The cases of established fraud were few and, on average, these decisions were reached after about three years. This may point to the need to invest further in the investigation/prosecution phase. At EU28 level, established fraud ratio was lower than 14%. It was zero or very low in many Member States. In Bulgaria, the ratio was relatively high, at 26%, and based on the (by far) highest number of cases of established fraud. In general, the established fraud ratio is not likely to increase significantly because, while 66% of cases are still classified as suspected fraud (pending ratio), about 40% of them is already closed and, in any case, between 6 and 13 years have already passed since the detection of the irregularity.

The dismissal ratio varied across the Member States, as the related average time. High dismissal ratios, especially when associated with high pending ratios, may due either to the detection phase or to the investigation/prosecution phase, especially when they are associated with high times. Low dismissal ratios may be positive, but they may also be the result of many irregularities still pending. After six years following the end of the period under consideration, the dismissal ratio was zero or very low in many Member States. This indicator must be read in combination with the pending ratio. The latter points to the possibility that the dismissal ratio increases in the future (depending on the number of cases that are still open) or to an underestimation of the dismissal ratio (depending on the number of cases that are already closed). For example, in Romania the dismissal ratio was low at 2%, but 87% of irregularities were still pending as suspected fraud. However, about one tenth of the pending cases of suspected fraud were already closed at the end of 2019, so the dismissal ratio could be already considered about 10%, with the potential to approach 90%. In Bulgaria, the dismissal ratio was higher, at 10%, but the pending ratio was much lower, at 63%. However, about one fourth of the pending cases of suspected fraud were already closed at the end of 2019, so the dismissal ratio could be already considered about 25%, with the potential to exceed 70%. The dismissal ratio was much higher in other Member States, such as Czechia and Hungary. The pending ratio was zero and low for Czechia and Hungary, respectively. In other Member States, the dismissal ratio was still significant, but lower, such as in Italy, but the pending ratio was much higher. The average times of reclassification were very high, ranging from one year and a half, in Latvia, to nine years, in Bulgaria.

About 21% of the irregularities reported as fraudulent were dismissed, on average after nearly five years. Another 66% of these irregularities were still pending and for more than one third of them no changes of status are to be expected. This is due to the fact that 40% of the irregularities that were still labelled as suspected fraud at the end of 2019 were closed. This point to a significant underestimation of the dismissal ratio, which could be already considered above 45%, with the potential to exceed 85%, if most of the pending cases of suspected fraud will be dismissed.

This reclassification was concentrated in a few Member States, with different average times of reclassification. This could be the result of different reporting practices or co-operation agreements between administrative and judicial authorities or could point to the need to improve the capability of control authorities to timely spot potential fraud. This phenomenon was concentrated in seven Member States, with different average times of reclassification, ranging from two months to more than four years. The incidence of reclassification of Lithuania and Spain was high, but based on just one and four irregularities, respectively. In Hungary, 38% of the fraudulent irregularities were the result of reclassification, with an average time of nearly one year. However, most of these cases of suspected fraud were then dismissed. In Italy and Poland, the incidence of reclassification was lower than in Hungary, but still significant, with higher average times. Only a minority of these irregularities were then dismissed. Different values of this indicator are not positive or negative per se. Different incidences of reclassification across Member States could be due to different reporting practices, for example in terms of the phase of the procedure when an irregularity is labelled as suspected fraud, or in terms of co-operation between the administrative authority and the authority entrusted with investigating intentionality, which is usually the judicial authority. In any case, cooperation should be based on a clear commitment by the judicial authority to act quickly on the notification by the administrative authority. On the other hand, if the reclassification was not due to the development of the initial procedure, but to another subsequent event - such as tip from an informant or information on the media - this could point to the need to improve the capability of the authorities in charge of control to identify potential fraud, for example on the basis of red flags.

About 7% of the fraudulent irregularities had previously been reported as non-fraudulent and then were reclassified, on average after more than one year. These irregularities had a higher tendency to be dismissed than other irregularities (compare with dismissal ratio). An irregularity can be part of the analysis in Table NR33 either because it was initially reported as fraudulent or because during 2007-2013 it was reclassified from non-fraudulent to fraudulent. Actually, 6.7% of these irregularities entered into the analysis because of reclassification, which on average took place 423 days after the reporting as non-fraudulent. In 42% of cases, these irregularities were then reclassified back to non-fraudulent, which is much higher than the general dismissal ratio (21%).

·Incidence of reclassification: it gives the percentage of fraudulent irregularites that were initially reported as non-fraudulent. As mentioned, the numerator takes into consideration only the instances of reclassification from non-fraudulent to fraudulent that took place before the end of 2013. Differently from the Reclassification ratio, the percentage is calculated with reference to the total number of fraudulent irregularities;

·Reclassification ratio: it gives the percentage of irregularities that initially had not been reported as fraudulent and then were reclassified as fraudulent before end 2013. This percentage is calculated with reference to the total number of non-fradulent irregularities;

·The irregularities that initially had been considered as non-fraudulent and then were reclassified as fraudulent before the end of 2013 are included in the analysis and their incidence is pointed out;

·This analysis focuses on PP 2007-2013 and considers the irregularities that have been reported from 2007 to 2013, so that the most recent irregularities have been reported six years before the end of 2019;

The following table is the result of a different, more precise approach to the analysis of the follow-up Member States give to the suspected fraud they report. It addresses the above mentioned issues:

Since the PIF Report 2014, the analysis has also focused on the follow-up the Member States give to suspected fraud they reported. The simple methology adopted in past PIF Reports leads to assess that only for 15% of irregularities reported as fraudulent, fraud was then actually established, while in another 25% of these cases fraud was dismissed. As mentioned, this methodology is open to a number of shortcomings, due to the possibility that irregularities are cancelled or reclassified from non-fraudulent to fraudulent during their lifetime.

Analysis suggests that the concentration of detections went beyond what could be expected from the distribution of payments related to direct aid to farmers among Member States. This concentration was analysed in detail in the 2018 PIF Report, with reference to the period 2014-2018. The findings of this analysis may be due to different factors, including dishomogeneous management and control systems and, for the fraudulent irregularities, different approaches to the use of criminal law to protect the EU financial interests. This analysis has not been replicated for this Annual Report, with reference to the period 2015-2019, as the situation is not expected to have changed significantly in one year.

Tables NR31 and NR32 suggest that the reporting of irregularities was concentrated in a few Member States. The top two Member States in terms of number of detections (Romania and Italy) reported about 75% of all fraudulent irregularities (and 82% of irregular financial amounts) related to DA, while they received about 13% of payments. With reference to non-fraudulent irregularities, the top two Member States in terms of number of detections (Italy and Romania) reported about 64% of such irregularities (and 79% of irregular financial amounts), while they received about 13% of payments.

Table NR32 and Map NR6 provide an overview of the irregularities not reported as fraudulent by Member States during the period 2015-2019 in relation to direct payments. It also shows the related amounts, overall payments for direct payments and the IDR.

A part of these irregularities are not exclusively referred to DA, but the reporting authority may have also included budget lines/posts referring to other measures (i.e. MM, RD or other payments related to budget years before 2006). These irregularities have been included in their full value in Table NR31 (see Annex 12). This applies also to Table NR32 below.

Table NR31 and Map NR5 provide an overview of the irregularities reported as fraudulent by Member States during the period 2015-2019 in relation to direct payments to farmers. It also shows the related amounts, overall payments for direct payments and the FDR.

Analysis suggests that the concentration of detections went beyond what could be expected from the distribution of payments related to market measures among Member States, especially for fraudulent irregularities. As mentioned in Section 3.4.3.1, this concentration was analysed in detail in the 2018 PIF Report, with reference to the period 2014-2018. In particular, this analysis suggested the need for more homogeneity concerning the use of criminal law to protect the EU. This analysis has not been replicated for this Annual Report, with reference to the period 2015-2019, as the situation is not expected to have changed significantly in one year.

Tables NR29 and NR30 suggest that the reporting of irregularities was concentrated in a few Member States. The top two Member States in terms of number of detections (France and Poland) reported about 53% of all fraudulent irregularities (73% of irregular financial amounts) related to MM, while they received about 26% of payments. With reference to non-fraudulent irregularities, the top two Member States in terms of number of detections (Spain and France) did not overlap with the highest ranking Member States, in terms of financial amounts involved (Poland and Romania). The top two Member States reported about 54% of the irregular financial amounts and received about 7% of payments.

IDR was the highest in Romania, Malta, Poland and Denmark, but it was more than double the EU average also in Hungary. Twenty-four Member States have reported non fraudulent cases with reference to MM (one more than during the period 2014-2018). Spain, France and Italy reported the highest numbers. The highest financial amounts were communicated by Poland, Romania, France and Spain.

Table NR30 and Map NR4 provide an overview of the irregularities not reported as fraudulent by Member States during the period 2015-2019 in relation to MM. It also shows the related amounts, overall payments for MM and the IDR.

FDR was the highest in Bulgaria and Poland but it was significantly higher than the EU average also in Czechia and Hungary. Seventeen Member States have reported fraudulent cases in this area. France, Poland and Hungary reported the highest numbers. The highest financial amounts were communicated by Poland, France and Bulgaria.

A part of these irregularities are not exclusively referred to MM, but the reporting authority may have also included budget lines/posts referring to other measures (i.e. DA, RD or other payments related to budget years before 2006). These irregularities have been included in their full value in Table NR29 (see Annex 12). This applies also to Table NR30 below.

Table NR29 and Map NR3 provide an overview of the irregularities reported as fraudulent by Member States during the period 2015-2019 in relation to MM. The table also shows the related amounts, overall payments for MM and the FDR.

Analysis suggests that the concentration of detections went beyond what could be expected from the distribution of payments related to RD among Member States. This concentration was analysed in detail in the 2018 PIF Report, with reference to the period 2014-2018. The outcome of the analysis could be due to many different factors, including different underlying levels of irregularities and fraud, a different quality of the prevention or detection activities or different practices concerning the stage of the procedure when potentially fraudulent irregularities were reported. This difference in concentration between detections and payments was less evident for non-fraudulent irregularities, which might be taken as an indication of more homogenous approaches to management and administrative controls, even if the examination of data concerning individual Member States highlighted significant discrepancies. The concentration of detections was instead more accentuated for fraudulent irregularities, suggesting that different approaches to the use of criminal law to protect the EU budget could be an additional and significant factor pushing for further dishomogeneity among Member States. This analysis has not been replicated for this Annual Report, with reference to the period 2015-2019, as the situation is not expected to have changed significantly in one year.

Tables NR27 and NR28 suggest that the reporting of irregularities was concentrated in a few Member States. The top two Member States in terms of number of detections (Romania and Poland) reported about 55% of all fraudulent irregularities and irregular financial amounts related to RD, while they received about 19% of payments. With reference to non-fraudulent irregularities, the top two Member States (Romania and Portugal) reported 33% of cases and 38% of the irregular financial amounts, but received about 15% of payments.

Lithuania, Portugal and Bulgaria recorded the highest IDRs. IDR was significantly higher than the EU average also in Romania, Malta, The Netherlands, Hungary, Estonia, Slovakia and Italy. Romania, Portugal, Poland, Spain and Italy reported the highest numbers. The highest financial amounts were communicated by Romania.

Table NR28 and Map NR2 provide an overview of the irregularities not reported as fraudulent by Member States during the period 2015-2019 in relation to RD. Table NR28 also shows the related amounts, overall payments for RD and the IDR.

Romania, Lituania, Estonia and Bulgaria recorded the highest FDRs. FDR was significantly higher than the EU average also in Denmark, Hungary and Slovakia. Twenty-four Member States have reported fraudulent cases in relation to RD during the period 2015-2019. Romania and Poland reported the highest numbers. The highest financial amounts were communicated by Romania, Poland, Bulgaria and Hungary.

These irregularities exclusively refer to RD. A number of additional cases concerned both RD and SA, including MM or DA (see Table NR6, NR7 and Annex 12), but considering them is not likely to significantly change the picture. This applies also to Table NR28.

Table NR27 and Map NR1 provide an overview of the irregularities reported as fraudulent by Member States and related FDRs during the period 2015-2019 in relation to RD. It also shows the related amounts, overall payments for RD and the FDR.

The highest FDRs were recorded in Czechia, Romania and Denmark. Romania was the Member State which has reported the highest number of irregularties and related financial amounts. Relatively high financial amounts were reported also by Czechia, Italy, Denmark and Spain.

The FDRs of Bulgaria and Romania exceeded 0.40%. FDR was significantly higher than the EU average also in Poland, Estonia and Lithuania. Romania, Poland and Italy are the three countries which have reported the highest numbers, while Poland, Romania, France, Bulgaria and Italy reported the highest amounts.

Table NR25 offers an overview of the irregularities reported as fraudulent by Member States during the period 2015-2019. It also shows the related amounts, overall payments for the agricultural policy and the FDR. The heat map on FDR associated to Table NR25 is centered on the FDR at EU28 level (0.10%).

The majority of irregularities have been protracted during a span of time, in particular in the case of fraudulent irregularities, consistent with their intentional nature. The average duration of these protracted irregularities is slightly more than two years, both for fraudulent and non-fraudulent cases. The Member States are requested to indicate the date or period when the irregularity was committed. Of the 17,222 irregularities (fraudulent and non-fraudulent) reported by Member States in 2015-2019 in relation to CAP, 9,807 (57% of the total) involved infringements that have been protracted during a span of time. For the 1,517 irregularities reported as fraudulent, the percentage rises to about 66%. The remaining part of the dataset refers to irregularities which consisted of a single act identifiable on a precise date (about 39% of the whole dataset and 32% of that including only the fraudulent irregularities) or for which no information has been provided (4% of the whole dataset, but only 1% of the irregularities reported as fraudulent). The average duration of the irregularities which have been protracted over time was 27 months (i.e. 2 years and 3 months). For the irregularities reported as fraudulent, this average was just one month less: 26 months.

(3)the FDR (the ratio between the amounts involved in cases reported as fraudulent and the payments occurred in the same period) and the IDR (the ratio between the amounts involved in cases not reported as fraudulent and the payments occurred in the same period) over the past five years;

For most Member States, private companies represent the majority of the persons involved. Associations are often mentioned in fraudulent irregularities reported by Romania. Table NR24b, below, breaks down the statistics by Member State. Given the low number of persons in most Member States, it is not possible to draw meaningful conclusions at the single Member State level. However, it is notable that for most Member States, private companies represent the majority of the persons involved. The only exception with a larger sample is Romania, evenly split between private companies and associations (sub‑categorised under Non-profits), together accounting for approximately half of all persons reported by Romania.

The majority of legal entities involved are private companies, followed by non-profit organisations, in particular associations. Graph NR7 shows the distribution of the 715 legal entities based on this classification. The majority of them (427) were ‘private companies’, while the second largest group was ‘non‑profits and cooperatives’ (166), most of which (114) were associations.

This made it possible to classify 715 (78%) of these legal entities. For purposes of this analysis, the following classification has been adopted: (1) ‘private companies’, (2) ‘public companies’, (3) ‘simple structures’, (4) ‘national governmental bodies’, (5) ‘sub-national governmental bodies’, and (6) ‘non-profits and cooperatives’ (see Annex 15). The category ‘private companies’ includes entities such as limited companies whose shares are not traded on the stock market. ‘Public companies’ includes entities such as limited companies whose shares are publicly traded. ‘Simple structures’ includes entities lacking legal distinction between the owner and the business entity such as sole proprietorships and partnerships. ‘National governmental bodies’ include any governmental entity operating at the national or central level (ministries, agencies, etc.). ‘Sub-national governmental bodies’ include all governmental entities operating below the national level (regional bodies, municipalities, local officials, etc.). ‘Non-profits and cooperatives’ is a catchall for entities such as associations, educational institutions, cooperatives and generally organisations whose primary goal is not the generation of income for members or shareholders.

Most fraudulent irregularities report a single person involved. Some 1,596 persons were involved to these 1,517 cases; most fraudulent irregularities report a single person, although a few have upwards of a dozen. These 1,596 persons consist of 919 legal entities and 677 natural persons. This analysis does not attempt to determine persons involved who are named in multiple cases and thus such parties would be counted once for every irregularity in which they are reported. IMS does not provide structured information regarding the corporate form or legal status (‘organisational status’) of the legal entities. However, for the purpose of this analysis, their ‘organisational status’ has been surmised based on the examination of their names.

In the majority of fraudulent irregularities, the “persons involved” were legal entities. For a significant one-third of cases they were natural persons. This analysis concerns the 1,517 irregularities reported as fraudulent in relation to CAP between 2015 and 2019. Findings are based on the characteristics of the entities (natural or legal persons) involved in the irregularities reported as fraudulent. Graph NR6 shows their distribution in relation to the type of person. For the majority of these cases (56%), the persons involved were only legal entities, while in one-third of them (35%) they were only natural persons. Apart from a few irregularities wherein both types of persons were mentioned, for the remaining cases the Member States have not provided the relevant information.

Table NR24 provides the same information for irregularities not reported as fraudulent in DA. In the past two years, there was a slight decrease in the use risk analysis and possibly similar methods; the share of relevant irregularities moved from 5% to 4.5%. In particular, only 0.5% of cases were started because of risk analysis (in the strict sense), while there was an increase of nearly two percentage points in ‘comparison of data’. It is not clear what kind of activity was reported under this reason. There was no increase in the use of information published in the media, while the use of tips increased as a reason for the detection irregularities (from 1.4% to 3.1%).

With a focus on controls that led to discovering irregularities reported as fraudulent in DA, Table NR23 compares the situation before 2018 with the situation in 2018-2019. In 2018-2019, apart from a declining share concerning tips, the Member States detected just two irregularities on the basis of risk analysis or similar.

With reference to DA, there seems to be no increase in the use of risk analysis and in the number of irregularities detected following information published by media. However, the percentage of non-fraudulent irregularities detected because of tips grew from 1% to 3%.

Table NR22 provides the same information for irregularities not reported as fraudulent in MM. In the past two years, there was a slight increase in the use of risk analysis and possibly similar methods; the share of relevant irregularities moved from 2.9% to 3.4%, in line with what can be seen for rural development (see Section 3.3.4.1). This was due to an increase in ‘comparison of data’, but the financial amounts involved in these irregularities were relatively low. Furthermore, it is not clear what kind of activity was reported under this reason. The share of irregularities detected on the basis of 'Scrutiny 4045/Scrutiny 485' decreased by more than six percentage points. The share of irregularities detected following tips slightly increased, but on the basis of very few cases.

With a focus on controls that led to discovering irregularities reported as fraudulent in MM, Table NR21 compares the situation before 2018 with the situation in the years 2018-2019. The categories 'Scrutiny 4045' and Scrutiny 485' refer to Regulation 4045/1989 and Regulation 485/2008, respectively. These deal with the scrutiny of commercial documents of those entities receiving payments from the Guarantee section of the EAGGF (Reg. 4045/1989) or from the EAGF (Reg.485/2008). While Reg. 485/2008 explicitly introduced the concept of risk analysis, Reg. 4045/1989 already required consideration of risk factors and concentration on sectors or undertakings where the risk of fraud is high. In 2018-2019, apart from a declining share concerning ' Scrutiny 4045/Scrutiny 485' the Member States did not report detecting any irregularities on the basis of risk analysis, information published by the media or tips.

With reference to MM, there seems to be no increase in the use of risk analysis and in the number of irregularities detected following information published by media or tips.

Table NR20 provides the same information for irregularities not reported as fraudulent in RD. There was a slight increase in the use of risk analysis and possibly similar methods; the share of relevant irregularities moved from 3.1% to 3.6%. Changes were not significant also for tips and media. With specific reference to risk analysis (in the strict sense), no Member State that had not reported this type of detections in 2015-2017 reported it in 2018-2019. During 2018-2019, detections based on risk analysis (in the strict sense) were confined to six Member States (55% of such detections in Hungary).

With a focus on controls that led to discovering irregularities reported as fraudulent in RD, Table NR19 provides information on the number of controls that were performed because of reasons that can be linked to the recommendations mentioned in Section 3.3.4. It compares the situation before 2018 with the situation in 2018-2019. In these past 2 years, Member States have not reported the detection of any irregularity on the basis of risk analysis or similar (apart from one case of ‘comparison of data’) or information published by the media. The share of irregularities detected following tips decreased from 8.5% to 5%.

With reference to RD, there seems to be no increase in the use of risk analysis and in the number of irregularities detected following tips (e.g. from whistleblowers) or information published by media .

So far, there seems to have been little improvement on the ground, at least in terms of detection after request for reimbursement to the Commission, but it could be too early to draw any conclusions. This is what is suggested by Tables NR19-NR24. The 2017 PIF Report was adopted at the beginning of September 2018 and effective evolution from reactive to proactive detections based on risk analysis may take time. In addition, there are time gaps between the moment the control bodies receive or produce (for example, through risk analysis) the information that triggers a check, the moment the check leads to detect the irregularity and the moment this irregularity is reported through IMS. A study has been done for the Cohesion and Fishery policies, which estimated to be about one year the overall time gap between suspicion and reporting. It should also be considered that non-fraudulent irregularities that are detected and corrected at the national level before inclusion of the expenditure in a statement submitted to the Commission for reimbursement do not have to be reported in the Irregularity Management System (IMS) (which is the source for this Report). Therefore, in case, for example, risk analysis were to be having a higher impact in terms of ‘early’ detection of these irregularities, this would not be captured by Tables NR19-NR24. On the other hand, it should be kept in mind that this exception does not apply to fraudulent irregularities, which should always be reported, even when detected before submission of the expenditure to the Commission.

To enhance the capability to detect irregularities, the Commission recommended to the Member States to improve risk analysis and the use of spontaneous reporting. In the framework of the antifraud cycle, the detection capability is a key feature, which contributes to the effectiveness and efficiency of the system for the protection of the EU budget. In the 2017 PIF Report, an analysis of the reasons for performing controls was introduced and led to the recommendation to further exploiting the potential of risk analysis, tailoring the approach to the different types of expenditure and taking advantage of best practices and the risk elements highlighted in that Report. Furthermore, the report recommended to facilitating and assessing the spontaneous reporting of potential irregularities and strengthening the protection of whistle-blowers that are also a crucial source for investigative journalism.

For irregularities not reported as fraudulent, the category 'products of the wine-growing sector' was the most frequently reported, but 'fruit and vegetables' was the one with the highest financial amounts, in particular due to the high AFA. Other categories with high AFA were 'Pigmeat, eggs and poultry, bee-keeping and other animal products', 'Food programmes' and 'Sugar'.

Also ‘Promotion’ was significantly affected by fraud, in particular in terms of financial amounts involved. The irregularities were split between violations related to the EU markets and third country markets, but the financial amounts involved in the latter were higher.

Another sector with many irregularities reported as fraudulent was ‘Fruits and vegetables’, in particular the measure ‘aid for producer groups for preliminary recognition’, which is the measure with the highest irregular financial amounts. While ranking first in terms of number of detections, ‘products of the wine-growing sector’ were clearly overcome by other products, in terms of financial amounts involved. ‘Fruits and vegetables’ represented more than 50% of the overall financial amounts. The majority of these detections and financial amounts concerned ‘aid for producer groups for preliminary recognition’. Within the aid for producer groups, a greater number of fraudulent irregularities and related financial amounts concerned ‘Investment’ measures in comparison with ‘Formation, administrative operations’.

The highest number of irregularities reported as fraudulent was related to national support programmes for the wine sector, in particular investment measures and promotion in third country markets. Most of the detections and irregular financial amounts concerned either investment measures or promotion. The majority of promotion measures affected by irregularities concerned third country markets. Also restructuring and conversion of vineyards were affected by a number of fraudulent irregularities.

In previous sections, reference was made to the fact that the irregularities involving the highest financial amounts are related to market measures. During the period 2015-2019, they concerned three specific types of measures, each of them targeted by one Member State. Three fraudulent irregularities related to MM, involving more than EUR 20 million each, were reported. Two of these irregularities were reported by Poland and concerned aid to producer groups for preliminary recognition in the sector ‘Fruits and vegetables’ (one of them was related to investment activities, the other one both to investment and formation/administrative operation). The third fraudulent irregularity was reported by France and concerned refunds for poultry meat. During the same period, five non-fraudulent irregularities related to MM, involving from EUR 10 million to more than EUR 20 million, were reported. Three of them were reported by Poland and concerned investments in the framework of aid to producer groups for preliminary recognition in the ‘Fruits and vegetables’ sector. Another irregularity was reported by France with reference to refunds for poultry meat. The fifth case was about food programmes for deprived persons and was reported by Romania.

As shown in Table NR16, market measures feature high FDR and IDR. Table NR17 shows the number and financial amounts of irregularities reported as fraudulent in relation to market measures for the period 2015-2019, while Table NR18 shows the same data with reference to irregularities not reported as fraudulent.

As mentioned in Section 3.2.2, the financial amounts involved in irregularities reported as fraudulent concerning market measures were heavily influenced by a few exceptional cases. Excluding these cases, the FDR for market measures would be 0.37% rather than 0.87% (still the highest in CAP). Similarly, excluding the few (five) ‘exceptional’ non-fraudulent irregularities, the IDR would be 1.18% rather than 1.85%.

The same case may cover several budget posts referring to different types of expenditure. In Annex 14, a detailed explanation of this issue and how it has been handled in estimating these FDR/IDR can be found.

As mentioned, via its two funds (EAGF and EAFRD) the CAP supports agriculture and rural development across Europe. The EAGF itself has two components with different aims: measures regulating or supporting agricultural markets and direct payments to farmers. Annex 12 provides a detailed explanation about the classification, for the purpose of this analysis, in these two categories of the cases reported by the Member States.

There were just a few reported cases of conflict of interest. There was one ‘pure’ case of conflict of interest and three additional cases of conflict of interest in combination with other categories of violation (public procurement infringement and ‘(non-)action’)). Apart from these cases, infringements related to 'Ethics and integrity' were reported as 'other irregularities concerning ethics and integrity'. Most of these irregularities were reported by Spain. In addition, there were nine other cases of conflict of interest in the public procurement procedure.

Focusing on 2019, the second most reported category for non-fraudulent irregularities was ‘beneficiary’ (this was third for the entire period 2015-2019). In addition, the category ‘beneficiary’ had a higher tendency to combine with other violations, including ‘(non-)action’. There was also a significant number of irregularities (and irregular financial amounts) were the violation concerning ‘beneficiary’ was combined with the ‘other’ (not specified) category. When the category ‘beneficiary’ is not combined with other categories, 'Operator/beneficiary not having the required quality' is the most reported type of violation. During 2015-2019, the category Beneficiary was more frequent among RD cases not reported as fraudulent than in SA (about 10%, if not considered in combination with other categories, or 16%, if considered also in combination).

During the period 2015-2019, '(non-)action' was followed by 'documentary proof', which was mentioned in 13% of the non-fraudulent cases. 'Documents missing and/or not provided' was the most reported type of violation. During 2015-2019, a number of 'documentary proof' cases (34) concerned the 'false and/or falsified documents' type of violation, which would not be expected for non-fraudulent irregularities. The same applies to the category 'request', where a number of cases (14) were related to the 'false or falsified request of aid' type of violation.

‘Pure’ violations concerning 'documentary proof' or the ‘beneficiary’ were also prevalent. However, they were also often combined with the category ‘(non-)action’ and with each other.

The highest number of detections and irregular financial amounts were related to ‘pure’ 'non-action'. This included ‘action not completed’, ‘action not implemented’, or ‘failure to respect deadlines’ among the most reported types of violation.

Table NR15 provides an overview of the most frequent categories of irregularities not reported as fraudulent in RD in 2019 and the related financial amounts. It also presents how these most recurrent categories have featured during the period 2015-2019.

The ’pure’ category ‘Ethics and integrity’ ranked high, with 133 irregularities, but none of these irregularities were reported in 2019 and very few in 2018.Only one irregulary was reported as corruption. Similarly to SA cases, most of these violations were communicated by Poland and were not reported under the types 'conflict of interest', 'bribery' or 'corruption', but as 'other irregularities concerning ethics and integrity'. Most of these violations concerned the creation of artificial conditions for receiving financial support. Other Member States may have reported this type of infringement under other categories of irregularity, such as the one referring to the beneficiary (for example, using the the type of violation 'Operator/beneficiary not having the required quality' or ‘Other’).

Similar to SA, fraudsters mainly relied on ‘pure’ falsification of the documentary proof or, to a lesse extent, of the requests for aid. The ‘pure’ category 'documentary proof' ranked (by far) first, with 'false or falsified documents' as the most reported type of violation. Also with reference to the ‘pure’ 'request', which was another frequent category, the false-related type of irregularity ('false or falsified request of aid') was the most reported.

Table NR14 provides an overview of the most frequent categories of irregularities reported as fraudulent in RD in 2019 and the related financial amounts. It also presents how these most commonly reported categories have featured during the period 2015-2019.

Other prevalent categories of SA irregularities not reported as fraudulent were related to 'Product, species and/or land', 'Beneficiary' or 'Ethics and integrity' (not combined with other categories of irregularity). For ‘pure’ 'Product, species and/or land', the majority of violations concerned 'Overdeclaration and/or declaration of fictitious product, species and/or land'. For ‘pure’ 'beneficiary', the most reported type of violation was 'Operator/beneficiary not having the required quality'. Infringements related to 'Ethics and integrity' were less frequent than for the irregularities reported as fraudulent. Apart from one case of conflict of interest, all of these violations were reported as 'other irregularities concerning ethics and integrity'.

The highest irregular financial amounts were due to infringements concerning the ‘(non)-action’. However, 2019 was a peculiar year for this category of violation (not combined with other categories of irregularity), which nearly equalled ‘request’, in terms of the number of detections. Nearly 50% of the irregular financial amounts reported during the period 2015-2019 for ‘(non-)action’ were reported in 2019, due to two irregularities totalling about EUR 45 million. In this area, the three most reported types pertained to the action itself (not implemented or not completed), and 'refusal to repay not spent or unduly paid amounts'.

Violations concerning the ‘request’ were the most frequent and they were often related to falsification, which would not be expected for non-fraudulent irregularities. Similar findings apply to the category ‘documentary proof’. When looking at these irregularities during the period 2015-2019, violations concerning ‘pure’ 'request' were by far the most recurrent category. More specifically, during 2015-2019, the most recurrent type of violation was by far 'false or falsified request for aid', followed by 'incorrect or incomplete request for aid' and 'Product, species, project and/or activity not eligible for aid'. Violations concerning the other category 'documentary proof' were also quite frequent and, considering the overall period 2015-2019, often related to the type of violation 'false or falsified documents' (about 125 cases in 2015-2019). This reporting of cases of 'false or falsified documents' as non-fraudulent mostly happened in the past; in 2019 there was only one such case. For most of the SA irregularities not reported as fraudulent where the type of violation was 'false or falsified documents' or 'false or falsified request for aid' there were no ongoing penal proceedings.

Table NR13 provides an overview of the most frequent categories (or combinations of categories) of irregularities linked to cases not reported as fraudulent in relation to SA in 2019 and the financial amounts involved. It also presents how these most recurrent categories (or combinations of categories) featured in the period 2015-2019.

The highest average financial amount (nearly EUR 2 million) was recorded in cases of conflict of interest combined with other violations. OLAF uncovered a complex fraudulent scheme. In 2019, Czechia reported two irregularities related to corruption, in combination with public procurement infringements (conflict of interest) and non-implementation of the action, with an average financial amount of nearly EUR 2 million. During the period 2015-2019, conflict of interest was combined with violations concerning the ‘beneficiary’ and ‘(non-)action’ in five irregularities detected in Bulgaria. Also for these irregularities the average financial amount was very high, again approaching EUR 2 million. In another case detected in Bulgaria, conflict of interest was combined with violations concerning the ‘beneficiary’ and ‘accounts & records’. All of these eight irregularities were related to the market measure ‘Promotion’ (see Section 3.3.3) and were detected in relation to OLAF investigations. OLAF uncovered a complex fraudulent scheme, mainly based on inflation of prices, kickback payments, money laundering. Furthermore, the public procurement procedures were flawed through a solid network of companies based in different countries. In some cases, the manipulation was possible also due to the collusion of the beneficiaries.

While there were no such cases in 2019, during the whole period 2015-2019, 51 irregularities were reported as pertaining to ‘pure’ 'Ethics and integrity'. All of these violations were communicated by Poland and were not reported under the types 'conflict of interest', 'bribery' or 'corruption', but as 'other irregularities concerning ethics and integrity'. Most of these violations concerned the creation of artificial conditions for receiving financial support. Other Member States may have reported this type of infringement under other categories of irregularities.

During the period 2015-2019, there were only a few cases of ‘pure’ ‘(non-)action’ reported as fraudulent, but they recorded the highest average financial amount. Despite the relatively low number of detections (27), the highest financial amounts were associated to this ‘pure’ category.

Fraudsters mainly relied on the ‘pure’ falsification of the documentary proof or of the request for aid. The most recurrent modi operandi were related to the ‘pure’ categories 'documentary proof' or to the 'request'. Each category is then articulated in different types of violations (see Annex 13). With reference to these two categories, the most recurrent types concerned 'false or falsified documents' or 'false or falsified request for aid', both in 2019 and in the overall period 2015-2019. Violations concerning the categories 'documentary proof' or 'request' tend also to be combined with each other or with the category ‘(non)-action’ in the same irregularity (see Table NR12).

Table NR12 provides an overview of the most frequent categories (or combinations of categories) of irregularities linked to cases reported as fraudulent in relation to SA in 2019 and the financial amounts involved. It also presents how these most common categories (or combinations of categories) featured in the period 2015-2019. In the following paragraphs, the adjective ‘pure’ is used to refer to instances where a specific category of irregularity is not combined with other categories.

For MM and RD, the ‘core’ AFA of non-fraudulent irregularities is lower than the ‘core’ AFA of fraudulent ones. The difference between the ‘core’ AFAs of fraudulent and non-fraudulent irregularities was not significant for SA and DA cases (their curves in Graph NR5 approach the x-axis). For RD irregularities, however, fraudulent cases had a higher ‘core’ AFA than non-fraudulent ones, with the difference hovering around EUR 50,000. The ‘core’ AFA of fraudulent irregularities with a MM component was significantly higher than that of the corresponding non-fraudulent irregularities. The difference was minimal for the years 2016-2017 (when it was similar to the RD difference) and experienced a jump in 2018.

Whereas the ‘core’ AFA of MM has been growing fast, the ‘core’ AFA of RD was lower and decreasing. As already mentioned, this may point to the need for better targeting controls in RD. Following the approach introduced in Section 3.2.1., the ‘core’ trend of AFA for non-fraudulent irregularities has been examined. Starting from the irregularities that have been selected in relation to Graph NR1, Graph NR4 shows this 'core' trend for the SA, RD, MM and DA irregularities during the past five years. The highest ‘core’ AFA was related to irregularities with a MM component, which has been significantly increasing since 2017. The ‘core’ AFA for RD cases decreased by 25% since 2015 and has been basically aligned to the ‘core’ AFA for DA, since 2016. The ‘core’ AFA for SA was higher than both of RD and DA, pushed by the financial amounts involved in the MM cases.

However, during the 2015-2019 period, RD has still been affected by many more non-fraudulent irregularities than SA. The difference in terms of total financial amount was narrower. In terms of the number of non-fraudulent irregularities (Table NR10), RD has regularly and significantly exceeded SA throughout the entire 2015-2019 period, with the result that the number of irregularities linked to RD have been more than double those affecting SA. RD non-fradulent irregularities also exceeded the SA ones in terms of financial amounts involved, but only by 35%.

The decrease in the number of RD non-fraudulent irregularities was due to a decline in the number of cases related to PP 2007-2013, which was to be expected, not compensated by the start of cases related to PP 2014-2020, which however was in line with the situation at the start of the previous programming period. The above reported trends for RD are the result of the effect of overlapping reporting for two programming periods (PP): PP 2007-2013, which closed in 2015, and PP 2014-2020 (under implementation). Tables NR11a and NR11b disentangle these two effects and compare the period 2015-2019 with the period 2008-2012, when there was a similar situation, with the overlapping of detections related to PP 2000-2006 (being closed) and to PP 2007-2013 (at the time, under implementation). Table NR11a confirms that, during the period 2015-2019, the decline in the number of RD non-fraudulent irregularities was due to the strong decrease of the detections concerning PP 2007-2013, which, in any case, were much more frequent than the detections concerning PP 2000-2006 during 2008-2012. On the other hand, the number of detections related to PP 2014-2020 has been rising, similar to what happened during 2008-2012 for PP 2007-2013.

Since 2015, RD non-fraudulent irregularities followed a downward trend, in particular in terms of financial amounts involved. The trend of SA non-fraudulent irregularities was flat, but subject to large fluctuations in terms of financial amouts, due to a few exceptional cases. The number of RD irregularities not reported as fraudulent has been constantly increasing until 2015, in line with implementation of the programmes, while that related to SA remained stable or recorded minor variations. Since then, RD non-fraudulent irregularites significantly decreased for two years and then stabilised, while SA non-fraudulent irregularities continued to follow a flat trend (see Table NR9). Also the irregular financial amounts linked to RD peaked in 2015, then started a downward trend, which continued in 2018 and accelerated in 2019 (as highlighted in Table NR10). The irregular financial amounts linked to SA fluctuated around an annual average of about EUR 85 million, with significant annual variations, before peaking at more than EUR 130 million in 2019. This was mainly due to the fact that cases involving 'exceptional' financial amounts were reported in 2015 (one case each in France and Greece), 2017 (one case in Romania) and 2019 (three cases in Poland), whereas none were detected in 2016 and 2018.

The rise of the ‘core’ AFA for MM in 2018 was due to a broader basis of irregularities with high financial amounts involved. In 2019, the ‘core’ AFA for MM remained high, in particular because less cases with low financial amounts were reported. Graph NR3 helps exploring further the distributions of the financial amounts involved in MM irregularities reported in the years from 2015 to 2019, in order to better understand the rise of the ‘core’ AFA for MM. As shown by the Box plot in Graph NR3, in 2018 more irregularities with financial amounts involved between EUR 1.5 million and EUR 2 million were reported. However, this was not the only reason contributing to the increase of ‘core AFA for MM in 2018; the Box plot also shows that the medians and, in particular, the upper quartiles for 2018 and 2019 were higher than the same indicators for 2015, 2016 and 2017. The column charts for the different years confirms that in 2018 and 2019, on the one hand, there was a tendency to report more cases with high and medium-high financial amounts (going beyond one or two high cases) and, on the other hand, there were less irregularities with relatively low financial amounts involved, especially in 2019.

During the period 2015-2019, the ‘core’ AFA for RD has been fluctuating, while the ‘core’ AFAs for SA and DA have been following a more stable path. The ‘core’ AFA for MM is much higher, following also a significant upward shift in 2018. Following the approach introduced in Section 3.2.1., the ‘core’ trend of AFA for irregularities reported as fraudulent has been examined. Starting from the irregularities that have been selected in relation to Graph NR1, Graph NR2 shows this 'core' trend for the SA, RD, MM and DA irregularities during the past five years. The ‘core’ AFAs for SA irregularities and for irregularities with a DA component were broadly stable and lower than for the other categories. The ‘core’ AFA for RD irregularities has been fluctuating around EUR 100,000. In 2018, it fell to the level of SA cases, then bounced back. The ‘core’ AFA of irregularities with an MM component - which is much higher than those for the other categories - grew in 2017 and, in particular, in 2018. In 2019, it decreased, but it did not revert back to the levels of 2015-2017.

During the period 2015-2019, financial amounts involved in SA irregularities were higher than those related to RD cases, but in relation to payments made, RD was still much more affected by fraud. Table NR8 provides information about the financial amounts involved in the cases considered in Table NR6. Taking into account the whole 2015-2019 period, financial amounts involved in SA cases were predominant, as they accounted for 53% of the total financial amounts involved in fraudulent irregularities. However, the share of the RD on the total (45%) was well above the share of the resources allocated to RD on the total of the CAP resources over the same period.

In 2019, the overall financial amounts dropped by 62%. This was due to a continued downward trend for RD and a significant downswing for SA, due to the absence of ‘exceptional’ irregularities. From the peak recorded in 2016, the financial amounts related to RD decreased by -72% (even more than the number of cases, which fell by -61%). The trend of the financial amounts related to SA was heavily influenced by the fact that a case worth between EUR 20 and 30 mn was detected in 2015 (France), 2017 (Poland) and 2018 (Poland). These 'exceptional' irregularities all affected market measures. In 2019, no such cases were reported and the financial amounts involved in SA fraudulent irregularities fell back to the level recorded in 2016. Excluding these exceptional irregularities, the irregular financial amounts detected in relation to SA were more stable. In 2019, they halved in comparison to 2018, but they were in line with the years 2016-2017.

The detection of fraudulent irregularities was concentrated in few Member States. In 2019, the irregularities notified by the top five Member States in terms of cases reported (Romania, Italy, Spain, Portugal and Czechia) represented about 80% of the total number of irregularities reported as fraudulent (75% of financial amounts). At the beginning of the period under consideration, the top five Member States in 2015 detected the same percentage of irregularities, representing however just 57% of the financial amounts. Instead, this concentration was higher in 2018, when the top five Member States accounted for 85% of detections and 95% of financial amounts. From 2018 to 2019, the most significant changes in the number of irregularities reported as fraudulent were recorded in Romania and Poland (decrease), Portugal and Czechia (increase). A deeper analysis of concentration was included in the 2018 PIF Report. That analysis found that the concentration of detections went beyond what could be expected on the basis of the distribution of relevant payments. This could be due to many different factors, including different underlying levels of irregularities and fraud, a different quality of the prevention or detection activities or different practices concerning the stage of the procedure when potentially fraudulent irregularities were reported. The concentration of detections was more accentuated for fraudulent irregularities, suggesting that different approaches to the use of criminal law to protect the EU budget or reporting practices concerning suspected fraud could be an additional and significant factor pushing for further dishomogeneity among Member States.

The decrease in the number of RD fraudulent irregularities is due to a decline in the number of cases related to PP 2007-2013, which was to be expected, not compensated by the (slow) start of cases related to PP 2014-2020, which should be closely monitored to ensure this is not due to less focus on fraud detection. The above reported trends for RD are the result of the effect of two programming periods (PP): PP 2007-2013, which closed in 2015, and PP 2014-2020 (under implementation). Tables NR7a and NR7b disentangle these two effects and compare the period 2015-2019 with the period 2008-2012, when there was a similar situation, with the overlapping of detections related to PP 2000-2006 (being closed) and to PP 2007-2013 (at the time, under implementation). Table NR7a confirms that, during the period 2015-2019, the decline in the number of RD fraudulent irregularities was due to the strong decrease of the detections concerning PP 2007-2013, which, in any case, were much more frequent than the detections concerning PP 2000-2006 during the period 2008-2012. However, Table NR7a also suggests that the management and control systems for PP 2014-2020 have been detecting much fewer fraudulent irregularities than those for PP 2007-2013 during the first years of implementations (2008-2012) of this programming period.

Since 2017, the number of irregularities reported as fraudulent in relation to RD has fallen below the number of those reported for SA and the gap has been slowly increasing. As a result, over the period 2015-2019, the number of RD irregularities reported as fraudulent was still higher than the number of SA ones, but the difference was just seven percentage points (52% - for RD - versus 45% - for SA - of the total number of irregularities reported as fraudulent). During the period 2015-2019, 48 cases concerned both RD and SA. In most of these 48 cases, the violations concerning RD were combined with violations concerning direct payments to farmers.

During the 2015-2019 period, the number of irregularities reported as fraudulent followed a downward trend, mainly pushed by the strong decrease of RD cases, while SA irregularities followed a flat trend. For the period 2015-2019, Table NR6 provides an overview of the number of irregularities reported as fraudulent by the Member States in relation to the type of support concerned. After a significant decrease in 2017, the number of fraudulent irregularities stabilised somewhat, but continued decreasing (-10% in 2018 and ‑3% in 2019). However, this was the result of a decrease in RD fraudulent irregularities (‑15%) and an increase in SA ones (+8%). A similar trend can be observed as regards non-fraudulent irregularities (see Section 3.2.3).

The ‘core’ AFA of MM seems to have shifted to a new higher level, with the contribution of detections by EU bodies. The ‘core’ AFA of RD has embarked on a clear downward trend. This may point to the need for better targeting controls in RD. Graph NR1 shows that irregularities including a market measure component recorded the highest ‘core’ AFA, which significantly increased in 2018 and lingered at this new higher level in 2019. In the 2016 PIF Report, the Commission recommended to the Member States to review their fraud risk assessments in relation to the market support measures. While prevention issues or increased threat from wrongdoers cannot be excluded, this rise of the MM ‘core’ AFA might be due to better detection activities in the Member States, following better risk assessments. However, most of the increase in the MM ‘core’AFA from 2017 to 2018 was due to ‘irregularities detected and reported by an EU-body’. Net of this type of detections, the increase in MM ‘core’ AFA would have been less than 8%, instead of 45%. Only a few detections were explicitly based on risk analysis. It must also be considered that in the MM domain a significant share of detentions follow scrutiny checks – such as scrutiny based on Reg. 4045/1989 or its successor Reg. 485/2008 - which refer to the analysis of risk (see Section 3.3.4.2). However, net of these checks, the raise of the MM ‘core’ AFA would have been even higher, so they cannot be considered as a contributing factor to the increase experienced in 2018. The situation is less clear when comparing 2017 and 2019. Scrutiny checks based on Reg. 4045/1989 contributed to the increase in the ‘core’ AFA of MM (net of these checks the increase would be 33%, instead of 41%). However, when considering also scrutiny checks based on Reg. 485/2008 together with those based on Reg. 4045/1989, the finding is reversed (net of these checks, the increase would be 44% instead of 41%). ‘Irregularities detected and reported by an EU-body’ are an important contributing factor also in the comparison between 2017 and 2019 (net of these checks the increase would be 35% instead of 41%) The ‘core’ AFA of SA irregularities followed a rather stable trend, with a slight tendency to increase over time. The ‘core’ AFA of RD cases fluctuated around that of the SA cases until 2017, but then it noticeably decreased for two consecutive years. This brought SA ‘core’ AFA to be about 40% higher than RD ‘core’ AFA. During the period 2015-2018, the lowest ‘core’ AFA has always been the one related to irregularities with a DA component, but in 2019 RD ‘core’ AFA joined at the bottom.

The AFA of the reported irregularities can be taken as an indicator of the detection capacity. The analysis of ‘core’ trends can provide useful insights. Targeting the limited resources that are available for detection, investigation and (as relevant) prosecution on cases with a higher financial impact can be beneficial in terms of efficiency, recovery and deterrence. Therefore, an increase in AFA of detected irregularities may point to better targeting of controls and viceversa. However, trends can be overly influenced by a small number of irregularities with unsually high financial amounts, and during the 2015-2019 period this was particularly the case for SA. This had an obvious impact also on the trends related to AFAs. In an attempt to isolate the 'core' trends, Graph NR1 shows the AFAs for SA and RD in general, and also those specifically for MM and DA during the past five years, when the first and the last percentiles are excluded from the analysis.

Despite these divergent patterns, RD remained more affected by irregularities than SA (as a whole). While the irregular financial amounts involved in RD irregularities fell below those involved in SA cases in 2019, it needs to be taken into account that RD represented only about 24% of the total resources devoted to the CAP. As in past years, the weight of the financial amounts involved in irregularities on payments is very different between the two types of support, as it is 0.1% for SA and 1.2% for RD (0.5% on the overall 2019 CAP expenditure - see also Section 3.3.2, about FDR and IDR). This is consistent with the findings of the ECA referring to 2017, according to which payments made on an entitlement basis (including direct aid to farmers, which is the biggest part of SA) are not affected by a material level of error. However, concerning SA, it should be added that the decoupled approach - linking the disbursement of subsidies to the verifiable availability of eligible land parcels and to the eligibility of the applicant – may have made typical methods (falsification of supporting documents, claims for ineligible parcels, claims from ineligible claimants) less relevant, but wrongdoers can resort to other malpractices (i.e. extortion, threats).

SA experienced the opposite: SA irregular financial amounts jumped by 61%, much more than the number of SA irregularities, which increased by 10%. This was not out-of-pattern. During the period 2015-2019, SA financial amounts have been following a rather horizotal trend with strong fluctuations due to the occasional detection of cases, concerning intervention in agricultural markets, involving exceptionally high financial amounts. In 2018, one such case, accounting for about EUR 20 million, was detected, while in 2019, three cases with an average financial amount of EUR 20 million were reported. So the strong increase from 2018 to 2019 should not be overemphasised, as it does not seem to point to a broad structural change. Considering the overall period 2015-2019, the AFA involved in SA cases was higher than in RD cases (+67%). This was influenced by the higher frequency in SA of few irregularities with exceptionally high financial amounts involved. This is addressed below, when analysing the AFA ‘core’ trends.

In 2019, RD irregular financial amounts dropped by 35%, much more than the number of related detections, which decreased by 4%. The RD irregular financial amounts have been following a steep downward trend since 2015, while the number of RD irregularities stabilised (see charts associated to Tables NR4 and NR5). As a result, during the 2017-2019 period, the AFA involved in these irregularities dropped by 37%. However, as mentioned, this can be overinfluenced by relatively few cases with very high financial amounts involved reported in the years 2015 and 2016. This is addressed below, when analysing the AFA ‘core’ trends.

In 2019, the overall financial amounts were relatively stable, but this was only on the surface. In 2019, the financial amounts involved in irregularities slightly increased. However, this was the outcome of significant shifts in opposite directions of RD and SA irregular financial amounts. As a result, for the first time during the past five years, the financial amounts involved in SA irregularities were higher than the financial amounts involved in RD irregularities (63% of the total).

A significant portion of the financial amounts is linked to a relatively low number of cases. In that context, fluctuations are more likely and should not be misinterpreted. Table NR5 provides information about the financial amounts involved in the cases considered in Table NR4. The trend of the financial amounts must be assessed while bearing in mind that it can be strongly influenced by individual events of significant value. During the period 2015-2019, cases that involved financial amounts over EUR 1 million represented less than 1% in terms of numbers, but 34% in terms of amounts. 54% of these 'over 1 mn' cases concerned RD, while 45% concerned SA.

SA irregularities fluctuated around a flat trend, while RD irregularities peaked in 2015, dropped for two years and then flattened. The two types of support (RD and SA) are provided following two different modes. SA follows an annual implementation. During the past five years, the number of SA irregularities has been fluctuating between 1,000 and 1,200 (see the chart associated to Table NR4), so the 2019 increase is not out of pattern. The trend of irregularities detected and reported in relation to RD is influenced by the fact that RD is financed by programmes in a multiannual context; the trend therefore was similar to that of the ESIF, which are also implemented through multiannual programmes (see Section 4). Consequently, the irregularities related to RD noticeably increased until 2015, then declined at a rather constant and sustained pace during 2016-2017, before stabilising in 2108 and 2019 (see the chart associated to Table NR4). Overall, the decrease from the 2015 peak has been about -40%. In fact, during 2015-2019, detections concerning PP 2007-2013 (closed in 2015) and PP 2014-2020 (undergoing implementation) have been overlapping and the RD downward trend was due to the decline of PP 2007-2013 cases, which was to be expected. The issue is further analysed in the next sections, separately for fraudulent and non-fraudulent irregularities.

The number of detections has been stable since 2017 and was concentrated in few Member States. After a significant drop for two consecutive years, the number of the irregularities related to CAP has been following a flat trend since 2017. In 2019, this was the outcome of two opposite, yet moderate, changes: a 4% decrease in the number of RD irregularities reported and a 10% increase in the number of SA irregularities reported. This increase in SA irregularities was due to a growth both of cases related to direct payments to farmers and, to a lesser extent, of cases concerning market measures. The irregularities notified by a minority of Member States (Romania, Italy, Portugal, Spain, Poland, France and Hungary) represented more than 70% of the total number of the irregularities reported in 2019. These Member States received 57% of the CAP payments in 2019.

As shown by Table NR3, there were about 550 irregularities with a financial amount below EUR 10,000, which represented about 3% of all the relevant irregularities. In order to make use of all information reported by the Member States, all these irregularities are considered in the analysis for this report. However, Table NR3 provides the reader with additional information to better interpret data about detections in different Member States.

It is not clear why some Member States reported many more 'below-the-threshold' irregularities than others did. It should be considered that an irregularity may consist of irregular or fraudulent operations which are interlinked and whose total financial impact exceeds EUR 10,000, even though each operation remains below the threshold. In such case, some Member States may have chosen to report these irregularities separately, while other Member States may have combined them into a single irregularity. Another explanation may be that irregularities were reported because the initial estimation of the irregular financial amounts exceeded EUR 10,000, but subsequent updates lowered these financial amounts below the threshold. Furthermore, about 30% of the 'below-the-threshold' irregularities were still open as of the cut-off date; the competent national authority might have reported them with a provisional estimation, pending the exact quantification of the financial amount involved. Other explanations may include typographical errors or mis-interpretation of the reporting rules.

In general, Member States are requested to communicate irregularities involving financial amounts above EUR 10,000. However, a number of irregularities involving financial amounts equal to or below this threshold have been reported by several Member States (see Table NR3). Furthermore, a number of Member States reported cases with financial amounts involved equal to zero. This may be due to the fact that the competent national authority did not have enough information yet to quantify the irregular amounts involved. However, this should not be the case once the irreguarity is closed. Table NR3 also provides an overview by Member State of the closed cases, for which the national authorities have not reported the irregular financial amounts involved.

The expenditure made by the paying agencies is then reimbursed by the Commission to the Member States, on a monthly basis - in the case of the EAGF – or on a quarterly basis - in the case of EAFRD. While entitlements and measures supported under the EAGF follow a yearly flow, those under the EAFRD are implemented through multi-annual programmes, very much like the interventions financed through the other ESIF funds. In general, reimbursements are subject to possible financial corrections which the Commission may make under the clearance of accounts procedures.

The paying agencies are, however, not only responsible for making payments to the beneficiaries. Before making payments, they must, either directly or through delegated bodies, satisfy themselves of the eligibility of the aid applications. The checks to be carried out are laid down in the CAP sectorial regulations and vary from one sector to another. Specific national authorities are competent in relation to RD operations.

The European Commission is responsible for the management of the EAGF and the EAFRD. However, the Commission itself does not make payments to beneficiaries. According to the principle of shared management, this task is delegated to the Member States, who themselves work through national or regional paying agencies. Before these paying agencies can claim any expenditure from the EU budget, they must be accredited on the basis of a set of criteria laid down by the Commission.

The CAP is financed by two funds, EAGF and EAFRD, which form part of the EU's general budget. For the past 50 years, the CAP has taken a large part of the EU's budget, which is now about 40% (see Table NR1).

The European Maritime and Fisheries Fund (EMFF) provides funding and technical support for initiatives that can make the fishery industry more sustainable. The EMFF is the successor of the European Fisheries Fund (EFF), for which the resources had been committed in full by the end of 2014. Table NR1 also shows the financial resources available for this policy area. However, in light of their belonging to the ESIF family, EFF and EMFF are treated together with the other structural funds (see Section 4).

The overaching objectives of the CAP are (1) viable food production, (2) sustainable management of natural resources and climate action, and (3) balanced territorial development. There is a direct management component but over 99% of expenditure is disbursed by Member States under shared management.

The cases of established fraud were few and, on average, these decisions were reached after about three years. This may point to the need to invest further in the investigation/prosecution phase. At EU28 level, established fraud ratio was lower than 14%. It was zero or very low in many Member States. In Bulgaria, the ratio was relatively high, at 26%, and based on the (by far) highest number of cases of established fraud. In general, the established fraud ratio is not likely to increase significantly because, as mentioned, while 66% of cases are still classified as suspected fraud (pending ratio), about 40% of them is already closed and, in any case, between 6 and 13 years have already passed since the detection of the irregularity.

Analysis suggests a significant underestimation of the dismissal ratio. About 66% of the irregularities reported as fraudulent were still pending, but for more than one third of them no changes of status are to be expected. This is due to the fact that 40% of the irregularities that were still labelled as suspected fraud at the end of 2019 were already closed.

About 21% of the irregularities reported as fraudulent were dismissed, on average after about five years. The dismissal ratio varied across the Member States, as the related average time. High dismissal ratios, especially when associated with high pending ratios, may be due to a detection phase that led to report to the judicial authority cases that were not fraudulent or to an investigation/prosecution phase that gave low priority or did not have enough tools, resources or information to properly address the case, especially when high dismissal ratios are associated with high average times. Low dismissal ratios may be positive, but they may also be the result of many irregularities still pending.

DA was the CAP sector featuring more concentration. This may be due to different factors, including dishomogeneous management and control systems and, for the fraudulent irregularities, different approaches to the use of criminal law to protect the EU financial interests. Specific problems may occur at the local level that need to be correctly and promptly addressed by the competent national authorities.

For RD and MM, concentration concerned in particular fraudulent irregularities. This suggests, in particular, the need for more homogeneity concerning the use of criminal law to protect the EU financial interests. With specific reference to RD, this analysis suggests that this difference in concentration between detections and payments was less evident for non-fraudulent irregularities, which might be taken as an indication of more homogenous approaches to management and administrative controls, even if the examination of data concerning individual Member States highlighted significant discrepancies. The concentration of detections was instead more accentuated for fraudulent irregularities, suggesting that different approaches to the use of criminal law to protect the EU budget could be an additional and significant factor pushing for further dishomogeneity among Member States. Also with specific reference to MM, the above mentioned analysis found that the concentration of detections went beyond what could be expected on the basis of the distribution of relevant payments, especially for fraudulent irregularities.

Detection levels were different in different Member States. In all CAP sectors, RD, MM and DA, the level of detection of irregularities and fraud across the different Member States was not homogenous. The concentration among Member States was analysed in detail in the 2018 PIF Report, with reference to the period 2014-2018.

With reference to the period 2015-2019, the FDRs of Bulgaria and Romania exceeded 0.40%. FDR was significantly higher than the EU average also in Poland, Estonia and Lithuania. However, the picture changes depending on the CAP sector. Detection rates are the outcome of the control activities of the Member States and they can vary across Member States because of different underlying levels of irregularities and fraud, but also of different quality of the prevention or detection activities or different reporting practices. Concernig RD, Romania, Lituania, Estonia and Bulgaria recorded the highest FDRs, while Lithuania, Portugal and Bulgaria scored the highest IDRs. Concerning MM, FDR was the highest in Bulgaria and Poland but it was significantly higher than the EU average also in Czechia and Hungary. IDR was the highest in Romania, Malta, Poland and Denmark, but it was more than double the EU average also in Hungary. Concerning DA, Italy and Romania recorded both the highest FDRs and the highest IDRs.

Irregularities tend to be protracted for more than two years. The Member States are requested to indicate the date or period when the irregularity was committed. The majority of irregularities covered extended spans of time, in particular in the case of fraudulent irregularities, consistent with their intentional nature. The average duration of these protracted irregularities is slightly more than 2 years, both for fraudulent and non-fraudulent cases.

In the majority of fraudulent irregularities, legal entities were involved, in particular private companies or associations. In a significant one-third of cases, natural persons were involved. For 56% of fraudulent irregularities, only legal entities were involved, while for 35% they were only natural persons. Most fraudulent irregularities report a single natural or legal person. Focusing on legal entities, the majority of them were private companies, while the second largest group was non‑profit organisations, most of which were associations. For most Member States, private companies represent the majority of the reported persons. The only exception with a larger sample is Romania, evenly split between private companies and associations, together accounting for approximately half of the total reported by Romania.

In the context of the antifraud cycle, the detection capability is a key feature and the Commission issued recommendations to improve it. Little progress has been made, so far. The detection capability contributes to the effectiveness and efficiency of the system for the protection of the EU budget. In the context of the 2017 and 2018 PIF Reports, the Commission recommended to the Member State to further exploiting the potential of risk analysis, tailoring the approach to the different types of expenditure and taking advantage of best practices and the risk elements highlighted in those Reports. Furthermore, the Commission recommended facilitating and assessing the spontaneous reporting of potential irregularities and strengthening the protection of whistle-blowers, who are also a crucial source for investigative journalism. So far, it seems there has been little improvement on the ground, at least in terms of detection after request for reimbursement to the Commission, but it may be too early to draw conclusions.

High financial amounts were involved in a single fraudulent irregularity concerning ‘refunds for poultry meat’. This is the reason why, the section ‘Pigmeat, eggs and poultry, bee-keeping and other animal products’ ranked high in terms of irregular financial amounts.

Also ‘Promotion’ was significantly affected by fraud, in particular in terms of the financial amounts involved. The irregularities were split between violations related to the EU markets and third country markets, but the financial amounts involved in the latter were higher.

Fraud affecting the fruit and vegetables sector: aid for producer groups. Another sector with many irregularities reported as fraudulent was ‘Fruits and vegetables’, in particular due to ‘aid for producer groups for preliminary recognition’, which is the measure with the highest irregular financial amounts. Irregularities concerning this measure concerned, in particular, ‘investment’ and, to a lesser extent, ‘formation, administrative operations’.

Fraud affecting the wine sector: investment and promotion in third countries. The highest number of MM irregularities reported as fraudulent was related to national support programmes for the wine sector, in particular investment measures and promotion in third country markets.

Concerning RD, the highest number of detections and irregular financial amounts were related only to the implementation of the action. Violations concerning only 'documentary proof' or the ‘beneficiary’ were also prevalent. However, these were also often combined with ‘(non-)action’ and with each other. There were just few cases of conflict of interest.

In relation to SA, violations concerning the ‘request’ were the most frequent, but the highest financial amounts were associated with the implementation of the action. Violations concerning the ‘request’ were often related to falsification, which would not be expected for non-fraudulent irregularities. Similar findings apply to the category ‘documentary proof’. During the period 2015-2019, the highest irregular financial amounts were due to infringements falling exclusively in the category ‘(non) action’, nearly 50% of which were reported in 2019, due to two cases accounting for nearly EUR 45 million. Other prevalent categories of SA irregularities not reported as fraudulent were 'Product, species and/or land' (mostly 'Overdeclaration and/or declaration of fictitious product, species and/or land'), 'Beneficiary' (mostly 'Operator/beneficiary not having the required quality') and 'Ethics and integrity'. Non-fraudulent irregularities under the last of these were fewer than for the irregularities reported as fraudulent and, apart from one case of conflict of interest, all of these violations were reported as 'other’. One further conflict of interest case was detected in combination with other categories of violation.

As mentioned, the level and decline in ‘core’ AFA of RD may point to the need for better targeting controls. The ‘core’ AFA of MM has been the highest in the CAP context and growing fast. The ‘core’ AFA of RD irregularities has been decreasing and, since 2016, it has basically been on par with the ‘core’ AFA for DA (the lowest). The ‘core’ AFA for SA was higher than the ‘core’ AFA of both of RD and DA, pushed by the financial amounts involved in the MM cases.

RD was still more affected by non-fraudulent irregularities than SA. However, market measures, which are part of SA, recorded the highest IDR, at 1.85%, nearly double RD. This was also (but not only) due to a few MM irregularities involving exceptional financial amounts. Despite the different patterns in terms of detections, during the period 2015-2019, the number of RD non-fraudulent irregularities were still more than double that of the SA non-fraudulent irregularities. The difference in terms of financial amounts was smaller, whereas, in relation to payments made, RD was still much more affected by non-fraudulent irregularities than SA. The IDR of RD was 0.98%, nearly three-times that of CAP in general. Most of SA payments concern direct payments to farmers, which recorded the lowest IDR, at 0.07%. As mentioned, this is consistent with the finding that entitlement-base expenditure (such as direct payments to farmers, which represent most of CAP expenditure) is less prone to error than reimbursement-based expenditure (such as RD). However, another part of SA, market measures, accounted for the highest IDR, at 1.85%. Excluding a few irregularities involving exceptional financial amounts, the IDR would be 1.18%, still higher than that of RD.

Stable detections for SA, with fluctuating financial amounts, on account of a few ‘big’ MM cases. Downward trend for RD, due to declining detections related to PP 2007-2013, which was to be expected. The trend of SA non-fraudulent irregularities was flat, but subject to large fluctuations in terms of financial amounts, due to one to three MM cases involving exceptionally high financial amounts, which were reported in 2015, 2017 and 2019 - but not in 2016 and 2018. Since 2015, RD non-fraudulent irregularities followed a decreasing trend, in particular in terms of financial amounts involved. The decrease in the number of RD non-fraudulent irregularities was due to a decline in cases related to PP 2007-2013, that was not compensated by the initiation of cases related to PP 2014-2020, which however was in line with the start of the previous programming period.

In the framework of RD, many detections were just related to the implementation of the action. The creation of artificial conditions for receiving financial support is a source of concern also for RD. Similar to SA, mainly fraudsters just relied on the falsification of the documentary proof or, to a lesser extent, of the request for aid. However, a significant number of detections and irregular financial amounts were related exclusively to the category '(non-)action'. Irregularities exclusively related to ‘Ethics and integrity’ also ranked high, in terms of number of detections; however none of these irregularities were reported in 2019 and very few in 2018 (while most of them were reported in the years 2015-2017). As was the case for SA, most of these violations concerned the creation of artificial conditions for receiving financial support, which points to a risk for the EU budget and thus deserves further analysis.

Concerning SA, mainly fraudsters just relied on the falsification of the documentary proof or of the requests for aid. Fraud risks were also related to the creation of artificial conditions for receiving financial support. Fraudulent irregularites falling exclusively within the category ‘(non-)action’ were less reported, but they accounted for a high AFA. The highest AFA (nearly EUR 2 million) was recorded for a few cases of conflict of interest combined with other categories of violation. Fraudulent irregularities only concerning 'Product, species and/or land' were also frequently detected, in particular related to 'overdeclaration and/or declaration of ficticious product, species and/or land'. During the period 2015-2019, many fraudulent irregularities for the creation of artificial conditions for receiving financial support were reported by one Member State through the category ‘Ethics and Integrity’, indicating a fraud risk that was either underdetected by the other Member States or reported through other categories of irregularities, such as the one related to the quality of the beneficiary.

‘Core’ AFA for RD was higher than ‘core’ AFA for SA. However, ‘core’ AFA for MM was the highest. ‘Core’ AFA for fraudulent irregularities was higher than that of non-fraudulent ones. During the years 2015-2019, ‘core’ AFA for RD has been fluctuating, while ‘core’ AFAs for SA and DA have remained relatively stable. Unlike non-fraudulent irregularities, ‘core’ AFA for fraudulent irregularities has constantly been higher for RD than SA, despite the contribution of MM to the latter. In fact, ‘core’ AFA for MM is much higher than the others, including because of a significant increase in 2018. The rise of the ‘core’ AFA for MM in 2018 was due to a broaded basis of irregularities with high financial amounts involved. In 2019, the ‘core’ AFA for MM remained high, in particular because less cases with low financial amounts were reported. For MM and RD, the ‘core’ AFA of fraudulent irregularities was significantly higher than the ‘core’ AFA of non-fraudulent ones.

RD was still more affected by fraud than SA. However, market measures, which are part of SA, recorded the highest FDR, at 0.87%, more than four-times that of RD. This was also (but not only) due to a few MM irregularities involving exceptional financial amounts. During the period 2015-2019, total financial amounts involved in SA irregularities were higher than those related to RD irregularties, but in relation to payments made, RD was still much more affected by fraud. The FDR of RD was 0.20%, double that of CAP in general. Reimbursement-based expenditure, such as RD, is more prone to errors than entitlement-based expenditure and provides more opportunities for fraudsters. Most of SA payments concern direct payments to farmers, which recorded the lowest FDR, at 0.01%. In this area the Integrated Administration and Control System (IACS) and Land Parcel Identification System (LPIS) support cross-checks that allow detection of fraud/irregularities and enhance prevention. However, another part of SA, market measures, accounted for the highest FDR, at 0.87%. Excluding a few irregularities involving exceptional financial amounts, the FDR would still be 0.37%, nearly double that of RD.

Drop in the irregular financial amounts, in line with a persistent downward trend for RD and no ‘big’ detections for SA. In 2019, the total financial amounts involved in irregularities reported as fraudulent dropped by 62%. This was due to a continued declining trend for RD and a significant downswing for SA. The fall concerning SA was mainly due to the fact that both in 2017 and 2018, one Member State reported one MM irregularity where high financial amounts were involved, which did not happen in 2019.

There was a strong decrease of RD fraudulent irregularities, due to the decline in detections related to PP 2007-2013, which was to be expected, and a slow start of detection related to PP 2014-2020, which should be monitored. The overall downward trend was mainly shaped by the strong decrease of the number of irregularities reported as fraudulent in relation to RD. The number of RD-related irregularities fell below the number of SA-related irregularities in 2017 and since then the gap has been slowly increasing. As a result, during the period 2015-2019, the overall number of RD fraudulent irregularities was just 17% higher than that of SA fraudulent irregularities. The decrease in the number of RD fraudulent irregularities was due to a decline of cases related to PP 2007-2013, not compensated by a slow start of cases related to PP 2014-2020, which should be closely monitored to ensure this is not due to a reduced focus on fraud detection.

The number of detections has been declining and concentrated in few Member States. During the 2015-2019 period, the overall number of irregularities reported as fraudulent followed a downward trend. As mentioned, the detection of fraudulent irregularities was concentrated in few Member States.

Detections were (too) concentrated in a few Member States, in particular for fraudulent irregularities, beyond what could be expected on the basis of the distribution of relevant payments. This could be due to many different factors, including different underlying levels of irregularities and fraud, a different quality of the prevention or detection activities or different practices concerning the stage of the procedure when potentially fraudulent irregularities were reported. The concentration of detections was more accentuated for fraudulent irregularities, suggesting that different approaches to the use of criminal law to protect the EU budget or reporting practices concerning suspected fraud could be an additional and significant factor leading to further dishomogeneity among Member States.

‘Core’ AFA of MM was the highest in the CAP context and increased, which is in accordance with past European Commission analysis and recommendations. ‘Core’ AFA of RD declined, which may point to the need for better targeting controls. The ‘core’ AFA of SA irregularities followed a rather stable trend, with a slight tendency to increase over time. However, the ‘core’ AFA of MM (which is part of SA) rose to a new higher level, much higher than the other CAP sectors. While prevention issues or increased threat from wrongdoers cannot be excluded, this increase of the MM ‘core’ AFA might also be attributable to better detection activities in the Member States, following better risk assessments, as recommended by the Commission in the 2016 PIF Report. However, an analysis of the reasons for the start of the controls that led to detect the irregularities shows that most of the increase of the ‘core’ AFA of MM was due to ‘irregularities detected and reported by an EU-body’. The ‘core’ AFA of RD has been on a clear downward trend, which has brought it to the level of DA ‘core’ AFA, at the bottom.

Looking at ‘core’ trends of the average financial amounts (AFA). AFA of the reported irregularities can be taken as an indicator of the detection capacity. In order to avoid overinfluence of a few irregularities with very high financial amounts involved distorting the overall picture, focus is on identifying ‘core’ trends, excluding outliers.

RD was more affected by irregularities than SA. Despite these opposite patterns, RD remained more affected by irregularities than SA (as a whole), in proportion to payments received by the Member States. As in past years, the weight of the financial amounts involved in irregularities on payments is very different between the two types of support, as it is 0.1% for SA and 1.2% for RD (0.5% on the overall 2019 CAP expenditure - see also below about Fraud Detection Rates (FDR) and Irregularities Detection Rates (IDR)).This is consistent with the findings of the European Court of Auditors (ECA), as concerns errors, according to which payments made on an entitlement basis (including direct aid to farmers, which is the biggest part of SA) are not affected by a material level of error, while payments made on a reimbursement basis are affected by a higher level of error.

2019: stability in financial amounts, but only on the surface. Irregular financial amounts in RD dropped. The upswing of irregular financial amounts in SA was due to a few ‘big’ detections in MM. In 2019, the overall financial amounts were relatively stable, but SA and RD followed two opposite patterns. Irregular financial amounts in RD dropped by 35%, much more than the number of RD-related detections, which decreased by just 4%. Irregular financial amounts in SA experienced an upswing of 61%, much more than the number of SA-related irregularities, which increased by just 10%. However, this strong increase does not seem to point to a broad structural change. SA financial amounts tend to fluctuate dramatically due to the occasional detection of cases concerning intervention in agricultural markets, which involve exceptionally high financial amounts. In 2019, three such cases with an average financial amount of EUR 20 million were reported.

Fluctuations in financial amounts involved in irregularities should not be misinterpreted. It must be kept in mind that a significant portion of these financial amounts was linked to a relatively low number of cases. In such context, fluctuations are more likely and should not be overemphasised.

After a significant drop, the number of irregularities related to CAP has been stable since 2017. The number of detections followed a flat trend for SA, while it declined for RD, due to the decrease of the number of irregularities related to PP 2007-2013, which was to be expected. The two CAP components have been featuring different patterns. During the period 2015-2019, irregularities related to SA fluctuated around a flat trend, which is consistent with the annual implementation of the underlying operations. Irregularities concerning RD peaked instead in 2015, dropped for two years and then they joined in following a flat trend. This pattern is consistent with that of the European Structural and Investment Funds (ESIF) (see Section 4) and is due to the fact that RD is financed by programmes in a multiannual context. In fact, during 2015-2019, detections concerning PP 2007-2013 (closed in 2015) and PP 2014-2020 (undergoing implementation) have been overlapping and the downward trend in RD was due to the decline of PP 2007-2013 cases, which was to be expected. The issue is further analysed in the Report, separately for fraudulent and non-fraudulent irregularities.

CAP, RD, SA, MM, DA. This part of the Statistical Evaluation focuses on the irregularities related to the Common Agricultural Policy (CAP). The latter is split in support to rural development (RD) and direct support to agriculture (SA). SA consists of direct payments to farmers (DA) and measures to respond to market disturbances (MM).

If TOR are not established or recovered because of an administrative error by a Member State, the Commission applies the principle of financial liability. Member States have been held financially liable in 2019 for nearly EUR 50 million, and new cases are being given appropriate follow-up.

Sound and flexible control strategies, interconnected IT applications combined with well-equipped and skilful customs officials is the key to combat loopholes exploited by fraudsters and to enable customs an effective protection of the EU’ financial interests. The Commission and Member States are currently in the process of reviewing existing systems and IT applications and developing new ones. They, together with the compliant traders, are in a leading role in meeting challenges of today’s global economy becoming digital and adapting quickly to new economic circumstances. OLAF plays also hereto an important role in defining anti-fraud policy and coordinating stakeholders’ actions with regard to fraud prevention and detection. Furthermore, EU-wide and international cooperation in detection of irregular cases is more and more required taking into account the fraud diversion and spreading of specific fraud mechanism.

One general conclusion drawn by the Commission from its inspections in Member States in recent years is that their control strategies are increasingly shifting from customs controls at the time of release of goods to post-release customs controls. The customs controls before or at the time of release of goods remain however indispensable for addressing undervaluation and the detection of new types or patterns of fraud or irregularities.

Other subjects of the TOR inspections by the Commission services in Member States in 2019 were the keeping of the separate account and the corrections of the normal account, the Binding tariff information and the control strategy for large businesses.

DG BUDG in 2018 already asked all Member States to assess their own liability and correct the amounts established since 2012. Now the Commission will quantified the TOR losses in all Member States.

Considering the magnitude of the TOR losses at stake, between 2017 and 2019, the Directorate-General for Budget (DG BUDG) carried out on-the-spot inspections on the control strategy in the field of customs value in all Member States, to check how they complied with their obligation of proper collection and timely making available of TOR to the EU budget. As a result, several inspection reports, the latest finalised in the end of 2019, found that the EU financial interests were not effectively protected, leading to significant losses of TOR for the EU budget. Besides, to date OLAF has also issued investigation reports to six Member States (Hungary, Greece, Slovakia, Czech Republic, Malta and France) with financial recommendations. In general, Member States have not fully implemented the necessary measures to tackle the undervaluation fraud consistently.

In its TOR inspecti