EU needs ‘FBI for customs,’ says former chief fraud investigator

Giovanni Kessler says the current system of national customs authorities makes fraud and smuggling too easy.

The EU needs a single customs agency for its common border that operates like an “FBI for customs,” according to the outgoing chief of OLAF, Europe’s anti-fraud agency.

Giovanni Kessler, who recently left Brussels to head the Italian customs agency, said he believed that fragmented customs enforcement across different EU countries has led to loopholes and perverse incentives that make fraud and smuggling easier.

“We have 28 customs agencies for goods and 28 border guard agencies for people, so 56 agencies for one border,” Kessler said in a parting interview on the 12th floor of OLAF’s office in Brussels. “My vision is that we have to go further and fully implement the customs union by establishing a European customs [authority],” he said.

The Italian prosecutor’s view that the 28 customs agencies should be merged into a harmonized unit is informed by six years investigating high-profile EU corruption cases.

If one case brought home the dangers of fragmentation, it was OLAF’s investigation that concluded this year into how the British authorities allegedly turned a blind eye to a massive cross-border fraud network that allowed ultra-cheap Chinese goods to flow into Europe, costing the EU some €5 billion in lost duties and VAT.

Under Kessler’s plan, a united EU border force would have been able to keep closer tabs on the extraordinarily low valuations that Her Majesty’s Revenue and Customs were allegedly giving to container loads of Chinese goods.

Customs authorities of the 28 member countries are in charge of tackling fraud — especially in cases that could deprive both the EU and national governments of tax revenues. These investigations range over subjects such as false certificates of origin, fraudulent VAT declarations and the evasion of excise duties on cigarettes and alcohol.

Customs services handle over 2 billion tons of goods a year — more than 270 million declarations — according to figures from the Commission.

However, different standards in how countries enforce controls of these goods and tackle fraud has led to significant losses for both the EU and member countries. Such disjointedness, Kessler said, must be fixed if Europe wants to clamp down effectively on smuggling and tax fraud.

“When a good enters a country, after a few hours it’s all over Europe but it is controlled according to that country’s standard, relying on the IT system of that country, which is different from the IT systems of all other 27 countries,” he said.

By Kessler’s argument, if Europe has one border and common duties on goods coming in from outside it should also have a federal guardian to ensure “consistency in the quality and quantity of controls,” he said, while also “avoiding potentially dangerous and surreptitious competition among member states.”

By “dangerous competition” Kessler means the race to the bottom among competing EU countries aiming to attract more traffic to their ports by establishing a reputation for less intrusive customs authorities.

Kessler is returning to Italy to head the country’s Customs and Monopoly Agency in Rome, although he remains an employee of the European Commission, seconded “in the interests of the service.” He has been given a role as adviser for the EU’s budget department, according to a copy of the decision obtained by POLITICO.

This has raised questions from the European Civil Service Federation, a union of civil servants, because the three-year arrangement will allow him to qualify for an EU pension, which employees are entitled to only after 10 years of work for the institutions. His salary is also being topped up by the Commission to bring it up to the level of his OLAF job — it’s not yet known by how much.

“All this in the name of the interest of the service on which no explanation is provided, as if this catch-all formula could justify any arrangement,” the union said.

Kessler says the arrangements are in line with EU regulations and do not constitute a special deal.