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 some 430 multidisciplinary staff to investigate potential crimes and serious misconduct and look after the financial interests of the European Union and its taxpayers.
To report suspected fraud, you can use OLAF's Fraud Notification System.
Identifying smuggled goods.
OLAF’s main role and remit for carrying out its administrative investigations are set out in Regulation (EC) No 1073/1999.
The mission of the European Anti-Fraud Office is to:
By performing its mission effectively, OLAF contributes to the efforts made by the EU institutions to guarantee that the best possible use is made of taxpayers’ money.
OLAF receives information from public sector sources (EU institutions and national governments) and private sources (including citizens, the private sector and whistle-blowers).
The Investigation Selection and Review Unit provides an opinion on the opening or dismissal of a case based on whether the information:
On the basis of this opinion, the Director-General opens or dismisses a case.
In the framework of an investigation, several activities can be performed: interviews, inspection of premises, on the spot checks, forensic operations, investigative missions in non EU countries and checks of the legal validity of investigative activities and conclusions. OLAF can also coordinate the anti fraud activities of the Member States.
Upon conclusion of the investigation phase, the Director-General issues recommendations for actions to be taken. The final report of the case is then transmitted to the EU institutions, bodies, offices, agencies or national governments concerned.
OLAF also monitors the implementation of these recommendations, such as criminal investigations, prosecutions and convictions, financial recoveries or disciplinary measures.
Examples of OLAF investigations:
OLAF's contribution to fraud prevention and detection policies
As part of its preventive mandate, OLAF plays a key role in the development of comprehensive anti fraud policies. In the framework of the new Commission anti-fraud strategy (CAFS) adopted in June 2011, OLAF has set-up a fraud prevention and detection network within the Commission. This network covers all Commission departments and EU Member States and provides support and advice, including on management of fraud risks.
OLAF has also created a dedicated fraud prevention website to provide Commission officials with the best available know how on the fraud issues threatening implementation of EU policies. The website provides a quick overview of relevant legislation, training and other services' experience in the anti fraud field. It gives the responsible personnel an outline of necessary tools for strengthening fraud prevention and detection.
Further to the implementation of the actions linked to the Commission anti fraud strategy, a number of concrete results have already been achieved, including:
Hercule and Pericles programmes
OLAF manages the Hercule programme, dedicated to fighting fraud and corruption affecting the financial interests of the EU, and the Pericles programme, which aims to improve the protection of euro banknotes and coins in Europe and worldwide.
Administrative cooperation arrangements
OLAF officials carry out on-the-spot checks on business premises in EU member countries and in some non EU countries. To that end, OLAF concludes administrative cooperation arrangements with its partners in order to facilitate day-to-day cooperation in areas including the transmission of information and conduct of investigations.
Joint customs operations
The customs authorities of EU countries as well as some non EU countries, in cooperation with OLAF, carry out regular joint customs operations with specific checks at European level. These operations are coordinated and targeted actions of a limited duration with the aim of combating the smuggling of sensitive goods and fraud in certain risky areas and/or on identified trade routes.
These operations can be organised by either OLAF or Member States with the cooperation of OLAF.
For example, 40 million cigarettes, 1,200 kg of hand-rolled tobacco, 7,000 litres of alcohol and 8 million other counterfeit items were seized during Operation 'Sirocco', which was conducted by OLAF in June 2010 and involved customs authorities from the then 27 EU member countries and then 11 non EU partner countries with the support of Interpol, Europol and the World Customs Organization. If the smugglers had been successful, they would have avoided €8 million in customs duties and excise taxes on the cigarettes alone.
Another good example of OLAF assistance to operations organised by EU member countries is Operation Barrel, which was organised by the Polish Customs Service in October 2011. 1.2 million cigarettes were seized in the first joint customs operation targeting rail traffic along the EU's Eastern border. As a result, potential losses to the EU and member country budgets – in the form of customs duties and taxes – of approximately €250,000 were avoided.
Stopping the cigarette smugglers
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.
Anti-contraband and anti-counterfeit agreements have been signed by all 28 member countries and the EU with Philip Morris International (PMI), Japan Tobacco International (JTI), British American Tobacco (BAT) and Imperial Tobacco Limited (ITL) to work together in tackling the illicit trade in tobacco products.
Keeping an eye out for fake euro coins
Counterfeiting of the euro has led to financial damage of at least €50 million since the introduction of the euro in 2002. On 5 February 2013, the Commission adopted a proposal for a Directive on reinforcing the protection of the euro and other currencies against counterfeiting by criminal law. This proposed legislation aims at better protecting the euro by providing more efficient criminal legislation and procedures and setting minimum rules for sanctions.
OLAF is in charge of the European Technical & Scientific Centre, which analyses counterfeit coins. In 2011, 157,000 counterfeit euro coins were removed from circulation – compared to 186,100 in 2010. The coin most popular with counterfeiters is the 2 euro, representing almost two thirds of all counterfeit euro coins detected in 2011.
Watch out for the fakes.
OLAF is preparing and negotiating legal initiatives to reinforce protection of the financial interests of the EU.
Protecting the EU's financial interests
The EU and its member countries have an obligation to counter fraud and any other illegal activities affecting the financial interests of the Union. Despite the legal instruments adopted throughout the years, there still exist divergent rules and practices – which results in shortcomings with regard to the level of protection of EU public money, and to sanctioning in case of infringements.
Given the current difficult economic prospects, the Commission is emphasising the protection of EU financial interests as one of the strategic policies to ensure that public finances are sound and that taxpayer money allocated to the EU is spent as appropriately and efficiently as possible.
In May 2011, the Commission issued a Communication on the protection of financial interests of the European Union , which mentions several areas where criminal law and administrative investigations can be used to further improve the protection of the EU's financial interests.
To implement the Communication, the Commission adopted a proposal for a Directive on the protection of EU financial interests by criminal law on 12 July 2012, COM (2012)363. The proposal comprises initiatives for further approximation of relevant offences and sanction levels under substantive criminal law to protect EU financial interests by measures which serve as a deterrent. It has been submitted to the Council, where OLAF and DG Justice represent the Commission in ongoing negotiations.
European Public Prosecutor's Office
Fighting crime affecting the financial interests of the EU requires measures throughout the Union. National concepts such as territoriality and jurisdiction do not provide the appropriate framework to combat complex cases – which by their nature are European and go beyond the national context. The Commission intends to put forward a regulatory proposal in June 2013 for the setting up of a European Public Prosecutor's Office, focusing on the Union's financial interests. The Office will make a decisive contribution to the investigation and prosecution of offences linked to fraud or irregularities affecting the EU budget.
Published in March 2014
This publication is part of the 'European Union explained' series