Cigarette smuggling... counterfeiting of euro coins... evasion of import duties on shoes and clothes... subsidies for growing oranges on farms that don't exist — all are examples of fraudulent activities that cost European taxpayers money.
The European Anti-Fraud Office (OLAF) has 500 staff to catch wrongdoers and look after the financial interests of the European Union and its taxpayers.
Each year, OLAF investigates hundreds of cases of the EU being cheated out of revenue or its funds being misused. In 2009, OLAF completed 220 fraud investigations, each of which had lasted an average of 24 months. In the same year, there was €280 million in suspected fraud cases involving EU funds, representing a mere 0.2% of the EU’s total budget.
Identifying smuggled goods.
The biggest single category of fraud involves misuse of the EU’s Structural Funds – which finance farming, social-policy projects and regional development.
Thanks to the Treaty of Lisbon, EU anti-fraud laws are being strengthened, making it easier for OLAF to tackle cross-border fraud.
OLAF’s mission is to protect the financial interests of the European Union, to fight fraud, corruption and other illegal activities – including financial misconduct within the European institutions, though such cases are few.
OLAF officials have extensive powers of investigation. They can carry out on-the-spot checks on business premises in EU member countries and in some other countries. OLAF cannot bring cases to court, referring them to the national authorities in the country where the alleged fraud has occurred. However, in future, there could be a European Public Prosecutor’s Office, which would prosecute cases directly in any member country where the EU’s financial interests were at stake.
OLAF has cooperation agreements with countries ranging from the United States to Uzbekistan, from China to Chile, and has close links with Europol (the European Police Office) and Eurojust, the agency set up to coordinate the fight against serious crime.
Watch out for the fakes.
One of OLAF’s key roles is coordination. By sitting at the centre of the investigative network, OLAF can ensure that there is a continuous chain of action along very different national investigative and judicial systems. A coordination centre in Brussels for joint customs operations led by OLAF or a national government provides technical and logistical facilities 24 hours a day, seven days a week, with real-time coordination across the EU.
Technology is vital in OLAF’s work. Information is exchanged through the EU’s Customs Information System, in which customs, police, coastguards, agricultural and public health services pool sensitive data in real time in a single database, and an Anti-Fraud Information System through which hundreds of thousands of messages are exchanged each year.
The OLAF coordination centre was used in June 2010 for Operation 'Sirocco', which targeted counterfeit cigarettes and involved customs authorities from the 27 EU member countries and 11 non-EU partner countries from the Union for the Mediterranean (Albania, Croatia, Egypt, Jordan, Lebanon, Palestinian Authority, Montenegro, Morocco, Syria, Tunisia and Turkey) with the support of Interpol, Europol and the World Customs Organization.
During the operation, 40 million counterfeit branded cigarettes, 1200 kg of hand-rolled tobacco, 7000 litres of alcohol and 8 million other counterfeit items were seized, including clothing, shoes, toys and electronics. If the smugglers had been successful, they would have avoided €8 million in customs duties and excise taxes on the cigarettes alone.
In April 2011, Operation 'Fireblade' was organised by the Hungarian customs authorities in close cooperation with OLAF. As a result, large consignments of counterfeit textile products and accessories entering the EU by road via its Eastern border were confiscated.
In the past, OLAF has held several other joint customs operations such as 'Diabolo II'.
Avoidance of excise and customs duties on cigarettes, generally by smuggling, is one of the major areas of fraud which OLAF has to tackle. In a single operation in April 2011 in cooperation with German, Lithuanian and Polish authorities, nearly 70 million cigarettes were seized, preventing losses of €6 million to the European taxpayer.
In September 2010, the European Commission signed a multi-year agreement with Imperial Tobacco Limited (ITL) to work together in tackling the illicit trade in tobacco products. Under the legally binding agreement, ITL will work with the European Commission, OLAF and member countries’ law enforcement authorities to help in the fight against contraband and counterfeit cigarettes. The Agreement includes substantial payments by ITL to the Commission and member countries, totalling €207 million over the next 20 years.
Two similar anti-contraband and anti-counterfeit agreements had already been signed by all 27 member countries and the EU with Philip Morris International (PMI) and Japan Tobacco International (JTI).
OLAF is also in charge of the European Technical & Scientific Centre, which analyses counterfeit coins and is housed in the Paris Mint. The number of counterfeit euro coins removed from circulation in 2010 increased by 8% compared to the year before, with a total of 186 000 coins seized, compared to 172 100 in 2009. The coin most popular with counterfeiters is the 2 euro, accounting for just under 70% of total counterfeits in 2010.