Friday

20th Apr 2018

Massive fraud of EU funds rarely reported by member states

Public authorities in member states are sealing their lips when it comes to passing on allegations of fraud, corruption, and criminal activities to the EU anti-fraud office, Olaf.

“The decrease of information from public authorities is something which is worrying us,” Olaf’s director-general Giovanni Kessler told reporters in Brussels on Tuesday (July 3).

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Olaf investigators recovered €388 million of EU funds from an EU-funded highway project in Italy's Calabria region. (Photo: OLAF)

Of the 1046 reported leaks from both public and private sources in 2011, only 54 came member state authorities. More than half came from companies, lawyers, and anonymous individuals.

Kessler noted public sources are becoming more reluctant to denounce fraud because of an inherit fear of being labelled corrupt at the EU-level.

Olaf, which audits how EU funds are spent and scrutinizes ethics within the EU institutions, said unspent structural funds attracts the vast majority of fraud and usually involves criminal organisations spread across the EU and the world.

The structural funds, which make up the bulk of the EU budget, are entirely managed by member state or regional authorities without any oversight from the European Commission.

“The mechanism of control on how the money is spent is the weakest and where we see most of the problems,” said Kessler.

Olaf’s investigations led in 2011 to the recovery of €691 million - over a ten-fold increase compared to 2010. Over €520 million of the money came directly from EU structural funds alone. In comparison, the total amount recovered from structural funds in 2010 was €32 million.

Italian mob nicks €388 million

The single biggest haul came when the investigators uncovered a racketeering scheme on a EU-funded highway construction project, near Salerno, in southern Italy’s Calabria region.

Olaf, along with the Italian investigators, found evidence of transport authorities who had written off €388 million in EU funds.

The investigators uncovered conflicts of interests where Italian officials were awarding contracts to companies they also worked for.

Judicial trials are on going but an Olaf official told EUobserver that the money returned to the EU budget invariably came from the Italian taxpayer.

The Olaf official also pointed out that most of these cases come to light when audits are carried out at the end of the EU’s seven-year multiannual financial framework budgetary cycle.

Meanwhile, customs fraud jumped from €7.6 million recovered in 2010 to €113.7 in 2011. The recovery of funds from agricultural subsidies also increased from €11.4 to €34.

Another anomaly, compared to 2010, is the recovery of funds from EU staff. In 2010, Olaf recovered around €100,000 whereas in 2011 they netted €600,000.

In one case, Olaf received allegations that a EU official employed as a project manager in a European Commission delegation was accepting bribes from contractors.

Criminals shop weak EU member states

Criminals also actively seek out member states where criminal legislation is weak, riddled with loopholes, or where prosecution is uncommon.

“Criminals choose the member states where to pay the bribe according to the legislation of the member state,” said Kessler.

Bribes are not necessarily cash stuffed in envelopes but rather payments made to a fake company placed in another member state.

Kessler declined to cite which member states are the preferred bribery point by criminals but EUobserver understands that Hungary, Romania, Bulgaria, and the Czech Republic top the list.

”If only one member state has inappropriate legislation, it could affect the whole of Europe,” stated Kessler.

The European Commission, for its part, will table a “substantive criminal law” directive in July that will specifically target financial fraud.

The Commission is also hoping to set-up its European Public Prosecutor office in the first half of 2013. The office would initially have the power to investigate and indict crimes that affect the EU budget but could eventually expand to other sectors.

Greek orthodox head defends Church over tax scandals

Taxes in Greece continue to slip through state scrutiny as some corporations, wealthy Greek-ship owning families, and the Greek Orthodox Church are either exempt or use loopholes to hide millions of euros.

Feature

'Flobert' guns - Europe's latest terror loophole

Project Safte, an international research project funded by the European Commission, has revealed a loophole in the EU firearms directive that is being exploited by criminals and possibly terrorists.

News in Brief

  1. Audit office: Brexit 'divorce' bill could be billions higher
  2. MEPs urge better protection for journalists
  3. Dieselgate: MEPs back greater role for EU in car approvals
  4. European parliament adopts new organic farming rules
  5. EU granted protection to half million people in 2017
  6. Report: Facebook to carve 1.5bn users out of EU privacy law
  7. Greek court ruling permits migrants to travel to mainland
  8. Commonwealth summit hopes for trade boost after Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  2. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  3. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  4. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  5. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  6. UNICEFCalls for the Protection of Children in the Gaza Strip
  7. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  8. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  9. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  10. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  11. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  12. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia

Latest News

  1. MEP friendship groups offer 'backdoor' for pariah regimes
  2. Macron and Merkel pledge euro reform
  3. Obscurity surrounds EU military fund's expert groups
  4. New EU party finance rules short circuit accountability
  5. Draghi to stay in secretive 'lobby' group
  6. Bulgaria offers lesson in tackling radical-right populists
  7. Getting secret EU trilogue documents: a case study
  8. Selmayr case scars Parliament and Commission

Stakeholders' Highlights

  1. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector
  2. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  3. Europea Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  4. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  5. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  6. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  7. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  8. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  9. Martens CentreEuropean Defence Union: Time to Aim High?
  10. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  11. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  12. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights