EU must ‘step up its fight’ against fraud, says Court of Auditors’ report

A damning new report published this week by the European Court of Auditors says that the European Commission lacks “comprehensive information on the scale, nature and causes” of fraud.
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By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

11 Jan 2019

The report says that as the current fraud investigation system has “inherent weaknesses,” it recommends that the European Commission should “ensure leadership and reconsider the role and responsibilities” of its anti-fraud office (OLAF).

“Fraud is a hidden and complex phenomenon and protecting the EU’s financial interest against fraud requires comprehensive and systematic efforts. This is a key responsibility of the European Commission,” the report says.

In their assessment, the auditors looked at whether the commission is properly managing the risk of fraudulent activities that are detrimental to the EU budget.


In particular, they looked at the information available on the scale, nature and causes of fraud in EU spending.

The commission has, in the past, frequently been criticised, not least by eurosceptics, for failing to control EU fraud.

This includes spending on cohesion policy, which accounts for the second biggest chunk of the EU budget.

The auditors examined whether the commission’s strategic risk management framework is effective and whether OLAF’s administrative investigations lead to prosecution and recovery.

"It is time for real action: the Commission should set up an effective system to prevent, detect and deter fraudsters. A reform of OLAF will be the litmus test for the Commission’s commitment to fighting fraud” Juhan Parts, European Court of Auditors

The auditors found that the commission “lacks comprehensive and comparable data” on levels of detected fraud in EU spending.

“Moreover, it has not so far carried out any assessment of undetected fraud, nor detailed analysis of what causes economic actors to engage in fraudulent activities,” the report said.

“This lack of knowledge reduces the practical value and effectiveness of the Commission’s plans to protect the EU’s financial interests against fraud,” it added.

Speaking at a news briefing in Brussels, Juhan Parts, the member of the European Court of Auditors responsible for the report, said, “The perception among seven out of ten EU citizens is that fraud against the EU budget happens rather frequently, even if the situation might be different. Unfortunately, anti-fraud activities to date are still insufficient.”

“It is time for real action: the Commission should set up an effective system to prevent, detect and deter fraudsters. A reform of OLAF will be the litmus test for the Commission’s commitment to fighting fraud,” he added.

The auditors conclude that the current system, whereby OLAF’s administrative investigation of suspected fraud is followed by a criminal investigation at national level, “takes up much time and makes prosecution less likely,” Parts said.

On average, 17 cases per year in which OLAF made recommendations - fewer than half of all such cases - have led to the prosecution of suspected fraudsters.

The auditors stress that OLAF’s final reports in a number of cases do not provide sufficient information to initiate the recovery of unduly paid EU money.

Between 2012 and 2016, only about 15 percent of the total amount recommended was actually recovered.

The auditors said they considered the establishment of the European Public Prosecutor Office (EPPO) a “step in the right direction” but warned that the current EPPO regulation poses several risks.

One of the main issues concerns detection and investigation, which the court says will be heavily dependent on national authorities.

However, the regulation does not put in place any mechanism enabling the EPPO to urge Member States to allocate the resources necessary to proactively investigate fraud in EU spending.

To achieve better results in tackling fraud against the EU’s financial interests, the auditors recommend that the commission should “put in place a robust fraud reporting and measurement system, providing information on the scale, nature and root causes of fraud.”

The Court said the commission should also “intensify its fraud prevention activities and tools.”

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