The head of the European Public Prosecutor's Office (EPPO) delivered a stark message during a visit to Slovakia late last year.

"There is no way to sugarcoat this: Slovakia has become a major transit point for criminal money flows," Laura Codruta Kovesi told members of the European Affairs Committee of the Slovak parliament in November.

"An important country for criminals, who invest proceeds from VAT fraud into drug trafficking, human trafficking, weapons trafficking, and vice versa," she went on, in remarks that were published in full in the Slovak media.

Ms. Kovesi said that the EPPO had uncovered what she described as a vast and previously underestimated ecosystem of fraud targeting both EU spending and EU revenues, with VAT fraud posing the most serious threat.

"Once we cross-checked information from all our cases, we realized that over 4,700 suspicious companies connected to 172 of our ongoing VAT fraud investigations have links to Slovakia," Kovesi told Slovak MPs.

"In other words, one out of three VAT fraud cases investigated by the EPPO has links to Slovakia!"

Damaging to the EU

That's an extraordinary claim.

With a population of just 5.4 million people, Slovakia accounts for about 1.2% of the EU's total population.

Among the cases being investigated, she said, almost €300 million ($350 million) was connected to recovery funds — money provided by the EU to help EU member states recover from the COVID-19 pandemic.

But it was the revenue side of things that was far more damaging to the EU, Kovesi told the committee.

"VAT fraud is at the top of the criminal pyramid in the EU. Currently, it is probably the most profitable and least risky criminal activity," she told the committee, adding that VAT fraud alone costs the EU an estimated €50 billion annually.

Slovakia a 'central hub' for this criminal activity

This money is diverted from public services and used instead to distort markets, undermine the rule of law and bankroll organized crime.

Slovakia, said the EPPO head, had emerged as a central hub and transit point for this criminal activity, despite the fact that only eight VAT cases formally originate in the country.

The response from the Slovak government was somewhat muted.

"One of the key priorities of this government is the fight against tax fraud and criminal activity related to VAT, which often goes beyond Slovakia's borders," Justice Minister Boris Susko said in a statement following a meeting with Kovesi.

"We are communicating with the Ministry of Finance and the General Prosecutor's Office, and we are ready to adopt further legislative measures if necessary," he said.

Long-term problem with VAT fraud

However, neither the justice ministry nor the government responded directly to Kovesi's claim that one in three VAT fraud cases investigated by the EPPO had links to Slovakia.

Observers said they were not surprised — either by Kovesi's staggering claim or the lack of an official response to them.

"Slovakia has had a long-term problem with VAT fraud," investigative journalist Zuzana Petkova from the country's Zastavme korupciu (Stop Corruption) foundation told DW.

The impact of changes in criminal law

"During successive Fico governments, criminal laws have been changed several times in favor of fraudsters," said Petkova.

"After these changes, for example, tax fraud up to €20,000 is no longer a criminal offence, and tax fraudsters in Slovakia face no punishment at all. Even for higher amounts, sentences were reduced," she went on.

"At the same time, Fico's government has abolished the Office of the Special Prosecutor, which dealt with and specialized in corruption and economic crime," she said.

"The National Criminal Agency (NAKA), which dealt specifically with corruption, organized crime and tax fraud, was also dissolved. As a result, the police and prosecutors now hardly investigate this type of criminal activity at all," she said.

According to Radio Slovakia International, Marian Viskupic, deputy chairman of the opposition SaS party, said that "Robert Fico is turning the country into a launderette for European money."

Ministers seek to shift the blame

Beata Balogova, chief commentator for the Slovak daily SME, said that she, too, was convinced the situation was as serious as claimed by the European Public Prosecutor's Office.

"I fully trust Kovesi when she warns that Slovakia has become a hub for the flow of money originating from criminal activities," she told DW.

She added that ministers in the Fico government responded to Kovesi's claims by trying to blame their predecessors or accuse journalists of lying when they wrote that Slovak politicians were themselves implicated.

"All the government's reactions seemed aimed more at downplaying the serious nature of VAT fraud in Slovakia than at suggesting any real solutions," Balogova added.

The murder of Jan Kuciak

And there is a sobering aspect to this story.

Investigative journalist Jan Kuciak was murdered along with his fiancee in February 2018. One of the issues he wrote about was fraud, including VAT fraud, and links between organized crime and senior officials connected to Robert Fico's Smer party.

"I worked together with Jan on many cases," Zuzana Petkova told DW. "One of the suspects we wrote about was [politically-connected] businessman Marian Kocner, who's charged with having ordered Jan's murder."

Kocner, who is serving a long prison sentence for unrelated financial crimes, has twice been acquitted in the Kuciak murder case due to insufficient evidence.

Prosecutors have appealed, and the case is set to be reheard later this month.

"Kocner had not only Kuciak followed, but according to the indictment also me and several other investigative journalists. He used information he obtained from the police and from corrupt police officers," Petkova said.

"I still receive threats today, including from government politicians, and publicly. It has no impact on my work. Quite the opposite," she went on.

"In the name of Jan Kuciak and his fiancee Martina, I am making even greater efforts to change Slovakia for the better."

Edited by: Aingeal Flanagan