COMMISSION OF THE EUROPEAN COMVIUNITIES 
4' ii 
't> I, COM(94) 94 final 
Brussels, 23.03.1994 
PROTECT*© THE COMMUNITY'S FINANCIAL INTffESTS 
THE FIGHT AGANST FflALCh 
1993 ANNUAL RB3QRT 
(presented by the Cot*1ss1on) 
if,, 
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TABLE OF CONTENTS Page 
Foreword 
Summary 
CHAPTER 1 
Section 1 
Sect ion 2 
Sect ion 3 Legal framework for fraud prevention 
Basic regulations and developments in 1993 
1. Reporting 
2. Administrative cooperation 
3. Controls 
4. Simplification and revision of 
agricultural legislation 
Treaty on European Union (TUE) 
Legal protection of the financial interests 
of the Community under the Treaty on European 
Union 
CHAPTER 2 : Infrastruture and new sources of information 
Section 1 : Internal organization of Commission 
departments 
Section 2 : Data-processing structures 
Section 3 : New sources of information 
CHAPTER 3 : Cooperation 
Section 1 : Advisory committee for the coordination 
of fraud prevention 
Section 2 : Training activities 
Section 3 : TAFI programme 
Section 4 : Agreements with non-member countries 
CHAPITRE 4 : INVESTIGATIONS AND OTHER OPERATIONS 
Section 1 : Transnational import/export fraud investigations 
Section 2 : Enquiries concerning the EAGGF Guarantee section 
Section 3 : Activities of community inspection teams 
(EAGGF guarantee section) 
Section 4 : Mutual assistance 
Section 5 : Enquiries relating to the structural funds 
CHAPTER 5 : INVENTORY OF CASES COMMUNICATED BY MEMBER STATES 
Section 1 : Statistical summary of the 1993 data 
Section 2 : Graphic analysis of reports 
Section 3 : Financial follow-up 
CHAPTER 6 : Fraud prevention appropriations 
Section 1 : Execution of the 1993 budget 
Section 2 : Financial analysis aspects 
Section 3 : 1994 appropriations 6 
6 
7 
8 
12 
13 
15 
16 
16 
18 
20 
20 
21 
21 
22 
22 
23 
24 
28 
32 
33 
37 
39 
39 
41 
51 
54 
54 
61 
62 
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FOREWORD 
Conscious of the need for the greatest possible clarity regarding the use 
of Community funds, the Commission presents its fifth annual report on the 
fight against fraud in line with the declaration made by the Council 
(Economic and Financial Affairs) on 13 March 1989. 
Fraud affecting the Community budget is a matter which not unnaturally 
attracts wide public attention and is a subject regularly discussed in 
depth by the political authorities of the Union. The public hearing held by 
Parliament on 9 and 10 June 1993, the declaration adopted by the European 
Council in Copenhagen and the reports delivered by the Court of Auditors 
are the most visible reflections of this. 
The size of the Community budget (ECU 65.6 billion in 1993) calls for the 
utmost rigour and tight surveillance at every level of both national and 
Community responsibility. The specific inclusion of anti-fraud measures 
among the special responsibilities of the Commission's Members highlights 
the political will to make the fight against fraud a lasting priority. 
Safeguarding the Community's finances is now at the heart of the 
Commission's economic and financial decision-making system, so ensuring the 
highest level of protection. 
The fight against fraud to the detriment of the Community budget is 
primarily the responsibility of the Member States; they alone have the 
necessary means, through their financial policing authorities, to monitor, 
detect, prosecute and punish fraud. Nevertheless it is essential for the 
Commission to play its full part in the crucially important role of 
coordinator, watchdog and provider of impetus, support and backup. 
With the entry into force of the European Union Treaty, the political 
stakes are greater than ever. The Commission continues to make every effort 
it can with the support of Parliament and its Committee on Budgetary 
Control, the Council and the Court of Auditors. 
This year's report focuses more closely on specific information (cases 
notified, enquiries), departing from the more traditional sector-by-sector 
approach in an attempt to make it easier to establish relationships and 
draw comparisons and so foster the emergence of a new, broader, 
intelligence-based strategy. This approach is vital for a proper 
understanding of the sophisticated mechanisms employed in large-scale 
economic and financial crime and to combat new developments more 
effectively as the removal of internal frontiers makes Community finances a 
tempting target. 
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SUMMARY 
This report takes stock of the highlights of 1993<1). It was a year 
which, beyond any doubt, marked a major milestone in the European venture. 
Not only did internal frontiers come down from the 1st of January, but on 
1 November the Treaty on European Union entered into force, adding a new 
dimension to the endeavour. 
Besides the effort made to increase the quantity and quality of information 
on fraud committed (amendments to Regulations 1552/89 and 1468/81, 
notification procedures in connection with the Structural Funds), special 
attention was given to adapting certain regulations on controls, above all 
so that they better fulfil the need for the same level of controls in all 
the Member States — a need that has been accentuated by the single market. 
With this end in mind, the Commission attaches the utmost importance to the 
preventive aspects of the rules. 
The new Article 209a EC confirms the Member States' obligation to treat the 
Community's financial interests in the same way as their own in combating 
fraud. With this in mind, work continued to achieve greater consistency of 
national provisions for the legal protection of the Community's financial 
interests. 
In the light of the second paragraph of Article 209a, the Commission put 
forward the idea of setting up an advisory committee for the coordination 
of fraud prevention. It would formally take over the mantle of the existing 
committee (COCOLAF), constituting the principal forum for discussing 
horizontal problems to do with the protection of the Community's financial 
interests and for organizing . close and regular cooperation between the 
Commission and the authorities responsible in the Member States. 
Assisted by the "intelligence" gathered and a rapidly growing computer 
architecture, the Commission's anti-fraud departments' aim is to develop 
consultations and partnership with the Member States in this forum in order 
to optimize results on the ground in the fight against fraud affecting the 
Commun i ty budget. 
The chapter on enquiries covers a range of initiatives in which the 
Commission was actively involved, but it cannot claim to cover every 
operation conducted, especially in the Member States. 
The new enquiries covered in this year's report demonstrate the high level 
of cooperation which is developing between the different national and 
Community authorities involved in combating fraud. Besides helping to 
(1) The report describes the main events and developments between 1 January and 31 December 1993. 
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uncover fraud on an increasingly large-scale, action in this direction 
holds out greater prospect of.securing the punishment of those responsible, 
at the same time reducing the differences of approach and so closing the 
loopholes that favour the spread of financial crime. 
The 1993 figures are encouraging as far as detected irregularities are 
concerned, but they also highlight the continuing difficulties surrounding 
recovery of the sums in question. 
The report also gives an account of the utilization of fraud prevention 
appropriations in 1993. Special attention was paid to the appropriations 
earmarked for co-financing schemes to strengthen control structures in the 
Member States. The report also sets out the position as regards the 1994 
appropriations for fraud prevention. 
Although in some places this year's report gives an outline of future 
prospects and raises some new ideas, it is primarily concerned with the 
past year's work and, unlike previous reports, does not include the action 
programme, which will now be presented separately. 
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CHAPTER 1 : LEGAL FRAMEWORK FOR FRAUD PREVENTION 
SECTION 1 : BASIC REGULATIONS AND DEVELOPMENTS IN 1993 
This section deals essentially with the presentation of prominent 
developments in the year 1993 which have contributed to the strenthening of 
regulatory mechanisms forming the legal reference framework for fraud 
prevention activités presented in greater detail in previous reports(1). 
1. Reporting 
Action to combat fraud affecting the Community budget is primarily the 
responsibility of the Member States, since it is they that have the means 
at their disposal, through their authorities, for detecting, monitoring, 
countering and penalizing fraud against the Community budget. The 
Commission plays an important coordinating and monitoring role, which rests 
on the information supplied by the Member States. So the flow and quality 
of information are a crucial factor guiding the direction of the work done 
by the Commission's specialized departments. This is the reason why there 
are specific regulations for each separate area of the budget. 
The Member States are under a statutory obligation to notify the Commission 
of cases of fraud and irregularity, as laid down in: 
Article 6(3) of Council Regulation (EEC, Euratom) No 1552/89<2) as 
regards own resources (customs duties and agricultural levies); 
Articles 3 and 5 of Council Regulation (EEC) No 595/91<3> 
as regards the EAGGF Guarantee Section; 
the amended Article 23(1) of Council Regulation (EEC) No 4253/88(4) as 
regards the Structural Funds. 
Using the information supplied in this way, the departments in question are 
able to monitor actual cases and use them as a basis for a programme of 
action. For this reason, in order to pinpoint difficulties that might be 
encountered in the course of such action, solutions are sought by 
harmonizing Community provisions on the content of the information to be 
supplied. 
As far as the Community's own resources are concerned, the proposed 
amendment to Regulation No 1552/89^5^ is intended: 
to specify in greater detail the conditions for the establishment of 
cases of fraud or irregularity; 
(1) See previous annual reports on the fight against fraud: SEC(90)156 final. SEC(91)456 final. 
SEC(92)943 final and C0M(93)141 final. 
[2) OJ L 155. 7.6.1989. 
3) OJ L 67, 14.3.1991. 
(4) See Council Regulation (EEC) No 2082/93 of 20 July 1993; OJ L 193, 31.7.1993. 
[5) C0M(92) 519. 11.12.1992. 
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to obtain from the national authorities in the Member States the 
information needed to improve the monitoring of cases from detection to 
recovery. 
As far as Community expenditure is concerned, the Commission's aim in 
the draft regulation which it is discussing with the Member States is 
to align the notification obligations relating to the Structural Funds 
with those that apply to the EAGGF Guarantee Section, especially in 
terms of providing details of the provision violated, the nature and 
volume of the expenditure, the possibiI ities for recovery and* the 
interim protective measures taken by the Member States. 
The regulation is to apply not only to the ERDF, the Social Fund, the 
EAGGF Guidance Section and the Financial Instrument for Fisheries 
Guidance (FIFG) but also to the Cohesion Financial Instrument. 
* 
Generally speaking, effective monitoring at Community level and the 
development of a coherent strategy based on firm and constructive 
partnership between the Member States and the Commission depend on the 
quality of the information supplied, the regularity with which it is 
transmitted*1) and its exploitât ion by modern techniques. 
2. Administrative cooperation 
Council Regulation (EEC) No 1468/81(2) establishes the mechanisms for 
mutual assistance between the authorities responsible in the Member States 
in agricultural and customs matters and the conditions for cooperation 
between them and the Commission. It also provides for the exchange of 
information on cases where no material facts have yet been established but 
are already, or shortly will be, under investigation. 
The Commission has approved a proposal to amend the Régulât ion*3) with a 
view to obtaining improved information for its departments along the same 
lines as in cases of fraud or irregularity. The proposal also seeks to 
speed up the exchange of information by setting up the Customs Information 
System (CIS)*4). 
In parallel with the mutual assistance arrangements, in agriculture*5), the 
Commission is proposing the same type of arrangements for the notification 
and exchange of information in relation to the structural policies. 
(1) Commun!cot ion of data on cases of fraud and irregularity as early as possible and 
notification of the follow-up measures taken by the Member States. 
OJ L 144, 2.6.1981. 
C0M(93) 350 final. 1.9.1993. 
See "Infrastructures and new sources of information — Data-processing structures", p.18. 
Article 4 of Regulation No 595/91. 
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Going beyond mutual assistance in the strict sense, Council Regulation 
(EEC) No 218/92*1) lays down arrangements for administrative cooperation 
in the field of indirect taxation. 
Finally, in 1994 the Commission is planning to transform the informal 
Committee for the Coordination of Fraud Prevention (COCOLAF) into an 
institutional committee*2). 
3. Controls 
The Member States are responsible for the proper application of Community 
measures in respect of both revenue and expenditure. It is up to the 
national authorities to ensure the reality and regularity both of 
operations to recover revenue and of expenditure operations financed by the 
Community budget (EAGGF Guarantee, structural policies). 
They are thus responsible for preventing and prosecuting fraud and 
irregularity offences and for recovering amounts evaded or wrongly paid 
out. 
The Commission has been given the task of monitoring the smooth working of 
the Community revenue and expenditure procedures. The regulations give it 
the power to conduct direct on-the-spot inspections on its own initiative 
or to ask the national authorities to conduct special inspections, in which 
Commission officials may take part, covering own resources,*3) the EAGGF 
Guarantee Section*4) and the Structural Funds*5). It may also undertake 
administrative cooperation and enquiry missions in non-member countries, 
acting in coordination and close cooperation with the authorities 
responsible in the Member States*6). 
The Commission has sought to improve the existing basic regulations*7) to 
stimulate anti-fraud action by the Member States and improve its 
coordination. Partnership with the Member States is directly in line with 
the principles set out in the Union Treaty, particularly in Article 3b. 
Another guiding principle behind the Commission's activities is risk 
analysis. 
1) OJ L 24, 1.2.1992. 
;2) See "Cooperation - Advisory Committee for the Coordination of Fraud Prevention, p.21. 
3) Article 18(2) and (3) of Regulation No 1552/89. 
[4) Article 9 of Council Regulation (EEC) No 729/70; OJ L 94, 28.4.1970; and Article 6 of 
Regulation No 595/91. See also Council Regulation (EEC) No 2048/89 on controls in the wine 
sector; OJ L 202, 14.7.1989; and Council Regulation (EEC) No 1319/85 on controls in the 
fruit and vegetable» sector; OJ L 137. 27.5.1985. 
'5) Article 23(2) of Council Regulation (EEC) No 4253/88. as amended by Regulation No 2082/93. 
6) Article 15b of Regulation No 1468/81. 
[7) See previous annual reports. 
Application of this principle, together with a systems audit*1), makes it 
possible to confine inspections to sensitive areas and "high-risk" 
operators and/or recipients, while still revealing control structures in 
the Member States which ought to be strengthened*2). The Commission also 
advocates the use of risk analysis for controls by the Member States. 
In the agricultural sector an effort was made to heighten awareness of this 
method in the Member States through the meetings of the working parties on 
irregularities and mutual assistance under the EAGGF and Regulation (EEC) 
No 4045/89. 
The meetings helped to: 
alert all departments to the method; 
analyse the elements that the method should involve; 
provide further information that needs to be taken into account in the 
analysis; 
allow an exchange of views on the experience gained in this area in 
some Member States. 
The EAGGF produced a number of papers on the subject and its implementation 
at sectoral level. Besides a general paper on the principles of risk 
analysis and the elements which it should involve, several others were 
prepared showing how the method should be applied in specific sectors 
(refunds for beef and veal, cereals, milk products, ex post accounting 
checks, etc.). 
In the area of own resources and customs controls, the 1992 Maastricht 
report on the organization of the Member States and customs administrations 
in 1992 set in notion a whole sequence of work. This was conducted in the 
Committee on Customs Matters, which held numerous discussions. Working from 
the information they hold, Commission departments can play a part in 
establishing selection criteria valid for the entire Community and the 
TARIC 2 database can be used to aiert the appropriate authorities to 
specific risks calling for special attention. A study was launched to 
target these select ion criteria. 
The most notable feature about the Structural Funds is that expenditure is 
co-financed by the Member States. Before approving projects submitted, the 
Commission's departments consult with the Member States to check whether 
the rules on controls are adequate. The Commission has prepared a guide to 
controls on operational programmes for local operators. A vade-mecum on 
controls has also been produced for the Social Fund. 
From the legislative point of view, attention was concentrated on 
agriculture. The main developments are set out below. 
(1) Audit conducted by the Commission departments responsible, to produce a critical analysis of 
the operation of control systems in the Member States (authorities responsible, physical 
organization, accounting and records system). 
(2) See "Fraud prevention appropriations — Financial analysis, p.51. 
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3.1 Controls on the export of products for which refunds or other payments 
are granted*1) 
Physical inspections are essential where the specific nature of the 
products generates entitlement to aid on the basis of export declarations. 
The deterrent effect, in response to the need to check the identity of 
products, is sought by introducing a minimum level of physical checks. 
A report*2) was presented on the application of Regulation No 386/90, 
supplemented by a further report*3) leading to a proposal for amendments 
in two important areas: 
. applying a 5% rule for controls covering all sectors taken together, 
where they are based on a risk analysis, with a minimum scrutiny rate of 2% 
for each product sector; 
. providing for a minimum level of checks by customs offices at the point 
of exit to counter the risk of product substitution where declarations have 
already been submitted and accepted at an inland office. 
The Council reached agreement on these proposals on 
16 and 17 December 1993*4). 
3.2 Post-payment administrative controls (EAGGF Guarantee Section)*5). 
The controls performed by the Member States on the basis of business 
documents from the firms receiving aid are a vital component of the fight 
against fraud. 
These controls supplement the checks made prior to payment. In 1993 — the 
third year since the current rules came into force — the Commission 
examined the application of the Regulation by the Member States. 
As a result of its review the Commission has: 
formulated proposals for amending the Regulation, in particular to 
include the use of risk analysis techniques; 
drawn attention to existing computer facilities in all the Member 
States (except Luxembourg) to help plan and optimize controls; 
J) Council Regulation (EEC) No 386/90; OJ L 42. 16.2.1990. 
2) COM(93)13 final. 25.1.1993. 
3) C0M(93)339 final. 19.7.1993; OJ C 218. 12.8.1993. 
4) Council Regulation (EEC) No 163/94; OJ L 24, 29.1.1994. 
(5) Council Regulation (EEC) No 4045/89; OJ L 338. 30.12.1989. 
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drawn attention to possible ways of strengthening mutual assistance 
between the Member States. 
The on-the-spot visits made in the Member States served to check the 
quality of the work being done in terms of the correct application of the 
rules and to assess the adequacy of the structures chosen and the measures 
adopted for planning, conducting and implementing controls. 
3.3 Integrated administration and control system (Common Agricultural 
Pol icy) 
The integrated administration and control system set up as part of the 
reform of the CAP*1) covers a number of Community aid schemes. Its 
implementation reflects the will to rationalize their management and 
administrative control as much as possible, from the moment aid 
applications are submitted (data are stored in a specially designed, easy-
access database). 
In particular, the integrated system involves the identification of parcels 
of farmland, which is crucial for the proper application of a scheme linked 
to surface area, and the identification and registration of livestock for 
the premium schemes for producers (sheepmeat, beef and veal). 
Commission departments have carried out controls in all the Member States 
to check the internal organizational arrangements worked out prior to the 
system's introduction. 
The Initial impression of the arrangements made to set up the integrated 
system in the Member States is quite positive. Meetings with those in 
charge showed great motivation in most cases, despite the difficulties they 
face. 
Some substantial problems still have to be resolved, however, in particular 
in relation to the creation of the land parcel register and the application 
of Directive 92/102/EEC on the identification and registration of animals. 
3.4 Identification and registration of animals 
Under Article 10 of Directive 92/102/EEC of 27 January 1992 laying down 
rules on the identification and registration of animals, the Council must 
review the Directive by the end of 1996 with a view to defining a 
harmonized Community identification and registration system and is to 
decide on the possibility of introducing electronic identification 
arrangements in the light of progress achieved in this field by the 
international Organization for Standardization (ISO). 
(1) Council Regulation (EEC) N* 3508/92; OJ L 355. 5.11.1992. 
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The Commission consequently decided to co-finance a project drawn up by 
three research institutes to study and perform large-scale experiments in 
electronic livestock identification (cattle, sheep and goats) to assess 
whether the current state of the technology would allow its general 
introduction to allow every animal entitled to an individual Community 
premium to be identified individually. 
The project, which will run for twelve months and involves experiments with 
10 000 animals (5 000 sheep, 3 000 cattle and 2 000 goats), is due to be 
completed towards the end of November 1994. 
3.5 Remote sensing (controls of surface area) 
The controls carried out in 1993 were based on specifications published by 
the Commission in December 1992*1). The controls were co-financed, with 
plans elaborated Jointly by the Member States and the Commission. The 
contracts were signed by the Member States, unlike in 1992 when only the 
Commission awarded contracts. 
The number of controls was far greater than in 1992 since implementation of 
the CAP reform affected many more producers. 
3.6 Control agencies 
In 1993 the Commission sought to tighten the rules on follow-up action in 
the wake of findings by national control agencies*2) by laying down 
penalties to be applied where irregularities are found*3). In addition, 
suppliers of firms receiving Community aid have been made directly 
responsible, enabling agencies to make much more effective cross-checks. 
4. Simplification and revision of agricultural legislation 
In the spring of 1993 the Commission decided to extend the life of the 
working party on simplification (Lachaux working party) for a further three 
years, at the same time clarifying its remit and method of working. The aim 
of its simplification work is not only to combat fraud but also to make it 
easier to understand and apply the measures taken under the reform of the 
CAP. 
The working party therefore examined at considerable length the question of 
how to clarify and simplify the Community rules governing the granting of 
export refunds. 
1) See the 1992 annual report; C0M(93)141 final. 
2) See previous annual reports. 
3) Commission Regulation (EEC) No 643/93, 19.3.1993; OJ L 69, 20.3.1993. 
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At the same time work went ahead to simplify the provisions implementing 
the CAP reform (both the Council regulations and the implementing rules 
adopted by the Commission). 
The working party subsequently proposed the following simplifications in 
the area of crop products: 
greater flexibility in taking account of certain cases of rotation of 
permanent crops; 
an easing of the prescribed two-year period during which land must be 
farmed before it can be subject to compulsory set-aside-, 
an easing of the method of determining the size of areas taken into 
account for compensatory payments; 
harmonization of the time limits for payment of premiums for oilseeds 
and other crop products. 
There were also wide-ranging discussions on the requirements as regards 
set-aside in the context of crop rotation and the quality requirements for 
oi I seeds. 
The Commission incorporated the working party's main proposals both in the 
measures it adopted and in its proposals to the Council. 
The Council adopted the Commission's proposals, principally at its meeting 
on 16 and 17 December 1993. 
The working party also devoted a number of meetings to the regulations on 
wine*1). 
The Commission considers that the working party needs to be given a new 
impetus. It will shortly be putting proposals before the Council. 
SECTION 2: TREATY ON EUROPEAN UNION 
The entry into force of the Treaty on European Union on 
1 November 1993*2), and in particular the new Article 209a EC and 
Title VI, provide a renewed impetus and establish a new institutional 
framework for the fight against fraud. 
The objective of combating fraud is now formally enshrined in specific 
provisions in the three Community Treaties which constitute the first 
pillar of the institutional structure of the Union (Articles 209a EC, 
78i ECSC and 183a Euratom). They clearly state the Member States* 
obligation*3) to treat the Community's financial interests in the same way 
(1) Following the Commission's discussion paper to the Council on the development and future of 
wine sector policy; C0M(93)380 final. 
OJ C 224, 31.8.1992. 
See Case 68/88 Commission v Hellenic Republic (1989) ECR 2985. at para 24. n 
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as their own when combating fraud*1) spelling out explicitly how they are 
to collaborate to achieve that end*2). 
Article 209a thus places the objective and the means for combating fraud at 
the highest Institutional level. The Union Treaty sets the objective of 
maintaining the acquis communautaire (Title I, Common provisions, 
Articles B and C), fully confirming the Member States* duty to protect the 
financial interests of the Community by effective, proportionate and 
dissuasive means, to use the Court's own words. 
As guardian of the Treaties by virtue of Article 155, the Commission keeps 
careful watch to ensure that this obligation is complied with. 
At the same time, Title VI of the Treaty on European Union makes 
provision for various forms of cooperation in the fields of Justice and 
home affairs (third pillar). 
This Title deals with several matters of common interest, notably combating 
fraud on an international scale (Article K.K5)). The Member States are to 
inform and consult one another within the Council with a view to 
coordinating their action. To that end they are to establish collaboration 
between the relevant departments of their administrations. The Council may 
adopt Joint positions, approve Joint action and draw up conventions on the 
initiative of any Member State or the Commission (Article K.3). The 
Commission intends to make full use of the new provisions and exercise its 
right of initiative to secure the highest level of protection for the 
Community's financial interests. The Council's discussions are prepared by 
a coordinating committee of senior officials (K.4 Committee), assisted by 
three steering committees that have been set up on asylum and immigration, 
police and customs cooperation, and Judicial cooperation. Under the action 
programme approved by the Council (Justice) on 29 and 30 November 1993, 
working parties have been set up for police cooperation (in particular, on 
drugs and organized crime, customs and Europol) and for Judicial 
cooperation (including groups on international organized crime and 
criminal/Community law). 
The closer cooperation provided for under the third pillar got under way 
very swiftly once the Maastricht Treaty came into force. The Commission 
intends to make full use of its powers in this area. Such cooperation is 
likely to play a key part in securing the necessary adjustments to the 
operational and legislative context and so complement the Member States' 
obligation under Article 209a to combat fraud. 
(1) "MembëTStatesshall take the same measures to counter fraud affecting the financial 
interests of the Community as they take to counter fraud affecting their own financial 
interests." Articles 781 ECSC and 183a Euratom are identical. 
(2) "Without prejudice to other provisions of this Treaty, Member States shall coordinate their 
action aimed at protecting the financial interests of the Community against fraud. To this 
end they shall organize, with the help of the Commission, close and regular cooperation 
between the competent departments of their aamlnistrations." Articles 781 ECSC 
and 183a Euratom are identical. 
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SECTION 3: LEGAL PROTECTION OF THE FINANCIAL INTERESTS OF THE COMMUNITY 
UNDER THE TREATY ON EUROPEAN UNION 
In response to the Council (Ministers of Justice) Resolution of 
13 November 1991, the Commission called in a group of senior researchers to 
produce a study on the laws, regulations and administrative provisions of 
the Member States applicable to fraud against the Community budget. 
The findings of this study and of the study on the systems of 
administrative and criminal penalties in the Member States were sent to the 
Council and Parliament on 16 July 1993*1). 
The Commission's departments have examined the findings to identify 
loopholes and conflicts in the legal protection afforded to the Community's 
financial interests. The Commission itself held an initial general 
discussion on the subject on 17 November 1993. The issues posed by legal 
protection brought to light some awkward institutional problems which the 
Commission will have to consider in greater depth. But in its statement at 
the Council meeting on 29 and 30 November 1993 it already undertook to put 
forward proposals for action in response to the request made by the Council 
(Economic and Financial Affairs) on 7 June in Luxembourg and by the 
Copenhagen European Council on 21 and 22 June. 
Quite independently of the Commission's deliberations and intentions, the 
Council took note of this work with interest and considered it necessary to 
examine, without prejudice to the division of competence between the 
Community and the Member States, the measures which should be taken to 
achieve a greater degree of compatibility in national provisions, with 
particular attention being given to the following points: 
offences; 
liability; 
penalties; 
settlements and the like; 
extra territorial application and mutual assistance in criminal 
matters; 
I imitât ion. 
Consideration should also be given to questions such as the definition of 
fraud against the Community budget, abuse of the law and the effectiveness 
of financial monitoring. 
(1) SEC(93)1172. 16.7.1993. 
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CHAPTER 2 : INFRASTRUCTURE AND NEW SOURCES OF INFORMATION 
This chapter presents the human and computing resources available to the 
Commission to respond to the missions with which it has been charged in 
conjunction with the Member States. 
The reinforcement begun in 1993 has already borne fruit and has allowed 
useful benefit to be drawn from the expertise of the Member States. Within 
the framework of the institutional advisory committee*1) cooperation will 
be strengthened through partnership and exchange of expertise with the 
Member States. 
SECTION 1: INTERNAL ORGANIZATION OF COMMISSION DEPARTMENTS 
As announced in its communication of 4 November 1992 on the fight against 
fraud*2) and in order to ensure its departments' tasks continue to 
complement one another, the Commission has decided to reorganize its anti-
fraud operations. The SG/UCLAF now consists of four units, three of which 
are directly concerned with fraud enquiries (EAGGF Guarantee Section and 
agricultural imports, Structural Funds and other areas, and own resources), 
with the fourth unit (general matters, policy and coordination) providing 
back-up. 
DGs VI (Agriculture), XIX (Budgets), XX (Financial Control) and XXI 
(Customs and Indirect Taxation) all have operational units dealing with the 
prevention, prosecution or monitoring of fraud in their respective fields. 
The financial units of other Directorates-General, such as DGs V, XIV 
and XVI, also have specialist staff or teams covering this area. 
m See Cooperation/Advisory Committee for the Coordination of Fraud Prevention page 21. (2) SEC(92)2045 final. V V 
Anti-fraud organization 
j_ 
DG V.D.6 
Financial 
management, 
control and 
administration ORGANIZATION CHART FOR ANTI-FRAUD OPERATIONS 
COMMISSION 
SECRETARIAT-GENERAL 
COMMITTEE OF ANTI-FRAUD DIRECTORS(I) 
chaired by the Director of UCLAF 
- Consistency of anti-fraud policy 
- Quarterly meetings SG/UCLAF 
1. General matters, policy and 
coordination 
2. Fraud prevention (EAGGF Guarantee 
Section & agricultural imports) 
3. Fraud prevention (Structural Funds 
and other areas) 
4. Fraud prevention (own resources) 
MEETING OF ANTI-FRAUD HEADS OF UNIT 
chaired by the Director of UCLAF 
- implementation of anti-fraud policy 
- programming of operations 
- monthly meetings i 
* 
"Ni 
DG VI.G.4 
Prévention and 
prosecution of 
fraud 
DG VI.G.5 
EAGGF - Guidance 
Budgetary matters DG XIV.A.2 
Budgetary and 
financial matters DG XVI.E.1 
Budgetary and 
financial 
management, and 
monitoring DG XIX.B.1. 
Financial 
perspective, 
analysis and 
application of 
rules, and fraud 
prevention DG XX.1 
Monitoring of 
frauds and 
irregularities DG XXI.A.2 
Prevention and 
prosecution of 
fraud Legal 
Service 
Inspectorate 
General 
Other DGs 
J L 
(1) UCLAF and DG V, VI, XIV, XVI, XIX, XX and XXI 
- 18 -
In the context of this organization, the staff designated to the specialist 
administrative units which are specifically assigned to anti-fraud tasks, 
are broken down as follows: 
Table 1 
Department 
Category 
Permanent staff 
Other staff 
% permanent staff SG/ 
UCLAF 
28 
23 
55% DG VI 
(1) 
27 
13 
67% DG XIX 
(2) 
13 
3 
81% DG XX 
4 
-
100% DG XXI 
18 
9 
66% TOTAL 
90 
48 
65% 
Parliament's reaction to the reorganization has been favourable and it has 
voted an amendment providing for 50 new posts for regular staff, 35 of 
which are temporary, to strengthen the Commission's expertise in this area 
and restore the balance in favour of regular staff. 
SECTION 2: DATA-PROCESSING STRUCTURES 
The Commission is eager to expand its databases and information networks 
and develop a more rational and integrated approach to fraud prevention. 
1. DAF 
Work on the general anti-fraud documentation database, DAF, 
during 1993 with the emphasis on adapting the project to the 
available without being over-ambitious. Consultations will be 
Member States to check the quality of the data provided by the 
which have completed data-gathering. A decision will then 
concerning further action, resource allocation and timetabling. cont inued 
resources 
held with 
countries 
be taken 
(1) Including staff active in other areas covered by the unit in question; only twelve staff can 
deal with the investigations referred to in "Enquiries concerning the EAGGF Guarantee Section", 
p. 28. 
(2) Of which 2 permanent staff and 1 external official are designated for fraud prevention tasks. 
- 19 -
2. IRENE 
The IRENE database (IRregularities, ENquiries, Exploitation) has been in 
operation since 1 December 1992^1^. It contains details of 11 000 cases 
of fraud or irregularities (some 8 200 under the EAGGF Guarantee Section, 
2 900 under own resources and 60 under the Structural Funds) based on 
notifications received from Member States concerning own resources, the 
EAGGF Guarantee Section, the Structural Funds and mutual assistance^2*. 
Judging by initial analysis of the contents of the database after its first 
year of operation, there are four main points which stand out: 
All mutual assistance cases have been input. Although only a third of 
them contain financial information, we can already gain an idea of the 
amounts involved. From the evidence, this could well prove to be the 
most productive part of the database. 
There is considerable potential for comprehensive financial monitoring. 
The great scope of the database. Generally speaking, the information 
received will not only be of much better quality, it will be more 
accurate and provide extensive coverage of all budgetary areas. 
In addition to providing a complete inventory of frauds and 
irregularities, the database makes it possible for data to be both 
analysed and interpreted from a qualitative perspective, helped by 
clear and accurate methods of communication [see footnote 1, page 7]. 
3. Pre-1 RENE 
A working party has been set up to develop a data-processing facility (pre-
IRENE) for information which does not go into the IRENE database. It will 
cover cases of fraud still under investigation as well as information from 
new sources*3>. 
By making it easier to correlate information, the pre-IRENE database will 
improve programming of the Commission's operations in the field and help in 
framing an intelligence strategy with a view to obtaining a better picture 
of the fraud prevent Ion scene and of economic and financial crime. 
4. SCENT, Fiscal SCENT, CIS 
These networks were set up to promote the exchange of information in the 
field of customs and tax fraud. 
The SCENT system, which has been operational since 1987, is to be backed up 
by the fiscal SCENT system*4* now being developed. 
is Most of the figures and diagrams in this report clearly illustrate the potential of IRENE, 
the total of cases communicated (and analysed), no distinction is made between organized 
deliberate fraud and mere infringements of the rules. 
See "New Sources of Information", page 20. 
See previous annual reports. 
- 20 -
The CIS message system is now operational. By the end of 1993, 
250 terminals had been installed to link up offices at points of entry and 
exit and allow them to communicate with their own central authorities and 
with Commission departments. A database covering customs or agricultural 
fraud is planned for the project's second stage; however, this will have 
to await the Council's adoption of the ad hoc legal framework*1*. 
SECTION 3: NEW SOURCES OF INFORMATION 
Like organized crime with its trans-border networks, the fight against 
fraud must be taken beyond national boundaries. An integrated approach is 
needed at Community level based on properly organized and protected 
information networks. 
In this context, the Commission is currently looking into the possibility 
of setting up a central contact number with an automatic answering system 
in order to strengthen direct information sources. 
CHAPTER 3 : COOPERATION 
The emergence of the European Union gives a new dimension to cooperation 
between the Member States and with the Commission*2*. The second 
paragraph of Article 209a states that action aimed at protecting the 
financial interests of the Community against fraud is to be coordinated, 
with the help of the Commission, by the competent departments of national 
administrations. At the same time, the authorities in the Member States 
are to set up administrative structures at an inter-ministerial level with 
pluridisciplinary operational resources and a remit that extends to all 
forms of financial crime, whether organized or not, including fraud against 
the Community budget. Contact has already been established between the 
Commission and these departments and good progress is being made. A new 
push has thus been given to cooperation to protect the Community's 
financial interests. The Commission is now preparing a decision to give 
official status to the Community Committee for the Coordination of Fraud 
Prevention (COCOLAF) and is pursuing its policy of training and awareness 
raising among national officials responsible for fighting fraud. 
An example of the high level of cooperation with the Member States in the 
area of fraud prevention is illustrated by the Commission initiative in the 
textiles sector (TAFI Programme). 
(1) Proposal for a Council Regulation replacing Regulation (EEC) No 1468/81. C0M(93)350 final of 
1 September 1993. 
(2) See "Legal Framework for Fraud Prevention/Treaty on European Union", page 13. 
- 21 -
It should not be forgotten that cooperation with non-member countries Is 
equally important. 
SECTION 1 : ADVISORY COMMITTEE FOR THE COORDINATION OF FRAUD PREVENTION 
This official fraud prevention body is to have the task of advising the 
Commission on all horizontal matters relating to the prevention and 
prosecution of fraud as well as the legal protection of the Community's 
financial interests. 
The Committee is made up of representatives from the Member States and 
chaired by the Commission; it will have the power to set up its own working 
parties to look into any specific question relating to fraud prevention and 
the protection of the Community's financial interests. 
SECTION 2 : TRAINING ACTIVITIES 
As part of its training policy, the Commission organizes seminars to 
acquaint national anti-fraud services with the Community dimension of 
fraud. 
In 1993, the following seminars were organized : 
two general seminars (Italy : Florence, 6 and 7 May; Denmark : Alborg, 
15 and 16 September) on anti-fraud policy and developments in combating 
fraud against the Community budget, and on new control and fraud 
investigation measures; 
one seminar in Portugal (Evora, 14 and 15 June) for staff at the 
Agriculture and Fisheries Financial Institue (IFADAP) and senior civil 
servants. The seminar covered the management and control of measures 
financed under the EAGGF Guidance Section and was organizes at the 
request of the President of IFADAP; 
one seminar in Brussels (9 November 1993) on the use of remote sensing 
for agricultural controls; 
two seminars in Brussels on the setting-up of an integrated 
administration and control system in the agricultural policy area (plot 
register and plot measurements); 
one seminar in Brussels on the subsequent scrutiny of accounts 
(Regulation (EEC) N* 4045/89 relating to the EAGGF Gurantee Section); 
one seminar in Germany (Bonn, 22 and 23 November) on the planning, 
implementation and evaluation of VAT controls (own resources), two 
seminars having previously been held in Brussels on the management and 
recovery of VAT debts (1 and 2 April) and on traditional own resources 
(29 and 30 June); 
- 22 -
one seminar in Belgium and one seminar in Italy with associations of 
European lawyers, attended by eminent politicians, academics and 
lawyers. 
In addition to these Commission seminars, officials and specialist 
departments take part, at the invitation of the competent national 
authorities in an increasing number of activities aimed at presenting and 
developing the Community strategy against fraud. 
SECTION 3: TAFI PROGRAMME (Textile antifraud initiative) 
The TAFI programme, set up in July 1993, is another illustration of an 
action based on strengthened co-operation between the Member States, the 
Commission and the manufacturers in a particular sector, in this instance 
the textI le sector. 
In this way the programme brings together in a specific structure the 
services of the Commission and the representatives of the Community's 
textile and clothing industry in order to analyse together on the ground 
commercial flows. 
New intiatives have been taken to make the fight against fraud more 
effective in this sector : market analyses produced together with the 
operators concerned, exchanges of experience with the main commercial 
partners of the Community, setting UD of a pilot project on the electronic 
transmission of import statistics of products subject to quotas or tariff 
ceiIings etc... 
The resources mobilised in 1993 (500.000 ecus) will be increased in 1994 to 
800.000 ecus and should enable the strengthening of the fraud prevention 
and investigation measures set up and also consolidate the international 
co-operation which has Just commenced. 
SECTION 4: AGREEMENTS WITH NON-MEMBER COUNTRIES 
If the Community is to be successful in combating fraud against its 
financial interests, it has to develop its administrative cooperation 
network with its commercial partners, for which it needs to obtain the 
proper legal basis. In 1993, therefore, agreements were signed with 
various countries or communities of states, such as Bulgaria, the Andean 
Pact countries and the Central American countries. Other agreements also 
came into force with Romania (association and mutual assistance protocol), 
the Baltic States (commercial and economic cooperation), San Marino and 
Andorra (customs union). . ' 
The Commission has been given a negotiating brief by the Council to hold 
discussions with six countries — Canada, South Korea, the United States, 
Japan, Hong Kong and Vietnam. The process for ratifying the agreement on 
the European Economic Space (scheduled for 1 January 1994) continues. 
- 23 -
Taking advantage of the mutual assistance protocol, which was part of the 
agreements concluded with Hungary, Slovakia, Poland and Romania, the 
Commission has requested permission from the authorities in these countries 
to carry out an investigation. In addition, missions to Argentina and 
Uruguay*1* have been organized in accordance with the provisions on 
customs cooperation contained in the agreements signed with these countries 
in 1990 and 1992. 
CHAPTER 4 : INVESTIGATIONS AND OTHER OPERATIONS 
This chapter covers a range of operations in which the Commission was 
actively involved. It does not include investigations carried out by 
Member States alone. The chapter does not give an exhaustive picture of 
the Commission's activities but it does serve to illustrate: 
the mechanisms of fraud and the sophisticated means employed by its 
perpetrators; 
investigation methods; 
the financial impact on the Community budget and/or other negative 
consequences for economic operators within the Community; 
enforcement aspects (legal proceedings, recovery/collection) although 
these tend not to be uniform and are therefore difficult to deal with 
succinctly; 
the Commission's conclusions, with special emphasis on regulatory 
developments. 
The investigations come under the following headings:*2* 
transnational import/export fraud investigations; 
EAGGF Guarantee Section investigations; 
activities of Community control bodies (EAGGF Guarantee Section); 
mutual assistance investigations; 
operations relating to the Structural Funds. 
Under each of these headings, a distinction is made between new cases 
opened in 1993 and earlier ones described in previous annual reports but in 
respect of which there were interesting developments during the course of 
the year. 
Some significant results have been achieved. They do, however, show that 
the Commission should not rely simply on the IRENE database, which contains 
notifications from Member States regarding cases of fraud and 
irregularities, but should itself enter information concerning ongoing 
W See "Investigations and Other Operations", page 23. 
See "Legal Framework for Fraud Prevention/.../Controls", page 8; see also 
"Cooperation/Agreements with Non-Member Countries", page 22. 
- 24 -
investigations into an ad hoc base (pre-IRENE)*1*, since these cases do 
not necessarily overlap. In so doing, it would contribute to the 
development of a coherent and operational intelligence strategy. 
SECTION 1: TRANSNATIONAL IMPORT/EXPORT FRAUD INVESTIGATIONS 
The substantial sums involved in Community trade (customs duties, levies, 
export refunds) have attracted the interest of big-league financial 
criminals who are always on the look-out for the maximum profit at the 
least risk. Whole networks have been set up to take systematic advantage 
of distortions in the Member States' legal systems and the lack of a 
genuine "Community" criminal law. 
These networks are much more varied than their stereotypes might suggest 
and they employ extremely imaginative and sophisticated methods. With the 
removal of internal frontiers, they have been trying to identify where they 
can most safely set up their transnational fraud circuits. Besides the 
unfairness of the transactions, professional crime of this type has social 
and fiscal implications every bit as disturbing as the financial harm done 
to the Community budget. 
If this type of crime is to be fought effectively, cooperation must be 
improved at all stages of operation from the detection of illegal practices 
through to recovery of the amounts. This entails cooperation not Just 
between the various administrations in the Member States, but also with the 
competent authorities in non-member countries. Here, the Commission's role 
is crucial. Cooperation must be strengthened and systematic use made of 
all available information if progress is to be made in the fight against 
transborder fraud. 
The transborder fraud cases outlined below illustrate the importance of 
this problem. The Commission for its part will be taking advantage of the 
institutional importance attached to the objectives and instruments for 
combating fraud set out in the Union Treaty, both those under the first 
pillar (Article 209a) and those under the third pillar (Article K.1.5)*2*. 
1. New cases 
Refined Sugar 
The investigation began when the Commission received a tip-off from the 
Belgian authorities that refined sugar purchased in Rotterdam and 
(1) See Infrastructure and New Sources of Informat ion/Dato-processing Structures, page 18. 
(2) See "Legal Framework For Fraud Prevention/Treaty on European Union", page 13. 
- 25 -
officially bound for Croatia and Slovenia would be diverted to Italy after 
first passing through Belgium, Luxembourg and France. 
The investigation involved the Commission in cooperation with national 
legal authorities and also the Dutch customs, the Belgian gendarmerie, the 
French police and the Italian Guard!a di Finanza. 
The lorries transporting the sugar from Rotterdam were tailed until they 
reached their final destination, the initial aim being to identify the 
transhipment points and the authors of the fraud. A series of searches was 
carried out and people questioned in the Netherlands, Italy and France so 
as to obtain evidence that there had never been any intention to export the 
goods to Croatia and Slovenia, to establish that the goods had effectively 
been sent to Italy and to identify the recipients of the goods. 
Further checks are being carried out to establish the tax implications of 
reselling the sugar without an invoice and establish whether the sugar was 
for sweetening wine. 
The success of this textbook operation was only made possible because the 
various national authorities and the Commission's departments were able to 
coordinate properly. As a result, the entire fraud was unravelled and the 
perpetrators brought in for questioning. The network was a very well 
organized one designed to exploit Community mechanisms using techniques 
more commonly seen in organized crime. The financial impact of the fraud 
is estimated at ECU 1.6 million (unpaid compensatory levy on the 
3 000 tonnes of contraband sugar placed on the Community market). 
Other points to emerge during the investigations were: 
the main offenders may reside in a Member State (in this particular 
case, Italy and France) other than that where the procedure is 
centralized (here, the -Nether lands); 
the search for evidence should not be restricted to the Member States 
where the offence has been committed (Netherlands and Italy) but should 
involve larger and more coordinated investigations extending to transit 
Member States; 
where the Community is the injured party, the fact that Community fraud 
is not a specific criminal offence, coupled with the present state of 
international legal cooperation, may hamper proceedings (in this case, 
the transmission and use of evidence obtained by France), while the 
severity of the penalty meted out to perpetrators and their accomplices 
may vary according to their nationality. 
Meat carousel 
This fraud involved importing live cattle into Italy from Eastern Europe 
under the inward processing arrangements. The animals were re-sold on the 
Italian market without an invoice. The inward processing arrangements were 
- 26 -
discharged by exporting low quality meat and offal to Malta. After the 
labels were changed, the meat was sent from Malta to Austria via Italy. In 
Italy the documents were fraudulently discharged and the meat remained on 
the Italian market before being re-exported to non-member countries to 
obtain a refund. 
This type of fraud damages the Community in two ways: 
the unfair competition it brings to Community production of cattle 
(live animals bought cheaply in Eastern Europe and sold without an 
invoice); 
the damage to the image of Community beef in non-member countries (re­
export of low-quality meat labelled as coming from the Community). 
The amount of own resources eluded is still being assessed but the fraud 
netted ECU 15-20 million in export refunds. Criminal proceedings are under 
way and several people have been questioned. 
Milk powder and cheese 
As a result of investigations carried out chiefly at the port of Antwerp, a 
large contraband network was identified. Community milk powder and cheese 
were exported to Poland and refunds claimed. No import declaration was 
made in Poland and the goods were re-imported into the Community from 
Poznan, accompanied by 90 documents drawn up in several German customs 
offices showing their destination to be Sierra Leone, via Antwerp. 
The milk powder and cheese exported to Poland was sent to a Warsaw company 
which was also a supplier of goods that were shipped officially to 
Sierra Leone. The company only received a commission on the value of the 
goods and acted on the instructions of a Belgian national. 
Once the goods were re-imported into the Community, they were sold and 
perhaps re-exported again to claim further refunds. Whether this in fact 
occurred is still being investigated. 
The quantities involved were 2 300 tonnes of milk power and 150 tonnes of 
cheese, representing ECU 4.5 million in export refunds and ECU 5 million in 
unpaid levies. The case as a whole highlights the need for the Commission 
to clarify Article 5 of Regulation (EEC) No 3665/87. 
- 27 -
2. Old cases 
The information below summarises the most important developments in 1993 in 
respect of : 
01ive oiI 
This fraud was uncovered in 1992 and is currently the subject of legal 
proceedings against the principals. In Italy, where the false documents of 
Community origin were discovered, proceedings are already in motion and the 
legal authorities have obtained all the necessary financial security to 
recover the sums due (about ECU 18.3 million). In Greece, the captains of 
the two ships involved in the fraud are the subject of proceedings for 
forging ships' papers, transport documents and loading and unloading 
manifests. 
In 1993, there were other instances involving the import of vegetable oil 
into the Community and marketing it as olive oil to obtain consumption 
aids. The Commission was involved in coordinating the various Member 
States to gather evidence of the fraud and notify it to the relevant 
national authorities, close the investigations and commence proceedings 
against the authors of the fraud. The criminals were well organized both 
in the importing Member States and the supplying non-member countries. 
Legal proceedings have also been opened in Spain as a result of the active 
cooperation the Commission has received from the Dutch authorities in 
gathering the necessary evidence. 
Such unfair practices harm Community producers by damaging the good name of 
the product and its quality image (through the use of substitutes) and 
highlights yet again the need for the Commission to strengthen cooperation 
with the assistance of Member States. 
Mi ik powder 
Investigations carried out by the Commission in 1992 in Italy and Austria 
resulted in the detection of: 
ECU 40 million in unco 11ected revenue (variable components) in Italy 
arising from the import of feedingstuffs; 
ECU 15 million unduly paid in aid for skimmed milk (for processing into 
compound feedingstuffs) and for skimmed milk powder (for feeding 
calves). 
- 28 -
The company Nutral SA (cases T-492/93 and T-492/93R) applied to the Court 
of First Instance in Luxembourg to have the following declared void: 
the Commission's request to the Italian authorities to recover the 
amounts unduly paid in respect of skimmed milk aid; 
the report of the Commission's investigation. 
On 21 October 1993 the Court held the application to be inadmissible since 
it was for Member States to decide how to recover sums unduly paid and any 
challenge to these decisions should be made through the normal channels 
provided for under national law. 
The Court ruled that even if national law made no provision for suspending 
the execution of a payment order issued by a national authority, "this 
circumstance would not be sufficient to alter the distribution of powers 
between the Community and the Member States as set out in the EEC Treaty". 
Nutral SA has lodged an appeal. 
* 
* * 
All these cases serve to illustrate how much cooperation has improved 
between the various Member State authorities, assisted by the Commission, 
and that there is now a basis for a global approach to combating new types 
of professional crime targeted against the Community budget. The 
Commission's experience shows that it is possible to strengthen the fight 
against fraud using the new tools provided by the Treaty on European Union 
and it is now preparing to launch a new anti-fraud strategy which will be 
marked by closer cooperation and frequent contacts between the Commission 
and Member States, and between Member States themselves. 
SECTION 2: ENQUIRIES CONCERNING THE EAGGF GUARANTEE SECTION 
The Member States, which are responsible for the execution of payments from 
the EAGGF Guarantee Section, must take every precaution to ensure that 
intervention agencies do not approve irregular or fraudulent applications 
and make payments on that basis. 
As part of the clearance-of-accounts procedure the Commission reviews the 
administration and control systems used in each Member State for 
administrative and physical checks on aid applications; it makes 
recommendations for improvements to such systems if it considers that the 
risks of fraud or irregularity have not been adequately identified and 
preventive action taken. 
- 29 -
Commission staff also carried out several on-the-spot inspections with the 
assistance of the Member States. 
In 1993 these enquiries were particularly fruitful (amounts totalling some 
ECU 250 million were detected); for comparison the total amount involved In 
cases of fraud and irregularity notified under the EAGGF Guarantee Section 
in IRENE was over ECU 1 billion*1*. 
1. New cases 
Durum wheat : Intervention stocks and Pre-financing 
Following the reform of the CAP and the subsequent fall In intervention 
prices for durum wheat between 1992/93 and 1993/94, the Commission checked 
the physical presence of intervention stocks in several Member States. In 
the Commission's opinion there was a risk that durum wheat might be sold 
from intervention stocks before the new marketing year and replaced by 
wheat harvested early in 1993/94. In Italy the quantities in storage were 
found to be 25% smaller than those declared. In France, despite 
shortcomings in the present administration and control system, no 
significant irregularities were detected. In Greece on-the-spot checks by 
Commission staff and the national authorities revealed that certain 
warehouses were unfit for the storage of cereals and that certain 
quantities had deteriorated and/or gone missing. 
Sums involved: 
Italy: ECU 76 mi I I ion 
Greece: ECU 15 million 
France: ECU 0.5 mi I I ion. 
In Italy the investigations also revealed irregularities in the pre­
financing arrangements for export refunds (quantities which did not exist 
had wrongfully qualified for the pre-fInancing of refunds worth almost 
ECU 99 mi I I ion). 
Olive oil in Intervention 
An investigation into the quantities and qualities of olive oil in Italy 
showed that, broadly speaking, the quantities declared were in fact being 
held in storage. Samples representing 90% of the oils in intervention 
storage (particularly those from 1992/93) were taken for analysis, however. 
Initial results indicate that 93% of these oils are of a lower quality than 
was stated at the time when they entered into storage. One third of the 
oils were not even eligible for intervention. The total sums involved are 
put at ECU 33.6 million. 
Olive oil: false export declaration 
Enquiries were launched into exports of olive oil for which refunds had 
been granted, it emerged that the product had never arrived at the 
declared destinations. Moreover, the goods in question were not olive oil 
(1) See Table 3. p. 52. 
- 30 -
which qualifies for a high refund) but soya oil (on which a smaller refund 
is payable). Investigations were carried out in several non-member 
countries. In all, the amount involved is estimated to be ECU 3 million. 
The enquiries are continuing. 
Stocks of dried figs 
In Greece enquiries were made into the quantities of unprocessed dried figs 
held in Community storage. The figs in question were found unfit to be 
processed for human consumption. Under the Community rules, such products 
must be removed from storage at the expense of the storage agency and do 
not qualify for Community financing (estimated sum involved: 
ECU 0.4 mi I I ion). 
Re-imported Community sugar 
In Antwerp a quantity of sugar was declared for export to the Republics of 
the former USSR. It was then, however, re-imported into Spain under cover 
of forged customs documents. The quantity fraudulently imported is 
estimated at some 13 000 tonnes of white sugar. Of this quantity, 
approximately 7 300 tonnes was French sugar exported with a refund, 
about 3 200 tonnes was French C-quota sugar and 2 700 tonnes was German C-
quota sugar. In Spain 2 000 tonnes were seized and the national 
authorities initiated criminal proceedings against the individuals 
involved. Legal proceedings have also been initiated in Belgium. The case 
is still in progress (estimated sum involved: ECU 5.8 million). 
Export of beef 
Enquiries made in Mers in (Turkey) revealed that some 2 000 tonnes of beef 
declared as for export to Lebanon and thus qualifying for additional 
refunds had been re-routed to Turkey and released for consumption on the 
Turkish market. Forged Lebanese import documents had been presented to the 
German payment agency, whose task it will be to recover the ECU 4 million 
wrongful I y claimed. 
Export and re-import of Community beef 
In the course of investigations by the Belgian authorities into imports of 
beef and pigmeat from Romania it was found that in some cases the same 
lorries were used for transport to and from Romania. This suggested that a 
team of operators were practising the following fraud scheme: export the 
goods to certain Eastern European countries and re-export the same goods to 
the Bahamas and the Nether lands Antilles. However, the documents issued by 
the German customs authorities were not cleared and the goods were entered 
for home use on the Community market. 
- 31 -
The Community enquiry carried out in Romania, with the participation of the 
Belgian authorities, revealed that the goods were imported into Romania 
under the drawback arrangement, whereby goods re-exported are exempted from 
import duty. Documents seized at the importer's premises made it possible 
to place a figure on the quantities exported to and from Romania and so to 
establish rightful recovery of export refunds and import duties. The 
amount involved is estimated at ECU 0.7 million. 
Export of beef as food aid 
Enquiries revealed that canned meat intended as food aid had not been 
properly sterilized. In all, 3 000 tonnes of beef were to be canned and 
then shipped to the former USSR. Some of this beef (400 tonnes) was 
analysed at various laboratories and the results confirmed that the meat 
had not been adequately sterilized. The Commission notified the various 
Republics concerned, asking them to destroy the goods already delivered but 
not yet consumed. The sum involved is estimated at 
approximately ECU 11.5 million. 
Swine fever 
Special Community measures were taken to support the pigmeat market in 
Germany and Belgium following an outbreak of classical swine fever and the 
imposition of health restrictions. The Commission initiated an inquiry to 
ascertain whether the administration and control system used by the 
national authorities could ensure that the operations in question were 
properly carried out and in accordance with the Community rules. 
On-the-spot checks revealed that the system used by the German authorities 
was inadequate. The case is still in progress. 
2. Existing cases 
The following information illustrates the most important developments in 
1993 in cases described in previous reports. 
Production aid for cotton 
A discrepancy having been found between the Greek authorities' estimate of 
the August 1991 harvest and the actual quantities grown, investigations 
were commenced in 1992 and continued in 1993. It was discovered that 
certain intermediaries were using growers' declarations to cover quantities 
of cotton ineligible for aid and that aid had been claimed for non-existent 
del iverles of cotton. 
The national system for checking aid applications is currently under 
scrut iny. 
- 32 -
Financial consequences of earlier enquiries*1* undertaken in 
connection with the clearance of the 1990 EAGGF Guarantee Section 
accounts 
Two types of correction were made to Member States' accounts. 
One type of correction arose from shortcomings in national control 
procedures: 
quality of durum wheat in intervention storage in Italy: 
LIT 943.3 mi I I ion; 
withdrawal of pigmeat following the outbreak of swine fever in 
Belgium: BFR 110.7 mi I I ion; 
intervention storage of "Nizo" butter in the Netherlands: 
HFL 82.6 million. This flat-rate correction reflects the gravity 
of the shortcomings discovered and the period over which 
irregularities were committed; 
processing of butter into butteroil in Belgium: BFR 47.7 million; 
withdrawal of fruit and vegetables in Italy: LIT 1 840.3 million. 
The second type of correction arose from irregularities where the sums 
wrongly paid were not recovered: 
beef exports (Zimbabwe): UKL 0.7 million in the case of the 
United Kingdom and HFL 0.4 million in the case of the Netherlands. 
In addition to the inspections conducted by the Member States themselves, 
Commission staff carried out several on-the-spot inspections and additional 
checks in close cooperation with the national authorities to ascertain 
whether transactions financed by the EAGGF Guarantee Section were in 
accordance with the rules. This partnership with the national authorities 
responsible for agriculture proved highly effective, and the results 
obtained were extremely satisfactory. A detailed examination of the 
results shows that the principles of risk analysis can be applied and 
future inspections targeted more closely on large-scale fraud. 
It is still difficult, however, to categorize the various frauds and 
irregularities thus detected, mainly because of the diversity of the 
operators involved (small-scale arable or stock farmers, cooperatives, 
exporters, etc.) and of the fraud techniques employed. 
SECTION 3: ACTIVITIES OF COMMUNITY INSPECTION TEAMS (EAGGF GUARANTEE 
SECTION) 
In the wine and the fruit and vegetables sectors, where a high level of 
standardization has been achieved, Commission officials have special powers 
(1) See earlier annual reports on the fight against fraud. 
- 33 -
to conduct Inspections. The shortage of staff poses a real problem in 
setting up the teams, however. 
1. Wine sector 
in 1993 the inspectors focused their attention on the annual harvest and 
production declarations, the definitive abandonment of vineyards, annual 
stock declarations and long-term storage contracts. 
Thesa inspections raised doubts as to the reliability of the information 
supplied by several Member States on areas under vines and yields per 
hectare, such information being derived from a system of declarations. 
Certain irregularities affecting grubbing-up premiums were also discovered 
(grubbing-up claimed despite the prior absence of any vines on the land 
concerned; over-valuation of the areas grubbed-up-, grubbing incorrectly 
carried out). The rules now give a closer definition of grubbing as "the 
complete removal of all vine stocks"*1*. The market organization will 
shortly be overhauled to take account of all these factors. 
2. Fruit and vegetables sector 
In 1993 checks were made on citrus fruit (quality of products presented for 
withdrawal or delivered to processors, in the light of the legal 
requirements) and on withdrawals of peaches and nectarines. Since the end 
of the year a number of on-the-spot checks have also been made on 
consignments of fresh fruit and vegetables to verify compliance with the 
quality control rules. 
SECTION 4: MUTUAL ASSISTANCE 
To gather evidence on frauds or irregularities involving goods imported 
into the Community, some 15 Joint investigations*2* were conducted in 
third countries by Commission staff and representatives from the Member 
States (together forming a Community delegation) and by the relevant 
authorities in the country in question. Responsibility for the frauds thus 
detected lay both with exporters in the non-Community countries and with 
Community importers, but in no case should the non-Community country itself 
be regarded as responsible for the fraud, since the Community rules hold 
the importer to be entirely responsible vis-à-vis the authorities of the 
Member State of importation. 
It should be said, however, that certain shortcomings in the checks carried 
out by the Community's partners under the various preferential agreements 
have sometimes placed Community traders in a very difficult position and 
could disrupt trade relations between the Community and the countries in 
question. 
m Council Regulation (EEC) No 1990/93. OJ L 182. 24.7.1993. 
ncluding preparatory visits. 
- 34 -
1. New cases 
1.1 Industrial products 
Car radios 
Several Member States and the Commission conducted enquiries into the 
importation into the Community of car radios from Indonesia. These 
investigations established that certain products which seven companies had 
been exporting since 1991 were not eligible for preferential treatment 
because of the origin, value and nature of the raw materials used (large-
scale use of Korean components). 
The own resources involved are currently estimated at ECU 18.96 million, 
comprising ECU 7.93 million in customs duties and ECU 11.03 million in 
anti-dumping duties. 
Television sets 
An inspection visit to Turkey revealed that television sets exported into 
the Community between January 1991 and November 1993 contained components 
originating in third countries, including Korea. These components did not 
enter into free circulation in Turkey and were not subject to the 
offsetting levy applicable to such components when the finished product is 
exported to the Community. The television sets in question did not, 
therefore, qualify for the preferential treatment available under the 
agreement with Turkey, since the export licences were wrongfully issued. 
The duty payable is estimated at approximately ECU 45 million. 
Text iles 
Investigations are in progress into the fraudulent importation of textile 
products into the Community. The products in question fall into three 
categories. First, there are textile products declared as originating in 
the United Arab Emirates but believed to originate in India, Pakistan or 
China. Second, there is bedding of Pakistani origin accompanied by forged 
certificates issued by a Swiss Chamber of Commerce and giving the Emirates 
as the country of origin. Third, there are T-shirts which are thought to 
originate in India, Pakistan and China but are loaded in the Emirates under 
cover of certificates specifying various origins, including African 
countries enjoying preferential treatment. 
The unpaid own resources are still being evaluated. The T-shirts alone, 
however, totalled almost 20 million items, on which some ECU 5 million is 
payable. 
- 35 -
1.2 Agricultural and fishery products 
Beef 
An inspection visit to Argentina and Uruguay revealed that 325 authenticity 
certificates presented in 1992 for the import of some 3 000 tonnes of 
Argentine hiiton beef into Germany, the United Kingdom, Spain and the 
Netherlands had been forged. The duty evaded is currently estimated at 
more than ECU 10 million. Further investigations are planned to ascertain 
whether beef imports in 1991 and the first quarter of 1993 were in 
accordance with the rules. 
The entry into force (with effect from 1 May 1993) of a new system for 
issuing authenticity certificates, including a tightening of administrative 
procedures, should put an end to such irregularities in future. 
Canned tuna 
An inspection visit to the Philippines with the excellent cooperation of 
the local authorities revealed that some canned products exported to the 
Community as bonito (which is eligible for the Generalized System of 
Preferences or GSP) were in fact tuna (which is not). The duty evaded 
totals between ECU 4 million and ECU 5 million, and the Member States are 
to collect the difference between the rate of duty applicable to canned 
bonito under the GSP (18%) and the rate for canned tuna (24%). Recovery 
procedures are now in progress. 
2. Existing cases 
The following information illustrates the most important developments in 
1993 in cases described in previous reports. 
2.1 Industrial products: textiles 
This case is a good example of the action which can be taken once enquiries 
within the mutual assistance framework have revealed that duty is being 
evaded. 
Commission staff visiting Bangladesh in 1992 discovered that in all 
ECU 10 million in duty had been evaded. Of this total some ECU 8 million 
has already been recovered (Germany and Denmark). 
2.2 Fishery products: canned tuna 
The 1992 inspection visit had revealed that a certain quantity of canned 
tuna from the Seychelle Islands (one third of the quantity exported over 
the period investigated) had not been eligible for the preferential 
treatment granted under the Lomé Convention, and that the payment of more 
than ECU 1 million in own resources had been evaded. The Seychelles 
authorities applied to the Commission for temporary suspension of the 
recovery procedure, given the difficulties facing their canning industry. 
- 36 -
In its reply the Commission pointed out: 
that it was the sole responsibility of the customs authorities in the 
Member States to take appropriate measures to recover duty from those 
liable; 
similarly, the granting of the payment facilities available under the 
Community rules is solely a matter for the national authorities, who 
must of course ensure that the limitation period does not run out. 
* * 
Several of these cases show Just how far the protection of the Community 
budget by proper application of preferential import schemes within the 
Community depends in actual fact on the proper management of these schemes 
in the non-member countries covered by the various preferential agreements 
and arrangements and on the administrative cooperation which these 
countries are supposed to provide to the Community. In some cases the 
government authorities in non-member countries are cooperating fully in 
accordance with the obligations laid down as a condition for the granting 
of preferences; in other cases, however, they have claimed that 
administrative, political, legal or economic difficulties were preventing 
them either from providing the necessary cooperation for on-the-spot 
enquiries or from accepting the outcome of such inquiries and withdrawing 
the certificates wrongly issued. The Commission and the budgetary 
authority must draw their conclusions from such incidents when granting (or 
continuing to grant) preferences to certain countries in future, and when 
considering their need for technical assistance in this area. 
In 1993, in addition to the specific Community inquiries referred to above, 
the Commission continued to coordinate the numerous enquiries conducted by 
Member States into frauds whereby goods subject to customs duties, 
agricultural levies and/or indirect charges which are particularly high in 
the Community (livestock, meat, milk products, cigarettes, etc.) are 
withdrawn from the Community transit arrangements or from the common EC-
EFTA transit arrangements. In many cases the products in question come 
from Central or Eastern Europe and are placed under the transit 
arrangements in order to cross Community territory to a third country. In 
other cases they may arrive at a Community port (e.g. from South America) 
and transit southwards or towards Central or Eastern Europe*1*. Numerous 
visits have been made under the mutual assistance agreements with Poland, 
Hungary, the Czech Republic, Slovakia and Romania to try to identify, with 
the help of traders in those countries, those individuals (usually 
Community nationals) who are organizing and profiting from frauds committed 
within the Community. 
(1) See "Transnational import/export fraud investigations", p.24. 
- 37 
At the same time the Commission continued its work on tightening the legal 
and administrative rules and on improving operational efficiency, including 
exchanges of information under the agreements with Switzerland and Austria. 
SECTION 5: ENQUIRIES RELATING TO THE STRUCTURAL FUNDS 
The Commission is pleased to report that it has received excellent 
cooperation, particularly from the Judicial authorities in the Member 
States, in the investigation and prosecution of irregularities committed to 
the detriment of the Structural Funds. The Commission intends to take 
active steps to encourage such cooperation in future. An update of the 
cases presented in previous annual reports on the fight against fraud is 
also given below. 
1. European Soc i a I Fund 
1.1 New cases 
. On the basis of statements made by a repentant offender in Italy, the 
Naples Court instigated inquiries which led to the arrest of several 
individuals in Rome and Naples for a fraud which had begun in 1985 and 
involved training courses for the pilots and ground staff employed by an 
airline. No such course ever took place and the registers were forged 
(forged signatures of teachers and students, forged invoices). Cost 
estimates had also been inflated to roughly ECU 22 million (50% paid). 
. Cooperation between the Belgian Judicial authorities and the Commission 
revealed that possible irregular use had been made of subsidies from the 
Social Fund in Belgium. 
A company had submitted 16 applications to the Social Fund between 1984 and 
1988 and had received subsidies totalling some ECU 2.7 mi I I ion. The sums 
relating to these projects had been paid by the Commission directly. 
Charges of forgery and embezzlement have been brought, and the Commission 
has Joined a civil action to the criminal prosecution as partie civile. 
1.2 Existing cases 
. Following preliminary findings in 1992 in Lombardy, the Commission 
cooperated closely with the Italian Judicial authorities (Milan Court) in 
1993. The irregularities related to inflated or fictitious expenditure on 
the lease of data-processing equipment and the holding of training courses 
- 38 -
1988-91). In all, seven individuals were arrested, including civil 
servants and businessmen. 
The Commission brought a civil action in which five of its officials 
testified as experts on such matters as the arrangements for the scrutiny 
and selection of aid applications to the Social Fund and the arrangements 
for the appraisal and monitoring of projects (supporting documents and on-
the-spot inspections with the Italian Ministry of Labour). 
As a result of this fruitful cooperation and the Commission's civil action, 
various ESF subsidies were recovered from some of those prosecuted (the 
irregularities were on a considerable scale and involved an estimated 
ECU 112 mi I I ion). 
. The Commission brought to a conclusion a number of cases, with the 
assistance of the Portuguese authorities within the working party set up in 
1992. The working party is continuing its deliberations, which should come 
to an end in 1995*1*. This will not, however, affect the cases which are 
still pending before national courts and to which the Commission remains a 
party. 
2. EAGGF Guidance Section 
In this new case concerning Calabra cooperation with the Italian Judicial 
authorities and Ministry of Foreign Affairs provided the Commission with 
information on the misappropriation of some ECU 0.5 million. The sums in 
question were taken from Community funds granted for the construction of an 
olive-oil storage and marketing centre and from Ministry of Agriculture 
funds paid over for the same purpose. 
3. Multi-fund operational programme 
The ongoing case in Abruzzi is of interest because in 1993 it gave rise to 
cooperation not only between the Italian Judicial authorities and the 
Commission but also between the Commission, the European Parliament and the 
Court of Auditors. 
On 16 December 1993 Parliament passed a Resolution concerning the 
management and monitoring of the Structural Funds in Italy*2*, emphasizing 
the need to give priority to structural policies in the fight against fraud 
and to draw up an inspection programme. None of the three Structural Funds 
has made any payment in respect of the 1991 instalment, which is currently 
sub judice. 
* 
m * 
(1) Asrequired by Council Regulation (EEC) No 2052/88, as amended by Regulation (EEC) 
No 2081/93. OJ L 193. 31.7.1993. 
(2) OJ C 342. 20.12.1993. 
- 39 
CHAPTER 5 : INVENTORY OF CASES COMMUNICATED BY MEMBER STATES 
The Commission's information on frauds and irregularities derives solely 
from the reports sent in by Member States. Unlike in chapter 4 where the 
facts related mostly to action taken by the Commission in cooperation with 
the member States, this chapter deals with the information officially 
communicated to the Commission under the specific regulations relating to 
the different sectors*1*. 
As a result not all the information in the preceding chapter is necessarily 
incorporated into an official communication, either because the 
investigation is in its early stages or because Member States have not 
fulfilled the obligation to communicate. This is particularly true for the 
Structural funds where the implementing provisions relating to Article 23 
of Council Regulation (EEC) N* 4253/88 were annuied by a decision of the 
Court of Justice*2*. Action taken by the Commission in 1993 has been 
aimed at rectifying this situation*3*. 
This system, which is based on the rules in force, has led the Commission 
to acquire suitable computer facilities for the storage and, more 
importantly, the analysis of the data supplied. 
Using the IRENE*4* database inaugurated in 1993, a list of reports will 
first of all be compiled, followed by an analysis providing a more detailed 
interpretation and using diagrams to show that strategic policy guidelines 
can already be drawn up. 
SECTION 1: STATISTICAL SUMMARY OF THE 1993 DATA 
The information gathered concerns cases of fraud or irregularity for which 
it is not possible, at this stage, to distinguish between irregularities 
for example resulting from material errors, and those which represent 
intentional fraud or acts of negligence. In fact the intentional nature and 
the seriousness of the irregularity only become apparent as administrative 
and Judicial procedures, which can be particularly lengthy, progress. 
Table No 2 summarizes the cases of fraud and irregularity notified by 
Member States in 1993*5*. 
;1) See "Legal framework for fraud prevention/...Reporting", page 6. 
,2) See annual report Fight against fraud 1992, COM(93) 141 final. 
,3) See "Legal framework for fraud prevent ion/.../Reporting", page 6. 
,4) See "Infrastructure and new sources of informât ion/Dato-processing structures", page 17. 
,5) The "mutual assistance" cases may be treated separately from the frauds and irregularities, 
since they are often based on suspicions, no specific irregularity having been detected. See 
"Legal framework for the fight against fraud Administrative cooperation", page 7. 
Tab Is N* 2 40 -
Maitosr 
Stats 
BE 
DA 
DE 
a 
ES 
PR 
IR 
IT 
LU 
H. 
PO 
UX 
TOTAL A) Oan resources 
Art. 6(3) Rsg. N* 
15S2/fe9 (casss Invol­
ving ECU 10 OCOf) 
1963 - 1st half 
N* of 
COBSS 
49 
-
121 
_ 
51 
80 
4 
85 
0 
2 
9 
137 
538 ECU 
million 
10.3 
-
32.8 
5.8 
9.5 
1.4 
34.9 
0 
0 
0.1 
10.5 
105.3 B) EAGGF - GuarantM Ssct Ion 
Art. 3 and 5 Rsg. N' 595/91 
(COBM Involving ECU 4 OCOf) 
1993 
N' of 
COBS* 
21 
75 
178 
211 
251 
118 
16 
47 
0 
61 
141 
180 
1297 ECU 
million 
6.1 
4.2 
19.9 
24.9 
7.7 
34.4 
1.1 
134.7 
0 
3.5 
7.5 
4.3 
248.3 ECU 
million 
rscovsrsd 
0.1 
1 
2.6 
1.3 
0.2 
8.1 
0,3 
19.9 
0 
0.6 
0.8 
1.3 
36.2 C) Structural Funds Art. 23(1) 
Rsg. N' 4253/fe8 (casss 
Involving ECU 4 OCOf) 
1993 
N* of 
casss 
-
1 
4 
0 
_ 
-
0 
0 
-
0 
5 ECU 
million 
-
0.02 
0.04 
0 
-
0 
0 
-
0 
0.06 ECU 
million 
rscovsrsd 
-
0 
0.02 
0 
-
0 
0 
-
0 
0.02 Mtnbsr 
Stats 
+ CCM-
MISSICN 
BE 
DA 
DE 
EL 
ES 
FR 
IR 
IT 
LU 
M. 
PO 
UK 
COM 
TOTAL Mutual assistants 
Art. 14/Ub Rsg- N' 
1468/91 
1993 
N* of 
casss 
14 
0 
12 
5 
8 
11 
S 
16 
2 
15 
2 
12 
52 
154 of which 
own rss 
13 
0 
11 
5 
7 
10 
4 
14 
2 
13 
1 
10 
45 
135 M.A. 
Art 
4/Rsg 
595/91 
1993 
N* of 
casss 
-
3 
1 
-
-
-
-
1 
-
-
-
1 
1 
7 
In ths tabls: 
(a) a 2sro Indioatss that ths rsports rscordsd zsro 
(b) o dash indioatss that no rsports w»rs sent. of fraud or Irregularity; 
The figures show a significant increase not only in the number of reports 
received in 1993, but also in the amounts involved. 
It can be noted that the increases over 1992 in the number of cases 
reported concerning own resources and the EAGGF Guarantee Section were 13% 
and 25% respectively in the period under consideration (1st half-year in 
respect of own resources), while the corresponding amounts increased by an 
even greater percentage (more than double). 
With regard to the EAGGF Guarantee Section, the amounts recovered in 1993 
in respect of cases reported during the year were also higher, accounting 
for 14% of the total (compared with 8% in 1992). 
- 41 -
SECTION 2: GRAPHIC ANALYSIS OF REPORTS 
The data supplied by the Member States are recorded and then analysed, 
sector by sector, in the Commission's various departments*1*. The IRENE 
database put into operation at the end of 1992, has made it possible to run 
a comparative analysis, illustrated by computer-generated diagrams which 
reveal its potential (Figures 1 to 7). As techniques are refined, it will 
become possible to acquire a fuller understanding of the data and to devise 
an anti-fraud strategy on the basis of more closely targeted and relevant 
analysis. 
For the purposes of this statistical section, the year 1990 to 1993 have 
been selected as a reference period because usable data is available on 
both resources and expenditure, although in the case of own resources only 
the figures for the first half of 1993 are available and usable. 
Figure 1 
This shows the number and size of reported frauds involving revenue and 
reported frauds and irregularities involving expenditure. In each case it 
shows the changes recorded over the reference period. A comparison between 
revenue and expenditure wi 11 not be possible until the reporting of cases 
is standardized*2*. 
Figure 2 
This provides a breakdown by Member State of the number of cases reported 
and the sums involved (revenue and expenditure). Under the existing rules 
it is not possible to draw any general conclusions regarding the steps 
taken at national level to combat fraud. 
Figure 3 
This shows the various categories of own resources covered by the reports 
received. Obtaining high-quality data is already emerging as a priority, 
since the Hindeterminate" category represents 42% of the cases reported and 
56% of the sums involved. The bulk of the "identified" categories are 
accounted for by cases relating to customs duties (other than anti-dumping 
duty). 
M See "Insfrestructures/Internal organization of Commission departments", page 16. 
See "Legal framework for fraud prevention /Reporting", page 6. 
- 42 -
Figure 4 
When the same breakdown is applied to EAGGF Guarantee Section expenditure 
on export refunds, aids for crop production and aids for stock farming, it 
is clear that refunds account for a large percentage of the sums 
misappropriated (22% of reported irregularities but 50% of the sums 
involved). From one year to another, however, these sums may vary even if 
the number of cases reported shows little change (see "aids for crop 
production" in 1990 and 1992). Thus, there is no definite link between the 
trend in the number of cases and that in the sums concerned, irrespective 
of category. 
Figure 5 
This shows side by side the export refunds paid by the EAGGF Guarantee 
Section and the agricultural import levies collected as own resources. 
Only cases involving sums greater than ECU 10 000 have been taken into 
account in the period 1990 - 1st half 1993. 
Figure 6 
Irregularities in connection with the structural policies are significantly 
fewer than those involving EAGGF Guarantee Section expenditure: 58 cases 
reported, representing less than ECU 2 million. Changes in the rules 
should clarify the position, since under the Union Treaty and the new 
financial perspective, the structural policies will account for more than 
30% of budgetary expenditure, whereas Guarantee Section expenditure will 
fa 11 to around 50%. 
Figure 7 
This summarizes the IRENE data on administrative cooperation*1*. It 
shows the preponderant role which Commission notifications play in the 
implementation of Regulations (EEC) No 1468/81 and No 595/91. The number 
of cases notified under the latter Regulation remains comparatively small 
(30 cases over the period 1990-93). 
* 
* * 
This preliminary analysis of the data, for which no grand claims are made 
at this stage, is intended simply to serve as a basis for discussion on 
certain points and, more importantly, to demonstrate that some resources 
should be set aside, as soon as possible, for the methodical processing of 
"intelligence". This will provide a better understanding of the various 
types of fraud and fraudster and should help to ensure that Community 
finances are protected on the optimum cost-efficiency basis. 
(1) See "Legal framework for fraud prevention/.../Administrât ion cooperation", page 7. 
Figure 1 
OWN RESOURCES AND EXPENDITURE 
1990-1993 reports (*) 14/03/1994 
1990 
1991 
1992 
1993 OWN RESOURCES 
YEAR Number of cases 
1990 507 
1991 702 
1992 1116 
1993 452 
TOTAL 2777 Sums involved 
(ECU million) 
57 
117 
95 
95 
364 
Sums 
involved 
(Mecus) 1990 
1991 
1992 
1993 
1990 
1991 
1992 
1993 YEAR 
1990 
1991 
1992 
1993 
TOTAL EXPENDITURE 
Number of cases 
849 
622 
1036 
1303 
3810 Sums involved 
(ECU million) 
126 
123 
115 
248 
612 250 
200 ~ 
150 -
100 -
50 -1990 
1991 
1992 
1993 
Sums 
involved 
(Mecus) 
(*) 1993: figures for own resources cover only the first six months. 
- 44 -
Figure 2 
OWN RESOURCES AND EXPENDITURE 
1990-93 reports (*) 14/03/94 
OWN RESOURCES 
EXPENDITURE B 
260 
91 DK 
86 
168 D 
815 
458 OR 
54 
310 Number of cases 
E 
115 
444 F 
521 
445 IRL 
10 
59 I L NL P UK TOTAL 
140 1 38 59 678 2777 
590 0 386 221 638 3810 
1400 
1200 
1000 
800 
600 
400 
200 
f ^^™ | ^^™ J.-^^M t ^^B , ^^M | ^^H , , EXPENDITURE 
OWN RESOURCES 
B DK D GR E IRL NL UK 
B DK 
OWN RESOURCES 
EXPENDITURE 23 
9 6 
10 D 
144 
60 Sums involved (ECU million) 
GR 
2 
27 3 
15 47 
50 IRL I 
6 66 
3 380 L NL 
0 2 
0 23 2 
13 UK TOTAL 
63 364 
22 612 
450 
400 
350 
300 
250 
200 
150 
100 
50 
t ^^™ f -^^™ , ^^H , ^^H ,.^^H t ^^M j I — I EXPENDITURE 
OWN RESOURCES 
B DK D GR E IRL L NL P UK 
(*) 1993: figures for own resources cover only the first six months 
- 45 " 
Figure 3 
OWN RESOURCES 
1990 -1993 reports (*) 14/03/94 
YEAR 
1990 
1991 
1992 
1993 
TOTAL 
1200 
1000 
800 
600 • 
400 • 
200 • 
0 • Number of cases 
CUSTOMS DUTIES ANTIDUMPING DUTIES AGRICULTURAL LEVIES INDETERMINATE 
211 
246 
522 
225 
1204 24 
25 
28 
25 
102 24 
9 
215 
56 
304 248 
422 
351 
146 
1167 TOTAL 
507 
702 
1116 
452 
2777 
INDETERMINATE 
AGRICULTURAL LEVIES 
ANTIDUMPING DUTIES 
CUSTOMS DUTIES 
1990 1991 1992 1993 
Sums involved (ECU million) 
CUSTOMS DUTIES ANTIDUMPING DUTIES AGRICULTURAL LEVIES INDETERMINATE 
20 
15 
24 
40 
99 3 
3 
8 
2 
16 YEAR 
1990 
1991 
1992 
1993 
TOTAL 
120 
100 , 
80 : 
60 ; 
40 ; 
20 • 
i 
0 > 
1990 1991 1992 
(*) 1993: figures cover only the first six months. 2 
2 
35 
7 
46 32 
97 
28 
46 
203 TOTAL 
57 
117 
95 
95 
364 
INDETERMINATE 
AGRICULTURAL LEVIES 
ANTIDUMPING DUTIES 
CUSTOMS DUTIES 
1993 
YEAR 
1990 
1991 
1992 
1993 
TOTAL - 46 -
Figure 4 
EAGGF GUARANTEE SECTION 
1990 -1993 reports 
Number of cases 
REFUNDS AIDS TO CROP PRODUCTION 
145 
181 
213 
304 
843 237 
198 
591 
616 
1642 AIDS TO STOCKFARMING 
444 
221 
224 
378 
1267 14/03/94 
TOTAL 
826 
600 
1028 
1298 
3752 
180 
160 
140 
120 
100 
80 
60 
40 
20 
0 1990 
YEAR 
1990 
1991 
1992 
1993 
TOTAL 1991 1992 1993 REFUNDS 
AIDS TO CROP 
PRODUCTION 
AIDS TO STOCKFARMING 
Sums involved (ECU million) 
REFUNDS AIDS TO CROP PRODUCTION AIDS TO STOCKFARMING 
37 
81 
20 
168 
306 70 
35 
89 
45 
239 18 
7 
5 
35 
65 TOTAL 
125 
123 
114 
248 
610 
àU. REFUNDS 
AIDS TO CROP 
PRODUCTION 
AIDS TO STOCKFARMING 
1990 1991 1992 1993 
- /. 7 -
Figure 5 
REFUNDS / LEVIES 
1990 -1993 reports for cases over 10000 ecus (*) 11/3/94 
Number of cases 
YEAR REFUNDS LEVIES 
1990 74 24 
1991 99 9 
1992 126 215 
1993 81 56 
TOTAL 380 304 
250 
200 
150 
100 
50 
1990 1991 1992 1993 
Sums involved (ECU million) REFUNDS 
LEVIES 
YEAR 
1990 
1991 
1992 
1993 
TOTAL REFUNDS 
36 
81 
20 
20 
157 LEVIES 
2 
2 
35 
7 
46 
1990 1991 REFUNDS 
LEVIES 
1992 1993 
(*) 1993: figures cover only the first six months. 
- 48 -
Figure 6 
STRUCTURAL FUNDS 
1990 -1993 reports 14/03/94 
Number of cases 
•Member State EAGGF-Guidance 
Fisheries 
ERDF 
ESF 
EAGGF-Guidance 
DK D GR IRL NL UK 
Sums involved (ECU thousand) 
| Member State EAGGF-Guidance 
1000 
900 
800 
700 
600 
500 
400 
300 
200 
100 
0 I Fisheries 
ERDF 
ESF 
EAGGF-Guidance 
DK D GR IRL NL UK 
- 49 -
Figure 7 
MUTUAL ASSISTANCE 
1990-1993 reports 14/03/94 
Number of cases under Reg. No 1468/81 
Member State Number of cases 
B 
DK 
D 
GR 
E 
F 
IRL 
I 
L 
NL 
P 
UK 
EC 29 
2 
32 
6 
18 
39 
11 
22 
3 
25 
6 
42 
145 
TOTAL 380 
Number of cases under Reg. No 595/91 
Member State Number of cases 
B 
DK 
D 
I 
UK 
EC 
TOTAL 5 
3 
2 
1 
4 
15 
30 
UK 3% 
13% 
Reports from the Members States 1990-93 
own resources (*) and expenditure 
Sums involved 
(as % of total) 
o 
(*) 1993: only the first six months for own resources. 
- 51 -
SECTION 3: FINANCIAL FOLLOW-UP 
Cooperation between the Commission's specialized departments and the 
national authorities has enabled many frauds and irregularities to be 
detected and prosecuted. The substantial sums which are often involved can 
be recovered only by the Member States acting under their national laws. 
The Community must therefore ensure that Member States make regular reports 
to the Commission under the agreed procedures so that appropriate action 
can be taken at Community level. 
In this context it should be remembered that the European Parliament, as is 
its right, keeps a close watch on such financial matters and that 
recommendations are made by the Court of Auditors in its annual reports. 
The Commission has the legal means to ensure the recovery of unpaid revenue 
or any amounts wrongly paid. Its staff make full use of the new scope for 
action on frauds against the EAGGF Guarantee Section (Regulation (EEC) 
No 595/91) and hope to take similar action on frauds against the Structural 
Funds. In the same way, the proposed amendment of Regulation (EEC, Euratom) 
No 1552/89 should make it easier to collect unpaid own resources^1). 
Some progress has already been made over the last financial year 
(particularly as regards the EAGGF Guarantee Section). Table No 3 
illustrates the Commission follow-up to various categories of fraud, 
particularly as regards cases now "closed", i.e. cases where the Member 
State has recovered all the sums payable or the Commission has decided to 
charge to the Member Stated or the Community those sums which cannot be 
recovered (although this applies only to the EAGGF Guarantee Section). 
Of 8 243 cases relating to the EAGGF Guarantee Section, 5 111 involving 
ECU 113.35 million have been closed. 
Of these ECU 113.35 mi I I ion, ECU 104.91 million (92.5% of the total) were 
recovered, and ECU 7.60 mi I I ion (6.7% of the total) were charged to the 
Community. It should be pointed out, however, that these cases involved 
relatively small sums and that, where large sums are involved, recovery 
takes a very long time because of the Judicial procedures followed. 
Here again, even with the Irene database only in its first year of 
operation, the advantages of computerized systems have become clear. From 
now on they will be used in cooperation with the departments concerned and 
to the full extent of their capacities, thanks to the refinement and the 
quantitative and qualitative improvement of input procedures. 
ÏÏ See "Legal framework for fraud prevention/... /Reporting", page 6. 
Such decisions may be taken in connection with the clearance of accounts. The procedure is 
laid down In Article 8(2) of Council Regulation (EEC) No 729/70 and in Article 5(2) of 
Council Regulation (EEC) No 595/91. 
Table N* 3 
EXTRACTS FROM IRENE 3 DATABASE 
(amounts in ECU '000) EAGGF - GUARANTEE 
Cases Amounts STRUCTURAL FUNDS 
Cases Amounts OWN RESOURCES 
Cases Amounts 
(1) TOTAL : CASES CLOSED 
Of which - without financial consequences* 
- full recevorey of amounts due 
- recovery impossible ** 
Of which (charged to Member State) 
(charged to EC) 5.111 
987 
3.855 
269 
(22) 
(247) 113.351 
0 
104.915 
8.436 
(832) 
(7.604) 16 
3 
13 232 
39 
193 210 
4 
206 8.365 
0 
8.365 
(2) TOTAL : CASES ONGOING 
Of which - recovery in progress 
- repayment of expenditure or 
collection of revenue pending 2.742 
244 
2.498 954.448 
76.657 
877.791 28 1.531 
3 31 
25 1.500 1.593 
1.593 265.667 
65.667 
U1 
(3) SUB-TOTAL : CASES CLOSED OR ONGOING 
(1) + (2) 7.853 1.067.799 44 1t7Ç3 1.803 274.032 
(4) CASES WHERE RECOVERY OF ALL OR PART OF 
73 
THE AMOUNTS DUE IS IMPOSSIBLE *** 14.620 174 
(5) CASES ON WHICH FINANCIAL DATA ARE 
LACKING ILL 
(6) INTERPRETATION IN PROGRESSA»*») 972 84.569 
GRAND TOTAL r REPORTED CASES 
(3) 4 (4) • (S) + f6) 8.243 1.082.419 1.937 2.775 358.601 
(*) Frauds or irregularities reported but not proven or confirmed. 
(**) Sums definitively lost, unless chargeable to the Member State as EAGGF Guarantee Section expenditure. 
(***) Sums lost but not yet charged to the Member State as EAGGF Guarantee Section expenditure. Sums lost under other headings are usual I ly 
charged to the Ccmmunity budget. 
(****) Cases relating to own resources or the EAGGF Guarantee Section where contradictory data have been supplied by the Member States. 
- 53 -
In the case of own resources, the financial data sent to the Commission 
for analysis include statements showing the duties which have not been 
collected. These statements can be compared, in the course of on-the-
spot checks with the frauds or irregularities which figure in the legal 
records kept by the Member States. Cases involving sums in excess of 
ECU 500 000 are investigated in detail; other cases are the subject of 
random checks. 
In the case of expenditure, there is no statutory requirement to keep 
or supply extracts from accounts of the type used for own resources. 
* In the case of the EAGGF Guarantee Section, any sums recovered are 
specified in accordance with an annual procedure (annual clearance 
of accounts) and are deducted from the Fund's expenditure. The 
Commission may decide to charge any amounts lost to the Member 
State if it has failed to do everything possible to recover the 
sums in question or has shown itself to be negligent. 
* In the case of the Structural Funds, any improper behaviour or 
negligence which has resulted in the misappropriation or unlawful 
use of payments is examined with the Member States under the 
partnership arrangements^1). In practice, repayments are a rare 
occurrence and the amounts lost may be redeployed or reprogrammed, 
again under the partnership arrangements. 
Lastly, Table No 3 shows that the rules do not apply in a uniform manner to 
all the areas which they cover and that the content of the reports from the 
Member States may vary according to the nature of the funds in question 
(revenue or expenditure) or even according to the nature of the expenditure 
(EAGGF Guarantee Section or Structural Funds). 
In this context the Commission is aware of the improvements needed to the 
legislation now in force, in particular with a view to: 
standardizing the contents of the reports from the Member States^2) 
and harmonizing recovery procedures, for although different bodies 
authorize different types of expenditure, they nevertheless perform the 
same function, i.e. taking the decision to recover amounts due, since 
they alone are empowered to commit expenditure; 
defining a consistent framework within which the standardization of 
reports and the harmonization of recovery procedures (and of procedures 
for the collection of own resources) can be put to optimum use and 
provide the basis for an effective fol low-up ; 
making provision in the financial follow-up, in certain well-defined 
cases and in agreement with the Member States, for a procedure whereby 
long-outstanding amounts which are impossible to recover may be 
definitively written off, existing procedures being used in the case of 
the EAGGF Guarantee Section and new procedures being introduced in 
other sectors. 
(1) Article 24 of Council Regulation (EEC) N' 2082/92 amending Regulation (EEC) N» 4253/88. 
(2) See "Legal framework for fraud prevention/... /Reporting", page 6. 
- 5< -
CHAPTER 6 : FRAUD PREVENTION APPROPRIATIONS 
SECTION 1: EXECUTION OF THE 1993 BUDGET 
In 1993 the appropriations allocated for fraud prevention totalled ECU 
133.24 million (including ECU 60 million entered in the reserve). 
Figure 8 shows how the amount of the appropriations has changed over recent 
years. 
Figure 4 
FRAUD PREVENTION 
APPROPRIATIONS 
(million ECU) 1990 
1 2 1991 
1 2 1992 
1 2 1993 
1 2 
Commission 
Member States 3.115 3.115 
71.580 67.302 6.398 6.806 
65.733 65.325 8.894 9.404 
67.662 61.995 2.060 2.060 
71.182 115.792 
TOTAL 74.695 70.417 72.131 72.131 76.556 71.399 73.242 117.852 
1 : appropriations entered in the budget (outside the reserve) 
2: appropriations available after transfers 
Allocation of fraud prevention appropriations 
120.000 
100.000 
80.000 
3 O UJ 60.000 
40.000 
20.000 
0.000 Mem ber States 
Commission 
- 55 -
These appropriations were allocated for the direct benefit of the Member 
States to finance national control structures (in agriculture in 
particular), to support training expenditure (seminars, training courses), 
and to co-finance certain programmes for setting up new control methods 
(remote sensing, vineyard register). 
The chart also shows that the volume of appropriations approved in the 
budget rose to ECU 117.85 million after transfers within the chapter, in 
particular boosting the operational Article B1-360 (Measures to combat 
fraud affecting the EAGGF guarantee Section). 
In general terms the operating appropriations (Part B of the expenditure 
side of the budget) are meant to cover technical assistance from the 
Commission to the Member States both for the organization of their 
specialist anti-fraud departments and to help them conduct enquiries and 
carry out effective controls^1). The fraud prevention appropriations are 
used by the Member States more for preventive than for punitive purposes. 
Above all, the Member States are bound to ensure that Community funds are 
properly employed, and the fraud prevention appropriations help them to 
fulfiI that obi igation. 
1. Utilization of appropriations 
Datai Is of the utilization of appropriations by the Member States are shown 
in Table 4. The following comments relate only to the main headings 
carrying substantial sums. 
. A-3531 (controls, studies, analyses in connection with the fight against 
fraud). A review of the utilization rate and the way in which the Member 
States use the appropriations to which they are entitled^2) prompts the 
fol lowing remarks : 
Since Regulation (EEC) N* 4045/89 was introduced, Community appropriations 
have clearly been underutilized. To help counteract this, the 
appropriations needed to co-finance the measures provided for in the 
Regulation .— which is now in its fourth year of application — have been 
fixed on the basis of Member States' own estimates at the time of the 
annual programming exercise and on their previous utiliztion record, rather 
than on the total amounts mentioned in the regulations as was the case in 
the past. 
This being so, total commitments now stand at ECU 1.71 million, and not the 
ECU 2.58 million provided for in the Regulation, a figure considered to be 
too high in relation to Member States' own forecast expenditure. 
The reason for this decision was to improve the way the Community's 
financial contribution under the Regulation was managed and to avoid the 
danger of appropriations lapsing as in the past. 
(1) Specific control* which they are under an obligation- to undertake by virtue of exi*ting 
legislation. 
(2) Under Regulation N* 4045/89. 
- 56 -
B1-360 (Measures to combat fraud affecting the EAGGF Guarantee Section). 
* Under Regulation (EEC) NT 307/91<1). With the Regulation entering its 
third year of application, it was difficult to establish in advance how 
Member States' actual expenditure would compare with the estimates arrived 
at during the annual programming exercise, especially as the Regulation's 
timetable is such that the end use of appropriations for the previous year 
cannot be known until well after appropriations for the current year have 
been estimated and committed. Consequently, the whole financial allocation 
provided for in the Regulation (ECU 20 million) has been committed. 
* Under Regulation (EEC) No 3508/92 — Expenditure amounting to 
ECU 50 million has been committed. It covers all appropriations made 
available to Member States to implement the integrated administration and 
control system*2* for the period 1992-93. From the very beginning, heavy 
calls have been made on the co-financing facility provided for in the 
Regulation and there have been none of the start-up problems that normally 
characterize the introduction of new regulations. 
* Remote sensing — Appropriations to co-finance controls using remote 
sensing by Member States (ECU 10 million) have been committed in their 
entirety. 
B2-5110 (Measures to control and combat fraud in agriculture). The 
initial allocation stood at ECU 33.5 million, but the amount available was 
reduced to ECU 18.11 million. The transfer decision was based on the fact 
that it was impossible to commit all the appropriations as planned, in 
particular for the vineyard register (the Member States failed to apply for 
funds). 
The utilization of appropriations can therefore be regarded as 
satisfactory. 
2. Payments 
Payments in respect of expenditure are made either in the course of the 
year or by the end of the following year (Part A: non-differentiated 
appropriations), or they may be spread over several years (Part B: 
differentiated appropriations) following a mandatory schedule, the 
principle being that appropriations not paid out in the course of the 
financial year subsequently lapse. 
Payments, then, are a reflection of the Commission's activities as a whole. 
If, when discussing the scheduling of expenditure, a Member State indicates 
that it needs funds to which it is entitled under the regulations, the 
Commission will take a decision committing the expenditure in question. If 
the Member State does not then submit a payment request (for instance 
because the programme due to be financed is not carried through), no actual 
payment is made. This is what happened with the vineyard register under 
Item B2-5110 [where commitments for ECU 23 million were made in 1992 to be 
(1) Council Regulation (EEC) N* 307.91 of 9 February 1991 on reinforcing the monitoring of cerain 
expenditure chargeable to the EAGGF Guarantee Section. 
(2) See Legal Framework for Fraud Prevent ion/..../Control 3, page 8. 
- 57 -
paid in 1993, but only ECU 13.5 million were actually paid out — so that 
appropriations of more than ECU 9 million are in danger of lapsing*1 >]. 
This computerized sectoral register is intended to establish the link 
between vineyards and the operators so as to be able to control planting 
and harvest déclarâtions(2). Among the countries concerned (Germany, 
France, Luxembourg, United Kingdom, Spain, Italy, Greece and Portugal) the 
actual implementation of the programme has not proceeded as planned 
(especially in Greece, Spain and Portugal). 
Other headings concerned: 
A-3531 (Regulation (EEC) No 4045/89) 
The utilization rate for appropriations made available to Member States 
rose from 42% in 1990 to 54% in 1992. Analysis of forecast expenditure for 
1993 shows a rate of 90% compared with the appropriations committed under 
the rule described above, although the final position will not be known 
until after Member States have presented their statements of actual 
expenditure on 15 May 1994. 
What we know concerning the utilization of Community appropriations 
indicates that the situation varies considerably from one country to 
another: the utilization rate is high in Denmark, Germany, Spain, France 
and Portugal, average in Belgium and the Netherlands, and low in Ireland, 
Greece, Italy and the United Kingdom. 
As for the Community financial resources provided for in the Regulation, 
the main increase over the years has been in appropriations to cover the 
salaries of the extra staff taken on (18% up in 1992 compared with 1990). 
On the training front, however, Member States have less and less resort to 
Community appropriations, which is paradoxical to say the least in view of 
the fact that they are continually asking to be instructed about Community 
regulations. There is also a low level of utilization in respect of 
expenditure on computerization, despite its being wholly chargeable to the 
Communi ty budget. 
B1-360 
* Under Regulation (EEC) No 307/91 — The co-financing system provided for 
in Regulation (EEC) No 307/91, for which the utilization rate for Community 
appropriations was 46% in 1992 (an increase of 10% over 1991), could 
register another slight improvement in 1993 if Member States' expenditure 
forecasts are respected. 
The forecasts suggest a utilization level of 55% in respect of the amount 
available (ECU 20 million), although it is only when the actual expenditure 
figures are presented on 15 May 1994 that it will be possible to ascertain 
the actual utilization rate for Community appropriations. 
(1) There is still a possibility of a transfer, which must be submitted for explicit approval by 
the budgetary authority. 
(2) Controls which the Member States have to carry out. 
- 58 -
At the moment, forecasts vary according to Member State: three countries 
(Denmark, Spain and the Netherlands) could well utilize all the 
appropriations available to them, but the utilization rate for other 
countries could be anything between 6% and 71%. 
Even those Member States whose control authorities are in greatest need of 
reinforcement (Greece, Italy) make little or no use of the financial 
resources made available to them by the Community. 
Generally speaking, Member States seem to prefer co-financing when it is 
for strengthening controls pertaining to export refunds rather than for 
controls in respect of intervention measures, as is shown by the fact that 
their respective utilization rates are running at 57% and 43% of total 
eligible amounts. 
* Under Regulation (EEC) No 3508/92 — Member States have evinced 
considerable interest in the financial incentive set out in Article 10 of 
the Regulation (scheduled to last for three years from 1992); the 
utiIization rate here is extremely high, at 96% of the amount available. 
As regards 1993, only the forecast expenditure figures are available, as 
the final ones will not be known until after Member States have presented 
their actual expenditure statements; however, it is almost certain that 
the percentage will be similar, since most Member States have presented 
forecasts considerably in excess of their overall allocation. 
So although the figures are provisional, they appear to show a satisfactory 
situation across the board, with the exception of Portugal and Luxembourg. 
Payments made so far (1992 final and 1993 advanced) amount to 
ECU 37.5 million, which is 75% of the ECU 50 million committed. 
* Remote sensing — So far the utilization rate is 41% in respect of 
commitment appropriations although, bearing in mind the time lag in 
presenting payment requests, the final rate will probably be considerably 
higher. 
Table 4 gives a breakdown of the execution of fraud prevention 
appropriations in 1993 by budget heading and operation financed. 
IMPLEMENTATION OF APPROPRIATIONS 1993 
BUDGET 
ARTICLE, 
ITEM 
A2554 
A3530 
A3531 
A3532 HEADING 
Conferences, congresses and 
meetings in connection with 
the activities of the associa­
tions of European lawyer* for 
the protection of the finan­
cial interests of the Commu­
nity 
Unit to coordinate action 
against fraud 
Controls, studies, analyses 
in connection with the fight 
against fraud 
Fraud suppression in the 
textiles sector (TAFI) MEASURES 
FINANCED 
Seminars, meetings 
training courses in 
the Member States 
- Meetings, seminars 
investigations 
- COCOLAF 
- Reg. N» 4045/89 
- Meetings, 
investigations, 
seminars, missions 
- Studies on customs 
and indirect taxa­
tion 
- Other studies and 
report on the 
fight against 
fraud 
- Computer systems 
(IRENE) 
- RTC 
- Seminars, 
investigations 
- Study 
- Co-financing a 
research unit APPROPRIA­
TIONS 
AVAILABLE 
200.000 
99.000 
4.341.000 
500.000 APPROPRIA­
TIONS 
COMMITTED 
199.155 
90.491 
50.491 
40.000 
3.799.028 
1.706,000 
1.422,048 
365.080 
113.000 
103.400 
89.500 
494.315 
161.000 
180.315 
153.000 UTILIZATION 
99.6 
91.4 
87.5 
98.9 CARRYOVERS 
FROM 1992 
324.924 
3,375.585 PAYMENTS 
AGAINST 
CARRYOVERS 
FROM 1992 
268.573 
82.6 X 
1,260,104 
32.5 X 
p.m. in earl 1er years 
BUDGET 
ARTICLE, 
ITEM 
A-355 
B1-360 
B2-5110 
B5-3051 
B5-3052 HEADING 
European documentation, 
coordination and study net­
work to control cross-border 
crime and fraud 
Measures to combat fraud 
affecting the European 
Agricultural Guidance and 
Guarantee Fund, Guarantee 
Section 
Measures to control and 
combat fraud (inspection in 
agriculture) 
Community action programme 
concerning vocational training 
for customs officials 
(Matthoeus programme) and tax 
officials 
Indirect taxation and customs 
networks MEASURES 
FINANCED 
EstabIishement of a 
foundation under 
Dutch law (legal 
structure of the 
network) involving 
5 countries : 
D. I, GR, L. NL 
- Reg. N« 307/91 
- Remote sensing 
- Integrated 
administration and 
control system 
- Vineyard register 
- Studies 
- Missions 
- Controls on fruit 
and vegetables 
in Portugal 
- Remote sensing 
(software) 
- 01ive oi1 agencies 
- Mi seellaneous 
— Matthaeus 
- Matthaeus-Tax 
Feasability studies, 
pi lot projects 
TOTAL APPROPRIA­
TIONS 
AVAILABLE 
375.000 
82.000.000 
18.110.000 
2.427.000 
9.800.000 
117,852.000 APPROPRIA­
TIONS 
COMMITTED 
375.155 
80.120.800 
20.000,000 
10.000,000 
50.120,800 
17.979.427 
389.052 
555.815 
103,251 
4.400,000 
467,423 
12,000,000 
63.886 
2.426.953 
1,900.707 
526,246 
9.800.000 
115.285,169 UTILIZATION 
(X) 
100 
97.7 
99.3 
99.9 
100 
97* CARRYOVERS 
FROM 1992 
245.000 
15,718.320 
23.069.727 
-PAYMENTS 
AGAINST 
CARRYOVERS 
FROM 1992 
240.500 
98.2X 
4,877.509 
31X 
13,491.392 
58.5 X 
-o o 
(*) The percentage of utilization of appropriations voted (excluding transfers) reaches 88.4X. 
- 61 -
SECTION 2 : FINANCIAL ANALYSIS ASPECTS 
Now that the partnership provided for in the régulât ions^1 ^ is drawing to 
an end, the Commission should take advantage of the situation to look at 
the quality of Member States' budgetary implementation^2* and decide 
whether the financial partnership policy should be continued. In so doing, 
the Commission will put itself in a position to address the problem of 
underutiIization of some appropriations. 
The specialist national departments that carry out controls in Member 
States bear the primary responsibility for the quality and effectiveness of 
measures. With the protection of the Community's financial interests in 
mind, the Commission, which is responsible under the Treaty (Aticle 205) 
for ensuring that the budget is properly implemented, has to apply sound 
financial management principles, taking into account the Council's wish for 
a partnership with Member States (Article 209a of the Treaty on European 
Union). 
Given also the situation in respect of actual payments, the question arises 
as to what to do with the unutilized appropriations. One solution might be 
to channel this money to Member States with the weakest control systems. 
The proportion of unutilized appropriations has evened out in the last few 
financial years^3), and requesting Member States need to be clear about 
their appropriations requirements and their intention to utilize them^4). 
The completion of the internal marked and the resultant dismantling of 
customs barriers has created a new situation in which Community trade needs 
to be properly monitored with the help of the various controls prescribed 
in Community regulations. 
Member States are duty-bound to carry out these controls, and the aim of 
the partnership with the Commission is to strengthen the control structures 
for which they are responsible. In cases where appropriations to which 
Member States are entitled are underutilized, other ways of achieving the 
same goal should be looked into. 
(1) See Legal Framework for Fraud Prevent ion/.../Controls, page 8. 
(2) See Budgetary Implementation 1993/UtiIization of Appropriations, page 54. 
(3) Since the entry into force of Regulations (EEC) N* 4045/89 and n* 307/91. 
(4) This "guarantee of utilization" should be given to the Commission in the form of a detailed 
timetable. 
- 62 -
SECTION 3: 1994 APPROPRIATIONS 
One of the Commission's budgetary priorities for 1994 will be to allocate 
additional human and financial resources to its fraud prevention programme. 
The amount a I located in the 1994 budget is ECU 139.14 million [an increase 
of 18% over the 1993 outturn]*1). 
Mention should be made here of the continuing role played by Parliament 
through its Committees on Budgets and Budgetary Control in clarifying the 
appropriations allocated to fraud prevention. Examples are the allocation 
of new appropriations to the Structural Funds headings (EAGGF Guidance 
Section, FIFG, ERDF, ESF)<2> which had previously only been given token 
entries, and the creation of new fraud prevention headings in the fields of 
agriculture, research and cooperation. 
In 1994, the focus will be on two areas in particular: firstly, the 
Structural Funds, where Parliament intends to allocate the various 
programming instruments (Community support frameworks and other operational 
programmes) sufficient funds to pay for proper controls, with the 
Commission stepping in to provide increased technical assistance to help 
national authorities ensure that Community funds are properly used (control 
of actual expenditure); secondly, there will be three new headings (B2-519 
for agricultural controls; B6-840 for research and B7-500 for cooperation) 
which Parliament hopes will make the utilization of fraud prevention 
appropriations more transparent by allocating money to specific measures on 
the basis of a detailed programme drawn up by the Commission. 
The breakdown of fraud prevention appropriations for 1994 is given in 
Table 5 and Figure 9. 
urn See Execution of the 1993 Budget, page 53. 
"em* B2-102, B2-111, B2-121 and B2-131 respectively. 
Table n' 5 - 63 -
FRAUD PREVENTION APPROPRIATIONS - 1994 BUDGET 
ITEM DESCRIPTION AMOUNT (ECU) 
A-2554 Conferences, congresses and meetings in connection 
with the activities of the associations of European 
lawyers for the protection of the financial interests 
of the Community 240.000 
A-3530 Unit to coordinate action against fraud 104.000 
A-3531 Controls, studies, analyses in connection 
with the fight against fraud 4.145.000 
A-3532 Fraud suppression in the textile sector (TAFI) 800.000 
A-355 European documentation, coordination and study 
network to control cross-border crime and fraud p.m. 
B1-360 Measures to combat fraud affecting the European 86.000.000^' 
Agricultural Guidance and Guarantee Fund. Guarantee Section 
B2-102 Measures to combat fraud affecting the European 
Agricultural Guidance and Guarantee Fund. Guidance 
Section 200.000(1) 
B2-111 Measures to combat fraud affecting the Financial Instrument 
for Fisheries Guidance 50.000(1) 
B2-121 Measures to combat fraud affecting the European 
Regional Development Fund 300.000(1) 
B2-131 ' Measures to combat fraud affecting the European Social Fund 200.000(1) 
B2-511 Inspection in agriculture 28.500.000 
B2-519 Campaign against fraud in agriculture 2.500.000 
B5-3051 Community action programme concerning vocational 
training for customs officials (Matthoeus programme) 
and tax officials (Matthoeus tax programme) 2.900.000 
B5-7212 Indirect taxation and customs networks 12.900.000 
B5-800 Cooperation in the field of justice and home affairs 
justice et des affaires intérieures. p.m. 
B6-840 Measures to combat fraud in the shared—cost research 
sector 50.000(1) 
B7-5096 Development Cooperation Inspectorate 250.000 
B7-530 Measures to combat fraud In the cooperation sector p.m. 
JJ) Appropriations entered wholly under Chapter B0-40 (except item B1-
360 : ECU 15 million out of a total of ECU 86 million). 
64 -
Figure 9 
FRAUD PREVENTION APPROPRIATIONS -1994 
broken down by main area 
Area 
EAGGF-Guarantee Section 
Agriculture (inspection) 
Customs and indirect taxation 
Training, various 
Structural Funds, other areas Budget heading 
B1-360 
B2-5 
B5 
A 
Other Amount 
(ECU 1000) 
86000 
31000 
15800 
5289 
1050 
TOTAL 139139 
A Other 
4% 1% 
B1-360 
62% 
ISSN 0254-1475 
COM(94) 94 final 
DOCUMENTS 
EN 0109 
Catalogue number : CB-CO-94-102-EN-C 
ISBN 92-77-66727-3 
Office for Official Publications of the European Communities 
L-2985 Luxembourg