The introduction of the new Law on the fight against fraud to the Union’s financial interests by means of criminal law of 2020

The new Law N.69 (I) of 2020, published in the Official Gazette of the Republic of Cyprus, is a transposition of the EU Directive 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law, known as the “PIF Directive”. The objective of this new legislation is the alignment of all terms and sanctions connected to fraud, such as bribery or corruption. Intention is a key element in all criminal offenses that constitute a threat to the European Unions’ financial interests.

The Directive, as well as the Law, focus on the common Value Added Tax (VAT) system, particularly VAT fraud when it is linked to two or more Member States, leading to a damage of at least € 10.000.000. According to article 3, title II of the Directive, fraud affecting the Union’s financial interests, is non-exhaustively defined as the following cross-border transactions:

  • the use or presentation of false, incorrect or incomplete VAT-related statements or documents, which have as an effect the diminution of the resources of the EU budget;
  • non-disclosure of VAT-related information in violation of a specific obligation, with the same effect; or
  • the presentation of correct VAT related statements for the purposes of fraudulently disguising the non-payment or wrongful creation of rights to VAT refunds.

The aforementioned intentional  fraudulent offenses are subject to a 4 to 8 year conviction. The penalty may increase in cases of crimes committed by criminal organizations.

The above-mentioned provisions also apply in respect of non-procurement related expenditure, in respect of procurement-related expenditure and in respect of revenue other than the revenue arising from VAT own resources. These offenses are subject to a conviction of 6 months until four 4 years, while the term may range from 4 to 8 years in case of a fraudulent gain exceeding the amount of 100.000 Euros.

Legal entities’ liability is governed by article 6 of the Directive, explicitly stating that  any person within a leading position, acting individually or as part of an organ of the legal entity, shall be held liable of a criminal offense affecting the Unions’ financial interests, depending on the persons’ representation power, authority in decision making and control. These criminal offenses, committed by an individual having the above-mentioned qualities, due to lack of control or supervision, are also considered to be liable in the context of the Directive and are subject to a fine starting from 20.000 Euros, but not exceeding the amount of 20.000.000 Euros.

Legal entities are subject to sanctions pursuant article 9 of the Directive, which include but are not limited to the following:
loss of public benefits or aid (a);
banishment from public tender proceedings. This sanction may be temporary or permanent (b);
bar from commercial practices ( c );
judicial supervision (d);
winding-up order (e);
Shutdown of organizations previously utilized for criminal offenses (f)
The sanctions to clauses b, c and f may be temporary or permanent.

The present article is for informational purposes only and does not, under any circumstances, constitute legal advice. For further information on the matter, please contact Arsen Theofanidis LLC to book a private consultation.

N. Kalifatidou
Advocate – Legal Consultant
Arsen Theofanidis LLC