EU’s anti-fraud tsar braced for pandemic recovery fund challenge

The EU’s first anti-fraud prosecutor has warned her organisation will face a “lot of troubles” as it gears up to police corruption around the bloc’s €800bn pandemic recovery fund bonanza.

Laura Codruta Kovesi said her new European Public Prosecutor’s Office (EPPO) was preparing to battle legal challenges, intimidation and resource pressures once it launched on June 1.

The EPPO is a response to criticism that the 27-member bloc has dealt ineffectively with repeated fraud scandals related to its funding. The risk has been magnified by unprecedented planned coronavirus crisis spending and the pressure to lavish it quickly to revive Covid-19 ravaged economies.

“I’m sure that after we start [work] we’ll have a lot of troubles,” Kovesi, formerly Romania’s anti-corruption chief, said in an interview. “[But] there’s nothing that can’t be managed or can’t be dealt with. The only risk I can see is the lack of resources. But maybe we’ll solve this during the next year or years.”

Kovesi said she would look to take on the biggest cases linked to the unprecedented sums released as the start of the EU’s normal seven-year budget cycle coincided with its economic relaunch package. The sheer scale of the spending plans presents massive challenges for Brussels and member states to ensure the money is correctly accounted for.

“The EPPO was not created to deal with petty cases,” said Kovesi. “There’s no clean country. We’ll take a look in all the member states — this is our job.”

The body was set up partly because the existing system of pursuing frauds on EU funds was seen as inadequate and failing to deter serious wrongdoing in some member states. In February, the EU’s existing anti-fraud body Olaf concluded that Bulgaria’s interior ministry had violated the terms of a €6m EU grant to purchase 350 police all-terrain vehicles.

But, crucially, Olaf only has the power to recommend that member states prosecute cases — advice governments were free to ignore. By contrast, EPPO prosecutors will be able to carry out investigations and bring cases in national courts.

Sophie in ‘t Veld, a Dutch liberal MEP, said there was a “big responsibility on Kovesi’s shoulders, but also on EU leaders who must back her mandate and her independence”.

“The EPPO will face a daunting task right after its inception,” in ‘t Veld added. “The upside is that it will have a very competent leader in this crucial phase.”

Kovesi said the Luxembourg-based EPPO’s €44.9m annual funding was “not a huge budget for a prosecutor’s office”, compared with some member states including her home country. 

“We need to have more financial investigators and analysts here in Luxembourg,” she said. “It’s not easy to make investigations in 22 different member states with 22 different procedures — and the criminals are free to move all the time, they’re free to move their goods.”

One potential obstacle to the EPPO’s success is that five countries — Denmark, Hungary, Ireland, Poland and Sweden — have opted to stay out of it. This means matters relating to them can only be investigated if there is a cross-border element with a country that has joined. 

Kovesi also said it was a “very bad signal” that Finland and Slovenia had not yet appointed permanent prosecutors for EPPO. The Finnish permanent representation to the EU said Helsinki wanted to make use of a provision to appoint part-time prosecutors “due to a very limited number of criminal cases which fall within the competence of the EPPO”.

Kovesi said she was ready to face legal actions alleging the EPPO was overreaching its powers. She said prosecutors were likely to face harassment and would need to be courageous — and to receive necessary protection from member states.

She herself bounced back to the top EU job after being ousted from her post in Romania by the country’s former government in a move widely seen as political.

Kovesi pointed to the significant firepower and expertise the EPPO would benefit from, including 22 Italian prosecutors. “They have the best experience fighting organised crime,” she said. “In a way they are unique in Europe and we need their experience.”