Expenditure fraud to the detriment of the EU’s financial interests (Sec 168f StGB)
Core concept and scope of application
Anyone who, in relation to expenditure not connected with the award of a contract, obtains or retains funds or assets from the general budget of the European Union or from budgets managed on behalf of the EU
- by using or presenting false, incorrect or incomplete statements or documents, or by violating a specific obligation to provide information, or
- misuses them for purposes other than those for which they were originally granted,
commits the criminal offence of expenditure fraud to the detriment of the financial interests of the European Union in accordance with Sec 168f of the Austrian Criminal Code (StGB).
Similarly, anyone who commits fraud to the detriment of the financial interests of the EU in relation to expenditure connected with the award of a contract with the intention of unlawfully enriching themselves or a third party shall be punished. In this context, expenditure in connection with the award of public contracts means all expenditure in connection with public contracts within the meaning of Art 101 para 1 of Regulation (EU, Euratom) Nr 966/2012 on the Financial Regulation applicable to the general budget of the Union.
Sec 168f StGB therefore protects EU budget funds on the expenditure side as well as the purposes and steering interests promoted by the EU. Of particular practical relevance are subsidies and grants, whether in the context of traditional project funding or in the context of public procurement. It should be noted that not only the unlawful acquisition of such funds, but also their misuse is punishable by law. In practice, this ranges from falsified invoices and incorrect statements of expenditure to the deliberate diversion of approved funds to uncovered parts of projects.
Penalties and thresholds
The basic offence carries a prison sentence of up to six months or a fine of up to 360 daily rates. If the damage exceeds a value limit of 5,000 EUR or if the offence is committed as part of a criminal organisation, the penalty increases to a prison sentence of up to three years. Damages exceeding 100,000 EUR are punishable by six months to five years’ imprisonment, and damages exceeding 300,000 EUR are punishable by one to ten years’ imprisonment.
Example
A company applies for EU funding for a research project. The accounts consistently show inflated personnel costs and external services that are not covered by the content, as well as falsified invoices; at the same time, parts of the budget are transferred to another project. The offence under Sec 168f StGB has been committed.
Misuse of funds and assets to the detriment of the financial interests of the EU (Sec 168g StGB)
Target group and focus of the offence
The offence of misuse of funds and assets to the detriment of the financial interests of the EU is a special offence and can only be committed by a public official who is entrusted with the administration, commitment or allocation of EU funds and who uses them for purposes other than those intended.
Specifically, according to this criminal provision, anyone who, as a public official, directly or indirectly manages funds or assets and commits or pays out these funds contrary to their intended purpose or allocates or uses other assets contrary to their intended purpose, thereby damaging the financial interests of the Union, is liable to prosecution.
This offence is also intended to protect the financial interests of the European Union. Particularly in public authorities, intermediary bodies or funding agencies, situations arise in which internal allocation or audit processes become relevant under criminal law if the earmarking of funds is clearly violated.
Penalties and distinctions
The envisaged sentencing ranges essentially correspond to those under Section 168f of the Austrian Criminal Code. Under the basic offence, a custodial sentence of up to six months or a fine of up to 360 daily rates may be imposed. Where the damage exceeds EUR 5,000 or where a criminal association exists, a custodial sentence of up to three years is prescribed. The further penalty ranges are as follows: where the damage is at least EUR 100,000, a custodial sentence of six months to five years may be imposed; where the damage is at least EUR 300,000, a custodial sentence of one to ten years may be imposed.
Example
A public official who is authorised to award EU subsidies awards a subsidy to an acquaintance without further examination, even though the acquaintance may not meet the requirements for a subsidy. If this results in a loss of assets to the EU budget, there is a suspicion of misuse. The decisive factors for the defence are whether the earmarking of funds was actually violated, whether there was room for discretion, and whether the alleged damage can be proven in concrete and causal terms.
Compliance measures for the companies and associations
An effective compliance and internal control system significantly reduces the risk of coming into contact with the above-mentioned criminal offences. The first step is to focus on a key question: In which areas do subsidies, contracts and goods or services cross borders – and where could potential risks lie? On this basis, clear responsibilities, the dual control principle and traceable, written decisions are required.
The earmarking of EU funds must be reflected in everyday working life. This can be achieved through the following measures: separate management of project cost centers, blocking budgets in the accounting system, timely provision of proof of use, ongoing post-award monitoring and random checks. In addition, it is advisable to use simple early warning signals, such as unusually high margins, sharp price fluctuations, new and unknown high-risk suppliers or conspicuous payment flows.
In addition, a reliable whistleblower system, appropriate training courses and workshops, and clear reporting channels to funding agencies and authorities are required. Complete documentation is of crucial importance here. Those who can provide clear evidence of their processes can often refute allegations of intent and excessive damage assumptions.
Support from a criminal defence lawyer
In European criminal law proceedings, it is advisable to engage a specialist criminal defence lawyer at an early stage. The subject matter combines criminal law with procurement, subsidy and budgetary law, often across several countries. In addition, the European Public Prosecutor’s Office (EPPO) is responsible for investigations into expenditure fraud to the detriment of the financial interests of the European Union (Sec 168f StGB) and the misuse of funds and assets to the detriment of the financial interests of the European Union (Sec 168g StGB), for which its own guidelines apply, which an experienced defence lawyer should be familiar with.
Even initial decisions – such as how to deal with searches, requests for information, internal clarifications or inquiries from funding agencies – shape the further course of proceedings. Legal representation ensures that the rights of the accused are upheld in criminal investigations, communication channels are organised and risks are correctly assessed: it is a matter of clearly classifying the facts, reliably examining the circumstances and calculating the damage. If necessary, the necessary legal remedies should be sought to protect one’s own rights.
The aim is not only to achieve the best possible outcome in criminal proceedings, from dismissal of the case to diversion to a lenient sentence, but also, in particular, to prevent damage to reputation.
