andStates thatfor market measures; several complex cases related to the promotion of agricultural products were also investigated by OLAF;

Change 19

Changed29.46. Regrets that during the period 2018-2022, in both rural development and direct payments, the contributions to the detection of fraudulent cases provided by risk analysis, whistleblowers, informants and investigative journalists has been very limited; is also concerned about the length of the administrative procedures opened to deal with the fraudulent cases reported, which, on average and during 2014-2022, required nearly four years from the start of the irregularity to arrive at a suspicion of fraudulent activity, and nearly three more years to close the case after reporting it to the Commission; points out that, for cohesion, it took about a year and a half to arrive at a suspicion that a fraudulent irregularity had been committed and more than two years to close the fraudulent case after reporting it to the Commission; asks the Commission to provide recommendations and to follow-up more frequently with the Member States’ authorities to reduce the length of administrative procedures;

▸4 unchanged paragraphs

47. Notes that the greatest number of irregularities reported in 2022, both fraudulent and non-fraudulent, affected the European Regional Development Fund (ERDF, for respectively 59 % and 67 %) and, to a minor extent, the European Social Fund (ESF, for respectively 27 % and 20 %); points out that the areas most at risk are transport and environmental protection, owing to the large amounts of money affected by the misconduct, and Research, Technological Development and Innovation (RTD&I), where the recurrence of fraudulent irregularities is the highest;

48. Is concerned about the fact that in 2022 the number of reported irregularities affecting the Instrument for Pre-Accession (IPA) peaked, and is aware that the cases concern the 2007-2013 Instrument for Pre-Accession Assistance I (IPA I) and 2014-2020 Instrument for Pre-Accession Assistance II (IPA II); calls on the Commission to build on the lessons learnt in relation to these instruments to fraud-proof the future actions and initiatives with identical or similar goals, such as in the case of Ukraine, which is expected to receive very relevant resources from IPA and Horizon Europe, and where the correct deployment of resources, even in very difficult conditions, is paramount for the efficacy and effectiveness of the accession process;

49. Emphasises that in the area of cohesion policy, the number and financial amounts of the non-fraudulent irregularities that had been reported during the first nine years of the programming period 2007-2013 were much higher than those being reported during the programming period 2014-2020 and that this trend concerns all funds and most of the Member States;

50. Observes that for cohesion policy, the most frequent type of fraudulent violation reported in the IMS concerns the supporting documents (incorrect, missing, false or falsified), while for non-fraudulent irregularities, the infringement of public procurement rules is the most reported;

Change 20

Removed34. Notes that, in 2022, the recovery items registered for irregularities were 770 (compared to 879 in 2021), of which 37 were for fraudulent cases (compared to 54 reported as fraudulent in 2021) amounting to EUR 61.28 million (of which EUR 5.67 million were for fraud, compared to EUR 7.04 million in 2021);

Added51. Notes with concern the findings of the ECA 2022 annual report on the implementation of the EU budget for the 2022 financial year, which show that despite improvements, audit authorities continue to address the risk of fraud insufficiently, and that Member State authorities do not report suspected fraud cases in the IMS as required; calls on these issues to be urgently addressed by the Commission;

Added52. Notes that, in 2022, the recovery items registered for irregularities in direct management were 770 (compared to 879 in 2021), of which 37 were for fraudulent cases (compared to 54 reported as fraudulent in 2021) amounting to EUR 61.28 million (of which EUR 5.67 million were for fraud, compared to EUR 7.04 million in 2021);

53. Observes that, overall, for direct management, the detected fraudulent irregularities have remained stable over the 2018-2022 period; appreciates that, for direct management in the period 2018-2022, OLAF is indicated as the source of detection for 88 % of the recovery items linked to irregularities reported as fraudulent, corresponding to 92 % of the total recovery amounts; observes that about 97 % of the irregularities not reported as fraud were detected through Commission controls;

Change 21

Changed36.54. NotesIs concerned that, between 2018 and 2022, average recovery remainslevels atwere positivestill levels,low, with an average recovery rate of 56 % (resulting from 34 % for ‘irregularities reported as fraudulent’ and 59 % for ‘irregularities not reported as fraudulent’); asks the Commission to put greater efforts into the swift recovery of abused funds;

Change 22

Added55. Reiterates once more its call on the Commission to submit a legislative proposal on mutual administrative assistance in the areas of EU funds spending that do not provide for this practice so far, in order to ensure a cross-cutting approach to the protection of the Union’s financial interests;

NextGenerationEU (NGEU) and the Recovery and Resilience Facility (RRF)

Change 23

Changed37.56. IsRecalls awarethat, thatowing to the implementationspecific design of the RRFRRF, isMember reachingStates itstogether peakwith andthe Commission should ensure that the regulation governingfinancial itsinterests deploymentof requiresthe MemberUnion Statesare toeffectively putprotected, in placeline effectivewith andtheir efficientrespective controlresponsibilities; systems,underlines withthat athe viewMember toStates’ protectingcontrol thesystems Union’smust financialensure intereststhat andRRF-funded ensuringinvestment complianceprojects comply with EU and national rules; pointsrecalls outthat that,the inCommission particular,and the counteringMember ofStates fraud,must corruption,prevent conflictsany ofaccountability interestgap (definedat asEU ‘seriouslevel irregularities’)and, andif doublenecessary, fundingput shouldin receiveplace appropriateadditional resourcessafeguards andto attention;address this issue, in line with the relevant recommendations of the ECA;

Change 24

Added57. Is aware that the implementation of the RRF is reaching its peak and that the regulation governing its deployment requires Member States to put in place effective and efficient control systems, with a view to protecting the Union’s financial interests and ensuring compliance with EU and national rules;

58. Observes that the Commission assessed these control systems prior to the approval of the plans, and subsequently, in 2022, carried out 16 system audits targeting the protection of the EU’s financial interests, covering the coordination and implementing bodies, such as ministries and agencies; expresses appreciation that the Commission is planning to audit all Member States at least once by the end of 2023, and welcomes the selection of the audit targets on the basis of a risk assessment;

Change 25

Removed39. Remarks that the Commission’s audit work has confirmed variations in the internal control systems across the implementing and coordinating bodies, identifying good practices in some of the procedures in place to verify and prevent fraud, corruption, conflicts of interest and double funding;