Protecting EU Funds: The Promise and Pitfalls of the PIF Directive

 

Dr. Krystyna Bakhtina, Luiss University

Photo credit: Kiwiev, via Wikimedia Commons

In mid-July 2025, the European Commission announced a structured reflection process to review the EU Anti-Fraud Architecture, complementing the preparatory work on the next multiannual financial framework. The goal is to ensure a stronger and more efficient protection of the Union’s financial interests. This review comes at a critical moment: transnational fraud schemes are becoming more sophisticated, organised crime continues to target EU funds, and criminal networks increasingly exploit advanced technologies such as AI and cryptocurrencies to misappropriate Union funds.

Examining the Directive (EU) 2017/1371 on the fight against fraud to the Union’s financial interests by means of criminal law (PIF Directive) is therefore highly relevant. Drawing on findings from the BETKONEXT project’s working paper, this blog outlines how PIF Directive has been implemented across several EU Member States. It provides insight into how effectively the EU financial interests are safeguarded, highlighting the main challenges and gaps that persist.

Built on Article 325 TFEU, the Directive establishes common rules to protect EU funds, harmonising definitions of key crimes, such as fraud, corruption, misappropriation, and money laundering, it provides rules on sanctions and limitation periods. Its aim is to close legal loopholes, reduce fragmentation across national frameworks, and enhance the safeguarding of EU funds and taxpayers’ money.

Implementation in Practice: A Comparative Perspective

While the European Commission’s report confirmed that the PIF Directive’s core provisions have been transposed, it also noted certain gaps and shortcomings in national implementation. The comparative research as part of the BETKONEXT project shows that many of these problems remain and, in some cases, reveal deeper systemic shortcomings affecting the Directive’s uniform application and the safeguarding of the EU financial interests.

An examination of four Member States, namely Italy, Poland, Belgium, and Spain, illustrates how these divergences manifest in practice.

Italy demonstrates a generally high degree of compliance; however, recent legislative reforms risk reversing this progress. The repeal of the offence of abuse of office and the introduction of a much narrower offence limited to the improper allocation of money or movable property significantly restrict the intended scope of the Directive. Unlike the Directive, which refers broadly to “funds or assets,” the new offence applies only to money or physical assets and is triggered exclusively when conduct violates specific laws that leave no discretion to public officials. This raises concerns about compliance with Article 4(3) of the Directive, as certain harmful behaviour could escape prosecution under Italian law.

Poland faces some transposition challenges, most notably its failure to criminalise attempts to commit certain offences covered by the Directive, and its reliance on restrictive jurisdictional provisions grounded in the principle of double criminality, contrary to Article 11. Moreover, some forms of misuse of EU funds, such as non-disclosure of relevant information when granting financial support, remain insufficiently addressed.

Belgium presents similar concerns. Its legislation does not criminalise attempts to commit certain offences relevant to the Directive, particularly embezzlement and misuse of company assets. Additionally, Belgian law conditions prosecution of nationals for crimes committed abroad on the filing of a complaint by the victim or foreign authorities - a procedural requirement that conflicts with the Directive.

Spain introduced broad reforms to align its criminal law with the Directive, including lowering the monetary thresholds for fraud offences, expanding the definition of “public official” for bribery and embezzlement cases, and extending corporate criminal liability to embezzlement. These changes closed an important gap in the previous framework and strengthened the overall system of protection for the EU’s financial interests. However, overlapping provisions on fraud remain in force, creating legal uncertainty. Research highlights that this overlap could lead to inconsistent enforcement until the redundant rules are clarified or repealed.

Conclusion

Although the PIF Directive aims to harmonise criminal law and enhance the protection of the EU budget, its potential to fulfil the obligations enshrined in Article 325 TFEU remains only partially achieved. Persistent divergences in national implementation and unresolved gaps undermine uniform application and weaken the level of protection envisioned by the Treaty. To ensure genuine compliance with Article 325 and strengthen the Union’s financial integrity, targeted legislative reforms and closer coordination among Member States and key Union institutions are essential. At the same time, preventive systems—such as internal controls, audits, and compliance measures—play a complementary role and should be reinforced where criminal sanctions are limited.