Europe’s anti-fraud watchdog sheds light on fraud trends in 2017

EPA / JULIEN WARNAND

A general view of the of the European Anti-Fraud Office (OLAF) logo at the OLAF headquarters in Brussels, Belgium, 02 June 2015.

Europe’s anti-fraud watchdog sheds light on fraud trends in 2017


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Europe’s Anti-Fraud Office (OLAF) spent much of 2017 dealing with large-scale investigations, detection and investigation of complex fraud schemes across the EU as the watchdog’s investigations ranged from major undervaluation scams where fraudsters profited from falsely declaring low values for goods that are imported into the bloc, to cases where organised crime groups embezzled funds intended for agricultural use, while investigators also uncovered large illicit infrastructure projects.

In total, 197 investigations, issuing 309 recommendations to the relevant national and EU authorities were carried by OLAF over the course of 2017.

The watchdog has recommended that over €3 billion needs to be reimbursed to the EU budget, most of which stemmed from fraud cases where the scope of the value of the project was undervalued.

OLAF opened 215 new investigations that also included over 1,100 preliminary analyses that were carried out by its experts. The anti-fraud regulator said the average duration of its investigations in the last years was 17.6 months.

According to OLAF’s Annual Report, its Acting Director General Nick Ilet, the most common type of anti-fraud cases included corruption, conflict of interest and the manipulation of tender procedures that affecting EU structural funds, where in some instances organised crime groups attempted to gain a profit. Attempts to defraud funds destined for research projects or the refugee crisis have increased, while dodging customs duties orchestrated through transnational criminal schemes have become common, according to OLAF.

An important part of OLAF’s mandate is, according to the report, the fight against smuggling tobacco into Europe, which causes enormous revenue losses to both EU and Member State budgets.

“In recent years, OLAF has paid particular attention to ships loaded with significant quantities of cigarettes that are being offloaded in the ports of Montenegro, which mainly originated from Libya, Egypt, Lebanon, and Cyprus,” the report said. “These vessels reached their destinations with cigarettes that were most likely being brought in through the EU smuggling market that either illegally landed directly on EU territory or were transported to other vessels on the high seas, completely unknown to the customs officers or the coastguard, which were then smuggled into the EU.”

Since the beginning of 2015, eight vessels moored in the port of Bar (Montenegro) were seized and their cargo of cigarettes –  which was smuggled into Greece and Spain – was impounded. The cigarettes loaded onto six of these vessels were destined for Libya, one for Cyprus and one for Lebanon. In total, almost 350 million cigarettes were seized on these vessels, corresponding to nearly €70 million in customs, excise and VAT duties.

OLAF is constantly tracking the movements of suspicious containers, in cooperation with the relevant services of the EU Member States and international organisations, to avoid the entry of illegal cigarette shipments into the European Union, which almost always end up on Europe’s black market.

The EU’s anti-fraud agency noted that it had seen an increase in cigarette smuggling by air, either as cargo or transported by passengers.  According to OLAF’s report, in July 2017, it provided Spanish customs officials with information about a suspicious airfreight cigarette shipment from the United Arab Emirates that was destined for Barcelona’s El Prat Airport. The successful bust resulted in 1.8 million contraband cigarettes being impounded.

The smuggling of illegal pesticides, usually with the involvement of organised crime, has become a particularly worrying trend, OLAF’s report said. Operation Silver Axe II, a joint campaign coordinated by Europol with the Netherlands targeted counterfeit and illicit pesticides being smuggled into major European seaports, airports, and at the land borders of at least 15 Member States.

Customs officials have found over 940 shipments of plant protection products and uncovered almost 122 tonnes of illegal or counterfeit pesticides. “This result confirmed previous estimates, namely that illegal pesticides represent around 10% of the entire EU pesticide market, although evidence suggests that there are considerable differences between the Member States,” OLAF’s report said.

Investigations into the improper use of EU funds showed that Romania had the higher number of cases opened in 2017 with 8 of the 11 total cases being forwarded to the relevant authorities for further review. Hungary, Poland, Greece, and Bulgaria joined Romania as the top countries with the highest number of new anti-graft investigations opened over the last year.

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