In its latest annual report, the European Anti-Fraud Office (OLAF) highlights the persistence and flexibility of fraudsters. While having to deal with the consequences of the pandemic (including limits on site visits), ongoing investigations into conflicts of interest, collusion and manipulation of public procurement continued, resulting in the recommended recovery of €293m to the EU budget. Overall, during 2020, OLAF concluded 230 investigations - including in Italy (13 cases), Bulgaria, Hungary and Romania (8 cases each) as well as Poland and France (7 cases each) – and opened 290 new investigations.
OLAF is tasked to detect, investigate and stop fraud with EU funds. It does so by carrying out independent investigations into fraud and corruption involving EU monies as well as by contributing to the development of a sound EU anti-fraud policy. It is for competent EU and national authorities to examine and decide on the follow-up of OLAF recommendations.
The sudden and massive increase in demand for facemasks, hand sanitisers, ventilators and testing kits as the pandemic took hold across the EU in spring 2020 appears to have provided significant opportunities for counterfeiters. More than 1,000 suspicious operators were identified and millions of substandard or counterfeit items seized. As countries started to roll out vaccine campaigns, OLAF also worked to coordinate awareness of the risk of fake vaccines.
Trends in fraudulent behaviour
Key trends identified in 2020 related to the manipulation of procurement and tendering processes to pocket EU funds – often with cross-border dimensions and underpinned by complex money laundering schemes. Conflicts of interest and collusion between beneficiaries and contractors were often at the heart of such frauds.
Other trends noted included the use of false or inflated invoices, corruption and conflicts of interest targeting agricultural and rural development funding as well as (increasingly) fraud associated with EU research funding. OLAF also points to fraud affecting the environment and biodiversity, with several investigations leading to the seizure of illicit pesticides as well as illegal cooling gases.
Cigarette and tobacco smuggling continued to be significant. In 2020, almost 370 million cigarettes destined for illegal sale in the EU were seized by OLAF and national partners. A three-year operation involving 10 countries led to the seizure of 95 million illegal cigarettes, 300 million tonnes of tobacco and over 200 arrests.
Detailed case studies of some of the most complex, cross-border schemes operated are included in the report.
Concerns over EU recovery spending abuse
Looking ahead, OLAF makes clear its concerns over the significant potential for misuse of the EU’s €800bn post-pandemic recovery spending. OLAF particularly notes potential gaps over central oversight which could limit the EU’s ability to monitor financial flows. While some countries are voluntarily using existing EU-wide risk assessment tools, others are likely to rely on their own internal systems. EU countries are being obliged to set up national systems to record and report the ultimate beneficiaries of EU recovery funds.
OLAF will also be working closely with the newly established European Public Prosecutor’s Office (EPPO). As an independent office, the EPPO is responsible for investigating, prosecuting and bringing to judgement crimes against the financial interests of the EU – thereby closing the gap due to OLAF’s limited authority to recommend rather than require prosecutions. Joint working arrangements between the two bodies have been agreed.
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