OLAF report: We remain the first to defraud European funds

George Marinescu
English Section / 19 iunie

OLAF report: We remain the first to defraud European funds

Versiunea în limba română

With 16 investigations opened by OLAF last year in our country, Romania ranks first in the fraud of European funds 11 cases regarding the fraud of European funds in Romania were sent by OLAF to the European Public Prosecutor's Office led by Laura Codruţa Kovesi OLAF requested the recovery of 15 million euros defrauded through IT projects in Romania Ernesto Bianchi, head of the Department of Customs and Commercial Fraud, Tobacco, counterfeiting of goods, structural and agricultural funds, within OLAF: "We discovered that a large part of the money allocated for the IT project was spend via bank transfer for trips to various exotic locations, tourist resorts, participation of individuals in various major global or European sporting events and for other related activities"

Our country ranks first in the ranking of investigations completed in 2023 by the European Anti-Fraud Office (OLAF) regarding the use of EU funds managed or spent in whole or in part at the national or regional level, the Brussels-based institution says in its activity report , published yesterday, for last year. With 16 investigations, of which 10 have ended following the implementation of some recommendations, and 6 are to be resolved by the criminal courts, Romania is, unfortunately, at the forefront of inconsistencies regarding the spending of European money. Our country is followed in the ranking by Bulgaria - 14 completed investigations and by Hungary and Italy with 11 completed investigations each.

Last year, the European anti-fraud inspectors sent 79 cases to the European Public Prosecutor's Office, on the basis of which the prosecutors opened 29 criminal investigations, for 43 the referrals are still being verified, and in 7 the European Public Prosecutor's Office did not exercise its competence. Out of the total number of cases sent by OLAF (29) to the European Public Prosecutor's Office led by Codruţa Kovesim, 11 refer to Romania. For its part, the European Public Prosecutor's Office sent the European anti-fraud inspectors information in 81 cases, and based on them OLAF opened 11 investigations.

From the cited document, we also note that in the period 2019-2023, the authorities in Bucharest discovered 250 incidents regarding the fraud of funds from the state budget that had an impact of 1.33% of the total public money allocated, and OLAF added to these 15 more cases that had a budgetary impact of 0.25% of the total state funds allocated in the four years.

Regarding the amounts allocated from the European Fund for Agriculture and Rural Development in the period 2019-2023, the Bucharest authorities discovered 4507 irregularities, the value of which amounts to 4.74% of the amounts paid, while, also for the country ours, in this area OLAF added 28 more irregularities that had an impact of 0.34% of the payments made.

OLAF's investigations resulted in criminal files, last year alone 22 files were pending in the prosecutor's offices, courts, tribunals and appeals courts in the country, of which 12 have a decision of the jurisdictional authority, and 10 were still in a stage or other of the criminal process. Of the 12 decisions, 7 mean the finalization of the indictment and sending the defendants to court, and 5 refer to the dismissal of the case and the acquittal of the defendants.

Fraud in IT projects in Romania

One of the cases of fraud of European funds in our country presented in the OLAF report is the one that involved the spending of 15 million euros for the implementation of some IT projects, the financing being provided from the European Regional Development Fund (ERDF) to support innovation and increase productivity. Following the checks carried out by OLAF inspectors and the prosecutors of the European Public Prosecutor's Office, it emerged that in this case it is a complex international fraud scheme, carried out by several actors and entities located in Cyprus, the Czech Republic, Malta, Monaco and the United States of America, which allegedly withdrew millions of euros through false or incorrect invoices and then tried to launder those sums of money. Following the investigation, OLAF ordered the recovery of 15 million euros to the EU budget, but the file instrumented by the European Public Prosecutor's Office is still under investigation, after in November 2023, prosecutors carried out 38 searches of homes and premises and obtained a large amount of evidence, including data stored on IT devices.

Ernesto Bianchi, head of the Department of Customs and Commercial Fraud, Tobacco, counterfeiting of goods, structural and agricultural funds, within OLAF, said, during the press conference organized yesterday for the presentation of the report: "We did administrative, but also procedural investigations. We investigated the criminal network, the way in which the money that was supposed to finance innovative projects that would increase IT productivity in Romania was distributed. I found that completely different activities were being carried out, we had to identify all the illegal parts of the business, follow the money trail and reconstruct its route to the criminal groups and their connections in Cyprus, Malta, the Czech Republic, Monaco and the USA. We found that a large part of the money allocated for IT projects was spent through bank transfer for trips to various exotic locations, tourist resorts, participation of individuals in various major global or European sporting events and other related activities. At this moment, the entire file is being processed by the European Public Prosecutor's Office, and we have recommended the recovery of the 15 million euros allocated from the European Union budget".

Regarding VAT and customs fraud and smuggling, our country was the subject of an OLAF investigation into contraband tobacco. Thus, in 2023 OLAF helped authorities dismantle a criminal network that produced illicit cigarettes in Spain and then smuggled them throughout Europe. The network had connections with Poland, Romania, Greece, Italy, Slovakia and Ukraine. After receiving information, Brussels-based inspectors liaised with national competent authorities in member states and created an information-sharing network between investigators that accelerated data collection and sharing, provided analysis, technical assistance and facilitated adoption a common investigative strategy. OLAF coordinated this collaborative effort, facilitating rapid action at European level that led to the dismantling of an illegal factory in Spain, the arrest of 20 people and the seizure of approximately 15 million counterfeit cigarettes and nine tonnes of raw tobacco. The estimated total financial impact of the seized goods, including excise duties and VAT, amounted to approximately 5 million euros.

The cited report also states: "Cigarette smuggling is once again a global problem, as some of the countries involved in the illicit trade were as far away as Turkey, Indonesia, the United Arab Emirates and Montenegro. In 2023, OLAF operations led to the seizure of more than 616 million illicit cigarettes worldwide, including 333 million cigarettes seized at the EU's external borders. OLAF also contributed to the seizure of 140 tonnes of raw tobacco and 6 tonnes of waterpipe tobacco, preventing losses of over 151 million euros for EU and national budgets. In addition, information provided by OLAF led to the seizure of 144.34 million cigarettes and 40 tons of raw tobacco from outside the EU."

Cross-border crimes are on the rise

Following the 265 investigations last year by OLAF at the European level and the 190 open investigations, measures were taken to recover 1.04 billion euros from the EU budget, the unavailability of payments for 209.4 million euros was ordered and there were issued by the competent authorities at European and national level 309 financial, judicial, disciplinary and administrative recommendations

OLAF received and analyzed 3548 new referrals from private and public sources, as well as from its own information, of which 1178 referrals were sent for thorough verification, leading to the opening of 190 new investigations.

Director General of OLAF, Ville Itälä, said during the press conference held yesterday for the presentation of the report: "In 2023, we fought fraud on all fronts. This report contains numerous examples of cases where OLAF and its partners have worked together to help protect the EU's financial interests, citizens, the economy and the rule of law in the Union. In addition to its independent investigative mandate, OLAF has an important policy role; In 2023, OLAF coordinated the European Commission's new anti-fraud strategy action plan, because we believe that prevention remains the most effective tool to fight fraud. With the presentation of this report, OLAF celebrates its 25th anniversary. During this period, OLAF identified billions of euros that might otherwise have been lost to fraud and irregularities. It is important to stress that none of the achievements in the report or over the past 25 years would have been possible without the work of OLAF staff. Investigators, IT experts, forensic analysts, data analysts, lawyers, legal experts and policy experts are OLAF's most valuable asset."

Andreas Schwarz, deputy general director of OLAF, stated that European inspectors have carried out checks in more than 80 countries in the world, in order to find all those who participated in the fraud of European funds, but also in the fraud of the European Union budget by evading customs duties or through tax evasion, but also through non-compliance with the economic sanctions imposed on the Russian Federation after the illegal start of the war in Ukraine.

Petra Kneuer, Director of General Affairs at OLAF, said that since the establishment of the European Public Prosecutor's Office three years ago, the European anti-fraud architecture is stronger and more competitive, and that both institutions are working together to protect the EU budget from any attempted fraud.

James Sweeney, Director of OLAF's Knowledge Centre, stated that the purpose of the recommendations made to the European institutions and the representatives of the member states is to take measures to have an effective control of the spending of European funds and national funds. He showed that last year the number of abusive, illegal behaviors of some representatives and officials of the European Union increased when they were abroad and when, through diplomatic abuse, they illegally benefited from goods given by the representatives of the member states. Against these European officials or officials, OLAF requested the European institutions to initiate administrative, disciplinary procedures to sanction this type of behavior.

In 2023, OLAF investigated allegations and cases of incompatibility, fraud in public procurement procedures, conflicts of interest, inflated invoices, fiscal evasion of customs duties, smuggling and counterfeiting.

In the report published yesterday, experts from the Brussels institution show: "Fraudsters can move quickly across borders and jurisdictions, relocate their activities and divide them into smaller activities, which makes it difficult for public authorities to detect and understand them national. An important trend of the last two years, which was very visible in 2023, is the use of administrative violations, preferably in artificially created cross-border situations, in order to defraud the EU budget without being detected. This worrying trend can only be effectively combated with the intervention of OLAF as a cross-border administrative investigation body. Another trend that continued to grow in 2023 is complex online fraud, with the generalization of digitization at European level. In order to combat these crimes, OLAF analysts and investigators analyze thousands of data to find points of convergence that lead to the resolution of each individual investigation. Operational experience gained in conducting investigations in EU third countries has shown, in addition to classic cases of fraud, an increase in double funding investigations. The detected mechanism consists in submitting cost estimates for experts who would work 100% of their time for the implementation of an EU-funded project, but it is found that they are employed with the same schedule and the same payment conditions by the other co-financiers of the project".

OLAF's investigations generally fall into three categories: investigating fraud against EU spending (such as EU cohesion funds, agricultural and direct management funds); revenue (such as customs duties) and internal investigations, involving staff and/or members of EU institutions, offices, bodies or agencies.