Exploiting Systemic Loopholes: €23m EU Transit Fraud

In a sweeping crackdown spearheaded by the European Public Prosecutor’s Office
(EPPO), Luxembourg’s judicial police last week raided several bus companies, the
country’s Administration for Public Transport, and the home of a former employee over
an alleged €23 million fraud involving EU and national funds.

The investigation, which remains ongoing, revolves around suspicions that public
transport operators submitted fraudulent invoices for electric bus services between 2022
and 2024, despite actually operating diesel-powered (thermal) or hybrid vehicles. By
falsely claiming they ran fully electric buses, the companies were allegedly able to
access generous subsidies earmarked exclusively for zero-emission public transport
under the European Regional Development Fund (ERDF or FEDER) and the national
budget.

Investigators believe the fraud occurred in two phases – €12 million was allegedly
siphoned off from the ERDF between 2022 and 2023, a fund meant to promote
sustainable and equitable development in EU member states.

An additional €11 million is suspected to have been improperly claimed from
Luxembourg’s national budget in 2024.
The key method involved issuing misleading invoices that overstated the environmental
performance of public bus fleets. The operators reportedly claimed to be running clean,
electric buses, which qualify for substantial public subsidies, when in fact they deployed
cheaper, polluting alternatives like diesel or hybrid vehicles. This discrepancy likely went
unnoticed due to weak auditing mechanisms, insufficient cross-checking of vehicle logs,
and possibly insider assistance.

One former employee of the Administration for Public Transport is suspected to have
played a pivotal role. Though the full extent of their involvement is still under
investigation, it’s believed they may have facilitated the fraudulent approval of subsidy
claims, either by manipulating data or bypassing verification procedures.

Experts say the case highlights long-standing vulnerabilities in EU funding mechanisms.
While EU subsidies aim to encourage sustainability, particularly in the transport sector,
they often rely on self-reported data from recipients, creating opportunities for abuse.
The shocking fraud may have gone unnoticed due to of systemic loopholes. A lack of
real-time vehicle monitoring, coupled with limited transparency and irregular audits, can
make it difficult to verify claims about fuel types, emissions, or service frequency. In this

instance, there appears to have been little oversight ensuring that buses classified as
electric were indeed operating as such.

Furthermore, the split responsibility between national and EU bodies may have allowed
discrepancies to slip through the cracks. While the ERDF is managed in partnership
with national authorities, the sheer volume of funding and the political pressure to show
progress on climate goals, sometimes leads to rushed approvals and blind spots in
accountability.

Yet, this is not an isolated case. Across Europe, there have been similar scandals
involving EU funds misused under the guise of green initiatives.
In Romania, a 2021 investigation uncovered fake contracts for solar farms that never
existed, costing the EU millions.
Italy had its fair share of scandal when several regional transport providers were caught
in 2018 inflating the number of electric buses in service to secure environmental grants.

In Bulgaria, an EU-backed water infrastructure project was halted after whistleblowers
exposed massive over-billing and nonexistent construction.
The EPPO, established in 2021 to tackle such cross-border crimes against the EU
budget, has increasingly turned its attention to the green transition, a sector now worth
billions in public investments.

While all suspects in the Luxembourg case are presumed innocent until proven guilty,
the scale and sophistication of the alleged fraud point to deeper issues. Analysts warn
that unless robust compliance systems are put in place, including GPS-based fleet
tracking, independent audits, and stricter whistleblower protections, similar abuses may
continue to undermine the EU’s climate and development objectives.

The outcome of this case may set a crucial precedent not just for Luxembourg, but for
the future of EU funding integrity across all member states.