The EU report called compensation checks "lax"
The move follows a report by the EU's Food and Veterinary Office which branded the UK's compensation system as "excessive".
The EU is expected to foot up to 60% of the bill for compensating farmers.
A spokesman said the UK had already requested £500m from Brussels, which was yet to be paid.
The news came as a foot-and-mouth security zone was set up in Cumbria amid fears that the disease could re-emerge in the region.
A 100-square-mile area, stretching from Penrith to Tebay in the south and east to Brough, is subject to restrictions after a second outbreak of the disease was discovered.
Lorries and people entering farms in the area have to apply for a special licence, and all vehicles entering or leaving must be disinfected.
Farmers 'are victims'
The critical EU report highlighted payments that were significantly higher than the guideline rates.
It questioned the procedure of allowing farmers to choose their own valuer from a ministry list.
Inspectors also attacked illegal animal movements and suggested there had been deliberate infection.
But the UK government said there was no evidence to support the allegations.
And farmers said they were the "victims" of campaigners against their industry.
The president of the Farmers' Union of Wales, Bob Parry, said it would be totally unfair for farmers to be denied adequate compensation for the destruction of their businesses.
"Political critics of the industry... have never had a good word for farmers and it would be futile to expect them to appreciate the tragedy that is unfolding in the farming industry."
Fraud inquiry
A spokesman for the European Commission said the report had been passed on to Olaf, the anti-fraud office, as a routine measure.
The spokesman said: "The commission has not launched a fraud inquiry and Olaf, which is independent, has not done so either.
Thorsten Münch, spokesman for the European Commission's consumer protection ministry, said it was possible compensation could be held back by the EU as it was paid in tranches.
"If in the end we find the initial sum was too high, our final contribution will be less," he said. "If we have paid too much we would have to ask for money back."
The commission's monitoring comes as farmers are still smarting from recent allegations that some in the industry have engaged in profiteering during the crisis.
Farmers have denied receiving too much compensation for slaughtered animals and attacked the government for leaking figures and secretly briefing against them.
The allegations have been dismissed as "nonsense" by Downing Street which denied any plot to undermine sympathy for agriculture.
But there will be an investigation into the cost of compensation for slaughtered livestock, after it emerged 37 farmers had each made claims for more than £1m.