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European Chief Prosecutor Laura Kövesi speaks at the Bundestag

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Speech of the European Chief Prosecutor, Laura Kövesi, at the Legal Affairs Committee of the Bundestag - 9 November 2022

 

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Honorable Members, Ladies and Gentlemen,

Thank you for having me here today. Last time I appeared in front of this Committee, almost three years ago, I presented my intentions as the first European Chief Prosecutor. I needed the help of the Bundestag to be able to put them into practice.

Three years ago, my main concern was to make sure that the creation of the EPPO would not cause disruptions to existing cases. This is why I insisted so much on resources. Today, I am glad to report about how the European Public Prosecutor’s Office is delivering on what I promised.

We started to exercise our competence on 1 June 2021. There was no disruption. With minimum resources, despite suboptimal working conditions, under extreme time pressure, we started to work, quite well, and in profit.

In our first year of operations, we dealt with more than four thousand (4000) criminal reports. Approximately half of the criminal reports that we have processed so far came from private parties. I see this as a reliable indicator of the citizens’ trust.

Together with all the relevant national authorities, we have thus managed to integrate the EPPO into the judiciaries of twenty-two (22) Member States. This is an extraordinary achievement.

We have created what I call the EPPO zone. A zone where, by implementing a prosecutorial policy, we are unifying the approach to EU fraud investigations. In the EPPO zone, the budget and the rule of law are better protected, criminal groups are fought more efficiently and, as a result, you are safer.

We can measure efficiency as a ratio between input and output. Our budget for 2021 was less than forty five (45) million Euro. In the first year of EPPO operations, judges have granted us the seizure of more than a quarter of a billion of Euro. So you put one (1) euro in and you get five (5) back. The return on investment is massive and immediate.

We seize, national authorities confiscate. By defending the financial interests of the European Union, the EPPO is in reality bringing money back into national budgets. The more efficient we are, the greater your benefit.

My dream is that the finance ministers come to see that the EPPO is an EU institution that brings money directly into their coffers. Not only because of our superior capacity to track and seize fraudulent assets; but also because we are the best tool available to fight cross-border VAT fraud.

Europol’s newest estimate is that EU VAT fraud alone costs fifty (50) billion Euro every year. According to our assessment, we are dealing mostly with consolidated criminal organisations, often also involved in smuggling (for example of tobacco), which causes further revenue loss from excise duties.

I have no doubt that a properly equipped EPPO will be able to repress these criminal groups with unprecedented ferocity. I have no doubt, because we see these criminals beginning to feel the heat.

The EPPO has started to improve the protection of the financial interests of the EU. Let me give you two examples illustrating why the EPPO is the best tool available to go after cross-border economic and financial criminality.

Our Paris Office started an investigation into a company involved in a VAT fraud scheme involving non-participating Member States and third countries. The European Delegated Prosecutor in charge identified a British citizen as a suspect. Based on information shared via Eurojust, he appeared to be also primary suspect in a Swedish VAT fraud case, with an estimated damage of eighty (80) million Euro.

At that point, Swedish prosecutors had been unsuccessful in capturing him in the UK for more than one (1) year. We got information that he travelled to Romania. We found him and searched his home. With all the evidence secured, he was arrested, and subsequently surrendered to Swedish prosecutors based on a European Arrest Warrant. All this happened just within two weeks…

Or take operation Platinum rush. In July 2019, German authorities started an investigation into a VAT fraud scheme. National authorities were advancing at good speed, bringing first suspects of what looked like a small criminal group to court just as the EPPO was about to start operations.

In June 2021, German authorities had to ask the EPPO whether it wishes to take this case over. Our Munich Office made standard checks in our Case Management System, which gives access to information about ongoing investigations from the whole EPPO zone. They realized there was much more to it than what German prosecutors could find using traditional instruments of judicial cooperation.

We evoked the case and immediately enlarged the scope of the investigation from three (3) to six (6) Member States. Suddenly, we saw the whole picture: a damage of more than thirty three (33) million Euro, and many more suspects (including members of the ‘Ndrangheta), as well as companies involved…

We went for their assets straight away, across borders, fast. Six months later, the first arrests were made. As of today, we have already obtained four (4) definitive convictions. Ten (10) million Euro were already confiscated. Having seized more than thirty three (33) million Euro worth of assets, 100% of the damage can be recovered in this case.

We have been an accelerator. More importantly: we have discovered the whole organized group behind this scheme and wiped it out with one sweep. Finally, our work on damage recovery was excellent. Only a transnational prosecution office can provide such efficiency gains.

Yet, the EPPO is far from having deployed its full potential.

The current level of detection of EU fraud makes us open approximately 100 new cases every month. Let us be optimistic on the speed of the corresponding judicial proceedings. My conservative estimate is that in the next three (3) years we will double the number of our active investigations…

In other words, our workload will increase mechanically even if we do not change anything.

However, the current level of detection of EU fraud is not satisfactory. We must do better!

On the expenditure side, we are getting an average of barely seven (7) criminal reports per month from OLAF and the Commission combined, and the trend is decreasing! There is room for improvement.

When it comes to revenue fraud: in several Member States, in the first months, national authorities failed to report any suspicion of serious VAT fraud or even customs fraud!

This is why I engaged with the Chiefs of Police, Tax administrations and Customs, as well as their responsible ministers, to ensure that specialized and dedicated investigators work on EPPO cases. Working transnationally, these officers will de facto constitute an elite corps of highly qualified financial fraud investigators. I have requested a discussion on this also with the finance ministers of the German Länder.

If we are serious about our mission, our workload can only increase. This also has implications on the way we organise our work, and brings the existing legal framework to its limits.

For instance, when the EPPO regulation was negotiated, no one really anticipated the workload put on the shoulders of the members of the College of the EPPO. We all have countless responsibilities. Let us only look at those that are strictly prosecutorial.

One example: my Italian Deputy. He is currently supervising almost two hundred and fifty (250) cases initiated in Italy. He is responsible for the work of sixteen (16) and soon hopefully twenty-two (22) European Delegated Prosecutors located in seven (7) and soon hopefully eight (8) territorial offices.

As any European Prosecutor, he must also take part in crucial decisions on cases initiated in other Member States in at least one (1) of our fifteen (15) permanent chambers. The average number of investigations monitored by one permanent chamber currently is more than sixty (60).

That is truly a lot of prosecutorial work. His successor will be facing at least double this workload. And so will my German Deputy, who is about to see the number of European Delegated Prosecutors in Germany double.

All this to say that we already know the main areas where the EPPO regulation needs to be reviewed.

From the beginning of my mandate, I have engaged the European Commission and the European co-legislator on a fundamental flaw in our institutional design. As the first transnational prosecution office, the EPPO is the result of a genuine transfer of sovereignty in the field of justice and not of a delegation of executive powers by the EU. Still, the EPPO is treated as a decentralized agency of the European Commission, which is not compatible with our independence.

Unlike decentralized agencies, the EPPO does not contribute to the implementation of a Union policy. It exercises a specific power, which was a prerogative of the sovereignty of Member States until its creation. As a judicial body of the EU, the EPPO should have never been assimilated to a decentralized agency of the EU. This needs to be corrected by way of legislative amendment.

We already know that the rotation system of European Prosecutors is mathematically incorrect. That their management under standard EU Staff regulations is institutionally wrong, while the administration of European Delegated Prosecutors is a bureaucratic nightmare.

We already know that the modalities of our cross-border investigations need to be clarified. That the EPPO must be allowed to exercise its competence for offences such as smuggling under the same conditions in all the participating Member States. Otherwise, we give criminal organisations the possibility of forum shopping between national jurisdictions. They are already doing it. Why should we allow it?

This is even more urgent in the context of ongoing reflections about how to make sure that EU restrictive measures have a powerful impact. You need consistent and effective enforcement by national authorities, of course. But you also need the penalties for their circumvention to be dissuasive and their application effective.

Commissioner Reynders recently inquired about our expert opinion on the extension of our competence to the violations of EU restrictive measures. The answer of the College of the EPPO is straightforward: yes, it is feasible.

In fact it had better be, since we already have a small piece of competence in this field! We already have cases of smuggling involving the circumvention of EU restrictive measures…

 

Honourable Members, to conclude,

Allow me to repeat the pledge I have made three years ago: I want the EPPO to be a truly independent, efficient and strong institution, an institution that the citizens will trust.

Our main principle is that everybody is equal in front of the law. We abide strictly by the legality principle. We will fend off any attempt to interfere with any of our investigations.

An efficient and independent European Public Prosecutor’s Office makes the EU stronger.

We are strong when we apply our principles consistently, when we enforce our decisions and laws effectively.

Yes, extending our competence would require reopening our founding regulation. But we need a serious revision of our founding regulation anyhow. Much sooner than initially planned.

I am convinced that there is currently no better criminal law instrument available in the EU to investigate and prosecute violations of EU restrictive measures.

I hope to have explained what we need to make the EPPO more efficient, to deploy its potential. And, once again, I count on your help.

Thank you for your attention and I will be happy to answer your questions.