CEE countries figure prominently in almost €1bn lost by EU to fraud last year

By bne IntelliNews June 1, 2016

Central and Eastern European states, particularly Romania and Bulgaria, were fingered by the European Anti-Fraud Office (OLAF) as the biggest culprits for the almost €1bn that was doled out to dishonest claimants in 2015.

The level of fraud in the EU's annual €141bn budget comes at a tricky time for Brussels as the UK gears up for its referendum on whether to leave the bloc on June 23. Though the 2015 amount that is suspected to have been criminally claimed is basically flat from 2014, OLAF – which itself has faced criticism in the past for a poor record in investigating corruption, inefficiency and misusing its powers – was at pains to show that it had opened and concluded many more investigations than in the past after a reorganisation four years ago.

In its annual report, OLAF said that last year it recommended to national and EU authorities a total of €888mn for financial recovery, most of which (€624mn) had come from Structural Funds that had been fraudulently claimed. This was marginally lower than the €901mn in fake claims paid out in 2014.

In 2015, OLAF concluded 304 investigations, a record number for the office, and opened 219 new investigations, with the highest number of investigations conducted in Romania and Bulgaria – two of the EU's most recent and poorest members – followed by Hungary, Greece, Slovakia, Italy and Poland.

Among the case studies OLAF cited was the modernisation of a refrigeration plant for fruit andvegetables in Bulgaria, which had received €1.3mn from the European Agricultural Fund for Rural Development (EAFRD). "The Bulgarian beneficiary plant was owned by an Italian company, managed by an Italian citizen. The same Italian citizen was also the beneficial owner and manager of the company which won the procurement procedure for the machinery. The winning tenderer was in fact a shell company which simply sold on finished equipment, thus acting as a mere intermediary," it said. "Following OLAF's recommendations, criminal proceedings are in course in Italy and Bulgaria."

Another case concerned the misuse of EU funding for a manufacturing project in Hungary. "The investigation showed that the supplier of machinery – the Pacific subsidiary of an Asian company – was de facto under the control of the Hungarian beneficiary. Prices had been fraudulently inflated and the machinery funded was not new and had been embellished with false serial numbers," it said.

Outside of investigating corruption, OLAF was involved heavily in the bloc's efforts to counter the illicit trade in tobacco. Joint customs operations (JCOs), which OLAF organises with member states and non-EU countries, led to an estimated total quantity of cigarettes seized during the year at 619mn cigarette sticks.

"JCO Baltica was led by the Polish customs administration and OLAF, with the involvement of six Member States (Finland, Estonia, Latvia, Lithuania, Poland and Sweden) and Europol. The operation focused on the problem of illegal tobacco products coming from non-EU countries such as Belarus and Russia. Over 13 million cigarettes were seized during the operation," it said.

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