European Anti-Fraud Office (OLAF) 18 June Neil RITCHIE, Head of Sector Directorate A Investigations I Centralised Expenditure A.

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1 European Anti-Fraud Office (OLAF) 18 June 2018 Neil RITCHIE, Head of Sector Directorate A Investigations I Centralised Expenditure A.3

2 A little history 1988 creation of OLAF predecessor, UCLAF 1999 creation of OLAF, based in Brussels 2012 OLAF reorganisation 2013 OLAF Regulation 883/2013 OLAF is the French acronym of the Office Européen de Lutte Anti-Fraude 2

3 OLAF Mission and Mandate Mission Detect, investigate and work towards preventing fraud involving European Union funds. Mandate OLAF's mandate is: to conduct independent investigations into fraud and corruption involving EU funds so as to ensure that all EU taxpayers money reaches projects that can stimulate the creation of jobs and growth in Europe; to investigate serious misconduct by EU staff and members of the EU institutions, thus contributing to strengthening citizens' trust in the EU institutions; to develop EU policies to counter fraud. 3

4 OLAF's Resources BUDGET 2016: EUR 57,7 million administrative budget STAFF 2016: Around 415 staff members Many with prior professional experience as: Magistrates or prosecutors Customs officers Police officers Tax inspectors Financial controllers Auditors Forensic experts and analysts 4

5 OLAF s organisation: two core activities Investigations (OLAF independent) Policy (OLAF as part of the EC) EU staff New Financial Instruments Centralised Expenditure External Aid Customs and Trade (contreband & counterfeiting) Agricultural Funds Structural Funds Development of anti-fraud policies and legislation (from conception to reporting on progress and effectiveness) Prevention of Fraud and corruption Assistance to EU Member States Coordination of investigations within the EU Hercule Programme management Other, such as international relations related to tobacco products 5

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7 Status 1. INVESTIGATIONS: fully independent Director-General of OLAF: appointed by the European Commission after consultation with the European Parliament and the Council for a seven-year term, not renewable; may neither seek nor accept instructions from any government or any institution, body, office or agency; entitled to bring an action against the Commission before the European Court of Justice. Supervisory Committee: made up of 5 outside independent experts who ensure/reinforce the Office's independence. 2. POLICY: administratively part of the European Commission 7

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9 Legal Basis EC. Treaty on the Functioning of the European Union (TFEU) Article 325 Regulation (EU EURATOM) No 883/2013 Commission Decisions 2013/478/EU and 1999/352/EC Interinstitutional Agreement (investigations in the EU institutions and bodies) 14-Jun-18 9

10 OLAF Investigates under administrative law Seeks evidence for and against the suspect (à charge et à décharge /evidence of guilt and innocence) Under a range of legal bases (Regulation 883/2013, Customs law, Mutual Assistance agreements) Transmits recommendations to national judiciaries and EU disciplinary and other authorities. 10

11 What is fraud affecting the European Communities' financial interests? Any intentional act or omission relating to: Expenditure: the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, the misapplication of such funds for purposes other than those for which they were originally granted; Revenue: the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, misapplication of a legally obtained benefit, with the same effect. non-disclosure of information in violation of a specific obligation, with the same effect. 11

12 Examples of fraud Embezzlement of EU funds in construction works (railways, roads, sea defence, bridges, power stations); Manipulation of procurement procedures; Fraud in the area of research and innovation; double funding; inflation of costs; Fraud in agricultural sector (fruit juice that has never been produced, trees that have never been planted, land that has never been cultivated); Non-payment of due import levies (on bicycles, TV sets, energysaving lamps, sugar) by misrepresenting their origin; Tax evasion caused by cigarette smuggling and contraband goods; Corruption inside the EU institutions, bodies and agencies. 12

13 EU expenditure Where is EU money spent? Shared Management Structural funds Provide funding for thousands of programmes all over Europe to improve competitiveness and potential for growth Managed jointly by the EU and authorities in Member States Fraud investigations often initiated by national authorities Common agricultural policy and rural development The 2nd largest block of expenditure in the budget Managed by Member States Fraud investigations usually initiated by national authorities Direct Management Direct expenditure Expenditure allocated and directly managed by EU institutions Fraud investigations usually not initiated by national authorities External aid External aid accounts for 7.4% of the EU budget (in 2016) EU National Authorities are not generally involved OLAF works with third country authorities Indirect Management EU Funds managed by International Organisations 13

14 Selection of OLAF cases - criteria OLAF s competence (financial and other interests of the EU, misconduct of EU staff) Sufficient suspicion of fraud / serious financial irregularities (reliability of the source, credibility of the allegation) Information falls within OLAF s Investigative Policy Priorities Proportionality (expected results vs resources; likelihood of recovery/prosecution ) Efficient use of investigative resources (workload, priorities, expertise ) Subsidiarity/added value (OLAF s sole competence ) Financial impact 14

15 OLAF Investigations (internal / external) and coordination cases The selection procedure can result in the opening of an: External investigation Internal investigation (EU staff) Coordination case (Limited to assistance / coordination requested) 15

16 Investigative activities and legality checks To ensure respect of the procedural guarantees and the national law of the MS concerned, OLAF Unit 01 carries out internal ex ante and ex post controls: In particular, it undertakes: legality checks during the investigation and final review of the final report and closure documents OLAF unit 01 also carries out legality checks on the following investigative actions prior to their being authorised: Interviews with witnesses and persons concerned Inspections of premises On-the-spot checks Digital forensic operations Missions in third countries Analysis of documentation /data Operational meetings 16

17 Procedural Guarantees OLAF investigations are conducted : With respect for individual rights (presumption of innocence, the right not to incriminate oneself, seeking evidence for and against the suspect, the right to legal advice etc.) For example - Persons concerned / Suspects are given the opportunity to comment of the facts which concern them, prior to the conclusion of the OLAF investigation. This may be deferred in exceptional cases. Under a range of legal bases (Regulation 883/2013, Customs law, Mutual Assistance agreements) At the end of its investigations, OLAF makes recommendations to competent Member State / National Authorities and EU disciplinary authorities. MS s prosecute, OLAF does not. 17

18 Outcome of investigations Review of the OLAF final report and closure documents. OLAF investigations lead to recommendations: Financial: OLAF and the European Commission can decide to ask for a recovery of the misused funds Judicial: OLAF will send its report to the relevant national authorities recommending legal action Disciplinary: the case is referred to the authority having disciplinary powers in the relevant EU institution. The European Commission operates a zero-tolerance policy Administrative: OLAF can recommend changes to procedures (and to the EDES) to prevent fraud being repeated Authorities of Member States shall inform the Office in due time of the actions taken on the basis of the information transmitted to them by OLAF (Article 12.3 of Regulation n 883/2013) 18

19 Cooperation with EU institutions European Parliament Committee on Budgetary Control (CONT) Council of the EU Working Party on Combating Fraud (GAF) Customs Cooperation Working Party (CCWP) Multidisciplinary Group on Organised Crime (MDG) European Court of Auditors ECA Annual Report and Special Reports Commissioner Oettinger and his Cabinet regular meetings on policy issues 19

20 Cooperation with European /National / International partners European Level: Europol, Eurojust, European Investment Bank, European Court of Auditors European Public Prosecutor's Office (EPPO) (in the future) National Level: Competent EU-Member States authorities Anti-Fraud Coordination Services (AFCOS s) in Member States and Candidate countries, Attorney General s and other Public Prosecutor s Offices, Anti-Corruption Commissions, Specialised fraud squads in the police Administrative/ national control bodies, Auditors General s Offices National Customs Authorities Authorities in non-eu countries with similar competences International Organisations: UN / WCO / World Bank / WHO / Interpol /OECD

21 Areas of Cooperation with national partners in EU countries and non-eu countries Sharing information with national partners in Internal and External investigations. But also providing information to national partners in Coordination cases; On The Spot Checks / Inspections: (OLAF has equivalent powers to NATIONAL ADMINISTRATIVE INSPECTORS): Assistance in verifying addresses of economic operators to be visited. Assistance in applying for court orders to gather data in Digital / Forensic Operations / search warrant if necessary; Assistance in gaining access to all information & documentation at a premises, where economic operator declines to cooperate / or becomes abusive/ violent; Notification to national authority to ensure that OLAF investigation does not affect ongoing national investigation. Assistance in advising on areas of National Law, so as to ensure admissibility of evidence in any subsequent National investigation. 21

22 Other areas of Cooperation with National and International partners Defining together the needs and solutions in the fight against fraud: Providing training (eg. forensic training courses) Providing technical assistance Joint investigation teams / Coordination of investigations (VAT/ Customs fraud operations) in several EU/ non EU countries. Provide all the assistance required to OLAF teams or vice versa (eg. Digital Forensic Operations / Forensic analysis of data) During Follow up with Judicial recommendations, explaining EU procedures; providing documents and coordinating taking witness statements. 22

23 Admissibility of OLAF evidence in national criminal investigations In gathering evidence in its administrative investigations, OLAF has regard to national law; Theory: Under Art.11 - Reg. 883/2013, evidence gathered in the course of an OLAF investigation is admissible in national proceedings; In practice: National criminal investigations often gather the evidence in accordance with national criminal investigation rules. However, the content of the evidence will often remain the same. 23

24 24 Future Relationships - the EPPO The EPPO Regulation adopted: No 2017/1939 The European Public Prosecutor's Office shall be responsible for investigating, prosecuting and bringing to justice those who damage assets managed by or on behalf of the EU Enhanced cooperation - 20 MS (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Germany, Greece, Spain, Finland, France, Italy, Latvia, Lithuania, Luxembourg, Portugal, Romania, Slovenia, Slovakia); Netherlands have applied to join Entry into force: 20 November 2017 Start of operations: not earlier than 3 years after the entry into force -> late 2020

25 OLAF-EPPO cooperation System for the protection of EU financial interests Complementarity of criminal and administrative investigations: different tools, different conditions, different aims Principles set out in the EPPO Regulation: Article 24: obligation to inform "without undue delay" Article 101: no opening of "parallel administrative investigations into the same facts" EPPO request for OLAF assistance 25

26 OLAF-EPPO cooperation Revision of Regulation 883 rules on EPPO/OLAF cooperation Reporting on possible criminal conduct without undue delay, preliminary verification (Article 12c) Assist the EPPO on request (Article 12e): Information, analysis, expertise Coordination of specific actions Administrative investigations Complementary investigations (Articles 12c, 12f): For precautionary measures or of financial, disciplinary or administrative action EPPO to be informed, possibility to object to safeguard an ongoing criminal investigation 26

27 Case study 1 Company Liquidation Beneficiary in an EU funded project receives money as Coordinator of a consortium of beneficiaries to carry out a project. The Grant Agreement provisions require that that the money may only be used for the purposes of carrying out the EU project. In addition, obligation on the part of the beneficiary, as Coordinator to forward money received from EU to other beneficiaries within a period of 30 days; EU payments are made, but the beneficiary pays them into its own bank account, where they are used to reduce beneficiary s debt/ bank overdraft, prior to any work actually being carried out on the EU project, following which it went into liquidation; Defence Some work carried out in project and accepted by the EU; BUT co-beneficiaries not paid their share of the EU funding; Money mixed with beneficiary s own money in Bank account. EU is not in the position of a secured creditor. Is it still EU money? Crime OR No Crime Cooperation between OLAF and MS. 27

28 Case Study 2 Research Scholarships EU Research projects involving Marie Skłodowska-Curie funding for recruitment and secondment of researchers; (sums involved EUR 900,000); Programme involves exchanges of researchers between industry and academic institutions by recruitment and secondment of researchers; aim - structured career path for researchers; Researchers CV s were falsified / altered in order to make them eligible for recruitment and secondment; (place of work / experience / jobs); Timesheets prepared by secondees falsified, and claims submitted to the EC which contain misrepresentations, both as to the duration/location of their secondments; Defence - Work has been successfully carried out in projects and accepted by the EU; persons have more than the required level of experience for the position for which they have been recruited. Secondees carried out the work, but not at place of secondment. Crime OR No Crime - Cooperation between OLAF and MS. 28

29 Thank you! OLAF website: 29