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New Pan-european Measures To Combat Corruption

European-wide measures to combat corruption are gaining traction.

 The European Anti-Fraud Office (OLAF) was founded 20 years ago to combat fraud that affects the EU budget and to investigate corruption among EU employees. It does not, however, have the ability to pursue these crimes. As a result, the European Public Prosecutor’s Office (EPPO) was founded in 2017 and is expected to begin operations in late 2020. Laura Kövesi, a Romanian prosecutor and anti-corruption activist, was named the first European Chief Prosecutor in October. 

Hundreds of public officials were convicted during her five-year term as Chief Prosecutor at Romania’s National Anti-Corruption Directorate (DNA), including former Prime Minister Victor Ponta, who was arrested in 2015 for tax evasion and money laundering. 

Kövesi’s achievements in combating the murky world of political lobbying and corruption received accolades from throughout the world, but he faced fierce opposition at home. Although she was deposed in July 2018, the DNA’s work continues. When Kövesi was removed from office, Liviu Dragnea, the head of the reigning Social Democratic Party, was sentenced to three and a half years in prison on corruption charges in May 2019. Despite internal opposition, Kövesi’s appointment was approved by all but five of the EPPO’s 22 member states. Jitká Logesova, a partner at Wolf Theiss in Prague and Co-Chair of the IBA Anti-Corruption Committee, was taken aback by Kövesi’s appointment, but welcomed it. 

‘She is really brave, and I believe it was a really excellent decision to chose her,’ she says, citing what she has accomplished and the fact that she was under criticism for what she was able to accomplish in Romania. “If you only deal with money laundering on a domestic level, you leave it exposed to criminals exploiting inefficiencies and loopholes between jurisdictions.” 

 

Luxembourg will host the new pan-European institution. 

Financial crimes using EU funds, such as fraud, corruption, and major cross-border VAT fraud, shall be investigated, prosecuted, and judgments handed down. Six Member States, including Hungary, Ireland, Poland, Sweden, and the United Kingdom, have yet to join the EPPO. Denmark is exempt from participation under the Lisbon Treaty. Despite the EPPO’s lack of authority over these countries, Joly believes it will provide a substantial legal outlet for combating corruption on the continent. ‘It has gone mostly overlooked, but it is a significant first step,’ she says. ‘There has never been a public prosecutor with international powers anywhere in the world, and this is the first time we can coordinate investigations across these 22 countries.

If it works, I’m certain that we’ll end up having a global court system for international economic crime.’ Drago Kos, Chair of the Working Group on Bribery in International Business Transactions of the Organisation for Economic Co-operation and Development (OECD), feels that the EPPO and Kovesi’s appointment are significant steps ahead. ‘For the European Union, fraud is just the other side of the corruption coin,’ he argues. ‘Simply putting this European Prosecutor in place – with a fantastic candidate, I should add – shows that Europe is aware of the difficulties of being in the single market and sharing so many things. 

It’s also past time to begin unifying, if not the legislation, at least the enforcement, or core EU legal requirements, in a similar fashion. This is an excellent first step in the correct direction. Frans Timmermans, the European Commission’s First Vice-President, said the measure would “strengthen the rule of law and fight corruption across Europe.” However, according to Kos, a former GRECO chairman, the effects will be limited as long as the EU refuses to become a full member, which means its own anti-corruption initiatives will not be scrutinized by GRECO. He is convinced that the EU should do a lot more to combat corruption: ‘Over the last year, the EU has faced so many big and tough difficulties that I understand why they are focused with them — the immigration problem, Brexit, and the Turkey-Syria situation. I appreciate that they have more pressing matters to deal with than corruption, but it is the underlying problem that exacerbates all of the other problems.’ 

Money laundering scandals at Dankse Bank, ABLV in Latvia, Pilatus Bank in Malta, and other European banks have exposed obvious compliance breaches across the continent. The banks aren’t the only ones to blame. According to research, a small minority of advisers – especially auditors and legal firms – are increasingly breaking basic AML standards (see box: Lawyers under the spotlight). The question is whether the EU will use its power to compel countries to comply. ‘Naming and shaming no longer works,’ says Kos. ‘The financial implications of their actions or omissions are what countries are most concerned about. Countries who refuse to tackle corruption will have to begin to suffer economic costs. 

The EU is the first to be able to take such steps.’ The EU’s Achilles heel continues to be tax havens and loopholes. The European Parliament adopted plans in 2017 forcing multinational corporations to reveal their tax payments on a country-by-country basis. In November 2019, EU Member States voted on the proposed law, but it fell short of the required 16 votes to continue forward. Joly, who retired from politics in May 2019 after ten years as a member of the European Parliament, expects that the European Commission’s new President, Ursula von der Leyen, would take a tougher position on tax avoidance than her predecessor and give the EU’s tax transparency a much-needed boost. ‘She has no interest in maintaining tax havens in Europe because Germany, like France, suffers from them,’ Joly explains. ‘There is public pressure. It is desired by the Parliament. This is now a transpolitical subject, and I believe the Parliament is still committed to it.