By Dan Byrne for AMLi
THE EUROPEAN Public Prosecutor’s Office (EPPO) will within the next few months be pursuing cases of fraud across the EU.
As the drive to combat money laundering has seen calls for future oversight to come from Brussels – not the individual member state governments – AML Intelligence met with one of the EPPO’s leading prosecutors, Danilo Ceccarelli.
Ceccarelli is an expert in the AML area and one of Italy’s foremost financial crime prosecutors.
Before joining the EPPO, Ceccarelli specialised in tackling financial and economic crime, money laundering, asset recovery and confiscation cases in Milan. A prosecutor since 1996 he served as an international prosecutor in Kosovo between 2013-2018.
Speaking about the key relationship between institutions and FIUs, Ceccarelli observed: “I’ve been a prosecutor in Italy for some time, and the amount of information we have historically received from our FIU was not manageable – and for them! Not for us. It’s their analysis which cannot be thorough because they have too much to process.
“The way the system is set up is the opposite of the way we used to work 25 years ago. 25 years ago, we started a case for money laundering only based on a predicate offence – then we tried to find the money,” he said.
“Now we’re going the other way, we are seeing the money and trying to understand where it comes from, which is really difficult. And there’s not much we can do at the moment except reinforcing the FIUs and creating stronger communication between them, law enforcement and the prosecution. Systems only work with continuous feedback,” Ceccarelli revealed.
He also spoke about how the office is preparing for his mammoth new role across 22 Member States, the challenges the agency faces, and the importance of the information flow between financial institutions and FIUs
WHO ARE THE EPPO:
The European Public Prosecutor’s Office is an independent body of the EU responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the Union (e.g. fraud, corruption, cross-border VAT fraud above 10 million euros). The EPPO can undertake investigations, and carry out acts of prosecution and exercise the functions of prosecutor in the competent courts of the member states.
In 2019 the Council and the European Parliament appointed Laura Codruţa Kövesi to be the first European Chief Prosecutor.
There are currently 22 member states participating in the EPPO (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Romania, Slovenia, Slovakia, Spain).
The EPPO, based in Luxembourg, is currently identifying which cases across the EU to pursue.
Dan Byrne: What stage is the EPPO’s setup at and when will it be fully operational?
Danilo Ceccarelli: Legally, we can begin operations from the 20th November, but there are a lot of delays which are not in our hands, like COVID-19. We estimate a 7-8 month delay in comparison to what was initially predicted, so we will be operational some time in 2021.
But it doesn’t only depend on us, it depends on the member states.
DB: So what needs to be done on the member-state side ahead of the start date?
DC: The member states have to establish their local branches and recruit personnel. They also have to adapt their national legislation to the EPPO legislations to ensure that an investigation can take place under our mandate.
They need to propose a candidate for the European-delegated prosecutors – these are the prosecutors who will stay in that member state and conduct actual investigations.
Each member state is responding differently. They’re trying to organise in a different way. So, there are negotiations every day between EPPO and the member states
DB: How many have proposed their candidates so far?
DC: Only two, Slovakia and Germany.
But the reason why is complex, it’s not only COVID-19. Each state needs to find an office, buy computers, recruit personnel. The delays that we have felt at the EPPO have also been felt by the member states.
DB: Jumping ahead to 2021, and a fully operational EPPO – what are the biggest challenges going to be in the short term?
DC: The first phase will be quite hectic. From day one, we estimate to receive around 3000 potential new cases. We are technically responsible for any cases opened in a member state after November 2017, so there’s a backlog and we will have to assess everything.
We aren’t going to take over all those cases, we’ll have to decide what is for us and what is not, one by one.
After that, the biggest challenge is the relationship between EPPO and the national prosecution services. How does that overlap? Which kind of communication do we need to establish? What kinds of cases are our responsibility and what lies with the member states? For sure, there are cases which fall under both, but we still have to agree.
Remember, there are 22 member states [in the scope of the EPPO], 22 different national legislations, 22 different police forces… you see how complicated it will be!
DB: Overlaps and boundaries: these have been discussed at length in the European Parliament. Where should national authority end and European authority start. Do you, or the office, have any opinion on this?
DC: It’s already in the regulation – but like all regulations, there’s room for interpretation. The way I see this, overlap and potential conflict is just around the corner. We’re trying to work hard on this, assess guidelines and find agreements, but inevitably some conflicts will arise – and that’s life.
DB: Do you have any examples of issues that might involve overlap?
DC: The biggest overlaps and potential conflicts would be in a case with several offences, some of which are for us, and others for the member states. You can’t split a case, so we and the member states are going to have to talk a lot and find an agreement.
Another big issue is organised crime – a big topic everywhere! Organised criminals usually operate with a large number of underlying offences. It’s not just simply ‘fraud’ – it’s also ‘extortion,’ and ‘murder’ etc. The challenge is trying to understand where the focus is.
DB: Turning to FinCEN files: what does this extensive trail of dirty money reports say about the problems that Europe is facing?
DC: FinCEN is a very general issue. We all know the advantages and disadvantages of a system that is built on FIU reports.
The advantage is you have a massive database, a lot of people working on it. But the disadvantage is when you have too much info, it’s like having no info at all.
I’ve been a prosecutor in Italy for some time, and the amount of information we have historically received from our FIU was not manageable – and for them! Not for us. It’s their analysis which cannot be thorough because they have too much to process.
The way the system is set up is the opposite of the way we used to work 25 years ago. 25 years ago, we started a case for money laundering only based on a predicate offence – then we tried to find the money.
Now we’re going the other way, we are seeing the money and trying to understand where it comes from, which is really difficult. And there’s not much we can do at the moment except reinforcing the FIUs and creating stronger communication between them, law enforcement and the prosecution. Systems only work with continuous feedback.
DB: Are all member states adopting this ‘stronger communication’ approach?
DC: Some are pushing a lot for it. Other countries are understaffed and under-resourced. It’s not a priority for them. A few countries are very slow, information is not accurate, they don’t use the IT tools.
DB: What’s your take on the relationship between the authorities and the prosecutors?
DC: For the prosecutors, the authorities are our filter. Authorities have criteria for checking which information should be sent to us. They will check if information is connected to previously recorded suspicions, or to a case which has been talked about in the press.
I have experience of working on cases and not getting any information from FIUs. But as soon as my investigation became public, they gave me the information I needed. Only when it became public and suspect did they act – that’s not how it should work.
DB: Is it common for media attention to be what drives a case to the prosecutors?
DC: Yes. It is not the only driver, but it is common. There are open sources like media attention and closed sources like our intelligence services. Open sources can sometimes raise the red flag.
But you should have a red flag before public attention, not afterwards – otherwise, where’s the use?
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