Monday

25th Mar 2019

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).

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • 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.

Slovakia puts squeeze on free press ahead of election

Smer, Slovakia's ruling party, wants the country's media to give politicians a right-of-reply, or face stiff fines. Advocates of a free press are alarmed, and it poses a problem for the European Commission, whose vice-president is a Smer presidential candidate.

News in Brief

  1. Orban vows more EU 'information campaigns'
  2. May 'effectively out of power', says Scottish leader
  3. May under pressure to resign over Brexit endgame
  4. Million march against Brexit, five million sign petition
  5. Italy first G7 country to sign China Belt and Road deal
  6. EU leaders at summit demand more effort on disinformation
  7. Report: Corbyn to meet May on Monday for Brexit talks
  8. Petition against Brexit attracts 2.4m signatures

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Latest News

  1. Romania presidency shatters EU line on Jerusalem
  2. The Spitzen process - a coup that was never accepted
  3. Russia and money laundering in Europe
  4. Italy takes China's new Silk Road to the heart of Europe
  5. What EU leaders agreed on climate - and what they mean
  6. Copyright and (another) new Brexit vote This WEEK
  7. EU avoids Brexit crash, sets new date for 12 April
  8. Campaigning commissioners blur the lines

Stakeholders' Highlights

  1. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  2. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  3. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  4. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  5. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  6. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  7. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  8. Nordic Council of MinistersSeminar on disability and user involvement
  9. Nordic Council of MinistersInternational appetite for Nordic food policies
  10. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  11. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  12. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”

Join EUobserver

Support quality EU news

Join us