The IEA's audits - Practices of Questionable Legitimacy

Legal Insight

August 2019

George Psarakis LL.M. (mult.), PgCert

Republished from TaxHeaven.gr

Summary: The new service of the Financial Crime Investigation Directorate, its responsibilities and the problems in conducting audits.

Since the end of 2018, the newly established Financial Crime Investigations Directorate (FCID) has effectively started operating. This service is the "operational arm" of the Financial Crimes Prosecutor, supervised by him and aimed at conducting audits to ascertain the commission of major tax crimes. The service is housed in the same building as the S.D.O.E., on Piraeus Street, with the offices of the Financial Crime Prosecutor's Office on the same floor. Now, and following Presidential Decree 84/2019, the DEOE is no longer directly under the Minister of Finance but under the newly established General Secretariat of Tax Policy and Public Property. The initial goal was to staff the service with 135 auditors-special investigators. To date, however, this number has not been reached. In October 2018, the first audit orders were issued in execution of prosecution orders. Based on the 2018 Annual Activity Report, only 52 control orders had been issued by 31/12/2018. 

The most important practical difference between the IEAEA and other audit services of the Ministry of Finance and the Independent Public Revenue Authority (AADE) is the direct prosecutorial supervision. All actions of the auditors and the corresponding requests of the auditees are processed by the supervising prosecutors, who set the "pace" for every action and audit method of the IEAE. Moreover, only the Prosecutor for Economic Crime and the prosecutors who assist him have the power to order the IEA to carry out audits. This was, moreover, the real reason for the creation of the IEA: the constant complaints from the audit services of the SAO about the numerous requests from prosecuting authorities, which greatly burdened their main audit work. As the Deputy Minister of Finance had, moreover, mentioned in a relevant parliamentary scrutiny: "The establishment of this new Service came to achieve a twofold objective: on the one hand, to relieve the AADE of a large volume of prosecutorial cases which, despite the fact that they concern important economic offences, do not always present a high level of recoverability...". The largest volume of cases at the IACO is taken up by controls on the accumulation of assets through the 'opening' of bank accounts. The findings of the audit, after the auditee's opinion has been requested, are sent to the AADE (through the preparation of a report), which, after hearing the auditee's views, decides as a matter of absolute priority whether to proceed with the issuance of the final tax assessment notice, with which any interest and fines are to be added. 

The specificity of this service, however, to carry out both investigative tasks under the Criminal Procedure Code and administrative controls under the Tax Procedure Code has created the following issue: if the person being controlled is identified as a suspect of committing a tax evasion crime and the control authorities have all the powers that the preliminary investigation officers (police officers, etc. ), the auditee-suspect should also be granted all the rights provided for in the Code of Criminal Procedure. Indeed, under the new Code of Criminal Procedure, a person suspected of committing a criminal offence is entitled to have access to the entire case file and all the evidence in the possession of the prosecution, even before he or she provides his or her own explanations (Articles 244 para. In fact, the New Code does not provide for any exception to this right, such as refusal to grant access for the "protection of an important public interest" (as in Article 101 of the previous Code). The ICJ itself, moreover, states in its 2018 Report of Activities: 'It should be noted that persons who are attributed with the commission of a criminal offence during investigations have all the rights provided for in the Code of Criminal Procedure'. However, the ICTY and the supervising prosecuting authority refuse to apply in practice what is described in the law. The refusal to provide all documents in the administrative file (including any complaint, prosecutor's order, etc.) is a violation of the suspect's rights. The only way forward in such cases is to appeal to the Plenary Council, with all the delays that such involvement of the criminal justice system entails at this early stage of control (which appeal is now explicitly provided for in the context of preliminary examination - see Article 244 para. 5 of the Code of Criminal Procedure).