Community lacks legal clout to catch fraudsters

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The Independent Online
BRUSSELS - The European Community is losing hundreds of millions of pounds in the war against fraud because it lacks the legal clout to recover it, according to senior EC officials, writes Andrew Marshall.

The European Commission is considering a report on fraud that says the EC lost 117m ecus ( pounds 92m) last year on farm fraud and 152m on customs evasion. The real figure is likely to be much higher. But the discovery of fraud, trumpeted over the past few weeks in both the tobacco and milk sector, is only a small part of the battle, officials say.

Legal cases can drag on for years. Often fraudsters are not prosecuted and money lost as a result of fraud often remains uncollected. Uclaf, the EC's fraud squad, wants new powers to break the deadlock that so often hampers investigation, prosecution and the recovery of funds.

The EC's Court of Auditors, its financial watchdog, complains in its report for 1991 that of about 800m ecus in fraud discovered up to the end of that year, 'virtually all' had neither been established by the EC as a debt nor entered in the accounts. But the Commission says it lacks the power to do anything about these debts where they result from fraud rather than irregularities caused by member states.

Instead, the duty falls on member states to collect the cash. But they frequently cannot or will not help recover it, with the result that EC money is lost. The Court of Auditors complains it has, as yet, no recourse to the European Court of Justice to enforce its decisions. Prosecutions against fraud are often long, time-wasting affairs because of clashing jurisdictions.

Criminals often commit the fraud in one country, keep the money in another, the goods in a third, and live in a fourth. This results in Kafkaesque proceedings that drag on for months.

Senior fraud officials believe the only answer is a directive that would clear up the problems of legal jurisdiction. This would empower EC institutions to act on their own, and would be highly controversial with states - such as Britain - which believe new powers should be held back under the doctrine of subsidiarity. 'Subsidiarity is choking our efforts to tackle the problem,' said one official.

The Maastricht treaty would make some differences to the pursuit of illegality. It will toughen the rights of the Court of Auditors, the European Court of Justice, and the European parliament to call officials and member states to account for their actions.