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Police in Italy and several other European countries have arrested 22 people and seized assets worth €600mn in connection with alleged fraud involving the EU’s post-pandemic recovery fund.
The Italian financial police said it had seized apartments, villas, luxury cars, watches and jewellery with a total value of more than €600mn. It added that over 100 suspicious financial transactions had been investigated.
The alleged fraud is likely to revive concerns about potential misuse of the EU’s €800bn recovery fund, a one-off joint borrowing programme that was launched to reboot the bloc’s economy after the Covid-19 pandemic.
Italy is the bloc’s biggest single recipient of the fund, slated to receive about €200bn in grants and loans.
Suspected fraud cases involving EU funds fall under the jurisdiction of the Luxembourg-based European Public Prosecutor’s Office, which co-ordinated the raids and the arrests in Italy, Austria, Romania and Slovakia.
The EPPO said that a multinational criminal association had successfully applied for €600mn in EU grants between 2021 and 2023 by setting up a network of fictitious companies and alleging the funds were needed for their international expansion.
The funds were granted to the fake companies by Simest, an Italian government-owned entity that was set up to help small businesses grow. The Italian financial police said in the statement that Simest had co-operated fully in the probe.
Of the 22 individuals arrested, eight were detained while 14 were placed under house arrest. An accountant suspected of involvement in the complex fraud had also been barred from practising, Italian authorities said.
Italy’s financial police said on Thursday the probe demonstrated adequate checks were in place to ensure the “proper implementation” of the funds and “recover illegally obtained” EU money.
The European Commission said it had noted the announcement, adding that the recovery fund “contains a very robust control framework”.
EPPO and Italian authorities said the scheme was based on an elaborate network of shell companies, including in Slovakia, Romania and Austria. It said these generated fake corporate balance sheets by using overseas cloud servers, crypto assets and artificial intelligence to “conceal and protect” their activities.
“The suspects transferred the funds to their bank accounts in Austria, Romania and Slovakia as soon as they received the advance payments,” the EPPO said.
It has added that all persons concerned are presumed to be innocent until proven guilty in Italian courts.
Additional reporting by Giuliana Ricozzi in Rome and Henry Foy in Brussels