What it is: background and legal basis
Understanding the mandates and jurisdictions of the European Anti-Fraud Office (OLAF) and the European Public Prosecutor's Office (EPPO) is crucial for any professional working in EU audit and financial management. This article explores the distinct roles of OLAF and EPPO in combating fraud affecting the EU budget, highlighting their powers, limitations, and areas of cooperation. Key legal foundations include the Treaty on the Functioning of the European Union (TFEU), which underpins the EU's financial interests, Regulation (EU, Euratom) 2020/2223 concerning investigations conducted by the European Anti-Fraud Office (OLAF Regulation), Regulation (EU) 2017/1939 implementing enhanced cooperation concerning the establishment of the European Public Prosecutor’s Office (EPPO Regulation), and Directive (EU) 2017/1371 on the fight against fraud to the Union’s financial interests by means of criminal law (PIF Directive).
How it works in practice
OLAF and EPPO operate with distinct but complementary mandates. OLAF conducts administrative investigations into fraud, corruption, and any other illegal activity affecting the EU's financial interests. EPPO, on the other hand, investigates and prosecutes crimes affecting the EU budget, as defined in the PIF Directive. The PIF Directive provides a harmonized definition of offences affecting the Union’s financial interests, such as fraud, corruption and serious cross-border VAT fraud. This definition is binding on Member States and EPPO.
OLAF: An Administrative Investigator
OLAF’s mandate is defined in Regulation (EU, Euratom) 2020/2223. It conducts administrative investigations, meaning it does not have the power to arrest or prosecute. OLAF's investigations can be internal (within EU institutions, bodies, offices and agencies) or external (in Member States or third countries). The purpose of OLAF's investigations is to gather evidence of fraudulent or illegal activity and to make recommendations to the relevant authorities, including EU institutions, Member States, and the EPPO.
What OLAF can do:
- Conduct on-the-spot checks and inspections in the premises of economic operators and EU institutions (Article 7 of the OLAF Regulation).
- Request information and documents from EU institutions, Member States, and third parties.
- Interview witnesses and suspected persons.
- Make recommendations to the relevant authorities to take appropriate action.
What OLAF cannot do:
- Arrest or detain individuals.
- Initiate criminal proceedings.
- Impose sanctions or penalties.
Adversarial Procedure Rights:
OLAF investigations must respect the rights of the persons concerned. According to Article 9 of Regulation 2020/2223, the rights of persons concerned include:
- The right to be informed of the investigation.
- The right to be heard.
- The right to access documents (subject to limitations to protect the investigation).
- The right to be assisted by a person of their choice.
OLAF Final Report:
OLAF's investigations culminate in a final report, which contains its findings and recommendations. This report is transmitted to the relevant authorities, such as the EPPO, national judicial authorities, or EU institutions. The legal status of the OLAF final report is that of evidence. It is not a judgment or a conviction. The authorities receiving the report must then decide what action to take, such as initiating criminal proceedings or recovering funds. The Court of Justice of the European Union (CJEU) has confirmed that OLAF's reports constitute admissible evidence but must be assessed by the national courts in accordance with national law.
EPPO: The EU's Public Prosecutor
The EPPO, established by Regulation (EU) 2017/1939, is an independent EU body responsible for investigating, prosecuting, and bringing to judgment crimes affecting the EU's financial interests. Its jurisdiction extends to 22 participating Member States. The EPPO operates under the principles of independence and impartiality. The participating Member States are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Romania, Slovakia, Slovenia and Spain.
EPPO Jurisdiction:
The EPPO's jurisdiction is limited to crimes affecting the EU's financial interests, as defined in the PIF Directive. These crimes include:
- Fraud against the EU budget.
- Corruption involving EU funds.
- Serious cross-border VAT fraud (above a certain threshold).
- Money laundering of proceeds from these crimes.
The EPPO Regulation outlines specific procedures for investigations, prosecutions, and judicial cooperation. European Delegated Prosecutors (EDPs) are located in each participating Member State and conduct investigations and prosecutions under the direction and supervision of the EPPO's central office in Luxembourg.
Cooperation Between OLAF and EPPO
OLAF and EPPO have a duty to cooperate with each other. Article 101 of the EPPO Regulation outlines the rules of cooperation. OLAF must report to the EPPO any suspicion of a crime within the EPPO's competence. Conversely, the EPPO must inform OLAF if, during its investigation, it uncovers evidence of administrative irregularities or fraud that falls within OLAF's mandate.
Key Aspects of Cooperation:
- Information Sharing: OLAF and EPPO exchange information and evidence relevant to their respective investigations.
- Coordination of Investigations: OLAF and EPPO coordinate their investigations to avoid duplication of effort and to ensure effective prosecution of crimes.
- Supporting Each Other's Work: OLAF can provide technical assistance to the EPPO, and the EPPO can request OLAF to conduct administrative investigations on its behalf.
EDES and its Connection to OLAF and EPPO
The Early Detection and Exclusion System (EDES) plays a significant role in safeguarding the EU's financial interests. It is a system managed by the European Commission that aims to protect the EU budget from unreliable economic operators. It's important to understand the link between EDES, OLAF and EPPO.
How it works: When OLAF uncovers evidence of serious professional misconduct or fraud by an economic operator, this information can be transmitted to the EDES panel. Similarly, if the EPPO is investigating or prosecuting an entity for crimes affecting the EU's financial interests, the EDES panel may be informed.
The EDES panel then assesses the information and can decide to exclude the economic operator from future EU funding or impose financial penalties. This ensures that entities engaging in fraudulent or illegal activities are prevented from receiving further EU funds.
The most common points of confusion
- OLAF vs. EPPO Mandates: OLAF conducts administrative investigations, while EPPO conducts criminal investigations and prosecutions. Many mistakenly believe OLAF has prosecutorial powers.
- Legal Status of OLAF Reports: OLAF reports are evidence, not convictions. It is the responsibility of the EPPO or national judicial authorities to initiate criminal proceedings based on OLAF's findings.
- EPPO Jurisdiction: The EPPO's jurisdiction is limited to crimes affecting the EU's financial interests in participating Member States. OLAF's mandate is broader, covering administrative irregularities within EU institutions and Member States.
Why it matters for EU auditors
EU auditors must understand the respective roles of OLAF and EPPO to effectively identify and report fraud affecting the EU budget. Knowing the limitations of OLAF's administrative investigations and the EPPO's criminal prosecution powers is crucial for ensuring that potential fraud cases are handled appropriately. Auditors must also be aware of the cooperation mechanisms between these two bodies and how information can be shared to maximize the impact of their investigations. This knowledge is highly relevant for the EPSO AD7 Auditors competition, as it demonstrates a comprehensive understanding of the EU's anti-fraud architecture. Prep for AD7 Auditors on Prep4EU