Author: Mariagiusi Calabrò
Committee: Agricultural and Enviromental Frauds Committee
Date: 11/08/2024
THE CASE
In the June of 20241 the EPPO has taken part of yet an increadible opertation in Belgium, uncovering a criminal network dealing with biodiesel import fraud, for a total damage to the Union’s finances of €3.1 million. The investigations have led to the arrests of two people – from USA and Bosnia -, who were already under the EPPO’s radar due to their potential link and high position in the hierarchy of the criminal network, which was known to illegally import biodiesel produced in the US into the EU. The two suspects were previously facing separate charges for a similar case involving with biofuel fraud, but it was possible to uncover the real scale of the fraudulent scheme due to the attempts of their legal rapresentatives – who were later arrested – to conceal incriminating evidence.
The specific case, which was immediately reported to the EPPO by Olaf and by the Belgian authorities, was much more complex as the investigation unrevealed that not only the biodiesel was produced in the US, but it was falsely documented as being originated in Morocco. The reason behind this practice is to be found in the anti-dumping duties commonly applied to imported biofuel, which are avoided by exploitating the zero import duties and preferential tariffs associated with Moroccan goods.
The biodiesel produced in the US by using Soy Methyl Ester (SME), a much low-cost material and which production is cheaper than in other extra European countries. Thus, to purposely avoid unti-dumping duties, the imported biofuel was first transferred to multiple countries before reaching Morocco to conceal its origins, and where it was then labelled as Used Cooking Oil Methyl Ester (UCOME), a more environmental frieandly substance, generally preferred in the Union.
As the case directly involved a US citizen in the case, the EPPO is currently cooperating with the US authorities to carry out seizures of the assets that have been illegally obtained, and recover the damage to the Union’s finances. Undoubtedly, this further demonstrates the EPPO’s ability to overcome borders and establish successful relations with third countries, while still effectively prosecuting transnational crimes.
A LOOK AT BIODIESEL FRAUD
Biodiesel fraud – or more generally fuel fraud – has become an increasingly rising threat in the Union, in light of the new objectives and measure set with the European Green Deal. Specifically, the new EU Renwable Energy Directive sets out the sustainable composition of biofuel through crops, food waste or cooking oils to achieve 14% of renewable fuels by 2030, but it does not prohibits the States to import oils from countries that are not in line with the European standards.
As reported by Europol in its 2022 Environmental crimes Threat Assessment2 criminal networks purposely exploits the legislative gap, and end up producing biodiesel through a mix of illicit substances – including palm oil, which is not considered renewable due to the resulting deforestation – derived from third countries, falsely labelling them to obtain European subsidies. Thus, the practice of illegally producing and trading biofuel has become a highly lucrative business from criminal organizations, spreading throughout the Union by setting up companies to sell the illicitelly produced biodiesel at a higher cost.
An example of such practice concerns a similar case discovered by Olaf related to a Bosnian company, Sistem Ecologica3 which was selling soy-derived biodiesel produced in the US and sold at high prices. The biodiesel was then purchased by 17 companies in nine EU Member States – including France, Germany and Italy -, which had later falsely laballed it as biodiesel derived from Used Cooking Oil (UCO).
These type of frauds are inherently transnational in nature as they do not concern one sole country, but generally involve several European and third States, deeply underming the Union’s environmental goals and its budgets. The role of the EPPO in tackling such frauds perfectly represents its forbidable contribution in safeguarding the Union’s finances, and its ability to prosecute the ever more challenging financial crimes. It is in this scenario that the EPPO is proving to be a fundamental player in ensuring that the Union’s objectives are effectively reached, particularly in light of the ecological changes that will be introduced with the European Green Deal. In fact, specifically by doing so the EPPO will protect the EU’s financial integrity – and the implementation of its measures -, and at the same time indirectly ensure a stronger environmental protection in all the Union.
References
1. Belgium: EPPO arrests two suspects in €3.1 million biodiesel fraud investigation | European Public Prosecutor’s Office. (28 June 2024). Retrieved from https://www.eppo.europa.eu/en/media/news/belgium-eppo-arrests-two-suspects-eu31-million-biodiesel-fraud-investigation
2. Environmental crime in the age of climate change: 2022 threat assessment. pp. 20-21, available at https://www.europol.europa.eu/publications-events/publications/environmental-crime-in-age-of-climate-change-2022-threat-assessment#downloads.
3. Moskowitz, E., Asani, M., Sys, M., (4 July 2023) How biofuels scams have undermined a flagship EU climate policy – OCCRP. OCCRP. https://www.occrp.org/en/investigations/how-biofuels-scams-have-undermined-a-flagship-eu-climate-policy
4. For similar cases also mentioned in Traversa, E. (23 March 2023). The problem of double-authorisation in cases of cross- border investigations, EU Institutions Subcommittee. Steppo-eulaw. https://www.steppo-eulaw.com/2023/03/14/the-problem-of-double-authorisation-in-cases-of-cross-border-investigations/; DE’ SANNA, F.(29 September 2023). EPPO, First reference for a preliminary ruling on cooperation: Form or substance?, Criminal Lawyers Subcommittee. Steppo-eulaw. https://www.steppo-eulaw.com/2023/09/15/eppo-first-reference-for-a-preliminary-ruling-on-cooperation-form-or-substance/