Changes from report parliamentary committee draft to plenary report

Added59. Is concerned that the ECA identified weaknesses in the Member States’ reporting and control systems, some of which were not fully functional at the presentation of the recovery plans, posing a risk to the regularity of RRF expenditure and to the protection of the EU’s financial interests leading to the adoption of ‘control milestones’;

Removed40. Reiterates that the effective prevention, detection and investigation of illegal activities threatening the implementation of the NGEU depend on the effective collection and sharing of data, including the rapid handling of access requests from investigative services within a Member State, as well as from other countries or at EU level, by OLAF and the EPPO to whom access is to be granted;

Added60. Remarks that the Commission’s audit work has also 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; invites the Member States to share their best procedures in order to facilitate more coordinated and fraud-proof processing of the funds;

Added61. Is aware of the inherent characteristics of the RRF spending model, the difficulty of the assessment of an error rate comparable (to other EU spending areas) and the limitations posed by the Commission’s payment suspension methodology; recalls, nevertheless, that delays can be observed in Member States’ submission of payment requests under the RRF and calls on the Commission to remain vigilant, in particular towards the end of the RRF lifecycle, in order to ensure that Member States protect the financial interests of the EU and that EU taxpayers’ money is adequately spent; points out that, in particular, the countering of fraud, corruption, conflicts of interest (defined as ‘serious irregularities’) and double funding should receive appropriate resources and attention;

Added62. Recalls the findings of the ECA in the 2022 Annual report, namely that control milestones in the national recovery and resilience plans vary in their requirements and granularity; questions why certain Member States were required to merely design their control system, while others were required to have an operational system;

Added63. Calls on the Commission to urgently revise its ex post audit procedures, in order to ensure adequate verification of whether the audited targets previously assessed as fulfilled were not reversed after the respective payments;

Added64. Further calls on the Commission to continuously monitor the fulfilment of the milestones and targets relating to the protection of the financial interests of the EU and to apply all necessary measures in the event of lack of compliance or the reversal of previously fulfilled milestones, including proportionate reduction of the support under the RRF and recovery of any amount due to the Union budget, or to ask for early repayment of the loan, in cases of fraud, corruption, and conflicts of interests affecting the financial interests of the Union, or a serious breach of an obligation resulting from the financing agreements, which have not been corrected by the Member State;

Added65. Reiterates that the effective prevention, detection and investigation of illegal activities threatening the implementation of the NGEU, in particular the risks of the infiltration of organised criminal groups, depend on the effective collection and sharing of data, including the rapid handling of access requests from investigative services within a Member State, as well as from other countries or at EU level, by OLAF and the EPPO and, if necessary, by Eurojust and Europol, to whom access is to be granted;

Added66. Regrets the Commission’s interpretation of the concept of ‘final recipient’ under the RRF; recalls that, according to the modified RRF Regulation, Member States should publish the list of the largest 100 final recipients receiving the highest amount of funding for the implementation of measures under the RRF; regrets that the Commission does not request that Member States provide information on the final beneficiary or recipient of RRF funding and chose to require Member States to provide information only about ‘second-level recipients’; is of the opinion that this interpretation is not in line with the agreement between the co-legislators;

67. Welcomes the joint analysis by Europol and OLAF assessing the risks of fraud and irregularities in relation to the NGEU; welcomes the recommendations made by Europol and OLAF and calls on the Commission, the specialised EU agencies and bodies, as well as Member States, to actively cooperate and interact to ensure the protection of the EU’s financial interests when implementing the NGEU;

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Changed42.68. Welcomes the Ombudsman’s strategic initiative, launched in February 2022, conducted to examine the transparency of the national recovery and resilience plans, public information and communication strategies on the RRF, and on how the funds are supervised; emphasises the importance of this initiative, given that the ECA annual report for 2022 contained a higher estimated level of error for that year; welcomes Ombudsman’s efforts to improve transparency standards in the RRF;

Change 27

Added69. Recalls the ‘NextGenerationEU - Law Enforcement Forum’ (NGEU-LEF), a joint initiative co-led by Europol and Italy, bringing together Europol, the EPPO, OLAF, Eurojust, the European Union Agency for Law Enforcement Training and national authorities by providing a forum for intelligence sharing and the coordination of operations to tackle the infiltration of organised crime into the legal economy, and to protect the NGEU stimulus package, with a specific focus on corruption, tax evasion, embezzlement and money laundering; welcomes the fact that the NGEU-LEF initiative won the European Ombudsman Award for Good Administration 2023 in the category ‘most popular with the public’;

Added70. Is concerned that many issues still exist, mainly because of a lack of sufficient supervision by coordinating bodies, incomplete anti-fraud strategies, missing elements in fraud risk assessments, a need for improvement of the ex ante controls aimed at preventing conflicts of interest, low participation in training activities intended to raise awareness of fraud, and deficiencies in the reporting of irregularities to OLAF for possible investigation; asks the Commission to inform Parliament about the issues identified, the recommendations addressed to the Member States and the follow-up given to resolve the issues;

Added71. Highlights that enhanced transparency plays a vital role in exposing fraudulent schemes and discouraging fraudulent actions; calls on new transparency initiatives and policies introduced to promote accountability;

Digitalisation and transparency to enhance the fight against fraud

72. Welcomes the ECA Review 04/2023 entitled ‘Digitalising the management of EU funds’, which stresses that digitalisation has the potential to make the auditing of EU funds more efficient; highlights ECA’s observations that there are many variations in the degree of digitalisation of EU spending, most centralised where the Commission has direct management and more fragmented for the other management modes, such as under shared management;

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Changed44.73. Is aware that the efforts made by the Commission and other implementing bodies to digitalise the EU budget have to overcome many obstacles in order to enhance compatibility between the IT systems used by the many entities involved; appreciates, in this regard, the consistency of the communication to the Commission of 30 June 2022 entitled ‘European Commission digital strategy – Next generation digital Commission’ (C(2022)4388); points out that digitalisation has been a strategic priority of the Commission for many years; believes that streamlining the management of EU funds requires further simplification of the IT landscape and reiterates that interoperability should be mainstreamed in EU policies in order to enhance compatibility between the IT systems used by the many entities involved;

Change 29

Added74. Highlights the necessity of enhancing the level of interoperability of data systems and the harmonisation of reporting, monitoring and auditing in the EU; reiterates, to this end, its call on the Commission to harmonise definitions in order to obtain comparable data across the EU;

75. Maintains that digitalisation has boosted the prevention and detection of fraud, simplified administrative procedures and that it needs to be at the heart of every anti-fraud strategy, including the National Anti-Fraud Strategies (NAFS); calls on the Commission to reiterate and follow up on its recommendations to the Member States which have not yet adopted NAFS to do so, and to keep the NAFS updated, taking advantage of the opportunities offered by new technologies;

Change 30

Removed46. Notes that among the available options, Arachne was by far the most widely-used IT system (by 21 Member States), in support of the European Structural and Investment Funds (ESIF) and the RRF; observes that many Member States used their own dedicated anti-fraud IT tools, often in conjunction with EU tools, although those tools were rarely interoperable;

Added76. Reiterates its strong support for the obligatory use of the single integrated IT system for data-mining and risk-scoring, Arachne, envisaged by the Financial Regulation recast, which should ensure better protection of the Union’s financial interests, alongside and complementing the IT tools developed at national level by the Member States;

Removed47. Reiterates its support for the single integrated IT system for data-mining and risk-scoring envisaged by the Financial Regulation recast, which should ensure better protection of the Union’s financial interests;

Added77. Notes that among the available options, Arachne was by far the most widely-used IT system (by 21 Member States), in support of the European Structural and Investment Funds (ESIF) and the RRF; observes with concern that many Member States used their own dedicated anti-fraud IT tools, often in conjunction with EU tools, although both types of tools were rarely interoperable and therefore hampered the detection and reporting of fraud to the Commission;

Removed48. Notes that the digitalisation of the fight against fraud is also one of the focuses of the revision of the action plan launched in 2022 accompanying the Commission Anti-Fraud Strategy (CAFS), adopted in 2019 and which needs to be adjusted to the rapidly shifting economic and social scenarios and to the new challenges; is aware that the Commission successfully implemented 60 of the total of 63 actions and that some of these are continuous in nature and ongoing; invites the Commission to present to Parliament the underlying standards and criteria that the revised action plan will endorse;

Added78. Emphasises that the EDES, as the EU’s blacklist, has huge potential for flagging people and companies that misuse EU funds; calls for the EDES to be extended to all types of management modes, in particular to shared management; stresses that Member States’ differing approaches to exclusion measures contribute to unevenness in the protection of the EU’s financial interests; underlines the need to make mandatory the use of the EDES as the common exclusion system for funds managed by Member States; believes that this reinforcement would strengthen the capacity of the EU and Member States to protect the financial interests of the Union and ultimately taxpayers’ money; urges Member States, in the interests of safeguarding the financial interests of the EU budget, to accept this extension without any delay;

Added79. Points out that consolidating, centralising and publishing the information on the recipients of EU funding provided by Member States and other implementing entities in a single database would enhance financial transparency by encompassing different forms of management modes and allowing cross-checks and exhaustive analyses; calls on the Commission to encourage the relevant stakeholders, including the national authorities, to cooperate on this aim; draws the Commission’s attention to the need to protect personal data and sensitive information on beneficiaries;

Added80. Maintains that digitalisation and state-of-the-art IT tools at the national and EU level would improve the management, control and audit of EU funds, and could contribute to preventing irregularities and to substantially reducing bureaucracy, as digitalisation allows easier and quicker access and cross-checks, remotely, to important sets of data, preventing the need for on-the-spot checks and controls;

Added81. Welcomes and supports the assessment of the ECA in its 2022 Annual report calling for the deployment of the IT system for data-mining and risk-scoring Arachne to be advanced from 2028 to 2025; recalls Parliament’s position calling for the system to be deployed as of 2026;

Added82. Notes that the digitalisation of the fight against fraud is also one of the focuses of the revision of the action plan launched in 2022 and adopted in July 2023, accompanying the Commission Anti-Fraud Strategy (CAFS) of 2019 and adjusted to the rapidly shifting economic and social scenarios and to the new challenges; is aware that Commission successfully implemented 60 out of the 63 actions of the previous plan overall and that some of these are continuous in nature and ongoing; invites the Commission to present to Parliament the underlying standards and criteria that the revised action plan has endorsed;

Added83. Calls for recognition of the importance of incorporating visual aids such as charts and graphs to make statistical information more accessible and easier to understand;

Added84. Calls for the implementation of advanced data analytics, artificial intelligence and machine learning in identifying irregularities;

The EU anti-fraud architecture and key measures in 2022

Change 31

Changed49.85. Welcomes the actions launched by the Commission in 2022 to enhance the level of protection of the EU’s financial interests;interests but calls for further vigilance and complementary actions in this field;

Change 32

Added86. Recalls its previous resolutions underlining that countering fraud against the EU budget can only be effective if approached holistically, covering all the stages of the anti-fraud cycle and drawing on a multitude of stakeholders, processes and actions; points out that the four stages of this cycle (prevention; detection; investigation and prosecution; recovery and sanction) require risk analyses, reporting processes and cooperation to be pursued by harmonised interventions at legislative, administrative, organisational and operational levels; recalls the observation by the ECA in its Special report on the EU’s financial landscape pointing out that the complexity of the galaxy of funds and instruments complementing the EU budget brings an increasing risk of serious gaps in the system of audit and control and a lack of accountability; believes that this complexity requires an equally comprehensive and focused approach for the protection of the financial interests involved, in order to tackle irregularities and fraud which could occur by taking advantage of the overall opacity of the financial landscape; recalls that the current fragmentation of the accessible data calls for standardised measures to collect, compare and aggregate information and figures, in particular on the final recipients and beneficiaries of Union funding, for the purposes of audit and control, including investigations;

▸4 unchanged paragraphs

87. Points out that the Union’s anti-fraud programme (UAFP) has been set up for a period of seven years, from 2021 to 2027, and 2022 is its second year of implementation, under direct management mode with OLAF as the lead service for programme implementation;

88. Observes that the 2022 Financing Decision allocated EUR 15.4 million to the Hercule component, EUR 9 million for the Anti-Fraud Information System (AFIS) component and about EUR 1 million for the IMS component, which resulted in awarding of grants to the relevant implementing bodies and in the financing of specialised training, databases, support for research, monitoring and analyses;

89. Points out that the IMS is now being used by 35 countries, encompassing Member States and other beneficiary countries, with around 700 reporting organisations, covering over 3 000 IMS users and several fields, including the RRF and other fields such as asylum, neighbourhood and pre-accession, in addition to the traditional areas of agriculture, cohesion and fisheries;

90. Appreciates the complementary roles of the Fiscalis, customs and customs control equipment instrument programmes and believes that the synergistic effects of the deployment of this financial support brings tangible improvements in the fields of taxation, the sharing of risk-related information and the upgrading to state-of-art customs control equipment;

Change 33

Changed54.91. RemarksRegrets the fact that the participation of Member States in the EPPO is not obligatory; remarks that, in 2022, only 22 Member States already participated in the EPPO, with the same five countries as in 2021 abstaining; insists that Member States which havedo not yet participated,participate, must do so without delay; calls on the Commission to incentivise participation in the EPPO through positive measures;

92. Welcomes the EPPO annual report for 2022, providing the results of the first full calendar year of operational activities; observes that the EPPO processed 3 318 crime reports (compared to 2 832 received in the seven months of operational activity in 2021) and opened 865 investigations in 2022 (576 were opened in June-December 2021); underlines the freezing of EUR 359.1 million (compared to EUR 157.3 in 2021) following EPPO investigations, representing more than seven times the EPPO’s budget and that, by the end of 2022, the EPPO estimated damages of EUR 14.1 billion resulting from misconduct on which it had a total of 1 117 active investigations;

Change 34

Changed56.93. Calls on the Commission to engage in a constructive dialogue with the EPPO, with a view to strengthening the Office’s capacity to tackle the constantly increasing challenges in the anti-fraud landscape;landscape, including, where appropriate, by addressing the shortcomings identified in the EPPO Regulation; stresses, at the same time, the need to ensure the fundamental principle and rules laid out in the EPPO Regulation, namely that the office must be independent and must be granted an autonomous budget in order to act in the interests of the Union as a whole and in line with the Conditionality Regulation;

Change 35

Added94. Calls on the Commission to ensure that the efficiency and efficacy of OLAF’s work in corruption and fraud detection is maintained and that, therefore, the reduction of OLAF’s annual budget envisaged for full-time employees must be considered in line with the true business needs of OLAF, as reflected in its annual report;

▸6 unchanged paragraphs

95. Welcomes the increased detection efforts and their results, which follow the calls from the EPPO and Parliament, indicated by a number of investigations into EU fraud initiated in the 22 participating Member States, which is higher than the historical average before the EPPO’s establishment; praises, in this regard, Operation Admiral which brought to light a VAT carousel fraud perpetrated by an organised group of criminals operating in several Member States, responsible for an estimated EUR 2.2 billion fraud;

96. Praises the cooperation between OLAF and the EPPO, which is highlighted in both OLAF’s and the EPPO’s annual reports; understands that regular exchanges of information occur between the two offices, notably the EPPO having replied to 133 hit/no-hit requests sent by OLAF in order to avoid parallel investigations into the same facts; calls on OLAF and the EPPO to coordinate their reporting on the actions launched to make their cooperation tangible, having specific regard to the number of complementary investigations requested by OLAF (ex Article 12(f) EPPO Regulation) and the number of cases to support EPPO investigations requested by the EPPO (ex Article 12(e) EPPO Regulation);

97. Is aware that the first annual high-level review of the cooperation between the EPPO and the Commission took place in September 2022, addressing, among others, issues on mutual reporting, access to databases and the institutional status of the EPPO;

98. Is concerned by the lack of information on the administrative recovery of sums due to the Union budget, carried out by the Commission following input from the EPPO, as provided for by Article 103(2) of the EPPO Regulation, referring to the EPPO’s obligation to inform the Commission without delay and without prejudice to confidentiality, and as provided for by Article 6(4)(c) of the EPPO-COM Agreement signed on 18 June 2021, referring to protective and corrective measures; asks the Commission and the EPPO to inform Parliament about the implementation of this important tool;

99. Notes that the EPPO and Europol have efficiently cooperated on various operational matters, under the aegis of the EPPO-Europol Steering Committee; understands that Europol provided support (information exchange, analytical support, expertise) on 28 cases upon the EPPO’s request and that the EPPO has become part of the Secure Information Exchange Network Application (SIENA), which ensures a secure communication channel in operational cooperation;

100. Notes that, in 2022, cooperation between the relevant actors occurred in a satisfactory way, with the EPPO-Eurojust liaison teams meeting twice in 2022, with 15 ongoing EPPO cases handled at Eurojust, and the investigative division of the European Investment Bank (EIB IG/IN) making 63 referrals to OLAF, the EPPO and other agencies within the multilateral development banks and the national development agencies entrusted with inherent activities; remarks that in September 2022 around 100 EPPO prosecutors and staff participated in an online awareness-raising session about EIB and EIF activities to increase the effectiveness of the cooperation between the EPPO and IG/IN as established under the 2021 working arrangement;

Change 36

Removed63. Observes that in 2022 the exclusion proceedings launched by the EIB following IG/IN investigations resulted in the exclusion of four economic operators from participating in any EIB-financed projects or activities; calls on the Commission to explore the possibility of making more uniform the exclusion criteria used by the EIB and the EIF in respect of those used in the Early Detection and Exclusion System (EDES), considering that the Financial and Administrative Framework Agreements with the EIB and the EIF cover only five of the seven EDES exclusion situations;

Added101. Stresses the added value that EU bodies bring to the protection of the financial interests of the Union and the fight against fraud, especially when it comes to cross-border crime, as shown by the operational results from the EPPO and OLAF also in 2022; reiterates its call to ensure that all relevant EU actors involved in the fight against fraud have adequate resources and, in this regard, reminds the Commission and the Council that every euro spent on investigation and anti-fraud actions returns to the EU budget;

Added102. Observes that in 2022 the exclusion proceedings launched by the EIB following IG/IN investigations resulted in the exclusion of four economic operators from participating in any EIB-financed projects or activities; calls on the Commission to explore the possibility of making more uniform the exclusion criteria used by the EIB and the EIF in respect of those used in the EDES, considering that the Financial and Administrative Framework Agreements with the EIB and the EIF cover only five of the seven EDES exclusion situations;

103. Reiterates that Member States’ ineffective or untimely cooperation or non-cooperation with the EPPO and OLAF constitute grounds for action under the Conditionality Regulation; calls on the EPPO and OLAF to therefore report each case where Member States have failed to comply with their obligations to inform, to assist, to take appropriate action and precautionary measures and to ensure an appropriate and timely follow-up of reports and recommendations;

104. Understands that the overall level of implementation of the Commission’s recommendations issued in the PIF Report 2021 across the Member States is considered satisfactory as regards the integration of dedicated IT anti-fraud tools into their fight against fraud, the strengthening of risk analysis and, in general, the development of IT systems both on the revenue and expenditure sides;

Change 37

Added105. Highlights the significant differences between Member States that can still be seen in the detection, reporting and follow-up of suspected fraud; encourages, therefore, the Member States to take a proactive approach to protecting the Union’s financial interests, to enhance the exchange of information between their national authorities and with EU bodies and agencies, also in order to identify and address emerging risks and fraud trends in a timely manner;

106. Endorses the Commission’s intention to launch a monitoring exercise on the state of play of the Anti-Fraud Coordination Services (AFCOS) established in the Member States; recalls that the definition of AFCOS’ structure, role, responsibilities and mandate should be better clarified to guarantee homogeneous and harmonised situations across the Union, thereby facilitating their cooperation and exchange of information; asks the Commission once again to update the AFCOS guidelines initially formulated in 2015, which are no longer adequate to effectively assist the national authorities in developing a well-structured coordination service; asks the Commission, furthermore, to report about the work in progress in this regard and the results of the monitoring exercise to the discharge authority;

Change 38

Changed67.107. Remarks that the NAFS need to be adopted or updated by as many Member States,States as possible, and reiterates that the need for such revisions stems from the new anti-fraud landscape, with the EPPO now fully operational, and from the opportunity to reflectidentify new significant risks in the increasingly complex fraud landscape;

Change 39

Changed68.108. Reiterates its appreciation for the Commission’s encouragement to Member States to adopt NAFS, which has so far resulted in an increase in the number of NAFS adopted;adopted, whereby 15 Member States had adopted NAFS by the end of 2022, nine of which were cross-cutting and therefore covered the EU’s financial interests fully;

Change 40

Changed69.109. Notes with concern that, by the end of 2022, only three Member States (Finland, Ireland and Poland) still indicated that they had not adopted any strategy for protecting the EU’s financial interestsinterests; andnotes that five Member States (Belgium, Spain, Luxembourg, the Netherlands and Romania) indicated that they were in the process of establishing one,one; whileurges the other Member States haveto alternativeadopt strategiesa atNAFS national,to regionalshow orthat sectoralthey leveltake or,the inprotection someof cases,EU combinefunds them;seriously;

110. Believes that Member States would benefit from a periodic evaluation of their anti-fraud frameworks, with EU guidance as appropriate, oriented towards establishing their effectiveness, identifying best practices and reviewing their anti-fraud strategies to address any emerging risks; calls on the Commission to encourage Member States to run independent or peer reviews of the anti-fraud frameworks to enhance consistency and high standards;

111. Maintains that the Conditionality Regulation is a permanent instrument which goes beyond the limits of a given multiannual financial framework and is to be applied horizontally, as a requirement for enforcing sound financial management principles, in general, and for the efficient and effective management of EU resources, in particular, and that it is a prerequisite for accessing all EU funds;