Number of European Anti-Fraud Office investigations rise to record by 58% in five years to record levels

Out-Law News | 30 Apr 2014 | 9:40 am | 5 min. read

The European Anti-Fraud Office (OLAF) opened 58% more investigations in 2013 than it did in 2009 following a reorganisation of its working methods, the European Commission has said. 

OLAF received the highest ever number of reports of alleged fraud last year, representing a 35% increase compared to 2009, the Commission said.

The anti-fraud body also issued 81% more recommendations for financial, judicial, administrative or disciplinary action to be taken by competent authorities than it did in 2009, resulting in recommendations that €402.8 million be recovered to the European Union budget.

OLAF is also completing investigations faster than at any time in the past five years, its report for its activity in 2013 said. Last year the average duration of the selection and investigation phases combined was 21.8 months, compared to 25.9 months in 2009.

OLAF director general Giovanni Kessler said that the entry into force in October 2013 of a new OLAF regulation which requires member states to designate an anti-fraud coordination service has strengthened its activities, along with new guidelines on investigative procedures  for OLAF staff .

"The reorganisation of 2012 has yielded promising results and has allowed us to step up our investigative efforts, to contribute to key legislative files and to further deepen the cooperation with our operational partners," said Kessler following the publication of the OLAF 2013 report.

"OLAF has been strengthened by the entry into force of a new OLAF Regulation and by the adoption of new Guidelines on Investigation Procedures for OLAF staff. We look forward to pursuing our good investigative work and to driving anti-fraud policy further. "

OLAF is charged with protecting the financial interests of the European Union by investigating fraud, corruption and any other illegal activities and by investigating matters of serious concern relating to the discharge of professional duties by EU institutions, bodies and staff which might result in criminal or disciplinary measures.  It has no judicial or disciplinary powers and can not oblige national prosecutors to act on its disciplinary recommendations. The changes affecting its working practises come as the European Commission moves forward with the establishment of the European Public Prosecutor's Office (EPPO) which would investigate fraudulent use of EU tax-payer's money.  A spokesman for OLAF said the details of how OLAF and EPPO would interact when the EPPO is established, are not yet clear.

Corporate crime expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said: "These statistics underscore the increased focus in Europe on stamping down on fraud.  This, combined with the moves to set up a European Public Prosecutor's Office, are a clear message that Europe is joining the white collar crime enforcement bandwagon."

"Corporates should take note," Vitou said. "The chances of fraud being uncovered are increasing and firms should ensure anti-fraud systems and controls are working properly.  If they don’t they may live to regret it."

The new figures cover the first full reporting year since OLAF underwent reorganisation in 2012, which the body says has led to the higher level of investigations and recommendations.

"The reorganisation aimed to improve the overall efficiency of our investigative activity. We can now see that it has yielded excellent results," said Giovanni Kessler, director general of OLAF, in his foreword to OLAF's 2013 report.

According to the new figures, OLAf opened a total of 253 investigations in 2013, compared to 160 investigations in 2009. In 2012 it opened 219 cases following reorganisation, which included cases which had previously been under evaluation, compared to 146 cases in 20122.

Overall investigation completion time is also shorter since reorganisation, according to the report. In 2013, the average duration of the selection phase for investigation was 4.3 months, and this included some cases which were closed during 2013, the selection phases for which would have occurred prior to reorganisation of OLAF in 2012.  The average duration of the selection phases conducted in 2013, post-reorganisation, was in fact 1.8 months, the report states, compared to an average of 5.7 months in 2009.

In 2013 OLAF also received the highest number of "incoming information items" since the office was established in 1999 with a total of 1294 items being passed to it.

"This reflects the continued attention given by citizens, institutions and other partners to fraud issues and shows increased confidence in OLAF's investigative capacities," said Kessler.

Information relating to EU structural funds accounted for the largest share of incoming reports to OLAF, representing almost a quarter of all information. Reports relating to agricultural funds and EU staff were also among the top three categories.

Two thirds of the information was received from private sources, both identified and anonymous, with 10% of this leading to the opening of a case by OLAF. Information received from public sources led to the opening of an investigation in 44% of cases.

OLAF attributed an 8% increase in information received from public sector sources in 2013 compared to the previous year to better cooperation with EU institutions, bodies, offices and agencies, and to the "implementation of anti-fraud strategies in the Commission services."

It highlighted that there was a 17% drop in the number of information items received from members states compared to 2012. Out of a total of 96 information items filed by member states, Germany submitted the most, with 38 items, with Italy in second place with 7 items. France and the United Kingdom each submitted 4 items to OFAL for consideration in 2013. OLAF described the number of items reported by the members states as "an indicator of the degree of cooperation with the (OLAF) office)".

The European Parliament last month backed proposals to establish the EPPO, which European justice commissioner Viviane Reding hopes will be operational by 2015.

Plans to establish the EPPO follow concerns at the Commission that investigation and conviction rates for fraud against EU resources vary greatly across the EU. Statistics released by the European Parliament show that only 46% of cases referred to member states are followed up by their national judicial authorities. EU-wide, the conviction rate of these is just 42%.

The UK and Ireland have decided not to opt in to the EPPO, but Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, has said that UK organisations involved in spending European Union money, or working with organisations doing so, must nevertheless ensure their  anti-fraud measures and controls over staff will withstand scrutiny by EPPO.  British organisations should also be sure that all their European partners have anti-fraud measures in place which will protect against investigations by the EPPO.

Kessler said: "We will continue to actively support the Commission's plans to establish a European Public Prosecutor's Office (EPPO). This project is a key part of our vision for a better protection of the EU's financial interests."

The OLAF spokesman told Out-Law.com that in the event that all 28 member states opt in to the EPPO , OLAF's role might be absorbed into the EPPO. However this is not anticipated after the UK and Ireland decided not to opt in to the proposal.  If the Commission does not achieve unanimity, it is expected to still go ahead with the creation of EPPO under the “enhanced co-operation” procedure, which says just nine EU countries can launch new EU initiatives. Should this happen, the spokesman said that OLAF might co-exist alongside EPPO, working with states which do not adopt the EPPO.