OLAF publishes 2020 report on European budget fraud – reveals impunity in many Member States

OLAF’s mission is to detect, investigate and stop fraud with EU funds. It is an independent agency of the EU and its investigations feature an administrative nature. OLAF lacks criminal investigating powers.

What does OLAF usually do?

  • anti-fraud investigations, in cooperation with EU & nat bodies
  • supports anti-fraud investigations of national authorities
  • recommends criminal prosecution of cases at domestic level, when ripe
  • monitors national follow-up of its recommendations

As all EU bodies, OLAF is bound by the Lisbon Treaty to publish Annual Activity Reports, and published its 2020 report on 10 September.

The main trends of OLAF’s investigative activity show a steady increase with respect to 2018 Report (more cases recommended for criminal prosecution, and notably a 30% increase in recommendations for asset recovery of EU funds unduly spent).

Source: OLAF in 2019 Report

Now the juicy details on which countries were targeted by OLAF investigations in 2019 and whether OLAF has recommended criminal prosecution at the national level. By number of cases launched by OLAF and share of recommendations issued…

  • Romania fares the worst [11(82%)] although the twitterverse has focused on Hungary for reasons disclosed below [5(40%)]. This is relevant in the current context because RO is a participating member in the EPPO, while HU opted out.
  • IT: 9 (77%)
  • BG: 7 (71%)
  • CZ: 3 (100%)
  • PT and SK: 2 (100%)
  • PO: 7 (57%)

Luckily, Spain was targeted 3 times in 2019 but none of them ended up in recommendation to prosecute.

The hottest topics of the year are linked to:

  • manipulation of public procurement tenders at the national level, particularly in agricultural and structural funds, with the usual suspects of bid rigging, kickback payments and conflict of interests.
  • the outraging case of 1,5 mill€ siphoned by an undisclosed NGO from humanitarian aid to Syria
  • research grants (ERC) obtained through forged documents (inflating cvs of participants, exaggerating project sustainability, etc) put forward by companies in several member states (and Italy is becoming a trend in this chapter). I wonder what the future holds for grants disbursed in the context of covid-19…
  • counterfeit goods smuggled into the EU
  • tobacco smuggling

As regards fraud within EU institutions, the focus of 2019 has been the EP; OLAF found irregularities in:

  • inflated travel expenses claims
  • undeclared nepotism (hiring members of extended family)
  • MEPs siphoning EP grants to foundations linked to political parties, just as
  • irregular financing of the national branch of the party through the EP financial allocation to parties, something that the EP explicitly prohibits

Since OLAF only issues recommendations, proper follow-up is key. The 2019 Report looks at the five-year follow-up and indictment rates at the national level. The table needs chewing, though.

OLAF in 2019 report

The majority of Member States have paid little attention to OLAF recommendations, with no reaction in more than 50% of cases. Those on the right side of the story are: AT-DE-FI-HR-LT-LV-MT-NL-RO-SE-SK-(UK). But some of the good followers turn then into poor prosecutors, showing poor indictment rates:

  • NL 30%
  • EE, FI, LU 0%
  • SK 14%
  • UK 25%

Surprisingly, other MS may follow-up poorly OLAF’s recommendations but then show good prosecution rates (at least indict the suspected persons), such as IT 62%, FR 50%, ES 50% .

In my opinion, OLAF should look further than the rates of indictment linked to its recommendations to prosecute and offer more long-term data based on the amount of condemnations and the amount of funds unduly spent that have been recovered. Some EU countries feature worrying signs of capture of the judiciary by the political realm, and in that context indictment rates offer a misleading picture of the domestic fight against corruption in the management of EU funds, which is all the most often due to political corruption. A captured judiciary will unearth all kinds of legal loopholes to avoid condemning the local corrupt politicians and their acquaintances.

Looking at this picture, the major question mark is: will the launching of the EPPO be able to reverse these dark figures from 2021 on?

Enough for today, another post will follow to crunch figures on the damage caused by fraud to the EU budget by country in absolute terms. As they say in Budapest, hamarosan találkozunk!

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