7th Jul 2022

Blacklist to stop fraudsters getting EU funds not working

  • An EU system to prevent fraudsters from accessing EU funds is not working as designed (Photo: Daniel Nyul)
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An EU blacklist preventing fraudsters from accessing EU funds is not working as designed, said a watchdog report.

The report out Monday (23 May) by the Luxembourg-based European Court of Auditors said the system does little to prevent dubious individuals from securing EU money.

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Also known as the early detection and exclusion system (Edes), the blacklist is operated by the European Commission.

But its dysfunctional management means potential fraudsters are likely to gain access to EU money anyway.

The problem appears to be that responsibility for the system is spread out over numerous different commission departments, notes the report.

"Nobody really feels accountable for it. The commission does not have a central overview," said Helga Berger, a court auditor who drafted the report.

Set up in 2016, the blacklist includes those individials who are bankrupt, don't pay taxes, commit fraud, corruption, or other similar offences.

But out of 448 named on the EU blacklist as at the end of 2020, all but 18 had been excluded from accessing EU funds due to bankruptcy.

Only two were listed for corruption.

"The problem is that bankruptcy is not really a risk because they are no longer in business and won't apply for additional contracts" she said.

Berger voiced frustration because on paper, the Edes is well designed. The problem is that it is not being executed properly, she said.

This is also due, in part, because the people working at the commission are unable to get easy access to information on the ground.

"For the moment, they have to do their own research and it is not easy for them," she says.

The commission instead places a high degree of reliance on declarations of honour from people who may otherwise be blacklisted, says the report.

Three-quarters of EU budget excluded

Another weakness is that the blacklist only covers the funds directly or indirectly managed by the European Commission.

It means that out of the €150bn of EU funds doled out in 2020, only €39bn was "vetted" by the commission.

The remainder or €111bn was managed by the EU states, which are not obliged to have any blacklists in place.

Those exemptions are spelled out in a revised 2016 financial regulation.

At the time, discussions sought to include EU states in Edes in the regulation. But EU states were exempted anyway.

"It's a pity because this blacklisting can ensure EU funds do not fall into the wrong hands," said Berger.

As an example, Berger and her team looked at Estonia, Italy, Poland and Portugal.

None have any fully functional system in place to screen people before they get EU funds.

Austria also has no blacklisting in place, she added.

Berger is hoping the report will pressure the commission to make the blacklist work.

The commission appears receptive and plans on making tweaks in the upcoming revision of the financial regulation to expand the scope of the blacklist.

This includes proposing "a targeted and proportionate extension" that involves member states.

It also aims to make it easier for commission officials to access data.

Fraud against EU dropped 20% last year

There were a total of 1,056 fraudulent irregularities in 2020, with a combined financial impact of €371m. Currently, Cyprus, Denmark, Finland, Germany, Ireland, Netherlands, Slovenia and Spain do not have domestic anti-fraud plans.

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EU efforts to fight fraud have been hampered by bugs and delays in an €29m IT system meant to help manage investigations more efficiently.


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