Tag Archives: Fraud

Anti-fraud offices

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Anti-fraud offices

Outline of the Community (European Union) legislation about Anti-fraud offices

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

Anti-fraud offices

The European Anti-Fraud Office (OLAF) is the core component of the fight against fraud. OLAF is part of the European Commission and conducts fraud investigations in all European Union (EU) countries and within the European institutions themselves. It can also conduct investigations in non-EU countries with which it has agreements.

  • European Anti-Fraud Office (OLAF)
  • European Technical and Scientific Centre (ETSC)
  • Advisory Committee for the Coordination of Fraud Prevention (COCOLAF)
  • The Court of Auditors of the European Union

European Anti-Fraud Office

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European Anti-Fraud Office

Outline of the Community (European Union) legislation about European Anti-Fraud Office

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Anti-fraud offices

European Anti-Fraud Office (OLAF)

Acts

Commission Decision 1999/352/EC, ECSC, Euratom of 28 April 1999 establishing the European Anti-Fraud Office (OLAF).

Operating modalities:

Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF).

Council Regulation (EURATOM) No 1074/1999 of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF).

Interinstitutional Agreement of 25 May 1999 between the European Parliament, the Council of the European Union and the Commission of the European Communities concerning internal investigations by the European Anti-Fraud Office (OLAF).

Summary

This Decision establishes the European Anti-Fraud Office (OLAF), which is part of the European Commission with a special independent status for conducting anti-fraud investigations. Two Regulations and an Interinstitutional Agreement stipulate how it is to operate.

OLAF’s competences

The Commission Decision establishes OLAF and sets out its powers, which are to:

  • carry out external administrative investigations as part of the fight against fraud, corruption and any other illegal activity that adversely affects the Community’s financial interests and for the purpose of combating fraud involving any other act or activity in breach of Community provisions;
  • carry out internal administrative investigations for the purposes of:
    1. combating fraud, corruption and any other illegal activity that adversely affects the Community’s financial interests,
    2. investigating serious situations relating to the discharge of professional duties that may constitute a failure to comply with the obligations of officials and servants of the Communities liable to result in disciplinary or, where appropriate, criminal proceedings, or a failure to comply with the analogous obligations of the members of the institutions, bodies, offices or agencies or their staff who are not subject to the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the European Communities,
  • carry out investigative assignments in other areas at the request of Community institutions and bodies;
  • help strengthen cooperation with the Member States in the field of fraud prevention;
  • develop strategies for the fight against fraud (preparing legislative and regulatory initiatives in the areas of activity of the Office);
  • set in motion any other operational activity in the fight against fraud (developing infrastructure, collecting and analysing information, providing technical support);
  • maintain direct contact with the national law enforcement and judicial authorities;
  • represent the Commission in the field of fraud prevention.

OLAF’s external investigative powers are mainly those that were conferred upon the Commission under Regulations (EC, Euratom) Nos 2988/95 (the European Communities’ financial interests) and 2185/96 (on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests). Furthermore, OLAF works on the basis of Regulation (EC) 515/97 on mutual administrative assistance.

How OLAF goes about its investigations

The two Regulations on investigations by OLAF, one applying to the EC and the other to Euratom, restate the Office’s main functions and define the practical arrangements for carrying out the administrative investigations for which it is responsible.

The checks and verifications OLAF carries out externally (in the Member States and in certain non-member countries with which the Community has cooperation agreements) and internally (inside the institutions and bodies established by or on the basis of the Treaties) do not affect the powers of the Member States in the area of criminal prosecution.

The Director of OLAF launches and directs investigations on his own initiative or at the request of a Member State with an interest in the matter (in the case of external investigations) or of the institution or body concerned (in the case of internal investigations).

As part of its external investigations, OLAF carries out the on-the-spot checks for which the Commission is responsible under Regulations (EC, Euratom) Nos 2988/95 and 2185/96.

For its internal investigations, OLAF has the right of immediate and unannounced access to any information held by the Community institutions, bodies, offices and agencies. It may also ask anyone concerned for oral information, and carry out on-the-spot checks on economic operators.

Where the Office discovers, in the course of an internal investigation, that a member, manager, official or other servant may be personally involved, it informs the institution, body, office or agency to which that person belongs, unless divulging such information is incompatible with the need to maintain complete strict confidentiality for the purposes of the investigation or a possible national investigation.

At the request of OLAF or on their own initiative, the Member States, institutions, bodies, offices and agencies are required to provide the Office with any document or information they hold that relates to an investigation under way.

All information passed on to the Office will be properly protected.

On completion of an investigation, OLAF draws up a report including recommendations as to the action to be taken. The report is sent to the Member States in the case of external investigations and to the institutions, bodies, offices and agencies in the case of internal investigations.

Information may also be sent to the competent authorities in the Member States and to the institutions, bodies, offices and agencies concerned, while an investigation is still under way (the Office is in direct contact with the national law enforcement and judicial authorities).

OLAF’s operational independence is protected by a Supervisory Committee consisting of five independent outsiders appointed by common agreement of the European Parliament, the Council and the Commission. Furthermore, if the Director considers that a measure taken by the Commission calls his independence in question, he is entitled to bring an action against it before the Court of Justice.

Any member of the staff of a Community institution, body, office or agency who feels that his interests are adversely affected in the course of an internal investigation may submit a complaint to the Director of OLAF or bring an action before the Court of Justice.

Interinstitutional Agreement between the Parliament, the Council and the Commission

The object of the Interinstitutional Agreement between the European Parliament , the Council and the Commission is to guarantee that internal investigations can be carried out under equivalent conditions in the three institutions and in all the other Community bodies, offices and agencies, including the European Investment Bank (EIB) and the European Central Bank (ECB).

To bring this about, the three institutions have agreed to adopt an internal decision based on the standard model annexed to the Agreement, and to call on the other institutions, bodies, offices and agencies to accede to the Agreement.

The model decision requires the Secretary-General, departments and all members of staff of the institution, body, office or agency concerned to cooperate fully with OLAF’s agents and to supply all useful information.

Where there is a presumption of fraud, corruption or any other illegal activity detrimental to the Communities’ interests:

  • any member who becomes aware of such evidence must without delay inform his Head of Service or Director-General or, if he considers it useful, his Secretary-General or OLAF directly;
  • the Secretary-General, the Directors-General and the Heads of Service or managers must transmit to OLAF without delay any evidence from which the existence of irregularities may be presumed;
  • members of the institutions, bodies, offices or agencies must inform the President or, where appropriate, OLAF directly.

Where it becomes clear during an internal investigation that a member, manager, official or other servant is involved, the person concerned is informed rapidly. He/she will be called upon to give his/her views on the matters concerning him/her. The invitation may be deferred where necessary for the purposes of the investigation or any subsequent national judicial inquiries.

OLAF delivers an opinion on any request for a waiver of immunity from the police or judicial authorities in a Member State, if the request relates to a manager, official or other servant of an institution, body, office or agency. If a request concerns a member of an institution or body, the Office is informed.

Background

The EC Treaty provides an explicit legal basis for operations by the Community and the Member States to combat fraud and other unlawful activities that are damaging to the Community’s financial interests (Article 280). The entry into force of the Amsterdam Treaty has given the Community much more substantial means for combating fraud and stamping out economic and financial crime.

The Commission’s Task Force for the Coordination of Fraud Prevention was thus replaced by the European Anti-Fraud Office (OLAF), which, in addition to carrying out investigations, is responsible for devising and preparing legislation for the protection of the Community’s financial interests and the fight against fraud. OLAF enjoys greater independence than its predecessor in conducting investigations.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Decision 1999/352/EC, CECA, Euratom

28.4.1999

–

OJ L 136 of 31.5.1999
Regulation (EC) No 1073/1999

1.6.1999

–

OJ L 136 of 31.5.1999
Regulation (Euratom) No 1074/1999

1.6.1999

–

OJ L 136 of 31.5.1999
Interinstitutional Agreement

1.6.1999

–

OJ L 136 of 31.5.1999

Related Acts

Proposal for a European Parliament and Council Regulation amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) [COM(2006) 244 final – Not published in the Official Journal].

In substance, the proposal has the following main objectives:

  • Governance, cooperation between the institutions and the Supervisory Committee. The Commission sees a need for political governance regarding priorities related to investigative activities. It proposes regular meetings between the Supervisory Committee and the other European institutions as part of a structured dialogue, without interfering in the investigative activities.
  • Guarantee of the rights of persons implicated. The Commission proposes including in the Regulation a detailed provision on the procedural guarantees to be respected in the conduct of internal and external investigations.
  • Improved monitoring of investigations. Monitoring that ensures the specific procedures are followed should be improved and the possibility of requesting an opinion should be introduced. A review adviser is provided for to fulfil such a role.
  • Improving the information flow. With this proposal, the Commission intends to improve the flow of information between OLAF and European bodies and institutions, between OLAF and the Member States, as well as between OLAF and whistleblowers.
  • Strengthening OLAF’s operational efficiency. The Commission is proposing measures that will allow OLAF to concentrate on its priority actions. For example, the opening and closing of investigations need clarification.
  • Improving the effectiveness of OLAF’s investigations. The Commission proposes to clarify OLAF’s powers of investigation in the context of external investigations involving economic operators receiving Community funds on the basis of contracts, agreements or grant awards (direct expenditure).
  • Term of office of the Director-General. A non-renewable term of office should be introduced for the OLAF Director-General in order to strengthen independence.

Codecision procedure (COD/2006/0084)

Activity reports:

Report of the European Anti-Fraud Office – Eighth Activity Reportfor the period 1 January 2007 to 31 December 2007 [Not published in the Official Journal].
This eighth activity report substantiates the principal trends of previous years. The volume and quality of information received by OLAF has steadily increased in the past years, confirming the public’s confidence in the Office. In the course of 2007, OLAF opened more cases than in 2006. Similarly, the number of cases closed increased as well, as opposed to previous years that have been characterised by a declining number of closed cases. Furthermore, the amount of “own investigations” OLAF carries out has exceeded the amount of investigations in which it merely provides assistance to national authorities. The average duration of cases increased slightly in 2007, due to the complexity of the cases the Office faces nowadays and to the necessity of involving Member States or outside partners in the investigations. OLAF has actively continued its cooperation with Member States, EU bodies in charge of police and judicial cooperation and international partners in the fight against fraud.

Report of the European Anti-Fraud Office – Seventh Activity Reportfor the period 1 January 2006 to 31 December 2006 [Not published in the Official Journal].

This report follows on from the sixth activity report. In it, the Commission assesses the irregularities committed and presents the most important measures taken in 2006 by the Member States and by itself to improve fraud prevention and the fight against fraud. The report also describes in detail the way OLAF decides to open an anti-fraud investigation and explains how cases are managed.

Report of the European Anti-Fraud Office – Sixth Activity Reportfor the period 1 July 2004 to 31 December 2005 [Not published in the Official Journal].

Evaluation report: Commission Report of 2 April 2003 – Evaluation of the activities of the European Anti-Fraud Office (OLAF) [COM(2003) 154 final – Official Journal C 76 of 25.3.2004].

Decisions by the institutions:

Council Decision 1999/394/EC of 25 May 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Official Journal L 149 of 16.6.1999].

As laid down in the Interinstitutional Agreement, this Decision states that the Council is to cooperate with the Office and keep it informed; it also requires the Security Office to assist OLAF’s staff in their work. In return, OLAF is required to inform anyone implicated in one of its investigations.

Commission Decision 1999/396/EC of 2 June 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Official Journal L 149 of 16.6.1999].

As laid down in the Interinstitutional Agreement, this Decision states that the Commission is to cooperate with the Office and keep it informed; it also requires the Security Office to assist OLAF’s staff in their work. In return, OLAF is required to inform anyone implicated in one of its investigations.

Decision of the European Parliament of 18 November 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [European Parliament Rules of Procedure, Annex XI – Official Journal L 44 of 15.2.2005].

As laid down in the Interinstitutional Agreement, this Decision states that the European Parliament is to cooperate with the Office and keep it informed. The Decision obliges Parliament’s Security Office to assist OLAF staff in their work. It also obliges OLAF to inform anyone who is implicated in one of its investigations.

Decision 1999/726/EC of the European Central Bank of 7 October 1999 on fraud prevention – [Official Journal L 291 of 12.11.1999].

The Decision seeks to provide adequate protection against fraud and other illegal activities at the European Central Bank (ECB), while maintaining the distribution and balance of responsibilities between the ECB and the European institutions.
Accordingly, the Decision sets up an anti-fraud committee to be responsible for monitoring the independence and functioning of the ECB Directorate for Internal Audit. The anti-fraud committee is also responsible for relations with the Supervisory Committee of OLAF. These relations are governed by the principles established by an ECB decision.

Decision of the Court of Justice of 26 October 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests [Not published in the Official Journal].

In accordance with the provisions of the Regulations setting up OLAF, this Decision requires the Court to cooperate with the Office and to keep it informed. It also lays down the procedures to be followed by OLAF staff when carrying out internal investigations. In line with the principle of confidentiality, it denies OLAF access to documents held in connection with legal proceedings that are in progress or have been terminated.

Judgment of the Court of Justice of 10 July 2003 setting aside Decision 1999/726/EC of the European Central Bank on fraud prevention and protection of the Communities’ financial interests (Case C-11/00).

Administrative cooperation in the field of taxation

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Administrative cooperation in the field of taxation

Outline of the Community (European Union) legislation about Administrative cooperation in the field of taxation

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Taxation

Administrative cooperation in the field of taxation

Document or Iniciative

Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC.

Summary

This directive repeals Directive 77/799/EEC and establishes new rules and procedures for the cooperation between European Union (EU) countries with a view to exchanging information that is relevant to the administration and enforcement of national laws in the field of taxation. It applies to all taxes except the following:

  • value added tax (VAT) and customs duties, or excise duties covered by other EU legislation on administrative cooperation between EU countries;
  • compulsory social security contributions payable to the EU country;
  • fees, such as for certificates and other documents issued by public authorities;
  • dues of a contractual nature, such as consideration for public utilities.

In accordance with this directive, on 17 June 2011 the Commission published a list of the EU countries’ competent national authorities in the Official Journal. The competent authority must designate a single central liaison office which is responsible for contacts with other EU countries in the field of administrative cooperation and may be responsible for contacts with the Commission. The competent authority may also designate liaison departments and competent officials with competences assigned according to national legislation or policy. Where a liaison department or a competent official receives a request for cooperation requiring action which is outside their area of competence, they must immediately send such a request to their country’s central liaison office and inform the requesting authority thereof.

EXCHANGE OF INFORMATION

Exchange of information on request

The requested authority must, at the request of the requesting authority, communicate any relevant information that it has in its possession or that it obtains from administrative enquiries. In order to obtain the requested information or to conduct the administrative enquiry requested, the requested authority must follow the same procedures as it would when acting on its own initiative or at the request of another authority in its own EU country. EU countries may not refuse to supply information solely because this information is held by a bank or other type of financial institution.

The requested authority must confirm receipt of the request within seven working days and must then provide the information as quickly as possible, and no later than six months after receipt of the request. If, however, the requested authority already possesses the information, it must be provided within two months of that date.

Mandatory automatic exchange of information

Each competent national authority must send to the competent authority of any other EU country, by automatic exchange, available information concerning taxable periods as from 1 January 2014 relating to residents in that other EU country on the following categories of income and capital:

  • income from employment;
  • director’s fees;
  • life insurance products not covered by other EU legal instruments on exchange of information and other such measures;
  • pensions;
  • ownership of and income from immovable property.

Spontaneous exchange of information

Each competent national authority must communicate information to the competent authority of any other EU country in the following situations:

  • the competent authority of one EU country has reason to suppose that there may be a loss of tax in the other EU country;
  • a person liable to tax obtains a reduction in, or an exemption from, tax in one EU country which would give rise to an increase in tax or to liability to tax in the other EU country;
  • business dealings between two persons liable to tax in different EU countries are conducted through one or more countries in such a way that a saving in tax may result in either or both of the EU countries;
  • the competent authority of one EU country has grounds for supposing that a saving of tax may result from artificial transfers of profits within groups of enterprises;
  • information forwarded to one EU country by another EU country’s competent authority has enabled information to be obtained which may be relevant in assessing liability to tax in the latter EU country.

Feedback

If requested, the competent authority which has received information has to send feedback to the sending country as soon as possible and no later than three months after the outcome of the use of the requested information is known.

OTHER FORMS OF ADMINISTRATIVE COOPERATION

Other forms of administrative cooperation include:

  • by agreement between the requesting authority and the requested authority, officials authorised by the requesting authority may be present in administrative offices and may participate in administrative enquiries in the requested country;
  • simultaneous controls of persons of common or complementary interest between two or more EU countries, with a view to exchanging the information obtained;
  • administrative notification;
  • sharing of best practices and experience to improve cooperation.

Any information communicated between EU countries in accordance with this directive is covered by the obligation of official secrecy and benefits from the protection extended to similar information under the national law of the EU country which received it. This information may be used in the following instances:

  • for the assessment and enforcement of other taxes and duties covered by Directive 2010/24/EU;
  • for the assessment and enforcement of compulsory social security contributions;
  • in judicial and administrative proceedings resulting from tax law infringements.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2011/16/EU

11.3.2011

1.1.2013

Article 8: 1.1.2015

OJ L 64, 11.3.2011

Overall strategic approach

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Overall strategic approach

Outline of the Community (European Union) legislation about Overall strategic approach

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Overall strategic approach

Document or Iniciative

Commission communication of 28 June 2000 – Protection of the Communities’ financial interests – The fight against fraud – For an overall strategic approach [COM (2000) 358 final – Not published in the Official Journal].

Summary

Given that the protection of the Community budget is the responsibility of the European institutions and the Member States, the Commission’s aim in this communication is to develop an overall strategic approach based on coordination, the key concept of Article 280 of the EC Treaty, with a view to affording effective and equivalent protection of financial interests Community-wide.

Since 1994, the Community approach to the fight against fraud has been pro-active and designed to develop a legislative framework covering all areas of protection of financial interests. This framework includes:

  • the convention on the protection of the European Communities’ financial interests (1995) and its Protocols of 1996 and 1997;
  • the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union (1997);
  • the Regulation relating to the protection of the European Communities’ financial interests (1995) and the Regulation concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (1996);
  • the establishment of the European Anti-Fraud Office (OLAF) in 1999.

In addition, the Commission, in response to its White Paper on reform, has decentralised the financial control function, set up an internal audit service and established working groups involving OLAF and all Commission departments.

Enlargement, the area of freedom, security and justice referred to in the Treaty of Amsterdam and the gradual abolition of national borders call for an overall and integrated approach based on a strengthened culture of cooperation.

Strategic guidelines

As part of this overall approach, the Commission is proposing a multiannual strategy around four main strategic guidelines to meet the principal challenges.

The first of these relates to an overall legislative anti-fraud policy in four parts:

  • prevention by means of clear and easily applicable legislation and including sufficiently dissuasive provisions. The Commission also hopes to increase the accountability of officials and is proposing that OLAF, the national authorities and professional circles be involved in prevention;
  • 0detection by strengthening the means and legal instruments for detection, controls and sanctions. The Commission therefore recommends continuing the effort to define precisely irregular conduct and illegal activities with a view to facilitating cooperation and the effective application of penalties. At the same time, it advocates extending information exchanges and control measures, in particular in connected or especially vulnerable sectors such as money laundering, public procurement and the granting of subsidies. This is to be backed up by an extended system of administrative penalties;
  • follow-up by ensuring more effective management of administrative and financial follow-up in order inter alia to improve the recovery of unduly received or evaded amounts. The financial correction instruments at the Community’s disposal should also be applied with the aim of motivating Member States to put in place effective national control systems;
  • cooperation in order to establish a single legal basis for combating fraud with a view to simplifying and clarifying the rules on participation in national investigations. Provision also needs to be made for a cooperation and mutual assistance system to fight fraud that is similar to that which already exists in certain areas such as the agricultural and customs policies, while cooperation with applicant countries and non-member countries needs to be strengthened.

The second challenge is to create a new culture of operational cooperation. The Commission is attempting to become more pro-active in its activities on the ground. This involves having an overall view of the economic and criminal environment and enhancing the exploitation and analysis of intelligence. For that purpose, technology and the information sources available must be improved and, in particular, OLAF must serve as a crossroads for gathering and analysing information and as a Community platform of services. Strengthened cooperation with the applicant countries is mentioned again. Lastly, the Commission undertakes to pursue a policy of permanent evaluation of anti-fraud action in order to measure the progress made.

The third challenge is to adopt an inter-institutional approach to prevent and combat corruption. The credibility of Community policies must be strengthened by safeguarding the integrity of the European public service and of the members of the institutions. OLAF must:

  • cooperate closely on the basis of loyal cooperation and consistency of the duties of each of the participants in the fight against fraud;
  • contribute more to training measures focusing on training and awareness-raising activities involving all staff, in particular those responsible for procurement or grants and providing a system of values;
  • encourage transparency and the duty to communicate;
  • complement its task of conducting administrative investigations with fair and effective penalties. Office action will have to be geared to the objective of “zero tolerance” and compliance with information obligations will be crucial for its effectiveness.

The fourth and last challenge is to enhance the criminal judicial dimension. National criminal policies should be adapted to the new Treaty provisions and assistance sought from the European institutions to improve the cooperation function. The Community already possesses the legal instruments to improve the detection of offences and provide the national judicial authorities with the means to process cases of fraud under criminal law. However, they are often not used because of obstacles such as the non-compatibility of national legal systems or technical specifications.

Lastly, in order to resolve problems arising from the various national systems regarding criminal offences linked to fraud, the conditions under which judicial assistance operates must be improved. OLAF must therefore develop its liaison and expertise function in this area.

Related Acts

Commission report to the European Parliament and the Council of 6 July 2007 – Protection of the European Communities’ financial interests – Fight against fraud – Annual report 2006 [COM(2007) 390 final – Not published in the Official Journal].
This report, which has been produced by the Commission in cooperation with the Member States, presents the measures taken in 2006 to meet the obligations provided for in Article 280 of the EC Treaty. It contains statistics concerning irregularities reported by Member States and gives an account of the measures taken and results obtained in preventing and fighting fraud and in recovering amounts not collected or wrongly paid. In particular, the report covers four specific areas: risk analysis and management; debarment and early-warning databases; warning systems involving internal informers; and mechanisms for recovery by offsetting.

Commission report to the European Parliament and the Council of 12 July 2006 – Protection of the Communities’ financial interests – Fight against fraud – Annual report 2005 [COM(2006) 378 final – Not published in the Official Journal].
In this report the European Commission evaluates its overall strategic approach for the protection of the Communities’ financial interests in the five years 2001-2005. Overall, implementation of the programmed objectives and actions was satisfactory. The report summarises the statistics on fraud and other irregularities notified by the Member States and records the measures taken by the Member States in 2005 and the Commission’s efforts to improve the effectiveness of OLAF. It also contains a section on improving the recovery of amounts not levied or wrongly paid out. The report also covers the issue of certifying the accounts.

Commission report to the European Parliament and the Council of 19 July 2005 – Protection of the European Communities’ financial interests – Fight against fraud – Annual report 2004 [COM(2005) 323 final/2 – Not published in the Official Journal].
This report presents the activities of the European Community and its Member States in combating fraud. To make the report easier to read, Community and national measures are now set out in parallel by topic (rather than in two separate parts). The report covers the salient features of the year’s activities, such as enlargement of the EU and the reform of OLAF. It sums up the statistical situation regarding irregularities reported and the position as regards public information on the fight against fraud. Part of the report is devoted to mutual assistance in customs and agricultural matters. And the Commission presents measures to improve the recovery of sums not collected or paid unduly.

Action Plan 2004-2005

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Action Plan 2004-2005

Outline of the Community (European Union) legislation about Action Plan 2004-2005

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Action Plan 2004-2005

Document or Iniciative

Communication from the Commission of 9 August 2004 on Protecting the Communities’ financial interests – Fight against fraud – Action Plan for 2004-2005 [COM(2004) 544 final – Not published in the Official Journal].

Summary

The 2004-2005 action plan corresponds to the second stage of implementation of the overall strategic approach adopted in June 2000. It testifies to the Commission’s ongoing commitment to the fight against fraud and constitutes one of its responses to the new challenges linked to the development of the Union in 2004 and 2005.

The action plan draws its legitimacy from Article 280 EC introduced by the Amsterdam Treaty. On that basis, on 15 May 2001 the Commission adopted a first action plan that saw a highly satisfactory rate of implementation.

Over the period 2001-2003, the legal framework for protecting the Community’s financial interests and fighting fraud and all other illegal activities adversely affecting those interests was supplemented in order to enable effective action to be taken in the fields of fraud prevention and fraud-proofing of legislation, protecting the euro, making public procurement procedures more secure and setting up coordination structures in the ten new Member States and the candidate countries. Cooperation between the relevant administrations was enhanced, thanks in particular to the capacity for analysis of fraud and irregularities and the magistrates unit set up within the European Anti-Fraud Office (OLAF); such cooperation is assessed each year in the report provided for by Article 280 of the EC Treaty. In addition to various measures to prevent and counter corruption, the Commission performed an evaluation of OLAF’s activities and put forward seventeen recommendations for reinforcing its structure and operations, while the Court of Justice confirmed on several occasions the legality and consistency of the inter-institutional framework for internal investigations. The criminal-law protection of the Community’s financial interests was strengthened with the entry into force in October 2002 of the first Convention instruments for the fight against fraud. Major steps were also taken towards setting up a European Public Prosecutor’s Office, and the objective was written into the constitutional treaty.

The new action plan follows the four main lines of action laid down in 2000 for the ensuing five years:

  • an overall anti-fraud legislative policy: making regulations more effective and consistent;
  • a new culture of cooperation: full participation of and collaboration between national and Community authorities;
  • an inter-institutional approach to preventing and fighting corruption: making the European institutions more credible;
  • strengthening the criminal-law dimension: adapting the legal and judicial framework for the protection of the financial interests of the European Union.

It also takes into account the new guidelines set out in the progress report on the activities of OLAF and the measures announced in the State of the Union Address delivered by the Commission President before the European Parliament on 18 November 2003.

In the context of an overall anti-fraud legislative policy, the action plan provides for the development of a culture of prevention and the tightening-up of legal texts through the following measures:

  • defining OLAF’s objectives and reinforcing its legal framework in order to consolidate its structure;
  • stepping up cooperation with the Member States, with special reference to money laundering and VAT fraud;
  • assessing the black list mechanism in the EAGGF Guarantee Section;
  • definitively setting up the European Technical and Scientific Centre (ETSC) for protecting the euro against counterfeiting;
  • continuing and adapting the Pericles programme.

Still within the same context, the aim is also to strengthen means of detection, controls and sanctions. To that end, the Commission plans to:

  • clarify fraud investigation powers at Community level, particularly in the area of direct expenditure;
  • extend the administrative penalty system, in particular to the areas of customs, the Structural Funds, direct expenditure and OLAF investigations;
  • issue technical guidelines to national authorities wishing to supervise the authentification of euro coins in their territory.

Lastly, the plan is aimed at ensuring more effective management of administrative and financial follow-up, and thus provides for the following action:

  • proposing amendments to the Regulation on the financing of the CAP in order to improve the recovery of sums wrongly paid under the EAGGF Guarantee Section;
  • clearing the backlog of cases concerning irregularities reported before 1999.

As part of the second line of approach, which focuses on a new culture of cooperation, the intention is to enhance the use and analysis of information (“intelligence”). The Commission aims to establish better operational cooperation between customs administrations and to simplify the procedure for notifying irregularities in the areas of the Structural Funds, the Cohesion Funds and the EAGGF Guarantee Section.

In addition, to develop a closer partnership with Member States and non-member countries, the Commission plans to:

  • strengthen relations with Member States by updating the Decision establishing the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF);
  • improve information from Member States on the follow-up given to OLAF’s investigations;
  • enhance synergy by drawing up an inventory of the services that the Commission and OLAF can provide to the institutions and Member States and implementing the multidisciplinary service platform;
  • help the new Member States to reinforce their capacity for fighting fraud;
  • reinforce anti-fraud coordination services in candidate countries;
  • conclude negotiations with Switzerland on the fight against fraud;
  • negotiate international agreements on mutual assistance in customs matters with non-member countries;
  • include anti-counterfeiting clauses in cooperation and association agreements.

Rounding off this second line of approach, the Commission will evaluate anti-fraud measures on an ongoing basis through an inventory of new measures at Community and Member State level.

The third line of action, an inter-institutional approach to prevent and combat corruption, includes the following measures aimed at developing a culture of cooperation at all levels:

  • examining the usefulness of adopting a memorandum of understanding between OLAF and the Commission and between the Commission and the other institutions;
  • re-examining the memorandum of understanding between OLAF and the Investigation and Disciplinary Office (IDOC);
  • setting up a high-level interdepartmental group to improve transparency and the flow of information between OLAF and other directorates-general.

To improve the legal framework for administrative investigations, the Commission intends to amend certain provisions in the interests of clarity and harmonisation.

The fourth and last line of approach focuses on enhancing the criminal-law judicial dimension. Here, the Commission plans to:

  • draft a White Paper on strengthening the effectiveness of criminal prosecutions by establishing a European Public Prosecutor ;
  • bring out a report on implementation of the Convention on the protection of the European Community’s financial interests by the Member States;
  • conclude a protocol with Europol;
  • draw up with the Member States a practical guide for cooperation with criminal prosecution authorities.

To sum up, the new action plan highlights three top-priority objectives:

  • reinforcing the regulatory framework of May 1999 for OLAF’s activities and competencies;
  • improving the flow of information between the Member States and the Commission;
  • developing the criminal-law protection of the Community’s financial interests with the Member States, following the proposal to create a European Public Prosecutor with competence for protecting the financial interests of the Union.

The measures planned for the period 2004-2005 take into account the findings of the progress report on the activities of OLAF and comprise actions that were not completed in the previous period as well as measures designed to respond to specific needs and reinforce OLAF’s legal framework, in particular in the light of the weaknesses revealed by the Eurostat case.

In the document, the Commission also assesses the overall results of the 2001-2003 action plan, which can be regarded as positive.

 

On-the-spot checks and inspections on the premises of economic operators

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On-the-spot checks and inspections on the premises of economic operators

Outline of the Community (European Union) legislation about On-the-spot checks and inspections on the premises of economic operators

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

On-the-spot checks and inspections on the premises of economic operators

Document or Iniciative

Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to detect fraud and irregularities affecting the European Communities’ financial interests.

Summary

1.The Regulation applies to the on-the-spot checks and inspections carried out by the Commission in order to counter fraud, in particular where there are grounds for suspecting that irregularities * have been committed against the Community budget by economic operators *. The regulation, which establishes additional general provisions to Regulation (EC, Euratom) No 2988/95, applies to all areas of the Community’s activities. It does not affect the Member States’ powers to prosecute criminal infringements under national law.

Carrying out on-the-spot checks and inspections

The European Commission is to carry out on-the-spot checks and inspections on the premises of economic operators:

  • to investigate possible serious or cross-border irregularities or irregularities involving economic operators acting in several Member States;
  • to reinforce on-the-spot checks and inspections in a Member State in order to protect the Community’s financial interests more effectively and ensure an equivalent level of protection within the European Union;
  • at the request of a Member State.

Prior to the on-the-spot checks and inspections the Commission is required to inform the Member State(s) concerned in good time in order to obtain all the assistance required. The on-the-spot checks and inspections are to be prepared and carried out by the Commission in close cooperation with the competent authorities of the Member State concerned. They will be carried out under the authority and responsibility of “Commission inspectors”, i.e. duly authorised officials or other staff, who will comply with the rules of procedure in the Member State concerned.

The economic operators must allow the inspectors access to their premises, land and other places used for business purposes, and means of transport. If an economic operator resists an on-the-spot check or inspection, the Member State concerned will give the Commission’s inspectors such assistance as they need to allow them to discharge their duty. This assistance will be given by the competent authorities of the Member State in compliance with national law.

In the interests of efficiency, the Commission will ensure that similar checks and inspections are not carried out at the same time in relation to the same matters on the premises of the economic operators concerned under sectoral rules. It will take into account inspections that are being or have been carried out by the Member State under national law.

Ensuring access to the necessary information and documentation under national law

Commission inspectors are to have access, in compliance with national criminal procedure law, to all the information on the operations concerned which are required for the proper conduct of the checks and inspections. They may avail themselves of the same inspection facilities as national administrative inspectors and in particular copy relevant documents.

On-the-spot checks and inspections may concern, in particular:

  • business books and documents such as invoices, lists of terms and conditions, pay slips, statements of materials used and work done, and bank statements,
  • computer data;
  • production, packaging and dispatching systems and methods;
  • physical checks as to the nature and quantity of goods or completed operations;
  • the taking and checking of samples;
  • the progress of works and investments for which financing has been provided, and the use made of completed investments;
  • budgetary and accounting documents;
  • the financial and technical implementation of subsidised projects.

Where necessary, it will be for the Member States, at the Commission’s request, to take the appropriate precautionary measures under national law, in particular in order to safeguard evidence.

Information acquired in relation to the on-the-spot checks and inspections is covered by professional secrecy and by the Community provisions on data-protection.

The Commission inspectors’ reports constitute admissible evidence in administrative or judicial proceedings of the Member State in which their use proves necessary.

Key terms used in the act
  • economic operator means: natural or legal person or any other entity on which national law confers legal capacity (Article 7 of Regulation No 2988/95);
  • “irregularity”: any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure (Article 1(2) of Regulation No 2988/95).

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2185/96. 18.11.1996 – OJ L 292 of 15.11.1996

Fraud proofing of legislation and of the management of contracts

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Fraud proofing of legislation and of the management of contracts

Outline of the Community (European Union) legislation about Fraud proofing of legislation and of the management of contracts

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Fraud proofing of legislation and of the management of contracts

Document or Iniciative

Commission Communication on fraud proofing of legislation and of the management of contracts [SEC(2001) 2029 of 07.11.2001 – Not published in the Official Journal]

Summary

The Commission Communication is the result of the work of an informal interdepartmental working party chaired by OLAF and made up inter alia of representatives of the Secretariat-General, the Legal Service, and the Directorates-General for Budget, Justice and Home Affairs, External Relations, Agriculture, Regional Policy, and Taxation and Customs Union. Its aim is to develop an overall strategic approach to fraud prevention which also takes account of the Commission’s White Paper on administrative reform and a fraud prevention culture. The new cooperation system will be targeted at new draft legislation with significant financial implications in areas of Community activity deemed most sensitive to fraud.

Provisions are also made in the 2001-03 action plan for mechanisms for cooperation from the stage of drafting legislation between the Commission departments and OLAF. As a result of its experience in conducting investigations and in drawing up legislation, OLAF will be able to help in analysing texts before they reach the stage of interdepartmental consultation by identifying loopholes which might hamper fraud prevention.

Legislative aspect

A horizontal unit has been created within OLAF (Unit OLAF/A/3) one of whose “fraud proofing” tasks will be to work with an ad hoc interdepartmental working party in defining criteria for identifying areas of competence which might be deemed highly sensitive from the point of view of their exposure to fraud risks. The outcome of this analysis will be communicated to the departments responsible and to the Directorates-General for Budget and for Administration.

This unit’s activities will be limited to the most sensitive draft legislation in areas themselves deemed high-risk. The procedure in question will apply to initiatives proposed by the Commission in its 2003 legislative work programme, adopted on 30 October 2002. Further to the decisions adopted within the interdepartmental working party, OLAF will launch a dialogue with the lead Directorates-General, who will have designated a correspondent for that purpose. OLAF and the Directorates-General will at any time be able to review the criteria validated by the interdepartmental working party.

The first meeting of this working party took place on 10 December 2002. This meeting was the first stage in the procedure leading to:

  • the determination of the criteria required to identify risk sectors;
  • the determination of risk areas of Community legislation;
  • the identification of sensitive draft legislation falling within risk areas, which will be specifically analysed by OLAF;
  • consultation of OLAF prior to interdepartmental consultation.

For the purposes of this analysis and prevention activity, departments will communicate draft legislation to OLAF as early as possible.

Contractual aspect

With regard to fraud prevention in the area of contracts, the Communication proposes two measures (which appear in the Commission’s White Paper on administrative reform), i.e.:

  • the adoption of standard contracts harmonised for the whole Commission (most frequently used clauses, types of contract, etc.);
  • the introduction of a central database of contracts and contractors.

OLAF, acting via its specific unit, will be involved at a very early stage in the process of defining and drafting clear clauses with a view to protecting not only the Community’s financial interests but also those of beneficiaries. Standard clauses concerning checks and penalties will have to be included in contracts.

Centralisation of information will enable all Commission departments to be quickly informed via the Intranet.

Hercule programme

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Hercule programme

Outline of the Community (European Union) legislation about Hercule programme

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Hercule programme

Document or Iniciative

Decision No 804/2004/EC of the European Parliament and of the Council of 21 April 2004 establishing a Community action programme to promote activities in the field of the protection of the Community’s financial interests (Hercule programme) [See amending acts].

Summary

The Hercule programme was established by Decision 804/2004/EC for the period 2004-06. By Decision 878/2007/EC, the programme was extended for the period 2007-13.

HERCULE (2004-06)

With a budget of nearly 12 million, the Hercule programme was designed to support the following measures:

  • the organisation of seminars and conferences;
  • the promotion of scientific studies and discussions on Community policies in the field of the protection of the Community’s financial interests;
  • the coordination of activities relating to the protection of the Community’s financial interests;
  • training and awareness;
  • promoting exchanges of specialised staff;
  • the dissemination of scientific information;
  • the development and supply of specific IT tools;
  • technical assistance;
  • promoting and enhancing the exchange of data. On condition that they were located in one of the 25 Member States, in the EFTA/EEA countries, on the basis of the EEA Agreement (Iceland, Liechtenstein, Norway and Switzerland), in Bulgaria, Romania or Turkey, three types of organisation were eligible to receive a grant in 2004-06:
  • national or regional administrations;
  • research and education institutes with legal personality;
  • non-profit-making bodies with legal personality. Aid applications were assessed on the basis of the criteria set out in the annex to the Decision. These criteria were, inter alia, consistency of the proposed activity with the objectives of the programme, complementary nature with respect to other activities receiving support and feasibility, i.e. the specific possibilities of implementation through the means proposed.

The aid amount could not exceed the following rates:

  • 50 % of eligible expenditure for technical support;
  • 80 % of eligible expenditure for training measures, promoting exchanges between specialised staff and organising seminars and conferences;
  • 90 % of eligible expenditure for organising seminars, conferences and other events.

In addition, the amount of an operating grant awarded to finance a body’s operating expenditure could not exceed 70 % of the body’s eligible expenditure for the calendar year. If operating grants were renewed, they were degressive.

HERCULE II (2007-13)

The Hercule II programme covers the period from 1 January 2007 to 31 December 2013. The financial envelope for that period is 98.5 million.

The programme provides for Community financing through the granting of aid, but is also available for public procurement contracts. The rules for Community financing are laid down in Regulation (EC, Euratom) No 1605/2002 as subsequently amended. In contrast to the previous programme, “operating” grants can no longer be awarded. Consequently, all the funds available for 2007-013 are to be used for activity promotion through grants for activities or public procurement.

The main objectives of the Hercule II programme are:

  • to enhance cooperation between the actors in the fight against fraud damaging to the Community’s financial interests, i.e. the competent authorities in the Member States, the Commission and the European Anti-Fraud Office (OLAF);
  • to reinforce the networks for exchange of information between Member States, the accession countries and the candidate countries;
  • to provide operational and technical support to law enforcement agencies in the Member States, particularly the customs authorities.

The Hercule II programme is designed to multiply and reinforce measures against cigarette smuggling and counterfeiting.

The organisations which are eligible for grants are the same as in the previous period, provided they are located in one of the 27 Member States, in the EFTA-EEA countries, on the basis of the EEA Agreement (Iceland, Liechtenstein and Norway) or in one of the EU candidate countries, on the basis of a memorandum of understanding. In addition, the western Balkan states, Russia and the countries covered by the European neighbourhood policy are also eligible for aid in respect of expenditure relating to participation by their representatives.

The Commission assesses applications on the basis of criteria such as the consistency of the proposed activity with the programme objectives, the relationship between the costs and benefits of the measure, the scope of the public targeted, etc. However, the aid granted cannot cover all the expenditure. The maximum rates of aid, which are the same as those that were in force for 2004-06, are as follows:

  • 50 % of eligible expenditure for technical support;
  • 80 % of eligible expenditure for training measures, promoting exchanges between specialised staff and organising seminars and conferences, in respect of national or regional administrations:
  • 90 % of eligible expenditure for organising seminars, conferences and other events, in respect of research and education institutes or non-profit-making organisations.

Throughout the period of the contract or agreement and up to five years after the final payment, the Commission may carry out inspections on the use of the Community financing. If necessary, the Commission may decide to recover the grant paid. The Commission and the persons authorised by it have the right to access the places in which the measure is implemented as well as all the information required in order to carry out the inspection. The European Court of Auditors and OLAF have the same rights.

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Decision 804/2004/EC 01.5.2004 – OJ L 143, 30.4.2004
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Decision 878/2007/EC 26.7.2007 – OJ L 193, 25.07.2007

Protecting the European Union's financial interests

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Protecting the European Union’s financial interests

Outline of the Community (European Union) legislation about Protecting the European Union’s financial interests

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Fight against fraud > Protecting the European Union’s financial interests

Protecting the European Union’s financial interests

The European Union (EU) has its own budget to finance Europe’s policies. The revenue side is made up of customs duties, value added tax and a share of the gross national income of EU countries. The Union’s financial interests are protected not only by OLAF, but by a battery of anti-fraud regulations.

GENERAL FRAMEWORK

  • Commission Action Plan towards an Integrated Internal Control Framework
  • Hercule programme
  • Criminal-law protection of the Community’s financial interests
  • Overall strategic approach
  • A common legal framework for combating fraud in Community policies
  • Convention on the protection of the European Communities’ financial interests

COMBATING FRAUDULENT PRACTICES IN THE USE OF EU FUNDING

  • Stratégie antifraude de la Commission
    (FR)
  • New approach to fraud prevention
  • Fraud proofing of legislation and of the management of contracts
  • On-the-spot checks and inspections on the premises of economic operators
  • Scrutiny of expenditure under the European Agricultural Guarantee Fund (EAGF)
  • Recovery and information system for money wrongly paid in connection with the financing of the common agricultural policy
  • Community system for the identification of certain beneficiaries of transactions financed by the EAGGF Guarantee Section
  • Action Plan 2004-2005
  • Action plan 2001 – 2003

PROTECTING THE UNION’S OWN RESOURCES

  • Anti-tax fraud measures
  • Administrative cooperation in the field of value added tax (until 31.12.2011)
  • Administrative cooperation in the field of VAT (from 1.1.2012)
  • Mutual administrative assistance in the fight against fraud

CUSTOMS

  • Agreement with the Swiss Confederation
  • Customs Agreement with Japan
  • Agreement with China
  • Agreement with India
  • Agreement with Hong Kong
  • Agreement with Canada
  • Agreement with the Republic of Korea

Combating social security fraud and undeclared work

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Combating social security fraud and undeclared work

Outline of the Community (European Union) legislation about Combating social security fraud and undeclared work

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Employment and social policy > Social protection

Combating social security fraud and undeclared work (Code of conduct)

Document or Iniciative

Resolution of the Council and representatives of the governments of the Member States meeting within the Council of 22 April 1999 on a code of conduct for improved cooperation between authorities of the Member States concerning the combating of transnational social security benefit and contribution fraud and undeclared work, and concerning the transnational hiring-out of workers [PDF ][Official Journal C 125 of 6.5.1999].

Summary

Member States are invited to take the necessary steps and adopt the required procedures with a view to improving cooperation in the relevant areas, using the following practical means of cooperation and reciprocal provision of administrative assistance:

  • direct communication between competent bodies;
  • designation of national liaison offices in the Member States with a view to facilitating cooperation, and their notification to the other Member States and to the Commission;
  • forwarding of any request for cooperation to the competent body of a Member State;
  • reciprocal provision of administrative assistance between the competent bodies (supply of information, transmission of documents).

Member States are to encourage cooperation between their competent bodies in respect of data transmission and requests for information, while protecting the right to privacy in the processing of personal data.

Member States are invited to keep the Commission informed of measures taken in implementing this resolution.

Background

In cases where at least two Member States are involved, the code of conduct aims to improve cooperation between the competent authorities and institutions of the Member States in combating social security fraud * and undeclared work *, as well as in the area of the transnational hiring-out of workers *.

Key terms used in the act
  • Social security fraud: any act or omission to act, in order to obtain or receive social security benefit or to avoid obligations to pay social security contributions, contrary to the law of a Member State.
  • Undeclared work: any paid activities that are lawful as regards their nature, but not declared in conformity with national law and practice.
  • Transnational hiring-out of workers: the hiring-out of workers by an employer for the purpose of providing services to a user in another Member State, whose national legislation so permits, with continuation of the employment relationship between the workers and the employer.