HERCULE III PROGRAMME

Transcription

1 FINANCIAL Investigation Coordination in Cyprus Financial Investigation Coordination in Cyprus HERCULE III PROGRAMME OLAF/2016/D1/014 Conference Report: Re-enforcing the Anti-Fraud infrastructure: Best Practice initiatives By Alexander Apostolides Assistant Professor, European University Cyprus This publication is supported by the European Union Programme Hercule III ( ). This programme is implemented by the European Commission. It was established to promote activities in the field of the protection of the financial interests of the European Union. This publication reflects the author s view and the European Commission is not responsible for the views displayed in the publications and/or in conjunction with the activities for which the grant is used.

2 Contents Goal of the FICC Project... 2 The Conference Re-Enforcing the Anti-Fraud Infrastructure: Best Practice Initiatives... 2 The Chairman s introduction... 2 Welcome Address:... 2 Keynote Address: Anti Fraud Initiatives in Europe... 3 Session 1: Current Cypriot Anti-fraud Infrastructure... 3 Fraud in the Public Sector The Role of the SAI... 3 Round table: how to improve the Cypriot Anti fraud Infrastructure... 3 Session 2: Globalization of Fraud: how to keep up... 5 Strength in Unity... 5 Analytics for Fraud Detection and Tax compliance: Best Practice Approaches... 5 Session 3: Current Issues in evaluation of Fraud... 5 The case of Fraud in EU funds: Cyprus... 5 The case of Fraud in EU projects: A Greek Perspective... 6 Investigation of Tax Fraud and changes in the Tax Department... 6 The Changing role of the Economic Crime Investigation Office in Combating Economic Crime... 6 Session 4: Financial Statement Fraud: Emerging issues and new approaches*... 6 Adoption of IFRS and potential Cases of Fraud on a National Level... 6

3 Goal of the FICC Project The European University Cyprus, in collaboration with IMH implemented the European Programme Hercule III - Financial Investigation Coordination in Cyprus (FICC), supported by the European Anti-Fraud office (OLAF) of the European Commission. One of the key aims of this training activity was to create a collective knowledge base for the key stakeholders of the Cypriot Fraud Prevention environment. We noted that the Cypriot environment has improved and expanded following the recent financial crisis that led to the Republic of Cyprus formally requesting for financial aid by the European Stability Mechanism. Yet the Key Issue Policy Paper of the European Commission (DG home) in 2014 highlighted that in parallel to more training, there needed to be a better coordination among all stakeholders for better monitoring and more effective tracing of financial criminal activity. The Conference Re-Enforcing the Anti-Fraud Infrastructure: Best Practice Initiatives The conference took place in the European University Cyprus on the 8 th of December Participants were engaged in the conference. The participants included accountants, lawyers, customs officers, police officers, treasury officials, auditors and internal auditors, public prosecutors, online payment companies and bank employees. There was a large number of members of the Cyprus civil service. In addition, members from the broader Cypriot financial service community participated. The event was supported by the Cyprus anti fraud infrastructure institutions (i.e. the Cypriot AFCO structure) with all the stakeholders sending representatives. The Chairman s introduction Speaker: Alexander Apostolides, Chair of the Department of Accounting, Finance and Economics, European University of Cyprus The project manager of the project, Dr Alexander Apostolides welcomed the participants and presented the role of OLAF in the changing European environment of cross border fraud. He presented the Hercule III funding initiatives and urged participants to collaborate with each other to enable greater participation of Cypriot stakeholders in this initiative. The role of the Chairman was to present the FICC project including the roundtables with stakeholders, and the six training workshops that were oversubscribed. Apostolides also presented the website and the information that is available in terms of training and policy documents that are freely available for the public and called for all the stakeholders to comment as well as participate in the informal body of coordination and communication is to be established by the European University Cyprus. Welcome Address: Speaker: Michael Stylianou, Political Analyst, European Commission Representation in Cyprus Mr Stylianou welcomed the FICC initiative and put forward the position of the European Commission in the effort to combat fraud in a European level, but also the need for greater cooperation in terms of European Nation States in combating cross border fraud. He pointed out

4 that fraud in relation to European funds is fraud against the citizens of European nation states and thus it is a priority to safeguard the European Citizen s interests Keynote Address: Anti Fraud Initiatives in Europe Speaker: David Marcus Nossen, LL. M Eur., Policy Officer at the European Anti Fraud Office (OLAF) Mr Nossen Presented the role of OLAF in the European sphere, informing the participants of how the role of the organisation is currently delineated but also providing a window to ongoing policy discussions. The current priority of the commission is to move to a more central structure at union level. At the same time within the current decentralised structure at a national level, there are efforts for harmonised measures could simplify persecution and cross-border investigations. Nossen then indicated the current VAT treatment and the phenomenon of the VAT carousel, which was one of the case studies of the FICC training workshops. Here he expounded the current thinking of possible solutions to this issue. Nossen then indicated that the European Commission strongly encourages for each nation state to develop a national anti fraud strategy. A national Anti Fraud strategy can notify vulnerability within the existing systems, asses main fraud risks, planning and implement responses, evaluate progress and adapt the existing framework to tackle trends in cross border fraud. Session 1: Current Cypriot Anti-fraud Infrastructure Fraud in the Public Sector The Role of the SAI Odysseas Michalides, Auditor General of the Republic, Audit Office of the Republic of Cyprus The Auditor General focused on corruption: the intentional misleading action by staff or officeholder to gain benefit. After indicating the vast economic and social effects, it indicated the key reasons on why people commit fraud, and indicated that the financial crisis that enveloped Cyprus has increased the risk of fraud in terms of opportunity, motivation and rationalization. The Auditor General expressed the belief that the greater exposure of fraud cases in Cyprus is a sign of an improving anti-fraud climate. However, he pointed that work still needs to be done to ensure that there is an effective strategy that will consider both fraud detection and fraud prevention, and suggested a broad strategy to infuse a fraud prevention ethic. He noted that a legislation for the protection of whistleblowing (which is still under discussion in Cyprus) is needed to increase information flow and that by increasing the role of the SAI, the service can have a more proactive role in combating corruption. Round table: how to improve the Cypriot Anti fraud Infrastructure Round Table Facilitator, Marios Skandalis, FICA Director, Group Compliance Division, Bank of Cyprus Group. Vice President, ICPAC Executive Vice Chairman, Transparency International (Cyprus)

5 Panelists: Anna Zavou Christoforou, Commissioner of Internal Audit of the Republic of Cyprus, Internal Audit Service Christoforos Mavrommatis, Superintendent B, Deputy Commander of Crime Combating Department, Cyprus Police Christos Christou, Customs Officer Investigation Section, Customs and Excise Department, Member of OAFCN in Cyprus Eva Rossidou Papakyriacou, Attorney of the Republic of Cyprus, Head of MOKAS George Georgiou, VAT Officer A, Fraud Investigation Section, Tax Department, Cyprus Odysseas Michalides, Auditor General of the Republic, Audit Office of the Republic of Cyprus Savvas Olympiou, Accountant, Treasury of the Republic of Cyprus Yiannis Pettermerides, Chairman of Economic Crime and Forensic Accounting Committee of ICPAC Zena Agathocleous, Customs Officer Investigation Section, Customs and Excise Department, This is the first time that the Cypriot Anti Fraud Coordination Services (AFCOS) in its entirety has been represented in a public forum to discuss the way forward in Cyprus. It is also the first time the broader stakeholders that are the interlocutor between the authorities, such as the Institute of Certified Public Accountants of Cyprus, was invited to add its voice to discussions on the future of Anti-fraud initiatives in Cyprus. There was a desire by stakeholders to promote their efforts both to the community as a whole but also to each other. Often the clear delineation of responsibilities and the effort that the stakeholders undertake are not clear to other parts of the Cypriot anti-fraud infrastructure. Notable successes that have led to greater exposure of corruption and fraud can be sometimes miss-interpreted in the community. A system that cleans itself up will catch activities that are more fraudulent and there is a worry that that will be misinterpreted by the public as a system is under destruction rather than one which is improving. All partners highlighted that progress has been made but there is a need for a broader Anti-fraud coordination in Cyprus. The need for political will has been identified: in particular the need for a political agreement for a common Anti-fraud strategy was highlighted. Such strategy is the most achievable way for the AFCOS to overcome issues of funding, and legal obstacles. The need of a legislation to fully protect whistle blowers and employees was identified by all, and ICPAC members indicated that it hampers their ability to notify authorities. However, the legislation should also safeguard people from intentional unlawful acts. The partners also noted the change of culture in the financial industries of Cyprus but the lack of a complete overthrow of the culture that prevents the public from coming forward with more leads to authorities, and suggested common awareness campaigns to change the culture of silence that exists up to now.

6 Partners showed willingness to pool resources in training and committed themselves in an common anti fraud informal coordination body that will push the issue identified by the roundtable. They also accepted the publication of a white paper that summarizes their position on the future direction of the Cypriot AFCOS which has been published on the website of the project (ficc.euc.ac.cy). Session 2: Globalization of Fraud: how to keep up Strength in Unity Speaker: David Clarke, Trustee Director, Fraud Advisory Panel, UK David Clarke presented the work of a Fraud Advisory Panel, which is a range of stakeholders throughout the spectrum of the British AFCOS and those who they regulate. They act as the collective memory of anti fraud efforts. The panel advises government, business and the general public on fraud prevention, detection and reporting, it educates business, the professions and the general public on anti-fraud prevention. By Collaborating with key stakeholders and policy-makers to achieve results and promotes research the Panel promotes a constantly improving anti-fraud infrastructure. Examples of the efforts of the Panel were then shared with the audience. Analytics for Fraud Detection and Tax compliance: Best Practice Approaches Speaker: Thanos Alifantis, Principal Government Consultant SAS institute Thanos Alifantis focuses on the efforts of fraud detection and tax compliance in the UK, and the real benefit of introducing data analytics in the efforts to combat fraud and tax evasion. In particular the introduction of social networking analysis has enabled authorities in the UK to move to a pro-active stance: the analytics identifies cases that are possible leads for the investigators. This use of digital resources and infrastructure has enables UK authorities to use their staff as effectively as possible. Details were provided in the key obstacles on the process of change and evolution Session 3: Current Issues in evaluation of Fraud The case of Fraud in EU funds: Cyprus Speaker: Stavri Tofa, Accountant, Head of Verifications and certification Directorate, Treasury of the Republic of Cyprus Stavri Tofa gave an overview of the current self-assessment tool that aid the managing authorities to control the adequacy of their systems, and how the Cypriot relevant authorities evaluate the possibility of fraud in EU funded projects and activities. Examples were discussed with emphasis in public procurement and it was pointed out that the EU funds were safeguarded by the nation state in each case.

7 The case of Fraud in EU projects: A Greek Perspective Speaker: Gregoris Gregoriades, Director of Investigations, Planning Directorate of Financial and Economic Crime Unit, Greece Gregoris Gregoriades emphasized the different environment that enables the Directorate in Greece to operate, and indicated the benefits of the existence of such a division. However, Gregoriades also indicated that the legal framework is still lacking the tools to enable the division to be as effective as possible. The highlight of the presentation was the case study of a cross border investigation that involved the misuse of European funds. An interesting discussion followed with Cypriot participants pointing out their weakness in being able to investigate a possibly similar case within the Cypriot current anti-fraud infrastructure. Investigation of Tax Fraud and changes in the Tax Department Speaker: George Georgiou, VAT Officer A, Fraud Investigation Section, Tax department, Cyprus George Georgiou began with an analysis of the Cyprus tax gap as estimated and the challenges in combating tax evasion and tax fraud. In that, Georgiou highlighted legal restrictions that restrict the ability of the tax office to operate effectively. Despite such limitations, the department was pro-active in initiating projects and agreements that emphasize in tracking possible in cross border tax evasion. The Changing role of the Economic Crime Investigation Office in Combating Economic Crime Speaker: Christos Chrystodoulou, Inspector, Assistant Director of Economic Crime Investigation Office, Cyprus Police. Christos Chrystodoulou described the remit of his office and the role in prosecuting Fraud and used case studies and examples to show the current limitations of the Cypriot investigation system. He pointed out how investigators are assigned with other members of the Cypriot AFCOS for better effectiveness in prosecution and coordination and indicated how it is a priority for the Police Force and the republic to strengthen the office with infrastructure, resources and training. Session 4: Financial Statement Fraud: Emerging issues and new approaches* Adoption of IFRS and potential Cases of Fraud on a National Level Speaker: Alexis Kytheotis, Alexios Kythreotis presented the current academic research on the adoption by listed companies in the European Union of the International Financial Reporting Standards. The research looked to see if because of such adoption there has been an increase in quality of reporting. This emphasis of quality was amazed in relation of corruption of each country and the level of enforcement of law in EU nation

8 states. The conclusion is adoption is not enough, and proper enforcement need to be in place to ensure adoption of standard have the effect in an increase in quality of reporting. * The Presentation Effect on IFRS on window dressing by Leonidas C Doukakis, Assistant Professor Of financial Accounting, HEC Lausanne, University of Lausanne, Switzerland, was cancelled due to an urgent family mater that prevented the speaker from traveling to Cyprus

9