Financial
The European Union takes all appropriate steps to ensure that funding is spent correctly, for the benefit of all, and to recover any amount that may have been used fraudulently. OLAF’s investigations are instrumental in this endeavour, which plays an important part in retaining citizens’ trust in the wider EU project.
The sum recommended by OLAF for recovery each year depends on the scope and scale of the investigations concluded in that particular year. The amounts recommended for recovery are therefore not an indication of the overall level of fraud in Europe; rather, they relate to the specific investigations finalised by OLAF in that year.
The table below shows how these figures fluctuate year on year. One or two high-value cases in any particular year can lead to a significant increase in the amount recommended for recovery. In contrast, years where there were a large number of recommendations do not necessarily have the highest amounts recommended for recovery. In 2022, OLAF issued 153 financial recommendations for €426.8 million to be recovered and €197.9 million to be prevented from being unduly spent.
In the area of expenditure, OLAF can recommend (to the entities concerned) either to recover EU funds already spent or to refrain from spending EU funds in the future, for example by blocking further payments for a project in progress that is affected by irregularities. The latter category is referred to as ‘amounts recommended to be prevented from being unduly spent.
Key to an effective implementation of OLAF’s financial recommendations is close cooperation with spending services, especially with Commission departments and executive agencies:
- For several years OLAF has maintained a consistent practice of liaising with the prospective recipient of a financial recommendation before issuing it. Such liaising has proven helpful to clarify factual and legal questions, thus adding to the quality of individual recommendations.
- To identify horizontal issues and gain a deeper understanding of business specificities with relevance for the implementation of financial recommendations, OLAF organises technical meetings with the spending services, often in sectoral clusters and involving the Commission’s Directorate-General for Budget.
- Insights gathered from these meetings fed into a guidance document, drafted in cooperation among DG BUDG, OLAF and the Commission’s Legal Service and issued in 2022, on the follow-up of recoveries in direct and indirect management as regards suspected fraud and other irregularities.
Moreover, Member States are responsible for most EU spending and they also manage the collection of EU customs revenue. Their activities represent the first line of defence against any attempt to defraud the EU budget. OLAF counts on national authorities to perform their work efficiently and diligently, and it supports them through an active exchange of information and through targeted training.
Under sectoral regulations, Member States must report to the European Commission any irregularity or suspicion of fraud they detect exceeding €10 000. An analysis of this data is included in the Commission’s annual report on the protection of the EU’s financial interests (the so-called PIF Report).
In addition to collecting data concerning Member States’ detections of fraud, OLAF also gathers data on the number and value of the financial recommendations that it has issued.
For the purpose of this analysis, it is assumed that financial recommendations issued by OLAF, following investigations, are comparable to the financial impact of irregularities detected and reported by Member States. The amount of financial recommendations is calculated as the sum of the amount recommended to be recovered and the amount recommended to be prevented from being unduly spent.
The first two tables below shows the number of irregularities / fraud cases detected in the area of traditional own resources (TOR) between 2018 and 2022 and their financial impact as a percentage of the gross TOR collected by Member States and made available to the EU budget. OLAF’s results are shown alongside those of national authorities.
The second two tables below shows the number of fraudulent and non-fraudulent irregularities detected in the two main areas of shared management (European Structural and Investment Funds and Agriculture and Rural Development Funds) between 2018 and 2022 and their financial impact expressed as a percentage of total payments, by Member State. OLAF’s results are shown alongside those of national authorities.
OLAF’s analysis highlights once again the important contribution that OLAF investigations make in helping the relevant authorities recover EU revenue and funds that have been defrauded or irregularly spent.
In terms of TOR, OLAF financial recommendations represent 0.82 % of the gross TOR collected for the EU27, compared with 2.14 % for irregularities and fraud detected by all the Member States together. This means that, for this period, OLAF’s financial recommendations represent almost 40% of the entire financial impact of the investigative and control activities of the Member States.
The OLAF results are significantly influenced by the conclusion of a string of investigations linked to the undervaluation of imported goods. These results also highlight OLAF’s commitment to using resources effectively and concentrating on cases where its input will create most added value. OLAF results are significant also in the shared management areas, where the financial impact of the activities of all Member States together amounts to 0.96 % of payments, while OLAF alone recommended the recovery of an amount representing 0.19 % of payments. In this area, OLAF’s financial recommendations represent almost 20 % of the entire impact of investigative and control activities. There are countries where the financial impact of OLAF cases is particularly significant and, at times, even greater than that of national investigations.
Complex fraud cases linked to undervaluation of imports
In recent years, OLAF has been investigating complex customs fraud cases related to systematic fraudulent undervaluation of imports, mostly textiles and footwear, from China into the EU by international criminal networks.
The largest investigation case concerned imports through the UK, which was ultimately considered by the Court of Justice of the European Union. The Court ruled in early 2022 in favour of OLAF’s investigative approach and confirmed that the UK did not take effective control measures on such undervalued imports.
Following the Court of Justice’s ruling of 8 March 2022 (C-213/19, Commission v UK ), the UK has made available to the EU budget a total amount of €3 billion, consisting of a principal amount of €1.6 billion and late payment interest of €1.4 billion. €678 million of this was already paid in June 2022 and the remaining amount of around €2.3 billion was paid in early 2023.