COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 08.05.1996 
COM(96) 173 final 
PROTECTING THE COMMUNITY'S 
FINANCIAL INTERESTS 
THE FIGHT AGAINST FRAUD 
ANNUAL REPORT 1995 
(presented by the Commission) 

CONTENTS 
Page 
INTRODUCTION 5 
CHAPTER 1: PROGRESS ON THE HORIZONTAL LEGAL 
INSTRUMENT IN 1995 (FIRST PILLAR AND TITLE 
VI) 8 
Section 1: INTRODUCTION AND ASSESSMENT 8 
Section 2: FIRST-PILLAR ACTIVITIES - IMPROVING THE 
COMMUNITY'S LEGISLATIVE FRAMEWORK . 10 
1. Regulation on the protection of the Community's financial 
interests 10 
2. The proposal for a Regulation concerning on-the-spot checks and 
inspections 12 
Section 3: TITLE VI ACTIVITIES - MAKING THE VARIOUS 
NATIONAL LAWS MORE COMPATIBLE WITH ONE 
ANOTHER 13 
1. The Convention 13 
2. Additional Protocol to the Convention on the protection of the 
European Communities' financial interests (second instrument) -
on judicial cooperation 15 
3. Protocol on corruption amongst officials 17 
Section 4: DEVELOPMENTS CONCERNING ORGANIZED FINANCIAL 
CRIME 18 
CHAPTER 2: DEVELOPMENTS IN THE REGULATORY 
FRAMEWORK IN 1995 20 
Section 1: OWN RESOURCES 20 
Section 2: AGRICULTURE , . . 20 
Section 3: CUSTOMS 23 
1. Customs transit arrangements 23 
2. The Customs 2000 project 26 
3. Chemical substances frequently used for the illicit manufacture 
of narcotics ("precursors") 27 
Section 4: ADMINISTRATIVE COOPERATION 27 
CHAPTER 3: THE OTHER INSTITUTIONS 29 
Section 1: THE EUROPEAN PARLIAMENT 29 
2 
Section 2: THE COUNCIL 30 
Section 3: THE COURT OF AUDITORS 31 
Section 4: THE COURT OF JUSTICE 31 
CHAPTER 4: THE MEMBER STATES 33 
Single section 1: NATIONAL REPORTS ON THE MISUSE OF 
COMMUNITY RESOURCES - APPLICATION OF ARTICLE 209a33 
1. Methods used 33 
2. Implementation of the first paragraph of Article 209a of the EC 
Treaty: state of play 34 
3. Implementation of the second paragraph of Article 209a of the 
EC Treaty: state of play . 36 
4. Avenues to be explored . 37 
CHAPTER 5: COOPERATION AND PARTNERSHIP 41 
Section 1: SEMINARS, CONFERENCES AND EXCHANGES OF 
OFFICIALS 41 
Section 2: THE ADVISORY COMMITTEE FOR THE COORDINATION 
OF FRAUD PREVENTION 43 
Section 3: PARTNERSHIP WITH SPECIALIST DEPARTMENTS IN 
THE MEMBER STATES 44 
Section 4: MUTUAL ADMINISTRATIVE ASSISTANCE IN CUSTOMS 
MATTERS BETWEEN THE COMMUNITY AND NON-
MEMBER COUNTRIES 45 
CHAPTER 6: INVESTIGATIONS 47 
Section 1 : MAJOR ORGANIZED TRANSNATIONAL FRAUD CASES ... 49 
Section 2: MAJOR FRAUDS RELATING TO ORIGIN AND 
PREFERENTIAL AGREEMENTS 60 
2.1 Industrial goods 6i 
2.2 Textiles 63 
2.3 Fishery products 66 
Section 3: OTHER FRAUD IN AGRICULTURE 67 
Section 4: OTHER FRAUDS IN RELATION TO STRUCTURAL 
POLICIES 74 
4.1 European Social Fund (ESF) 74 
4.2 European Regional Development Fund (ERDF) 75 
Section 5: OTHER FRAUD IN RELATION TO DIRECT EXPENDITURE . 76 
5.1 Research 76 
3 
5.2 Energy 76 
5.3 European Development Fund (EDF) 77 
5.4 Environment/Medspa programme (Italy) 77 
CHAPTER 7: STATISTICS AND ANALYSES 78 
Section 1: THE SITUATION IN 1995 78 
Section 2: . TRENDS 80 
Section 3: TRANSIT 81 
Section 4: RECOVERY 82 
Section 5: ANALYSING LEGISLATION 83 
CHAPTER 8: ANTI-FRAUD APPROPRIATIONS 97 
Section 1: IMPLEMENTATION OF THE 1995 BUDGET 97 
Section 2: 1996 APPROPRIATIONS 97 
ANNEX 104 
GLOSSARY 105 
INTRODUCTION 
1995 was particularly notable for the substantial progress achieved at legislative level with 
the adoption of two basic texts, one concerning checks and administrative penalties (a 
horizontal regulation) and the other on penal protection of Community finances (a 
convention). In the operational area, the investigations undertaken at the Commission's 
initiative with the national authorities show more and more clearly that the Commission 
can provide an added value in combatting fraud on the ground. 
This momentum results from the anti-fraud strategy put in place in 1994 which focuses 
on four priority areas: 
- reinforcing the presence on the ground; 
- exploiting intelligence and strengthening the partnership between the Commission 
and the Member States; 
- improving the Community legislative framework; 
- securing greater compatibility between national legislations with regard to punitive 
measures to deter fraud on a scale commensurate with the problem to be tackled. 
In addition, valuable progress was made in all these areas in 1995. 
Following the proposals1 on legal protection for the Community's financial interests 
presented by the Commission in 1994 and considered in the first part of the report, the 
Council adopted a Regulation to establish a consistent and effective system of penalties 
to punish those responsible for fraud once it is detected and deter such activity in the 
future, and signed an international Convention which, for the first time, introduced a 
common definition of the concept of irregularity and fraud. 
These texts aim for a better protection of the Community's financial interests, the 
principle contained in article 209a of the EC treaty, and are a response to the frequently 
expressed public concern to see fraud and waste of Community funds put down with the 
greatest severity, and constitute a vital legal basis for the development of future work in 
that field. The on-the-spot inspection arrangements and the penalty systems applied by the 
Commission and the Member States must be improved and strengthened accordingly. 
Although substantial progress has been made in the legislative field, experience has 
shown, from the Commission's point of view, that the legal means contained in the treaty 
are not sufficient given the amounts involved and the degree of protection required for 
a budget of the size of the Union. This is why the Commission considered that their 
reinforcement, at the time of the Inter-Governmental Conference (IGC), was necessary. 
The Cannes European Council of 26-27 June 1995 and the Madrid European Council of 15-16 
December 1995 emphasized in particular topics related to the protection of the Community's 
financial interests and the fight against fraud in the Community. 
It has therefore taken the initiatives required to include the question on the agenda of the 
IGC which begins in March 1996. 
The horizontal regulation defines very broadly the concept of irregularity. This concept 
covers both simple omission due to error or negligence which is likely to have a harmful 
effect on the Communities' budget and intentional and deliberate acts which correspond 
for their part to the more restrictive concept of fraud as defined in the penal convention. 
The investigations presented in the second part of the report refer to cases in which the 
Commission participated. They only involve irregularities of particular interest at 
Community level whose intentional or deliberate nature has not yet necessarily been 
demonstrated. These irregularities cannot therefore all be considered as cases of fraud in 
the penal sense of the term. This also applies to the data featured in the statistical part 
of the report. 
This "post-operational" stage is just as vital. The closing chapters of the report give an 
analysis of the data compiled in the field and in carrying out the procedures, which makes 
it possible to map out trends in large-scale fraud and distinguish which sectors are the 
most affected, so that the Community framework in which the financial provisions are 
decided on can be adapted accordingly. 
The major trends are clear : the number of fraud cases detected is still rising (+/- 15%) 
while the total amount involved is tending to stabilize. Half this total concerns 
investigations in-hand under Commission coordination, in close cooperation with the 
Member States. The number of these investigations in increasing. The scale of the 
amounts at stake illustrates how the launching of in-depth inquiries in cooperation with 
specialized departments in the Member States as soon as fraud is suspected can reveal the 
existence of networks, often criminal, operating with highly sophisticated techniques. A 
rapid administrative and judicial operational response is vital if all prospects of recovering 
sums diverted or evaded are to be preserved. 
In statistical terms, on the side of expenses administered by the Member States 
(agricultural expenditure and structural policies), the fraud detected in 1995 is represented 
by a global amount of in the region of 383 million ECU, that is 0.6% of the finance 
allocated. Concerning direct expenditure, managed by the services of the Commission 
(contracts concluded with beneficiaries in the Member States), this amount is in the region 
of 28 million ECU, that is 0.3% of benefits paid. 
On the income side, fraud amounts to in the region of 735 million ECU (in the area of 
Traditional Own Resources), that is 3.6% of the income collectable under this hçading in 
1995. This amount represents the duties and taxes evaded, principally during commercial 
operations (trade) between non-Member countries and the Community. The Member 
States are the principal financial losers. In effect, balance (of income and expenditure) 
is one of the fundamental principles of the Community budget, which implies that each 
loss in the matter of Customs duties and agricultural levies, for example, is made up by 
the increase of direct contributions of Member States under the heading of the 'Fourth 
Resource', founded on the GNP of Member States, known still as the 'balancing income'. 
Globally and schematically, it is possible to point out that fraud on the Community 
budget, cases known, recognised, that is to say prosecuted or under investigation, do not 
go beyond 1.4% of the Community budget. The Member States have shown that the 
system of detection functions ; the Commission, for its part, has largely devoted itself, 
with the participation of specialised national services, to the triggering off of detailed 
enquiries from the first stages of suspicion of irregularity or 
The Commission is continuing to develop its partnership with the Member States. With 
their assistance it has embarked on a wide-ranging exercise to make the management of 
Community appropriations more efficient. The initiative, which goes by the name SEM 
2000 (standing for Sound and Efficient Management), encompasses three stages, of which 
the first two involved the Commission improving the standard of its own financial 
management. The last stage aims to bring about improvements in the management of 
Community resources by the Member States and will lead to greater transparency on the 
one hand and greater security on the other for the benefit of taxpayers. This new stage 
is being conducted in the same spirit of partnership as were the anti-fraud activities 
proper, even if it goes beyond the confines of the fight against fraud. It will in any event 
have a definite impact on the policy for preventing and fighting fraud. Therefore, 
analysis of legislation, mentioned in chapter 8 of this report, forms a major part of the 
SEM 2000 initiative. 
In this context, the important work done by the Member States in producing their reports 
on national measures to combat waste and misappropriation of Community resources 
deserves special mention. The Commission carried out a comparative analysis of the 
reports which clearly brings out the problems and questions which have to be dealt with 
by joint action. At the same time, again using the Member States' reports, it reviewed the 
application of the "assimilation" principle set out in the new Article 209a of the EC 
Treaty. A comparative summary paper was submitted to the Council which, in taking note 
of it, called on the institutions and the Member States to press on with their efforts in the 
fields in que^ion, in particular by striving to establish an equivalent level of protection 
for the Community's financial interests throughout the Community. 
In 1995 the Commission also restructured its fraud prevention department (SG/UCLAF -
Unit for the coordination of fraud prevention) by regrouping its anti-fraud activities into 
this operational and multi-disciplinary structure2 to enable it to fulfil its role independent 
of the services with authorizing responsibilities and to achieve the global, integrated 
approach defined for the protection of the Community's financial interests. 
Decision of 16 February 1995 - See SEC (95) 249, Commission Communication of 10 February 
1995 on the organization of fraud prevention within the Commission. 
7 
CHAPTER 1 : PROGRESS ON THE HORIZONTAL LEGAL INSTRUMENT IN 
1995 (FIRST PILLAR AND TITLE VI) 
Section 1: INTRODUCTION AND ASSESSMENT 
One of the most important events in 1995 was the completion of the work begun in 1994 
on legislation to protect the Community's financial interests. This work also laid the 
foundations for the Commission's new proposals. The combination of the Commission's 
efforts and political will at the highest level, produced some very real and practical 
results.3 
The Commission worked on the premise that, as well as bolstering the preventive aspects 
of the checks and other measures designed to protect the Community's financial interests, 
it also needed to devise a set of uniform administrative and criminal penalties. 
* A first layer of protection was needed in the form of Community administrative 
penalties. 
There were already penalties for irregularities concerning the common agricultural 
policy but these had to be extended to other areas to ensure uniform protection 
across the Union. This could only be done through Community law. Accordingly, 
the Commission proposed a horizontal Community instrument establishing a 
special legal framework for Community administrative sanctions covering every 
section of the Community budget. 
A framework regulation on the protection of the Community's financial 
instruments was duly adopted by the Council on 18 December 1995 (Regulation 
(EC, Euratom) No 2988/95)/ 4 
This Regulation is the product of the Commission's first set of legislative 
initiatives relating to the first pillar. The general horizontal legal framework which 
it provides for confirms the Community administrative penalty, in accordance with 
the case law of the Court of Justice of the European Communities, as a key 
element in the systems developed to protect the Community's financial interests.5 
The initial proposal for the Regulation on the protection of the Community's 
financial interests, presented by the Commission in July 1994, contained general 
rules for Community measures and controls as well as Community administrative 
A Commission proposal (Draft Treaty for the common rules on the protection under criminal law 
of the Community's rinancial instruments) has been before the Council since 1976. See Chapter 1, 
Section 6 of the 3 J ,4 Annual Report on the Fight Against Fraud (COM(95) 98). 
OJL 312, 23.12.1995 
The Commission, in close cooperation with the Member States, conducted a comparative study into 
the way irregularities concerning the application of the common customs code are punished. On 
the basis of the findings, which are now being analysed, the Commission will decide whether 
legislation is required, on the basis of Regulation No 2988/95, for example, to protect the 
Community's financial interests. 
8 
sanctions.6 For the sake of expediency, the Council opted, at this stage, for 
Community administrative penalties and general control measures in order to be 
sure of achieving political results in the first half of 1995. "On-the-spot checks 
and controls", it was decided, were to be provided for in a separate Community 
legal instrument.7 
However, with the exception of VAT, which the Council excluded from the scope 
of the Regulation, the comprehensive, horizontal approach the Commission 
favoured in its proposal has largely been retained. The Regulation applies to all 
expenditure and all traditional own resources. 
The Community has opted unequivocally for the horizontal approach, which is 
now a distinctive feature of legislative initiatives in the fight against fraud. It 
makes for a far more consistent legal framework for measures to protect the 
Community's financial interests. It has also created a certain momentum, as the 
Council demonstrated when it asked the Commission to put forward proposals for 
Community administrative penalties covering all sections of the Community 
budget. 
The Regulation is the first Community instrument containing a broad definition 
of what constitutes an irregularity - a definition which has been lacking for some 
years. 
A second layer of protection is required in the form of national criminal penalties. 
These are the only types of penalties which, by their exemplary and transparent 
nature, provide effective, dissuasive and proportionate protection against the most 
serious of offences in accordance with European case law. The Commission has 
therefore presented a proposal aimed at reducing the inconsistencies between the 
laws on fraud in the various Member States.8 Such discrepancies provide a 
breeding ground for international fraud, which can easily develop into large-scale 
financial crime and even organized crime. 
On 26 July 1995, the Council, acting on a Commission initiative, adopted a 
Convention on the protection of the European Communities' financial interests 
with the intention of improving the compatibility of national criminal laws.9 The 
Convention aims to achieve this by formulating a common definition of fraud and 
of other serious offences which damage the Community's financial interests. This 
constitutes a major step forwards for the Union; fraud affecting the Community 
budget is to be made into a specific criminal offence, with appropriate penalties, 
in each of the Member States. 
OJ C 216, 6.8.1994. See Chapter 1, Section 6 of the 1994 Annual Report on the Fight Against 
Fraud. 
See Article 10 of Council Regulation (EC, Euratom) No 2988/95 
The features which makes the various systems incompatible were highlighted in a study carried 
out by a group of researchers, led by Professor Delmas-Marty in 1993. See the 1993 Annual 
Report on the Fight Against Fraud (COM(94) 94 final) 
OJ C 316, 27.11.1995, p. 48 
The Commission based its proposal for the Convention on Article K.3 of the 
Treaty on European Union (Title VI of the Union Treaty - cooperation in the 
fields of justice and home affairs).10 This approach is without prejudice 10 the 
Community's powers and does not prevent it from acting within the scope of the 
first pillar - which Parliament feels is the preferred option with regard to the 
Community budget. 
In terms of the quantity and quality of the work which the institutions put into it, 
the Convention can be seen as an important milestone. It marks the completion of 
the first stage in accordance with the conclusions of the European Council of 
Cannes and, at the same time, calls for further action.11 It illustrates the special 
problems involved in protecting the Community's financial interests and, in so 
doing, promotes the creation of tailor-made cooperation structures in the field of 
criminal justice. 
The negotiation of these two instruments highlighted the difficulty linked to 
adopting legislation on the basis of Article 235 and of Title VI. Given the problem 
of the relationship between the EC treaty and Title VI of the TEU on questions 
concerned with the fight against fraud, the Commission intends to suggest the 
introduction of a more operational legal base for the protection of the 
Community's financial interests. 
Section 2: FIRST-PILLAR ACTIVITIES - IMPROVING THE COMMUNITY'S 
LEGISLATIVE FRAMEWORK 
1. Regulation on the protection of the Community's financial interests 
The adoption of Council Regulation (EC, Euratom) No 2988/95 on the protection of the 
Community's financial interests was an important step forwards in the process of 
improving the Community's legal framework and tailoring it to the requirements of its 
overall anti-fraud strategy - a process which the Commission began in 1994. 
As far as penalties are concerned, the comprehensive, horizontal approach finally 
prevailed. This was the approach favoured by the Commission in the proposal it advanced 
in July 1994. 
A twin-track approach was adopted to the question of on-the-spot controls and checks. 
For the main traditional checks carried out by the Member States, some_ general 
obligations were set out;12 the task of harmonizing checks, to ensure a comparable level 
of stringency across the Community was then left to sectoral Community legislation or 
even national legislation. For the checks carried out by the Commission, the Regulation 
does lay down certain rules,13 though some more detailed provisions concerning 
Proposal for a Council Act establishing the Convention, OJ C 216, 6.8.1994. 
The second recital is quite explicit on this matter, calling for ''another legal instrument" to 
complement the first "in such a way as to improve the effectiveness of protection under criminal 
law of the European Communities' financial interests. 
Article 8 of the Regulation. 
Article 9 of the Regulation 
10 
procedures were removed from the initial Commission proposal and will appear instead 
in a separate instrument for which the Commission will put forward a proposal to the 
Council at a later date.14 
The main achievement of the Regulation is that it creates a basic legal framework for the 
formulation of uniform Community administrative penalties with the same force 
throughout the European Union. The penalties can be set for fraud relating to any area 
of Community policy where they are required and for which there is a legal basis. 
The Regulation is entirely in keeping with the Commission's approach to administrative 
penalties in relation to agricultural policy, which the Court of Justice has always upheld, 
e.g. in 199215 and, more recently, in 1995.16 
These basic ground rules, preserving the acquis communautaire, were the subject of 
heated debate at the very highest level within the Council before eventually receiving 
unanimous support from the Member States. This result gives the Commission .the go-
ahead to maintain the existing policy with respect to agriculture and to extend Community 
administrative penalties to other areas. 
The Regulation confirms the effectiveness of the system of penalties already in place for 
the common agricultural policy and draws on the impetus provided by the Council's call 
for the introduction of Community administrative penalties in areas other than agriculture. 
In practical terms, the Regulation is the first piece of Community legislation to give a 
broad definition of conduct which prejudices proper application of Community financial 
legislation. It also establishes the concept of "abuse of rights", describes the measures and 
penalties available and identifies the people who can be held liable. 
All of the above apply to irregularities affecting all sections of the Community budget. 
The introduction of the concept of abuse of rights*fills a major gap in Community law. 
From now on, those "attempting to obtain benefits contrary to the objectives of the 
relevant Community legislation may have their entitlement to subsidies or exemption from 
customs duties withdrawn. 
The Regulation provides for a limitation period of four years for the imposition of 
penalties. This is a compromise solution balancing the need to protect the Community's 
financial interests effectively and the principle of legal certainty. The four-year limitation 
period in no way affects the rules governing the financial management of the 
Community's revenue and expenditure as it applies only to penalties and not to debt-
recovery. 
Another of the Regulation's main features is its list of penalties, with specific provision 
for fines, other financial penalties and other types of penalties that the Commission has 
traditionally imposed in the past. 
16 Article 10 of the Regulation 
Case 240/90 Germany v Commission of the European Communities [1992] ECR 1-5383 (judgment 
given on 27 October 1992). 
Case C 104/94 Cereal Italia Sri (judgment given on 12 October 1995) 
11 
The relationship between national criminal-law procedures and Community administrative 
law is made explicit. A good balance, which respects the principle of proportionality, has 
been found. The principle of the primacy of Community law is left intact and the 
Regulation ensures that financial penalties are fair, whether they are provided for by 
Community law or national criminal law. The acquis communautaire is preserved in that 
administrative financial penalties relating to agricultural matters are expressly excluded 
from the suspension arrangements. With regard to other matters, the suspension 
mechanism comes into operation only when criminal proceedings are initiated; it is not 
triggered by proceedings initiated by the administrative authorities with a view to 
imposing national penalties or by out-of-court settlements. 
Owing to the very tight schedule set by the European Council, much hard work was done 
at the beginning of 1995, with Parliament examining the proposal and drafting 
amendments in accordance with the consultation procedure. Parliament delivered its 
opinion on the Commission proposal on 15 March 1995.17 In view of the link between 
the provisions on administrative penalties and criminal law, and the importance of 
providing for a special mechanism in the section on on-the-spot Commission checks, the 
Presidency felt the need to finalize agreement on a joint approach. This involved making 
a certain number of amendments to the initial proposal on which Parliament was to be 
consulted again. This agreement was reached on 29 June 1995. Parliament duly issued a 
second opinion when the Council negotiations were over.18 
The Council finally adopted the Regulation on 18 December 1995 after it had discussed 
Parliament's amendments. As a result of the political views expressed, particularly within 
the ad hoc group of the Budget Committee, the Council did not accept Parliament's 
amendments. The Commission, however, took account of the amendments, most of which 
have been incorporated into the new proposal on on-the-spot checks. 
2. The proposal for a Regulation concerning on-the-spot checks and inspections 
The Commission proposal19 is a response to the Council's call for a separate draft 
regulation concerning on-the-spot checks and inspections. 
The Commission did not opt for harmonization or amendment of the existing sector-based 
Community provisions granting powers to Commission inspectors. Instead, it chose a 
horizontal approach more specifically geared towards combating fraud and detecting 
irregularities, leaving the existing sector-based legislation on checks and inspections 
untouched. 
The proposal gives a clear definition of what constitutes an on-the-spot inspection and 
establishes who can be checked. It also lays down rules governing the powers and duties 
of Commission inspectors and, lastly, it contains provisions aimed at bolstering the legal 
force of the inspectors' findings. 
17 Resolution of 15 March 1995, OJ C 89, 10.4.1995 
18 Resolution of 30 November 1995., OJ C 339, 18.12.1995. 
19 Proposal adopted on 20 December 1995 (COM(95) 690 final) 
12 
The Regulation provides a legal basis for checks and inspections aimed at detecting fraud. 
It is not concerned with checks carried out by the Commission services to ensure that 
Community regulations are being properly implemented by the Member States. 
If adopted, the Regulation will make it significantly easier to set up and carry out 
inspections concerned specifically with combating fraud. It will be particularly valuable 
in cases of major complex or cross-border frauds where the extent to which one Member 
State can act is limited. 
The Commission's desire to work closely with the Member States in combating fraud is 
the cornerstone of the new horizontal approach, which relies on full cooperation between 
the Commission and the Member States with regard to on-the-spot checks and inspections. 
To summarize, the Regulation will complement and rationalize existing arrangements, 
introducing greater clarity and uniformity and enhancing their effectiveness. 
It will also place partnership between the Member States and the Commission on a more 
official footing. It is designed to achieve the aim spelled out in the second paragraph of 
Article 209a of the EC Treaty regarding the assistance the Commission is required to give 
the Member States with the task of protecting the Communities' financial interests.20 
Lastly, the Regulation goes a long way towards establishing some kind of methodology 
for anti-fraud inspections. It is intended to meet the requirements laid down by the 
Madrid European Council, held on 15 and 16 December 1995, which stressed the need 
for a regulation to be adopted as soon as possible, before June 1996. 
Section 3: TITLE VI ACTIVITIES - MAKING THE VARIOUS NATIONAL 
LAWS MORE COMPATIBLE WITH ONE ANOTHER. 
1. The Convention 
As part of the new anti-fraud strategy it adopted in 1994, the Commission also presented 
a proposal for a Council Act21 establishing a Convention relating to the criminal-law 
aspects of the protection of the Communities' financial interests, on the basis of 
Article K.3(2) under Title VI of the Treaty on European Union. 
Parliament recommended an approach based on the first pillar for measures aimed at 
protecting the Community budget. While the Commission did not necessarily disagree, 
it preferred for the sake of expediency and for reasons connected with the scope of the 
proposed measures, to use the intergovernmental procedures associated with Title VI. 
These procedures are even more familiar to central administrations of Justice Ministries, 
which are becoming more aware of the issues surrounding protection of the Communities' 
financial interests and the obligations on the Member States and the institutions. In opting 
for the intergovernmental approach, the Commission enhanced the credibility of the new 
Maastricht provisions without giving the impression that the Community pillar was 
inadequate. 
20 See also Chapter 4, single section, point 3, page 36. 
21 OJC 216, 6.8.1994 
13 
The resolution adopted by the Council on 1 December 1994 identified the issues most 
urgently requiring attention if legislation protecting the Community's financial interests 
through national criminal law is to be passed as quickly as possible.22 
In view of the difficulties the negotiators encountered with the third pillar, the Council 
of 9 and 10 March 1995 decided to limit the scope of the instrument. It would set out 
only to provide a definition of fraud and settle the criminal liability of the people 
involved, the penalties and jurisdiction. The Cannes European Council, held in June 1995, 
was able to reach an agreement on the matter and, on 26 July 1995, an act establishing 
the Convention for the protection of the Communities' financial interests was signed. 
Other instruments supplementing the Convention were to be passed as soon as possible.23 
The Convention as adopted by the Council does not contain all the elements in the 
Commission's initial proposal.24 However, it goes a long way towards ensuring a uniform 
level of protection throughout the Community, in accordance with the express wishes of 
the Madrid European Council. The adoption of a common definition of fraud, combined 
with provisions requiring the Member States to incorporate the definition into their own 
body of criminal law brings the Community much closer to its objective of an equivalent 
level of protection in all Member States. 
The Convention marks a major step forwards in the campaign to protect the Community's 
financial interests; every Member State is now required to punish fraud with appropriate 
criminal penalties. It also does much to approximate in a specific area the Member States' 
criminal-law provisions, which is an appropriate response to the problem of financial 
crime, particularly international fraud. 
The most important, and undoubtedly the most conspicuous change for the better is the 
adoption of a definition of fraud affecting both revenue and expenditure in the 
Community budget. The idea of creating a specific offence - the Commission's preferred 
solution - was rejected in favour of new offences based on the definition contained in the 
Convention. The Member States can choose whether to create a specific offence of fraud 
against the Community's financial interests or to make it an offence under the laws 
criminalizing fraud in general. The Convention also requires Member States to make 
serious fraud involving more than ECU 50 000 an extraditable offence, punishable by 
imprisonment. 
The Convention confirms that persons with the power to take decisions within a business 
should be made criminally liable, albeit in accordance with the principles defined in 
national law. It also lays down very basic rules for judicial cooperation in cases where 
the Community's financial interests are at stake. These include rules on centralization of 
the prosecution and on the aut dedere aut judicare (extradite or prosecute) principle. 
22 
23 
24 OJ C 355, 14.12.1994, see also Chapter 1, Section 6.2 and Chapter 2, Section 3 of the 1994 
Annual Report on the Fight Against Fraud (notably judicial cooperation, laundering, responsibility 
of legal persons, corruption). 
The supplement took the form of the Protocol described at point 2 of this Section. See also the 
second recital of the Council Act establishing the Convention (OJ C 316, 27.11.1995, p.45). 
See Chapter 1, Section 6.2 of the 1994 Annual Report on the Fight Against Fraud. 
14 
The Convention gives the Court of Justice the jurisdiction provided for by Article 
K.3(2)(c) of the Treaty on European Union. The minimalist approach taken by the 
Member States is not the approach sketched out by the Commission in its initial proposal 
and does not give the Court the power to decide on all the questions of interpretation 
concerning the Community budget which the Convention is sure to raise. The 
Commission feels that this situation must be rectified by conferring jurisdiction on the 
Court of Justice. 
Detailed procedures are laid down for the transposition into national criminal law of the 
obligations imposed by the Convention on the Member States, which are required to 
inform the Commission of the relevant provisions. The Commission is given the task of 
monitoring and assessing the transposai measures25 and reporting to the Council on the 
progress made in incorporating the Convention into national criminal law. 
Failure to ratify and transpose the Convention swiftly would effectively wipe out the 
progress made so far, make the agreement reached by the heads of state and government 
redundant and disable the instruments associated with Title VI - a fate which some are 
only too happy to predict. 
2. Additional Protocol to the Convention on the protection of the European 
Communities' financial interests (second instrument) - on judicial cooperation 
The Commission proposal of 20 December 1995 for a Protocol to the Convention on the 
protection of the European Communities' interests26 is another of the Commission's 
initiatives currently in the Council's hands. The Protocol was drafted at the request of the 
Madrid European Council, echoing an earlier demand, in the actual Council Act 
establishing the Convention, for an instrument to supplement it. 
The Commission proposal contained certain elements which had figured in the original 
proposal from June 1994 but which had not been included in the final version of the 
Convention signed on 26 July 1995 for reasons connected with the timetable set by the 
Council. The purpose of the proposal for the Protocol is to lay down rules for judicial 
cooperation and joint investigations into cases of suspected multi- or transnational fraud. 
In practical terms, the intention is to flesh out the principle of centralization of 
procedures, laid down in the Convention. The proposal also attempts to put into practice 
the Council Resolution of 1 December 1994 which was concerned in particular with 
money laundering27 and the liability of legal persons. 
Since the form of the instrument supplementing the Convention was not specified, the 
Commission opted for a protocol. 
From the legal point of view, the Protocol has the same status and binding force as the 
Convention since it will be adopted by the same procedures, i.e. those provided for by 
Title VI of the Treaty on European Union and notably ratification by national 
parliaments. 
25 
26 
27 See the Commission's anti-fraud work programme for 1996, doc COM (96) 17 final. 
COM(95) 693 final. Document published in OJ C 83, 20.3.1996. 
See Chapter 1, Section 6.3.2 of the 1994 Annual Report on the Fight Against Fraud. 
15 
As far as content is concerned, the Protocol complements the Convention by providing: 
an appropriate legal response (liability of legal persons and appropriate penalties, 
definition of laundering of profits from fraud affecting the Community budget and 
creation of a specific offence); 
the procedural aspects, to enhance the effectiveness of national instruments at 
Union level (judicial cooperation, centralization of procedures and establishment 
of a common register of prosecutions). 
The criminal liability of legal persons is an issue of fundamental importance and the 
Commission does not underestimate the problems associated with it. The principle is not 
an established legal concept in all Member States, though most of them are familiar with 
the idea under another guise. The introduction of the concept is a major legal innovation, 
aimed at ensuring that businesses and other organizations involved in defrauding the 
Community can be prosecuted. It will also ensure that it is not only the senior 
management or less important people who feel the full force of the law while the 
company or organization continues to operate without being penalized for actions which 
can be attributed to its organizational structure and which it has unlawfully benefited 
from. 
The Protocol also requires that the Member States make laundering the proceeds of fraud 
a criminal offence and contains provisions which address the issue of judicial cooperation 
and procedural questions. The experience gathered by the national inspectorates and the 
inadequacy of existing laws28 would indicate that there is an urgent need for legislation 
to deal with the problems which are now arising (connected with the special nature of the 
Community budget and the rise in financial crime etc.) 
The Convention merely set out a few basic principles for judicial cooperation, which the 
Protocol now amplifies with more detailed rules. In cases of international fraud or a 
complex web of interrelated fraud, the Protocol provides for centralization of the 
prosecution by conferring priority jurisdiction on a principal authority on the basis of 
objective criteria. The rules on mutual assistance and judicial cooperation enable the legal 
authorities to contact one another and to submit direct requests for mutual assistance to 
one another, making the procedure far more simple and putting the second paragraph of 
Article 209a of the EC Treaty into practice. Unlike the Convention, the Protocol also 
confers on the Court of Justice the power to give preliminary rulings on matters for 
interpretation. 
Given that the Council Act establishing the Convention called for an instrument 
complementing it to be adopted as soon as possible, the Italian Presidency made the 
drawing up of the Protocol one of its priorities for 1996. The Commission is doing its 
best to facilitate the process as the proposal goes through the specialized bodies within 
the Council. 
28 Many of the national reports produced in connection with the assessment of implementation of 
Article 209a of the EC Chapter (see Chapter 4, single section, page 33) mentioned the need for 
effective judicial cooperation. Current arrangements are based on international legislation dating 
back to the 1950s, when Europe had no common policies or shared resources, and financial crime 
was carried out by individuals or gangs, not organized networks capable of maintaining an outward 
appearance of legality, as today. 
16 
3. Protocol on corruption amongst officials 
Corruption was one of the points dealt with in the Council resolution (Justice) of 
1 December 1994. A draft Treaty, drawn up by the Commission, was sent to the Council 
on 10 August 1976 but discussions have never got off the ground. 
In view of the speed with which the Spanish Presidency presented its own proposal in 
June 1995,29 the Commission refrained from putting forward yet another one to avoid a 
plethora of proposals and measures all dealing with corruption. Instead, it preferred to 
retain the existing draft treaty and make an active contribution to the preparatory work 
in the Council on the basis of its own studies into the matter. In so doing, it hoped to 
ensure that the problem of corruption affecting the Community's financial interests was 
given due attention without falling into the trap of focusing the text exclusively on 
corruption amongst Community officials and forgetting about corruption amongst national 
civil servants. 
Thanks to the work done in the Council, the Madrid European Council, held on 15 and 
16 December 1995, was able to reach a consensus which is apparent from the conclusions 
it drew. This certainly represents a step forward. The main aim of the instrument is to fili 
in the gaps in existing criminal law on corruption (acts and omission) having a link with 
protection of the Community's financial interests which, by their nature, are international 
and may involve both Community and national officials. 
The purpose of the Protocol is to make up for the shortcomings of the Member States' 
domestic legislation by assimilating officials of the European Community to national 
officials under criminal law, while taking account of the immunity conferred by the 
Protocol on the Privileges and Immunities of the Communities. The principle of 
assimilation was laid down in the 1976 proposal for a draft treaty, from which the current 
definition of a "European official", as it appears in the Council draft, was also taken, with 
a few changes. 
The Protocol provides for an offence covering both acts and omissions in the interests of 
a rapprochement of the various concepts found in the Member States' legislation. 
Members of Community institutions will be assimilated to their political counterparts at 
national level rather than to officials, as they are under the criminal law of certain 
Member States. 
The authorities in a Member State may claim jurisdiction for criminal cases involving 
European officials employed by a Community institution established on its territory. The 
rules on the jurisdiction of the Court of Justice follow the minimalist approach taken by 
the Council as regards the Convention. 
It is expected that the Protocol will be adopted in the first half of 1996 when Parliament 
has been consulted, a process started by the Spanish Presidency in December 1995. In 
accordance with Article K.6 of the Treaty on European Union, Parliament must be 
consulted on the principal aspects of the Council's activities covered by Title VI. 
29 Spain is very eager to address this issue, which it considers to be of central importance. 
17 
Section 4: DEVELOPMENTS CONCERNING ORGANIZED FINANCIAL 
CRIME 
The Council signed the Convention on the protection of the European Communities 
financial interests on 26 July 1995 and, in so doing, signalled that the fight was on 
against the organized criminal networks that are often behind multinational or 
transnational fraud against Community resources spanning several countries. 
This approach is a response to the hard facts on the ground and reflects the experience 
of the Commission and the specialized national departments with the investigations they 
have conducted.30 
This experience is also shared by several Member States. The national reports submitted 
by the Member States concerning implementation of Article 209a of the EC Treaty, as 
requested by the Council, revealed that certain national authorities, particularly in France, 
Denmark and Italy, were well aware of the involvement of organized criminal networks 
in setting up scams to defraud the Community budget.31 
The basic issues are clear: organized crime has gone international, jeopardizing not only 
the security of individual Member States but also the protection of common interests 
which cannot be safeguarded by isolated action on the part of national anti-fraud units. 
Moreover, criminal networks actually thrive on the differences between the criminal 
justice systems in different countries and the discrepancies between the penalties applied 
in the Member States. This means that to protect the common good and safeguard 
financial interests, there is a need not only to bring the criminal law systems of the 
Member States closer together to agree on a definition of the offence of "fraud against 
the Community", but also to adopt legal instruments that facilitate judicial cooperation 
between Member States and discourage judicial self-sufficiency in favour of Community 
solidarity. In this way more uniform levels of protection and prevention could be 
achieved.32 
The tools which the Member States have at their disposal for judicial cooperation on 
cross-border financial crime are no longer up to the task. Financial crime has become 
increasingly international, because it is easier to get away with undetected. It takes an 
enormous amount of time and effort to gather together sufficient evidence to crack known 
crime networks. Hence the need for a Community-level approach to ensure the requisite 
cooperation and coordination. 
The criminal organizations involved often have considerable means at their disposal. Their 
financial power in particular is used for the purposes of corruption to circumvent 
30 
31 
32 See the 1994 annual report on the fight against fraud, Chapter 5, Section 1 regarding cross-border 
fraud. 
Member States also sent the Council various contributions, which were used to draw up a report 
on organized crime in the European Union. The Italian Presidency has undertaken to pursue the 
issues raised in the report and will soon produce a report on financial crime covering 1995. 
See conclusions of the inquiry on meat carousel in the annual report for 1994, chapter 5, section 
1.2.2. 
18 
international legislation. This is particularly the case with the Community transit 
arrangements, where the regulations should be strengthened, especially as regards 
sensitive products,33 to prevent the evasion of customs duties and levies, which make up 
a considerable portion of the Communities' traditional own resources.34 This also affects 
national budgets to a considerable extent. 
To a certain extent, these practices entailed little risk for the perpetrators, since the 
organization of the criminal networks involved is tight and mechanical and the financial 
gain is out of all proportion to any legal penalties that may be incurred. The more astute 
villains have used, and continue to use, sophisticated systems to escape prosecution, for 
example by using companies that often seem to operate within the law, but are actually 
set up as fronts in areas where crime prevention is more lax. 
Nowadays economic and financial systems are geared up for speed and efficiency in 
international trade35 and could obviously not do without this flexibility. However, when 
the rules are being abused for criminal purposes, the response needs to be equally, speedy 
and efficient. 
Financial interests cannot be protected by using instruments that date from the 1950s, 
when European integration did not have common policies covered by a single budget and 
when trade and financial flows were a fraction of what they are today.36 
33 
34 
35 
36 See Chapter 2, Section 3 on customs, page 23, and Chapter 6, Section 1, point 1.14, on cigarette 
smuggling, page 58. 
This type of fraud is particularly common and varied, ranging from cigarette smuggling (see 
Chapter 6, Section 1, point 1.14, page 58 to shipping carousels involving alcohol and agricultural 
products and anti-dumping duty fraud (see Chapter 6, Section 1, page 49 and Section 3, page 67). 
In terms of revenue, 2% of the fraud cases discovered account for 66% of the amounts at stake; 
on the expenditure side, 8% of the cases account for 74% of the amounts at stake. These figures 
lend further support to the Commission's belief that fraud against the Community is not a question 
of petty pilfering, but of large-scale organized financial crime. 
For example, the international SWIFT network can transfer funds between banks in many countries 
in a matter of seconds. 
As regards judicial assistance and cooperation between the Member States, although the 1959 
Strasbourg convention is adequate for dealing with certain types of one-off crimes, it is quite 
unsuitabi ""or dealing with international economic crime, let alone protecting the financial interest 
of the European Communities. 
19 
CHAPTER 2: DEVELOPMENTS IN THE REGULATORY FRAMEWORK IN 
1995 
This chapter is intended to give an account of developments in Community legislation in 
1995 aimed at simplifying the regulatory framework and making legislative provisions 
with financial impact as fraud-resistant as possible. 
There were considerable developments in agriculture and customs, for example in the 
transit procedure. In the area of structural policies, significant progress was achieved in 
1994 with the tightening up of sectoral regulations and the adoption of Regulations (EC) 
Nos 1681/94 and 1831/94 on irregularities and the recovery of sums wrongly paid under 
the Structural Funds and the Cohesion Fund. The Commission has been working hard on 
putting the finishing touches on the implementation of these regulations, which are still 
applied in different ways from one Member State to another.37 
Section 1: OWN RESOURCES 
The Commission proposal to amend Council Regulation (EEC, EURATOM) No 1552/89 
implementing Council Decision 88/376/EEC, EURATOM on the system of the 
Communities' own resources38 has yet to be formally adopted by the Council. 
The proposal aims to improve the reporting procedure, under which the Member States 
provide the Commission with information on cases of fraud and irregularities they have 
uncovered, by increasing both the level of detail of information submitted and the 
frequency of submission of reports, in line with what is already in force in the area of 
expenditure. The Commission will then be better placed to keep tabs on the recovery of 
amounts involved in fraud and irregularities. 
On 17 November 1995 the Council agreed on a common position on the amendments to 
be adopted, and this was presented to the European Parliament under the conciliation 
procedure. -
Agreement was reached under this procedure, which means that the regulation should be 
adopted sometime in the first quarter of 1996. 
Section 2: AGRICULTURE 
One of the main objectives of the prevention side of the anti-fraud strategy adopted by 
the Commission in March 1994 was to review and improve agricultural legislation 
containing financial provisions.39 Following on from its 1995 work programme,40 the 
Commission has continued to pursue these aims with the following results: 
37 
38 
39 
40 For example, by organizing training for the relevant staff from the national authorities. See Chapter 
5, Section 1, page 41. 
See the annual report on the fight against fraud for 1994, Chapter 1, Section 1. 
The Commission's Anti-Fraud Strategy, Work Programme for 1994, COM(94) 92 final. 
Commission's Work Programme for 1995, Section 6.4, COM(95) 26 final. 
20 
41 
42 
43 
44 
45 
46 
47 
48 Council Regulation (EEC) No 4045/89,41 which concerns scrutiny by Member 
States of transactions financed by the Guarantee Section of the European 
Agricultural Guidance and Guarantee Fund, needed further tightening up with 
specific provisions in the following areas: 
strengthening of mutual assistance procedures between Member States 
(under Article 7 of the Regulation referred to above): discussions are under 
way in Commission working groups on a proposal for a regulation and on 
joint courses of action when commercial documents are inadequate or 
come from companies based outside the Community; 
standardization of documents and reports submitted by Member States with 
a view to harmonizing scrutiny: on 19 December 1995 the Commission 
adopted Regulation (EC) No 2992/9542 amending Regulation (EEC) No 
1863/9043 laying down detailed rules for the application of Council 
Regulation (EEC) No 4045/89; 
The Commission further tightened up the implementing provisions for Council 
Regulation (EEC) No 386/9044 as regards physical checks at the time of export of 
agricultural products receiving refunds. This regulation was amended by Council 
Regulation (EC) No 163/94.45 
Commission Regulation (EC) No 3122/9446 lays down the criteria to be 
used by the Member States in applying risk analysis techniques to devising 
fraud prevention strategies for agricultural products receiving refunds. It 
came into force on 1 January 1995. 
Commission Regulation (EC) No 2221/9547 covers physical checks and the 
selection of samples to be analysed at the time of export of agricultural 
products qualifying for refunds. It came into force on 1 January 1996. 
As regards Community agricultural products exported to non-member countries 
with export refunds, the Commission is currently undertaking a full consolidation 
of Commission Regulation (EEC) No 3665/87.48 The work will be completed in 
1996 and will incorporate the results of work carried out previously. 
OJ L 388, 30.12.1989. Subsequently amended by Council Regulation No 3094/94 (OJ L 24, 
29.01.1994) and Council Regulation No 3235/94 (OJ L 338, 28.12.1994). See the annual report 
on the fight against fraud for 1994. 
OJL 312, 23.12.1995. 
OJ L 170, 3.7.1990. 
OJ L 42, 16.2.1990. 
OJ L24, 29.1.1994. 
OJL 330, 21.12.1994. 
OJL 224, 21.9.1995. 
OJL 351, 14.12.1987. 
21 
Commission Regulation (EC) No 2949/9449 amends Article 11. It came 
into force on 1 April 1995 and lays down a system of fines and penalties 
applicable on the basis of amounts wrongly paid. 
Commission Regulation (EC) No 2955/9450 amends Articles 18 and 44 as 
regards the approval of specialized international control and supervisory 
agencies authorized to issue certificates of arrival and release for 
consumption in non-member countries. This regulation came into force on 
1 January 1995 and states that the power to grant approval lies with the 
Member States. 
At the same time the adoption of this regulation also made it possible to 
lay down criteria for approval procedures that may be used by the Member 
States. It was also stipulated that an up-to-date list of the agencies 
approved by the Member States would be periodically published in the C 
series of the Official Journal of the European Communities. 
The Commission also set about revising Article 15 to counter the diversion 
of agricultural products which have been exported from the Community 
(with payment of refunds) and subsequently reintroduced, having been 
processed and having qualified for reduced import duties, on the basis of 
preferential agreements concluded with the non-member countries 
concerned (overseas countries and territories and ACP countries). The 
revised text makes the exporter liable for repayment of any refund wrongly 
paid out for the products. 
Commission Regulation (EC) No 1384/9551 amending Regulation (EEC) 
No 3665/87 concerns differentiated refunds, in particular the introduction 
of a system of penalties for changing the destination where the actual rate 
of refund is less than the rate fixed in advance. This is to avoid any 
irregular advance fixing of the destination to obtain higher rates of refund. 
Council Regulation (EC) No 1469/9552 provides for measures to be taken with 
regard to certain beneficiaries of operations financed by the Guarantee Section of 
the EAGGF who present a risk of non-reliability (the "blacklist" regulation). It is 
now possible to compile a list of traders, whether individuals or companies, who 
have been ill intentioned or particularly negligent. The Member States may impose 
tighter controls on these traders or other measures, which may go as far as 
suspension of payments or temporary exclusion from them. 
The Commission proposal for detailed provisions implementing this regulation is 
currently being adopted. 
49 
50 
51 
52 Amending Regulation (EEC) No 3665/87 as regards the recovery of amounts wrongly paid and 
sanctions (OJ L 310, 3.12.1994). 
Amending Regulation (EEC) No 3665/87 (OJ L 312, 6.12.1994). 
OJ L 134, 20.6.1995. 
OJL 145, 29.6.1995. 
22 
As regards the Community co-financing arrangements for stepping up controls by 
Member States, the Commission has drawn up a report on the state of play as 
regards implementation of the current arrangements with a view to formulating 
new proposals to resolve the shortcomings of the previous regulation.53 A draft has 
already been produced and should be adopted by the Council in 1996. It provides 
for control operations in the Member States to be co-financed on the basis of cost-
effectiveness studies on each of the projects the Member States are to submit to 
the Commission each year. 
Section 3: CUSTOMS 
1. Customs transit arrangements 
On 29 March 1995 the Commission adopted a communication on fraud involving the 
transit procedure.54 The objectives of the communication include making traders who 
work with the system, and in particular those who stand as guarantors for the principal, 
more aware of the sort of risks they should avoid taking in the course of their work, since 
the Commission is in any circumstances unable to authorize postponement of the payment 
of customs debts. Not only is there is no legal provision for this, but the Commission is 
actually duty-bound to protect the Community's own resources. 
The Commission communication puts forward specific measures to tighten control 
procedures and to improve and computerize transit procedures. 
Rather than describing once again the fraud methods used or the particular types of 
fraud,55 this section is intended to report in detail on the state of play as regards the 
measures put forward in this important Commission communication. 
Procedures: 
Action was taken on several of the measures in 1995. 
Changes to the provisions guaranteeing Community transit and common transit 
operations56 for sensitive goods.57 
All transit operations must be covered by a guarantee required to cover the 
amount of the customs duties and other taxes which would be payable in the event 
of the T document not being discharged. There are three types of guarantee under 
the Community and common transit arrangements: comprehensive, flat-rate and 
single-operation. The comprehensive guarantee is the most flexible arrangement 
for traders, since it is good for a series of operations by the same principal over 
a given period. The amount of the guarantee is calculated on the basis of criteria 
53 
54 
55 
56 
57 Council Regulation (EEC) No 307/91, OJ L 37, 9.2.1991. 
COM(95) 108 final. 
See the annual report on the fight against fraud for 1994, Chapter 1, Section 5. 
The common transit procedure is an extension of the Community transit arrangements to cover the 
countries of the European Free Trade Area (EFTA) under a convention signed in 1987. 
Cigarettes, agricultural products, butter, milk powder, alcohol, sugar, meat and textiles. 
23 
58 
59 
60 
61 
62 laid down in the regulations and it covers only a very small portion of the customs 
duties (and other taxes) due on the operations. 
Under Article 360 of Commission Regulation (EEC) No 2454Z93,58 Member States 
may request the agreement of the Commission to the temporary prohibition of the 
use of the comprehensive guarantee for operations involving products where there 
is an exceptionally high risk of fraud. 
To date the Commission has issued two decisions on prohibiting the use of the 
comprehensive guarantee:59 one at the request of Spain for the transportation of 
cigarettes and one at the request of Germany for the transportation of certain 
agricultural products (live cattle, frozen beef and veal, milk, cream, butter, cheese, 
bananas, alcoholic beverages and other products containing alcohol, sugar, rye and 
wheat). 
Stricter eligibility criteria for traders to use comprehensive guarantees were also 
approved by the Customs Code Committee (transit section) and incorporated into 
the regulations at the beginning of 1996. 
The provisions governing the flat-rate guarantee (calculated in multiples of 
ECU 7 00060) were altered to increase the guarantee for products where the risk 
is greater to 100 % of the duties and taxes concerned for products for which the 
prohibition of the use of the comprehensive guarantee applies. 
Accelerated discharge procedure for sensitive goods (Community and common 
transit and TIR61). 
This procedure was devised as an administrative arrangement (whereby a copy of 
the transit document can be sent to the office of departure on the same day that 
the goods are presented at the office of destination). These provisions have also 
been integrated into the regulations. 
For the TIR system Resolution No 49 of 3 March 199562 introduced accelerated 
discharge procedures by fax, which came into effect on 1 September. 
Measures concerning transportation, travelling time (Community transit and TIR) 
and mandatory routing (TIR). 
These measures concern the transport of goods: as a rule, traders are free to 
choose any route to reach the office of destination. They may even change the 
OJ L 253, 11.10.1993. This regulation lays down certain implementing provisions for Council 
Regulation (EEC) No 2913/92 setting up the Community customs code (OJ L 302, 19.10.1992). 
Commission Deci^. jn No 95/521/EC of 28.11.1995 at the request of Spain (which came into force 
on 1.4.1996), OJ L 299, 12.12.1995, and Commission Decision No 96/37/EC of20.12.1995 at the 
request of Germany (which came into force on 1.3.1996), OJ L 10, 13.1.1996. 
Article 367 of Commission Regulation (EEC) No 2454/93. 
The TIR system, which was laid down in a 1975 convention, governs the international carriage of 
goods by road. 
Council Decision No 95/285/EC of 24.7.1995 adopting this resolution, OJ L 181, 1.8.1995. 
24 
office of destination, for example in the event of resale to a different consignee. 
The only obligation is to present the goods together with the transit document at 
the office of destination. But now offices of departure are entitled to impose 
mandatory routes and may also prohibit changing the office of destination for 
operations involving sensitive goods. 
For the TIR system Resolution No 49 referred to above also allows time limits 
and compulsory routes to be imposed in the case of sensitive goods (measures that 
take effect immediately). A further measure involves excluding traders from using 
the TIR system if they repeatedly commit serious irregularities (Article 38 of the 
convention). 
Certain other measures were not able to be taken in 1995. They include :. 
Adopting, in the framework of the common transit arrangements, of different 
provisions adopted at Community level concerning guarantees. The adoption of 
this measure requires a consensus amongst the contracting parties. This was not 
possible in 1995 as Switzerland refused to adopt the banning of the use of the 
comprehensive guarantee for the transport of cigarettes. 
Calculation of the comprehensive guarantee on the basis of 100% (instead of 30% 
at present) of the duties and taxes at stake with the amount per guarantee 
certificate limited. 
Establishment of the obligation on the part of the customs office of departure to 
set a stricter time limit for presentation of the "T" document at the office of 
destination. 
Establishment of the financial liability of persons other than the principal, in 
particular the transporter. 
Establishment of the obligation to lodge a guarantee for goods in transit 
transported by sea. 
Establishment of the obligation to present proof of the Community status of goods 
transported by sea. 
Early Warning System 
A further important measure involves the implementation of an advance notification 
system for sensitive goods (operations under the Community transit, common transit and 
TIR arrangements). The office of departure notifies the office of destination immediately 
that goods have been placed under a particular scheme. This gives offices of destination 
the time to investigate the stated consignees. This means that they immediately know 
when goods have not been presented and can notify the office of departure accordingly. 
In the case of the TIR arrangements, an advance notification system has been in operation 
since 1 July 1994. 
The Commission is carrying out significant improvements to the system, with the aim of 
speeding up further the submission of information. 
25 
Computerization of the transit system 
The Commission, the Member States and the EFTA countries embarked on 
computerization of the system with three objectives in mind : 
to make the transit procedures work more effectively and efficiently for Customs 
services; 
to improve prevention and detection of fraud; 
to. make transit operations more fluid, safer and quicker for economic operators; 
As stated in the Commission communication, national and community investment costs 
are estimated at respectively ECU 13 million and ECU 10 "million over five years. 
Although it is obvious that computerization will not totally wipe out fraud, it is safe to 
assume that the cost of the project will soon be recouped. 
Task Force 
The Commission has set up a Community Transit Task Force to monitor closely the 
implementation of the reinforcements and improvements to the system on the basis of the 
comprehensive analysis of the system already carried out. 
2. The Customs 2000 project 
On 4 April 1995 the Commission adopted a proposal for a European Parliament and 
Council decision63 adopting a Community customs action programme, to run from 
1 January 1996 to 31 December 2000, to develop and expand on the pilot operation 
launched in 1994.64 The programme, called Customs 2000, is designed to improve 
openness in the application of Community customs law and cooperation between customs 
authorities in the Member States so as to improve the overall performance of customs 
procedures and make controls at the Union's external borders more uniform. 
The programme must ensure that trade can flow as smoothly as possible in the internal 
market, as well as improving the recovery of duties and providing greater protection of 
the Community's financial interests. 
This is to be achieved through operations to combat customs fraud, as part of the 
Commission's overall anti-fraud policy, focusing on the following areas: * 
taking maximum advantage of existing legislative provisions and, where necessary, 
amending them; 
improving the collection and exploitation of information at Community level, 
making the fullest use of information technology and increasing the use of 
computer systems by customs departments; 
eliminating obstacles that impede swift action and effective cooperation by 
customs investigators, particularly as regards their investigative powers; 
ensuring that effective penalties are applied; 
63 
64 COM(95) 119 final. 
See the annual report on the fight against fraud for 1994, Chapter 1, Section 4. 
26 
conducting and expanding coordinated operations, in particular Community 
investigation and inspection visits to non-member countries; 
developing cooperation with non-member countries, in particular the associated 
countries of Central and Eastern Europe, and with the relevant international 
organizations and professional circles; 
ensuring that irregularities are followed up. 
3. Chemical substances frequently used for the illicit manufacture of narcotics 
("precursors") 
Arrangements for Community action on the control of precursors is covered by Council 
Regulation (EEC) No 3677/90.65 The Commission has made sure that the practical 
measures needed to implement this regulation have also been extended to the new 
Member States. It is also planning to organize training courses on how to use the 
Community PREXCO66 database. 
Community action in this area has been on the increase.67 Under the mutual assistance 
arrangements in 1995 the Commission notified the Member States of 36 cases, compared 
with 7 in 1994 
On 24 September the Commission was given a negotiating brief by the Council to discuss 
the implementation of precursor control agreements with the 34 member countries of the 
Organization of American States. On this basis negotiations were immediately launched 
with the five member countries of the Andean Pact.68 The negotiations were rapidly 
completed, which meant that the Community was able to adopt and sign the agreements 
on 18 December 1995. 
Section 4: ADMINISTRATIVE COOPERATION 
The Commission continued to follow up its contacts with the other Community 
institutions regarding its 1992 proposal for a regulation on mutual assistance in the areas 
of customs and agriculture. The proposal improves on and updates the corresponding 
provisions of Council Regulation (EEC) No 1469/8169 and provides a legal basis for the 
setting up of a database to hold the information exchanged under the CIS (customs 
information system) in cases where primary responsibility lies with the Community.70 , 
65 
66 
67 
68 
69 
70 OJ L 357, 20.12.1990. Under Article 7 of this regulation, the provisions of Regulation (EEC) No 
1468/81 on mutual assistance between Member States in the areas of customs and agriculture apply 
here mutatis mutandis. 
Precursor Exportation Control 
On 1 June 1995 responsibility for operations in this area was transferred from DG XXI (customs 
and indirect taxation) to the Secretariat-General's fraud prevention unit, UCLAF. 
Bolivia, Colombia, Ecuador, Peru and Venezuela. 
OJL 144, 2.6.1981. 
See the annual report on the fight against fraud for 1994, Chapter 1, Section 4. and Chapter 2, 
Section 1.2.3. 
27 
Concerning the Customs Information System, the Member States have adopted, in the 
Title VI context, the convention on the use of information systems in the field of customs 
and reached an agreement on the provisional application of this convention between some 
of the Member States. The convention still has to be ratified in the Member States and 
the central database which will be the nucleus of the project will not be created until the 
new mutual assistance regulation is in force.71 
A common position on the regulation was adopted by the Council in December 1994 and 
transmitted to the European Parliament in July 1995. The latter has not yet taken a 
position on the text. 
At intergovernmental level, a convention drawn up on the basis of Article K.3 of the 
Treaty on European Union on the use of information technology for customs purposes 
was signed on 26 July 1995.72 Among other things, the convention provides the legal 
basis for including in a database information to help in combating illicit trafficking in 
narcotics and other restricted products. The database is to be set up following adoption 
of the regulation repealing Regulation (EEC) No 1468/81 governing the areas of 
Community responsibility. 
Since the extension of the network to include the new Member States, there are now 323 
SCENT/CIS73 terminals installed at departments designated by the Member States at 
administrative headquarters and at large ports and airports. As a computerized tool the 
network may be used for data on both Community and non-Community matters. 
71 See Chapter 1, section 4 of the 1994 Annual Report on the Fight Against Fraud. 
72 OJ C 316, 27.11.1995, p.33. 
73 CIS is a component of SCENT (System customs enforcement network). 
28 
CHAPTER 3: THE OTHER INSTITUTIONS 
Each of the other Community institutions, in its particular sphere, has continued to 
develop its own ideas or activities, aiming, like the Commission, to achieve the sort of 
progress in the fight against fraud which Europe's citizens and taxpayers wish to see. 
The importance of relentlessly pursuing the fight against fraud has been emphasized at 
the highest political level. Member States in particular are being urged to act, but the 
Community institutions must also respond. Responsibility for achieving results in this 
field does not, therefore, rest with the Commission alone. Seen in this light, the 
development of effective cooperation between the institutions is an important element 
which more than justifies the decision to devote a separate chapter of this report to the 
anti-fraud activities of the European Parliament, the Council and the Court of Auditors 
in 1995. 
Section 1: THE EUROPEAN PARLIAMENT 
The European Parliament is responsible for monitoring the use of Community funds. In 
its capacity of budgetary authority, Parliament discharges this institutional responsibility 
to the full, acting through the intermediary of its Committee on Budgetary Control and 
bolstered by its democratic legitimacy. It is primarily through the work of this Committee 
that Parliament closely follows all matters relating to the fight against fraud and the 
protection of the Community's financial interests, taking specific initiatives in these areas 
whenever it sees fit. 
In addition to its normal activity of questioning the European institutions and monitoring 
the budget, and as a way of introducing the appropriate political dimension into its action, 
Parliament organized a public hearing on the fight against fraud in the European Union 
budget,74 as it had done in 1993. This tackled three themes: corruption and organized 
crime involving the European Union budget, recovery of misappropriated funds, and the 
legal protection of the European Union's financial interests - legislation, investigation and 
prosecution procedures. 
Parliament also exercised the new power of inquiry conferred on it by the Treaty on 
European Union, using it for the first time in connection with the fight against fraud and, 
particularly, the Community transit procedures, a subject which Parliament had already 
worked on and discussed, notably in its Committee on Budgetary Control. A temporary 
committee of inquiry to examine the critical state of transit procedures was set up by a 
decision adopted on 13 December 1995. This is the first such committee to be set up by 
Parliament on the basis of Article 138(c) of the EC Treaty. It has 17 members and will 
report to Parliament within 12 months of the publication of the decision.75 
Finally, the European Parliament has announced an inter-parliamentary conference (to 
which members of national parliaments will be invited), organized on the initiative of its 
President and dealing with fraud affecting the European Communities' budget, to be held 
on 23 and 24 April 1996, to coincide with the IGC. 
74 On 29 and 30 May 1995. 
75 It was published in OJ C 7, 12.1.1996. 
29 
Section 2: THE COUNCIL 
The Council achieved some particularly gratifying results as regards the protection of the 
Community's financial interests in 1995. The demands made by the Essen European 
Council in December 1994 were at least partly met. The national reports and the 
Commission's comparative study (presented in Madrid76) and the adoption of legislation 
(in Cannes and Madrid) represent the first step towards establishing the legal foundations 
essential to the effective protection of Community finances. 
Firstly, the Regulation on the protection of the Community's financial interests was 
adopted on the basis of the Commission's proposal for legislation on checks and 
Community administrative measures and penalties in all areas of the budget.77 The 
Council will continue its efforts to introduce legislation on checks to complement this 
provision. The Madrid European Council called for this aspect to be dealt with as soon 
as possible, and in any event by the end of the first half of 1996.78 
Secondly, once its working parties and coordinating committees had examined the 
Commission's Title VI proposals,79 the Council adopted a convention for the protection 
under criminal law of the Community's financial interests on 26 July 1995.80 
Because of the strategic importance of the political message to be conveyed to Europe's 
citizens, it proved impossible to conclude the debate on the draft convention on the 
protection of the Community's financial interests in the time envisaged by the Council 
and the Commission. A supplementary protocol is currently under discussion, which 
would harmonize penalties for corruption among national and European officials and staff 
of Community and national institutions and agencies. 
Thirdly, the Council will continue to examine and analyse the national reports on the 
application of Article 209(a) of the EC Treaty and on the measures taken to combat waste 
and the misuse of Community financial resources. The summary prepared by the 
Commission at its request is an interim report which will serve as a basis for continued 
analysis, drawing on the Council's conclusions. 
76 
77 
78 
79 
80 See Chapter 4, single section, page 33. 
See Chapter 1, section 2, point 1, page 10. 
The Council has delegated work on this topic to its Budget Committee (see 1994 annual report on 
The Fight Against Fraud, chapter 4, section 3). This specialist body has been prominent since the 
introduction of the Commission's annual anti-fraud report in preparing the political impetus 
articulated by the Council in specific conclusions which have been instrumental in securing 
substantial progress in 1995. 
See the chapter and section of the 1994 annual report on The Fight Against Fraud referred to 
above. The working party on criminal law and Community law was particularly active in 1995, 
producing significant practical results. 
See Chapter 1, section 3, page 13. 
30 
The Madrid European Council accordingly concluded that over and above the principle 
of assimilation embodied in the first paragraph of Article 209a of the EC Treaty,81 it is 
the duty of both Member States and the Community institutions to ensure an equivalent 
level of protection of Community finances throughout the Union. 
* 
* * 
The need for continued efforts to equip the Community with effective means of protecting 
its finances and ensuring effective penalties for serious financial fraud was strongly 
emphasized at the Madrid European Council, and indeed the subject of fraud and the 
protection of the Community's financial interests merited a section of its own in the final 
conclusions. 
Section 3: THE COURT OF AUDITORS 
In the course of carrying out its traditional tasks of examining the legality and regularity 
of revenue and expenditure and ensuring sound financial management by the 
Communities, the Court of Auditors, the body responsible for auditing the Communities' 
finances, has had ample opportunity to reflect on the problem of fraud in the Community 
budget. 
In its annual report on the 1994 budget,82 the Court defined its role in this area, reiterating 
that prime responsibility for the prevention, detection and investigation of fraud rested 
with the authorities which manage and supervise the implementation of the Communities' 
financial policies. 
Cooperation with the Commission is particularly important in this respect, for the 
Commission has to achieve the highest possible degree of transparency in all its 
expenditure and revenue operations and at the same time lay down clear and precise rules 
on the specific subject of fraud prevention and the exchange of information between the 
specialized departments of the two institutions. 
Procedures to strengthen co-operation between the Court of Auditors and the Commission 
are currently being studied. 
Section 4: THE COURT OF JUSTICE 
The Court of Justice of the European Communities has always had a vital part to play in 
the area of protecting the Community budget. The importance of that role has recently 
been made fully evident with the handing down of a number of decisive judgments. 
The judgment of 21 September 198983 laid the foundations for Member States' obligations 
towards the Community budget, which are now set out in the first and second paragraphs 
of Article 209a of the EC Treaty, i.e. the principle that they must take the same measures 
81 
82 
83 See Chapter 4, single section, point 2, page 34. 
OJ C 303, 14.11.1995. 
Case 68/88 Yugoslav maize. 
31 
to counter fraud affecting the financial interests of the Community as they take in relation 
to their own financial interests, with details of how they should work together to this end. 
These principles have since been confirmed by the Court in the judgment given on 
14 July 1994 in Milchwerke Kôln/ Wuppertal v HZA Koln/Rheinau*4 
In other cases referred to in this report,85 particularly in Chapter 1, the Court gave detailed 
judgments on the lawfulness of Community administrative penalties imposed in the area 
of the common agricultural policy and recognized the Commission's power to impose 
such penalties in its implementing legislation (judgments of 27 October 199286 and 
12 October 1995).87 These judgments confirmed the Commission's power to impose 
penalties including the temporary exclusion of an operator from entitlement under an aid 
arrangement and payment of an amount greater than the amounts wrongly received or 
evaded.88 
Judicial review is indeed central to the issue and must be confirmed by the Title VI 
instruments relating to the protection of the Community's financial interests under 
criminal law. 
Although Article 8 of the Convention of 26 July 1995 on the protection of the European 
Communities' financial interests confers contentious jurisdiction on the Court and allows 
the Commission to refer matters to it (in relation to Articles 1 and 10 of the Convention), 
the question of competence to give preliminary rulings remains in abeyance.89 The 
Commission attached to its proposal for an additional protocol to the Convention on the 
protection of the European Communities' financial interests90 an Article 17 providing, 
among other things, for jurisdiction to give preliminary rulings on the interpretation of 
the protocol. The Council's working party on the Court of Justice responsible for these 
matters is at present negotiating on the question of the Court's jurisdiction to give 
preliminary rulings under the Europol convention. The Commission's view is that at the 
very least any result of these negotiations must be extended to the Convention on the 
protection of the European Communities' financial interests, given the pivotal role 
assigned to the Court in specifying the obligations borne by the Member States in relation 
to combating fraud. 
84 Case C-352/92. 
85 See also the 1992 report on the fight against fraud, Title I, Section 2.8. 
Case 240/90. 
Case 104/94. 
Article 5 of Council Regulation (EC, Euratorp) No 2988/95 on the protection of the European 
Communities' financial interests). 
When the convention was signed, several of the delegations tabled declarations whereby ratification 
at a late date would be subject to the conferring on the Court of Justice of powers to give 
preliminary rulings on the Europol and CIS conventions and the convention on protection for the 
financial interests of the Community. 
See Chapter 1, Section 3, point 2, page 15. 
32 86 
89 
90 
CHAPTER 4: THE MEMBER STATES 
The inclusion of Member States' anti-fraud activities in the Commission's annual report 
is a natural development designed to strengthen the partnership between national 
authorities, which carry out considerable field work, and the Commission, which is bound 
by its responsibility for the budget to monitor the proper use of Community funds.91 
The fight against fraud is primarily the responsibility of the Member States but it is a 
matter of concern to everyone. There were several developments in 1995 concerning the 
separation of responsibilities, which led to concrete action at the highest political level. 
Between the Essen European Council in December 1994 and the Madrid European 
Council in December 1995, fifteen national reports on measures taken to combat 
wastefulness and the misuse of Community funds were produced. This is the subject of 
the first section of this chapter. 
Single section: NATIONAL REPORTS ON THE MISUSE OF COMMUNITY 
RESOURCES - APPLICATION OF ARTICLE 209a 
In its conclusions of 11 July 1994 the Council (Ecofin) asked the Commission to report 
on Member States' implementation of Article 209a of the EC Treaty by the end of 1995 
at the latest.92 
The Essen European Council (9 and 10 December 1994) called on the Member States to 
submit reports on the measures they were implementing to combat wastefulness and the 
misuse of Community resources. 
The Cannes European Council (26 and 27 June 1995) took note of the Member States' 
reports and requested the Commission to prepare a comparative summary, which was 
presented at the Madrid Council (15 and 16 December 1995). 
1. Methods used 
The comparative summary, based on the national reports, takes stock of progress in 
implementing Article 209a of the EC Treaty on protection of the Community's financial 
interests and does a round-up of the measures taken by the Member States to combat the 
misuse of Community resources. 
To ensure that the national reports followed a standard pattern so that a proper 
comparison of the national systems could be made, the Commission devised a general 
layout for the reports as requested by the Council and this was approved by the Council 
91 
92 It should not be forgotten that around 80% of Community budget expenditure passes through 
national treasury departments. 
OJC292, 20.10.1994. 
33 
(Ecofin) on 20 February 1995. By and large the Member States adhered to the proposed 
layout. Even so there were considerable differences between the reports, since some 
Member States tended to stress recent developments in their legal set-up or regulations, 
while others concentrated more on the organization of their inspection departments. 
Overall, despite the short deadlines, the efforts made by those who compiled the nationa-
reports enabled the Commission to produce the required summary and report.93 To satisfy 
the Council's request, the Commission also set out the avenues to be explored with a view 
to devising operations to step up the fight against fraud and wastefulness, so as to ensure 
that the Community's financial interests are properly protected. 
2. Implementation of the first paragraph of Article 209a of the EC Treaty: 
state of play 
The first paragraph of Article 209a of the EC Treaty reads: 'Member States shall take the 
same measures to counter fraud affecting the financial interests of the Community, as they 
take to counter fraud affecting their own financial interests''. This is known as the 
'assimilation principle'. 
This writes into the Treaty the rule enunciated by the Court of Justice in Case C-68/88 
[1989] ECR 2965 (judgment given on 21.9.1989), specifying the scope of the first 
paragraph of Article 5. The national reports reveal that the Member States apply Article 
5 of the EC Treaty, as interpreted by the Court, in conjunction with Article 209a of the 
Treaty. Most of them accordingly cover both the measures they have taken to treat fraud 
against the Community's interests in the same way as fraud against their own financial 
interests and the effectiveness of their systems of penalties for infringements of 
Community law. 
2.1 Legal instruments 
Preventive measures received little attention. The Member States tended to have separate 
systems of penalties for revenue (covered by tax and customs law) and expenditure (with 
minor variations depending on the category). 
In the case of revenue the extent to which the system of penalties has been 
assimilated can be assessed by comparing the system which the Member States 
apply to Community revenue (traditional own resources) and the system they 
apply to their own revenue (VAT, excise duties); 
In the case of expenditure certain Member States have a specific offence of fraud 
involving subsidies, which also covers Community financing. 
The comparison revealed discrepancies between the systems applied to revenue and 
expenditure regarding the effectiveness of the legal measures taken. This means that the 
objective for certain Member States should be to tighten up the level of protection. 
Two things are immediately clear: 
93 See the summary report entitled "Comparative Analysis" and the recapitulative document, 
COM(95)556 final. 
34 
the comparative analysis revealed that only part of the necessary data had been 
collected, which means that additional information is needed, particularly as 
regards prevention; 
the difference between the approaches taken to revenue and expenditure raises the 
problem of the consistency and effectiveness of operations, since it fails to reflect 
the fact that the techniques of organized financial crime vary according to the area 
of activity, but are broadly similar as between revenue and expenditure. 
2.2 Administrative organization 
Departmental organization as described in the national reports shows that special 
structures capable of dealing with own resources as a whole either already exist or are 
being set up. As regards the monitoring of agricultural expenditure, the national payment 
agencies are basically designed to achieve the quantitative targets set by Community rules. 
There is a predominance of independent arrangements for trade-related measures (export 
refunds) as there is for revenue controls (note in particular the role of special bodies and 
of the national audit bodies). 
The Structural Funds are subject to control procedures applied by the authorities 
responsible for implementing the Community programmes, in particular at local level. 
The summary analysis shows that most of the agencies are experienced and that the 
effectiveness of their controls has been proven at the level of national finances (customs 
duties, taxation). More generally, the public accounting rules that protect national finances 
in all the Member States are also applied to Community expenditure, most of which is 
channelled through the national budgets. However, there is a lower level of protection of 
the Community's interests than in the case of revenue. Since the controls are the 
responsibility of the management agencies, which are unfamiliar with techniques for 
combating large-scale fraud, they tend to be of the traditional audit and account checking 
kind and are, therefore, not necessarily the most effective way of detecting large-scale 
embezzlement and organized crime. 
One way of significantly increasing the level of protection of Community resources would 
be to have special anti-fraud controls carried out by specialists at national level grouped 
into structures with far-reaching powers of investigation and working independently of 
the management agencies. 
2.3 Results 
Only half of the reports provided actual figures relating to the inspections carried out and 
the administrative and legal action taken. 
In any case, the figures given need to be approached with some caution. This is a 
sensitive area, and all sorts of interpretations are conceivable: it may be that statistical 
notification methods have improved (which is a good thing in itself), or that the anti-fraud 
departments have been more active, or that fraud itself has been on the upsurge. This is 
doubtless why few Member states provided detailed statistics or offered analyses or 
commentaries in a directly usable form. There was no identification of risk areas and the 
sort of data in standardized form that would need to be examined to arrive at proper 
Community-wiae typologies was unfortunately not provided. 
35 
The national reports do not provide enough information to assess the level of assimilation 
of recovery procedures for misappropriated funds.94 In all but a few cases, there is no 
mention of instruments relating primarily to public creditors (including Community ones). 
There is no description of the procedures and no mention of the links between finance 
departments and investigation departments. 
Furthermore, for the purposes of cross-border operations there should be greater use of 
the opportunities offered by mutual assistance in the areas of customs and agriculture. 
3 . Implementation of the second paragraph of Article 209a of the EC Treaty: 
state of play 
The second paragraph of Article 209a of the EC Treaty, which is intended to step up 
cooperation, reads as follows: 'Without prejudice to other provisions of this Treaty, 
Member States shall coordinate their action aimed at protecting the financial interests of 
the Community against fraud. To this end they shall organize, with the help, of the 
Commission, close and regular cooperation between the competent departments of their 
administrations.' 
This new provision supplements the duties laid down in the first paragraph of the same 
article. It is intended to create the necessary conditions for stepping up the fight against 
organized crime targeted at Community finances. This will require the introduction of 
close and regular cooperation arrangements between the departments involved. With this 
particular end in mind the Commission set up COCOLAF, the Advisory Committee for 
the Coordination of Fraud Prevention.95 
The information provided by the Member States shows that considerable use is 
made of non-Community administrative cooperation and assistance instruments. 
These instruments are designed to protect national finances, but more structured 
cooperation arrangements are needed to achieve the level of protection required 
for Community finances under Article 209a of the EC Treaty and to resolve the 
difficulties currently encountered (particularly as regards the time taken to reply). 
The implementation of more comprehensive cooperation on enforcement to tackle 
cross-border fraud committed by organized crime rings is a particular aim of 
Article 209a of the EC Treaty. The discrepancies between the Member States' 
judicial arrangements that showed up in the reports are a serious risk and highlight 
the need for direct and prompt cooperation. 
Some of the reports also mention police cooperation, without making a clear 
distinction between it and judicial cooperation. The value of administrative 
cooperation in this area right from the initial investigation stage is made clear 
(information exchange between the Member States and with the Commission). 
Some very practical suggestions are also put forward on stepping up enforcement 
cooperation, such as the possibility of conferring comparable powers on national 
investigators. 
94 
95 See Chapter 6, section 4, page 74. 
See Chapter 5, section 2, page 43. 
36 
The national reports make it clear that, although the Community instruments for 
administrative cooperation and mutual assistance are not totally neglected, their 
full potential is not exploited. Some of the reports even referred to certain 
difficulties that can slow down investigations and enforcement proceedings, such 
as administrative, legal and technical differences which hamper the movement of 
information between Member States. 
4. Avenues to be explored 
There are many, but it has not proved possible to achieve the initial aim of this exercise, 
which was to discover whether there was a correlation between the measures and means 
intended to protect national finances and those intended to protect the Community's 
financial interests. It was not possible to produce a proper comparative analysis of the 
results of the fight against national and Community fraud owing to a lack of sufficiently 
detailed data. 
So although the principle of "assimilation" was clearly demonstrated, it is trickier to draw 
any conclusions on exactly how far this has progressed in the Union. Analysis of the 
arrangements in place (instruments, organization) reveals that by and large Community 
revenue is better protected than Community expenditure and that on the expenditure side 
agricultural expenditure appears to be scrutinized more closely than expenditure under the 
Structural Funds. 
Be that as it may, as our inquiries and analyses currently stand, there are insufficient 
grounds for concluding that there is 100% equivalence. In addition, protection of financial 
interests differs according to the Member State. There needs to be ongoing evaluation 
of the practical steps taken to ensure that the Community's financial management is really 
transparent and that its financial interests are protected beyond any doubt. This leads to 
the thought that the principle of assimilation must be completed by the concept of 
equivalent protection throughout the Community. 
With this in mind, the Commission has put a series of avenues to be explored at the end 
of each descriptive section in the summary report to the Council. 
One set of considerations concerns the assimilation principle. Apart from the 
problems inherent in having one approach for protecting revenue and another 
different one for monitoring the proper use of expenditure, there is a need to adopt 
measures that are up to the job. This means measures that are effective and that 
deter crime rings specializing in financial crime. The same applies to prevention, 
which it was not possible to analyse sufficiently on the basis of the national 
reports. 
This realization points to the need for a clear policy of administrative penalties in 
the area of expenditure. Penalties of this type already exist at national level. 
Obviously they are independent, but they could be added to the Community 
administrative penalties that are provided for, in the area of agriculture for 
example. The horizontal Commission regulation adopted by the Council lays down 
37 
96 
97 
98 a legal basis that should serve as a reference framework, for example, for 
introducing effective penalties on the expenditure side generally.96 
In the same vein, the transposai into national legislation of the convention on the 
protection of the Community's financial interests should provide the legal basis 
the Member States need to create a specific offence of fraud against the 
Community budget.97 In this context, it makes sense for companies that enjoy the 
benefit of Community funds to incur the penalties in the event of fraud. 
There should be greater equivalence of penalties between the Member States, so 
as to avoid creating areas of lighter enforcement and deflecting business towards 
the "softer" Member States. 
A second set of considerations concerns the organization of national inspection 
arid anti-fraud departments. Specialist investigation services should obtain the 
necessary powers to carry out their tasks in an increasingly difficult context. 
Moreover, the development of multidisciplinary structures with wide-ranging 
investigative powers should be highlighted. There are numerous examples: 
Belgium's OCDEFO (Central Office for the Prevention of Organized Economic 
and Financial Crime) consists of operational staff specializing in customs and 
taxation as well as prosecution staff and police officers. Italy's Guardia di 
Finanza is also on its way to becoming a key instrument of a policy laid down at 
the highest level by the Interministerial Committee for the Prevention of 
Community Fraud.98 
This list is far from exhaustive, but these examples serve to show that there is an 
interesting trend which is significant in that it takes account of the special nature 
of Community fraud prevention work (lengthy large-scale investigations that 
require the services of experts in different fields). 
A third set of considerations concerns the results of anti-fraud work. Reducing the 
risk of fraud involves extracting the maximum benefit from intelligence gathered 
in the field. For example, the national reports showed that the Member States had 
become aware that fraud was no respecter of national boundaries and had taken 
measures accordingly. 
Fraud involves such a vast amount of information that more detailed knowledge 
of the results of anti-fraud work is needed right from the initial investigation stage 
to recovery and the ordering of penalties. 
This means that national practices should be made more similar at Community 
level. The same applies to controls, which should be made comparable throughout 
See Chapter 1, section 2, page 10. 
See Chapter 1, section 3, page 13. 
This Committee was set up, in the spirit of Article 209a of the EC Treaty and answers to the 
Prime Minister's own department for the coordination of Community policies, to which the 
operational unit of the Guardia di Finanza established by Decree of the Prime Minister dated 
11 June 1994 is attached. 
38 
the Community, recovery rules, administrative penalties and the rules governing 
their imposition. 
Several of the national reports reveal the enduring desire for simpler Community 
regulations. The Commission feels the same way, and the action it is taking on 
this subject is designed to ensure that fraud is not facilitated by excessively 
complex regulations. 
The last set of considerations concerns cooperation arrangements. A number of the 
national reports acknowledge the need to develop them. This may provide scope 
for solving the problems mentioned in connection with the operation of the mutual 
assistance mechanisms. 
There is also a need to improve the operational links between the various 
departments responsible for prosecuting the perpetrators of serious and complex 
fraud, for example by building up personal contacts and exchanges of officials. 
As regards cooperation at the enforcement stage, the information provided in the 
national reports reveals just how urgent it is for the national authorities to have 
effective arrangements to meet the need to protect the Union's finances: this will 
involve more fluid information exchanges between the national enforcement 
authorities and the relevant Commission departments, increasing the means and 
powers available to fraud investigators and, in the area of criminal law, taking the 
measures needed to implement the Convention on the protection by the criminal 
law of the Community's financial interests as quickly as possible. 
In the same vein, emphasis was placed on the need to adapt the information 
systems for the Community mutual assistance mechanisms. Certain cooperation 
arrangements put forward by the reports should be explored and built on (such as 
action to be taken on cross-checking of goods in free circulation). 
Mutual assistance on recovering debts owed to the Community needs to be made 
more efficient, regardless of which budget area is affected. 
The Advisory Committee for the Coordination of Fraud Prevention meets 
regularly to assess the strengths and weaknesses of the arrangements and plan any 
necessary alterations. 
The analysis carried out by the Commission is the first stage in an ambitious programme 
to tackle fraud simultaneously from all sides, encompassing all aspects of anti-fraud 
activity including prevention, enforcement and administrative and judicial cooperation. 
Maximum use must be made of both the national and Community intelligence set-ups, in 
line with the actual risks and circumstances encountered. Operations devised at the highest 
political level become credible only when concrete progress is made in all areas relating 
to the protection of the Community's financial interests. 
39 
The next stages in the programme will involve putting these new initiatives into effect 
and progress will be reported on at forthcoming European Council meetings. 
As stressed by the Madrid European Council, Community finances cannot be effectively 
protected unless the policies implemented are supervised in a comparable way throughout 
the Community. Both the institutions and the Member States are working towards this 
end. 
40 
CHAPTER 5: COOPERATION AND PARTNERSHIP 
As in previous years, this Chapter describes the fraud prevention seminars held by the 
Commission, either on its own initiative or at the request of the Member States. In 
addition to these seminars, contacts with the specialist departments at national level may 
take the form of bilateral meetings or consultations within the appropriate institutional 
framework, namely the Advisory Committee for the Coordination of Fraud Prevention. 
In 1995 this Committee organized its work so as to provide an overall view of fraud 
prevention policy. 
The Member States, for their part, are continuing to adapt their specialized departments 
to the interdisciplinary and multisectoral dimension of Community fraud. Contacts with 
the Commission are on an ever-larger scale and initiatives have been launched in various 
areas. Some examples are given in this Chapter (see Section 3 below). 
Section 1: SEMINARS AND EXCHANGES OF OFFICIALS 
Since SG/UCLAF was set up in 1988, a large number of general seminars have been held 
to spread awareness of the coordinated action taken by this Unit and the Commission's 
other specialist departments. These seminars have dealt with a wide range of topics 
which have now been brought to the attention of almost all the departments concerned 
in the Member States. 
It was essential to ensure that working methods (inspections and investigations in the 
field) were adapted to the Community dimension of fraud. Just as the economic context 
is constantly changing, so too are the fraud mechanisms employed. Initially, therefore, 
the aim of the general seminars held by the Commission was to acquaint the competent 
officials with the characteristic features of transnational Community fraud. 
These general seminars (other than those held for the new Member States) were followed 
in 1995 by special-subject seminars. In accordance with its work programme, the 
Commission continued to hold special training courses for the officials responsible at 
national level for the prevention of fraud against the Community budget. 
In 1995 general training courses were held for officials from the new Member 
States: in Brussels two awareness-raising seminars were held for a small number 
of senior officials ( for Swedish, Finnish and Austrian officials); seminars were 
also held in the Member States for larger groups of officials (in Finland and in 
Sweden).99 
The officials concerned belonged to the tax inspectorates, customs, audit offices, 
police and judicial authorities. 
Another of the Commission's priorities is to provide specialist training for 
departments and bodies engaged in the fight against economic and financial crime, 
99 A seminar will be held in Austria in the first quarter of 1996. 
41 
including prosecution and other legal action (on-the-spot intervention teams, 
administrative and legal authorities, etc.). 
To this end, special training courses were held in Brussels in 1995: for senior 
officials in the Danish police; for inspectors in the ECD (a branch of the Dutch 
Ministry of Economic Affairs); for inspectors in Italy's Guardia di Finanza. Five 
seminars were held in the Member States: in Portugal, a seminar on the Structural 
Funds100 for officials of the IGAT (the Inspectorate-General for the National 
Administration); in Cologne (Germany), a seminar for prosecutors dealing with 
economic crimes, including fraud to the detriment of the Community finances; in 
Barcelona (Spain), a seminar on the Cohesion Fund; in Deauville (France), a 
seminar for members of the Police Judiciaire (criminal investigation department); 
and in Athens (Greece), a seminar for officials responsible for management, 
surveillance and the prosecution of irregularities in the field of the structural 
policies. 
By holding these different types of training courses the Commission hopes to develop 
direct and fruitful cooperation with the national bodies concerned.101 Direct contact 
between Community officials and those responsible for day-to-day fraud prevention is 
seen by the Commission as a way of ensuring mutual understanding and trust. A similar 
aim is pursued by the "workshops",102 where preparations are made for enquiries or 
multisectoral investigations. 
As part of the grander pre-membership strategy, the Community is also holding 
information seminars and meetings in the countries of Central and Eastern Europe and is 
thus establishing contact with economic enforcement officials, with whom it will soon be 
cooperating on the prosecution of fraud. The first such information seminar, which dealt 
with operational cooperation and the exchange of data, was held in Brussels on 10 and 
11 July 1995 and was attended by eight customs inspectors from the Czech Republic 
(with whom the Commission had already worked on certain special investigations). 
In line with its policy since 1994, the seminars which the Commission plans to hold in 
the near future will be on a smaller scale (the most effective format) and will take a more 
specialized approach. 
Lastly, fourteen seminars were held in 1995 under the Matthaeus programme (a 
Community action programme for the training of customs officials organized by DG 
XXI), seven of which were particularly concerned with the prevention of customs fraud. 
Similarly, eleven seminars were held under the Matthaeus Tax programme.103 Three were 
held specially for the officials responsible for VAT and excise duties in the three new 
100 
101 
102 
103 In 1996 particular attention will be given to training in this particular area and in that of the 
Cohesion Fund. 
See Section 3 of this Chapter. 
These working groups, which study specific cases, provide an excellent opportunity to exchange 
views on the problems encountered and the solutions to be applied. Generally speaking, these 
solutions involve closer judicial cooperation or call for resources which may or may not be 
available (it may be recommended that the Commission define new legal bases). 
The purpose of this programme is to improve administrative cooperation and develop mutual 
understanding as Member States implement the single market in the field of indirect taxation. 
Control measures to prevent fraud are essential in this area. 
42 
Member States and dealt with the Community rules governing these matters. Officials 
from the Member States explained the operation of the single market and shared their 
know-how by outlining their control systems and mechanisms. 
These Matthaeus and Matthaeus Tax programmes also lead to exchanges of officials 
between the Customs administrations of the Member States (390 in 1995) and between 
the administrations responsible for fiscal questions (118 officials in 1995). There were 
also sixty exchanges between Member States under a scheme to develop audit methods 
for the scrutiny of company accounts. 
Section 2: THE ADVISORY COMMITTEE FOR THE COORDINATION OF 
FRAUD PREVENTION 
The activities of the Advisory Committee expanded considerably in 1995. Drawing on 
the experience gained in 1994,104 the Commission, which chairs the Committee, and the 
delegations from the Member States continued their deliberations on various subjects 
relating to the protection of the Community's financial interests, with special reference 
to the Commission's anti-fraud programme for 1995 and its 1994 annual report. 
In 1995 the Committee held three plenary meetings: on 1 February, on 31 May and 
1 June (two days) and on 4 October. 
The usefulness of the Committee's work was emphasized by the Council in its 
conclusions of 19 June and 27 November 1995 on the fight against fraud, particularly as 
regards the monitoring of the Commission's anti-fraud programme, the scrutiny of the 
1994 annual report, and the follow-up to the national reports and the Commission's 
comparative analysis of the aspects covered by the EC Treaty.105 
In addition to the scrutiny of the abovementioned reports, the Committee's meetings were 
mainly concerned with the development of legal and operational means of achieving more 
effective fraud prevention. The Committee provided a forum where Member States could 
obtain information direct from Commission staff. 
Wide-ranging discussions were held on matters relating to the regular flow of information 
between Member States and between the specialized national departments and the 
Commission (UCLAF) (particularly as regards the notification of irregularities discovered 
by the Member States in the field of the Structural Funds and the Cohesion Fund). 
The nature and tasks of the various sectoral committees dealing with fraud prevention 
were confirmed. The bodies dealing with each specific area are thus the Committee for 
Mutual Assistance, the Advisory Committee on Own Resources (ACOR) and the Standing 
Committee on Administrative Cooperation in the field of Indirect Taxes. 
These Committees may comprise subcommittees or "technical" working parties, which are 
attended by experts from the Member States and by representatives of the Commission 
departments whose activities have repercussions on fraud prevention. Mention may be 
104 
105 The Advisory Committee was set up by a Commission decision of 23 February 1994. See the 
annual report on the fight against fraud for 1994, cited above. 
See Chapter 4, single section, page 33. 
43 
made of the SCENT/CIS Working Party (which answers to the Committee for Mutual 
Assistance), the sub-group on irregularities in the agricultural sector, the various working 
parties on data processing and accounts, the ACOR sub-group on recovery and the 
anti-fraud sub-group of the Standing Committee on Administrative Cooperation in the 
field of Indirect Taxes. 
Section 3: PARTNERSHIP WITH SPECIALIST DEPARTMENTS IN THE 
MEMBER STATES 
The Commission's annual report for 1994 mentioned the contacts established between the 
UCLAF and certain specialized bodies in the Member States. These contacts, which are 
frequently informal, form part of the overall policy pursued by the Commission under its 
fraud prevention programme. 
Know-how is exchanged at meetings where the emphasis is placed on operational, aspects 
(directly measurable in terms of results) of the fraud investigations conducted under the 
partnership arrangements. Training courses, special-subject seminars and similar events 
also provide opportunities which the Commission earnestly and discreetly endeavours to 
exploit. 
The contacts established in 1995 were constructive and positive, the Commission having 
cooperated throughout the year with each of the national departments responsible for the 
detection, prosecution and prevention of fraud committed in the Member States to the 
detriment of the Community budget. These were primarily the customs departments 
concerned with frauds involving complex transactions in the trade in products requiring 
a significant degree of co-ordination which is carried out using procedures well 
established at Union level. They also included the financial control departments coming 
under the Ministries for Economic and Financial Affairs (such as the Inspection Générale 
des Finances in France and the IGAE106 in Spain), the national inspectorates for various 
sectors (including the social sector) and criminal investigation departments in cases 
requiring prosecution in the courts (national police and gendarmerie), e.g. organized 
financial crime. 
One example is the Belgian OCDEFO (Central Office for the fight against Economic and 
Financial Crime).107 This body works under the auspices of the Ministry of Justice. 
Investigators are placed at its disposal by the Belgian gendarmerie, the Belgian CID and 
the Comité Supérieur de Contrôle. Since each of these bodies has its own traditions and 
its own approach, the aim is (in the words of the report) to place new police methods and 
a spirit of enterprise at the disposal of law enforcement. . 
The OCDEFO carries out operational enquiries in those areas of the Community budget 
which are directly affected by large-scale fraud. It also investigates money laundering, 
serious tax offences, stock-exchange offences and serious social fraud. 
106 Intervention General de la Administration del Estado. 
107 OCDEFO published its first report, which covered 1994, in November 1995. 
44 
To the same end Italy's Guardia di Finanza has set up a special unit for the prevention 
of Community fraud.108 It aims to provide an appropriate response to the need to 
implement the first paragraph of Article 209a of the EC Treaty, which is concerned with 
equivalent protection of the Community's financial interests. 
The Guardia di Finanza is a multidisciplinary body which deals with market intervention 
as well as own resources and the Structural Funds. It has all the necessary means for 
carrying out exhaustive controls in all parts of Italy. 
The Italian Government intends this special unit to be responsible chiefly for the 
centralized management of control operations targeting offences against the EC budget. 
Since the essential purpose of the unit is to pursue a long-term objective, the ongoing 
nature of its work must be emphasized. 
In Spain the Guardia Civil has the task of protecting and monitoring the State's tax 
interests and is responsible for taking the necessary steps to prevent any type of 
smuggling on land or sea. 
Combining its roles of administrative police force and criminal investigation department, 
the Guardia Civil has the capacity to carry out all sorts of investigations, from simple 
administrative enquiries to the prosecution and prevention of elaborate offences 
perpetrated by transnational criminal organizations. 
Section 4: MUTUAL ADMINISTRATIVE ASSISTANCE IN CUSTOMS 
MATTERS BETWEEN THE COMMUNITY AND NON-MEMBER 
COUNTRIES 
In line with the briefs obtained from the Council for the negotiation of agreements 
containing protocols on mutual assistance in the Customs field, the Commission held 
further talks with several non-member countries with a view to strengthening the 
Community's arrangements for the prevention of customs fraud. 
In 1995 agreements containing such protocols were initialled or signed with Tunisia 
(signed on 17 July), Morocco (initialled on 16 November), Israel (initialled on 
20 November and interim agreement signed on 18 December), Slovenia (signed on 17 
July 1995) and the Trans-Caucasian republics (Armenia, Azerbaijan, Georgia, signed on 
15 and 19 December 1995). 
Pending the entry into force of the agreements signed with most of the CIS countries, 
interim agreements on mutual administrative assistance on customs matters falling within 
the Community's sphere of competence were signed with Belarus (June), Kyrgyzstan 
(9 February), Moldova (2 October), Russia (17 July) and Ukraine (1 June). 
On 1 January 1995 the free trade agreements signed with the Baltic States in 1994 came 
into force. Moreover, the Europe Agreements signed with the Czech Republic, Slovakia, 
Romania and Bulgaria entered into force on 1 February 1995, thus extending mutual 
assistance beyond the confines of the Community. 
108 Known as the "Nucleo Spéciale per la repressione delle frodi comunitarie". 
. 45 
Negotiations continued with the Faroes, Jordan, Egypt, Lebanon, South Africa, the 
United States, Canada and South-Korea. 
Lastly, the European Parliament approved the conclusion of an agreement on customs 
union between the Community and Turkey. This agreement, which also includes a 
protocol on mutual assistance, entered into force on 1 January 1996. 
46 
CHAPTER 6: INVESTIGATIONS 
The need for protection for the Community's financial interests becomes clearer with 
events on the ground every year that passes. The range of forms of delinquent conduct 
is such that two different types of fraud can be distinguished. 
The first is fraud (or irregularity) which could be described as individual forms of 
conduct by economic operators seeking to use their competitive position on international 
markets to boost their market share to the maximum, often interpreting the rules in ways 
that are at the limit of what is lawful. Such cases may often be national in scale, in which 
case the Commission's operational task is to support the Member States in their inspection 
and investigation work by giving them the added benefit of its experience of the methods 
in force at the Community level, depending on the cases involved and any difficulties 
which arise. 
Then comes conduct which is deliberately fraudulent in intent and organized in a 
thoroughly businesslike way. There are criminal aspects to this type of fraud which need 
to be looked at in the broad sense. Such fraud is committed either by individuals who, 
because of the very nature of their activities, intentionally organize their activities in ways 
commonly described as major financial crime or organized crime and whose ability to 
mobilize substantial resources, particularly money, is far from negligible. There is also 
a transnational aspect to it, and there may well be a congeries of individual offences 
committed in several Member Slates (the multinational aspect) but linked to each other 
with a single, probably covert, decision-maker behind them. These can have a devastating 
effect on the credit of the Community, its institution and the Member States. 
The Commission's job here is to take unmistakable and vigorous action against this 
nuisance, in collaboration with the Member States' investigation services. It has 
accordingly decided to reorganize its internal structure so that a single, independent and 
specialized department is responsible for providing the requisite support to national 
authorities that do not have this type of structure. Investigating and detecting fraud is not, 
of course, an end in itself. The need is for tougher enforcement measures against major 
crime and for equivalent criminal penalties in all Member States for serious fraud against 
the Community budget; the scale and complexity of the problem demand an immediate 
response that will be have the maximum deterrent effect. That is why, in the context of 
the Council's work,109 the Commission's paramount wish is that the Member States should 
reach agreement on implementing an appropriate penal policy. As soon as an investigation 
strays beyond national frontiers, the Member States' scope for action is m limited, 
procedures are lengthy, not to say never-ending, and the grounds for the Commission to 
act become abundantly obvious, especially when it comes to the target it has set itself of 
successfully establishing effective legal cooperation between the national authorities 
responsible for investigating cases. 
The fact is that fraud on this scale is invariably transnational. The higher the financial 
stakes, the more sophisticated the methods applied. The networks behind it exploit the 
smallest loopholes to take advantage of ongoing developments and adjust efficiently by 
109 See Chapter 1, Section 4, page 18. 
47 
setting up the requisite structures and establishing circuits for the exchange of information 
and money in arid sometimes even outside the territory of the European Union. 
The difficulties facing the Member States and the Commission are innumerable and have 
to do with the peculiarities of this type of organized financial crime as it hides behind an 
appearance of legality to conceal its main objective, which is to loot the Community's 
coffers. It seeks to exploit to the full the weaknesses generated by the combined operation 
of Community rules and the national legislation governing their application, in order to 
attack sectors identified as vulnerable and more difficult to monitor where the potential 
gains are very high compared with the risks, which are still only minor in the absence of 
a proper penal response. 
One of the main areas under attack is that of Community transit, where, when fraud is 
detected, the application of the guarantee system to the principal is still not widespread 
enough.1 w 
Organized crime is also active in other types of fraud against the Community budget, 
particularly fraud involving the origin and value of products exported from certain third 
countries to the Community, and the preference arrangements. 
Inspections carried out on the spot show that fraud by some operators in these areas 
involves several Member States and entails making identical resources available over a 
single period. The defence systems some of these operators set up also presuppose a high 
degree of preparation and collusion between suppliers in third countries and importers. 
In some cases, evidence has come to light that there are organizations, generally based 
outside the Community, which have accomplices in several countries and are capable of 
supplying certificates of origin that are either false, or genuine but drawn up in the names 
of front companies; these can be used by buyers in the Community to have goods released 
for free circulation without having to pay the normal customs or anti-dumping duties on 
them. 
In other cases, the initiative in carrying out the fraud has come from within the 
Community itself. For instance, European companies, fully aware of the circumstances, 
have non-originating raw materials delivered to assembly or processing firms and import 
the finished products under certificates of preferential origin which they know full well 
have been wrongly obtained. 
In both such cases, the true origin of the goods is, at least on the surface, "laundered" 
away by completing the customs formalities. The consignees can market the goods in the 
Community through the lawful distribution channels without having to run the risks or 
face the extra costs associated with illicit selling. 
* * 
See Chapter 2, Section 3, point 1, page 23. 
48 
This chapter is, logically enough, structured to take account of these findings. As the rise 
in the number of transnational fraud cases discovered has shadowed the development in 
import-export dealings between the Community countries and with third countries, it is 
reasonable to group all the sectors concerned under one heading which identifies these 
particular cases. 
The statistics speak for themselves: 
Of 12 000 cases notified by the Member States between 1991 and 1995 and 
affecting traditional own resources and expenditure financed by the EAGGF 
Guarantee Section, 120 (or 1% of the total) by themselves account for more 
than 50% of the total budgetary impact. It has also emerged that 3% of the total 
number of cases notified by the Member States involve individual amounts of 
more than ECU 1 million, which represents altogether more than two thirds of the 
overall sum notified (in evaded duties and expenditure diverted or unduly 
received). 
Of the 273 cases under investigation co-ordinated by the Commission, 
20% involved sums of more than ECU 100 000, and in half of them the amounts 
involved were more than ECU 1 million. 
Fraud cases involving organized crime are few and far between, but their effect on the 
budget is considerable. The Commission therefore focuses particular efforts on such cases 
because it is in these areas, where fraud is being organized from one or more countries, 
where there is greatest need of active support from the Community. 
The illustrative character, financial impact and variety of the investigations reported in 
this chapter are a sign of the need for both the national and Community anti-fraud 
agencies to keep up the alert on all fronts. 
Section 1: MAJOR ORGANIZED TRANSNATIONAL FRAUD CASES 
This section describes a number of inquiries which have involved the carrying out of a 
considerable number of on-the-spot controls in partnership with the Member States. In 
some of them, carried out in 1995, a large number of investigations were made on the 
spot in partnership with the Member States. They brought to light major fraudulent 
practices involving milk products, cereals and rice, olive oil, beef, tobacco, sugar and 
wine products. A specific paragraph is devoted to cigarette smuggling (a matter being 
dealt with by a special task force in the Commission), the European Social Fund 
(structural policies) and tourism (direct expenditure). 
The inquiries mentioned in this section have sometimes lead to missions of enquiry spread 
out over several years.111 The departments responsible in the Member States, working in 
conjunction with the Commission, made great efforts to detect fraud rings. Major fraud 
circuits have been brought to light, many of them operated by organized crime networks. 
These are complex transnational or multinational frauds involving a number of Member 
111 Indeed, certain cases have been mentioned for the first time in the earlier annual reports, in 
particular those of 1993 and 1994. 
49 
States and certain non-member countries. The response has been to establish close 
cooperation between the departments concerned in Member States and the authorities in 
the non-member countries. 
1.1 Refined sugar 112 
It was established that 1 375 tonnes of C sugar, which were removed from export 
procedures to Eastern Europe and never actually left Italian territory, were used for 
domestic wine production. The same investigation further revealed that some 1 243 
tonnes of non-C sugar were later used for sweetening wine. 
Of the 65 people accused of smuggling, irregular use of sugar in wine production, tax 
offences and forgery, 38 were remanded in custody. 
The Asti Public Prosecutor's Office informed the Commission of the progress of judicial 
proceedings in Italy in this case in 1995. 
The Italian authorities still have to ascertain whether other offences were committed 
resulting in losses for the Community budget. 
1.2 Exports of cheese, meat and milk products 113 
These products were diverted to Greece although they were declared for export to Jordan, 
Bulgaria and Lebanon with payment of refunds. 
Investigations revealed that the fraud was the work of organized financial crime 
professionals using networks of companies in Denmark, Germany, Cyprus and Greece, 
whose names changed regularly but whose role was always the same: to claim to be 
exporting outside the Community with payment of refunds. 
The firms operated through various supply channels and also used different means and 
methods of transport to escape detection. 
Forged certificates for release for consumption in non-member countries were produced 
in support of the applications for export refunds from the Community. In reality the 
customs documents declaring that the products had reached their destination were 
forgeries, as the products were reexported to the Community and released for free 
circulation in Greece. 
Investigations are continuing in the Member States concerned, as other companies 
involved in the scheme have been identified. An administrative cooperation mission went 
to Bulgaria to collect further evidence. 
Criminal proceedings have been initiated against four people, one in Denmark, one in 
Germany and two in Greece. 
112 
113 See the annual reports on the fight against fraud for 1993, Chapter 4, Section 1.1, and for 1994, 
Chapter 5, Section 2.2.1. 
See the annual report on the fight against fraud for 1994, Chapter 5, Section 1.1.4. 
50 
Steps have been taken to recover ECU 5 million in wrongly paid refunds from suppliers, 
and the customs duties and agricultural levies evaded in Greece since 1989 total around 
ECU 9 million. 
114 1.3 Imports of milk pov ..er and butter into the Community 
During inquiries carried out in the Community in 1991 and 1992 concerning the 
removal from the Community transit arrangement of some 200 consignments of 
milk powder being carried from Belgium to Spain under cover of customs 
documents drawn up in Antwerp, Spanish investigators undertook checks at 
Spanish companies exporting milk powder in order to determine where the 
products were coming from. 
They found that certain companies were purchasing milk powder, via 
intermediaries, from a firm claiming to be importing a chemical product declared 
to be coming from the Czech and Slovak Republics. 
In the course of administrative cooperation missions in the Czech and Slovak 
Republics in 1994 and 1995 under the protocol on mutual assistance, it was found 
that 30 consignments of milk powder (720 tonnes) and some 200 consignments 
of frozen butter (5 000 tonnes) exported from these countries in 1992, 1993 and 
1994 had been covered by a false declaration of product in^Spain. 
The products falsely declared were respectively milk powder and frozen butter. 
The agricultural levies evaded in Spain are estimated at around ECU 15.7 million. 
During an administrative cooperation mission in Austria in 1994 it was found that 
large quantities of butter and milk powder originating in Eastern Europe were 
being processed in Austria (under the inward processing arrangements). This 
processing involved adding a minimum percentage (less than 1%) of prepared 
cultuie mediums (micro-organisms) to the raw material, enabling them to be 
imported into the Community under a customs heading carrying no import duties. 
The goods were then exported to the Community, where they were released for 
free circulation (in Italy, Germany and Spain) under tariff headings for which no 
agricultural levy was applied. When the goods were cleared through customs, the 
operators presented genuine tariff papers issued by the German authorities on the 
basis of erroneous information. Tests carried out ex post showed that the tariff 
classification requested was not the right one. Over 20 000 tonnes of milk powder 
and over 6 000 tonnes of butter were wrongly declared in this way. 
The duty evaded comes to over ECU 66 million. 
See the ai,:.ual report on the fight against fraud for 1994, Chapter 5, Section 1.1.1, 
51 
1.4 Removal of milk powder and butter from the Community transit arrangements115 
The investigations into the Spanish companies were initiated at the request of the 
Commission following the discovery of purchases of milk powder outside the usual 
marketing channels. 
In December 1995 the Spanish authorities questioned four members of an organized gang 
making up a network of European companies irregularly bringing milk powder into Spain 
from Estonia. 
The firms involved diverted from the Community external transit arrangements to the 
internal market 650 tonnes of milk powder originating in Estonia and intended for 
Morocco. Included in this smuggling network were two Spanish companies based in Vic 
and Montornes del valles whose officers were charged with offences. Additional 
investigations by specialized departments in the Member State concerned are continuing 
to determine what role was played by certain Dutch, French and German companies. 
The investigations already completed in Germany, the Netherlands and Spain suggest that 
the cost to the Community is around ECU 650 000. 
The Spanish authorities are investigating other similar fraudulent operations involving an 
estimated ECU 1 million. These inquiries are being coordinated by the Commission, 
which is also helping with the preparation of criminal proceedings. 
1.5 Removal of sugar from the Community transit or TIR arrangements 116 
In June 1994 the German authorities informed the Commission about a case of fraud 
involving the dispatch of sugar originating in the Czech Republic and Poland to 
non-member countries (Morocco and Angola) in transit through the Community. The 
goods, which were carried by Czech and Polish haulage companies under the TIR 
convention, were supposed to have left the Community in Spain or Portugal. 
In actual fact the goods remained in Spain and Portugal, after customs documents with 
forged stamps were presented. 
As the sugar was not exported out of the Community, the customs duties suspended under 
the transit arrangements became payable. A total of 19 000 tonnes of sugar, covered by 
some 950 TIR carnets, was exported in this way from Poland and the Czech Republic by 
some 150 different haulage companies. The Spanish and Portuguese authorities confirmed 
that the fraud had taken place, in that the sugar dispatched was not presented at the 
customs offices concerned. 
The financial impact is some ECU 9 million. 
Judicial proceedings are in progress in the countries concerned both in the Community 
and elsewhere. 
1 See the annual report on the fight against fraud for 1994, Chapter 5, Section 1.1.1. 
See the annual report on the fight against fraud for 1994, Chapter 5, Section 1.1.3. 
52 
1.6 Meat carousel 117 
This operation involved imports of live cattle from Eastern Europe to Italy under the 
inward processing arrangements followed by re-exports of low-quality cuts and offal to 
Malta. 
After being stored in Malta the goods were brought back into the Community. The 
investigations which the Italian authorities, in collaboration with the Commission, have 
now completed reveal that when the containers from Malta and bound for Eastern Europe 
were passing through Italy the contents were removed and were then exported with 
refunds, along with other products from the internal market, to various non-member 
countries. 
The financial impact of this matter was finally put at ECU 18.5 million in evaded levies 
and ECU 24 million in wrongly paid export refunds. 
Working jointly with the Italian authorities, the Commission sent a mission to Gabon, the 
main destination for the diverted products, which were systematically declared for export 
as "pieces of meat from the hindquarters of adult male bovine animals". Evidence was 
found on the spot that most of the products reaching their destination were low-quality 
cuts from the front quarters of the animal. The refund papers were discharged only 
because the Gabonese entries for home use carried the general description "beef. 
In a number of cases it was shown that the Gabonese import declaration carried a clear 
description of the real nature of the meat. In those cases the exporter got an agency of 
an international security company to replace this compromising original by an import 
certificate describing the goods simply as "chilled beef. Examination of the business and 
transport papers which it ought to have carried out before making out the certificate 
would have enabled it to describe the goods in accordance with the reality. 
Criminal charges have been brought against 119 people for conspiracy, fraud against the 
Community budget, smuggling, tax evasion, forgery and corruption. 
42 people have already been convicted and assets worth around ECU 30 million have 
been confiscated. 
Because of the seriousness of the case the Commission and the Italian State have both 
asked the judge directing the preliminary investigation in Turin to join a civil action to 
the criminal proceedings. 
1.7 Imports of butter-based food products118 
Investigations continued in 1995 in this case involving imports of butter-based food 
products originating in Hungary and the Czech Republic. The products were declared as 
"sauce" (or liquid butter) when imported into Italy and San Marino, with the result that 
the duties due were not paid. 
117 See the annual report on the fight against fraud for 1994, Chapter 5, Section 2.2.2. 
See the annual report on the fight against fraud for 1994, Chapter 5, Section 1.1.2. 
53 
Criminal charges have been brought against the importer in Italy. The San Marino 
authorities are responsible for recovering the arrears on the products imported into San 
Marino. The recovery procedure is still in progress in respect of the duty owed. 
It was established that the goods were processed in part into butteroil and re-exported 
from the Community with payment of refunds. Although butteroil does qualify for 
refunds, the amount may under no circumstances exceed the amount of import levies paid. 
All the destinations of the consignments to the Community have been traced. The 
Member States have been asked to recover the difference between refunds paid and 
import levies charged. The amounts have not yet been determined. 
The Italian authorities' investigations have further revealed that the same network was 
behind the irregular imports of 4 000 tonnes of Hungarian butter, declared as a 
cocoa-based preparation to evade customs duties and agricultural levies. This product was 
then sold, mainly in France, as Italian butter. 
Investigations are continuing in France and Italy with a view to determining the ultimate 
destination of these products and the exact amount of the wrongly paid refunds. 
Organized crime networks were found to be involved in all these cases. As more 
than one Member State was concerned, it was soon apparent that administrative 
action at national level alone would not put an end to the fraud. Judicial cooperation 
between Member States is more necessary than ever, if only to implement concerted 
action, the only effective way of bringing the perpetrators to justice. 
1.8 Removal of Czech butter from the Community transit arrangements 
This case concerns the irregular removal from the Community transit procedure 
(document Tl) in Italy of butter originating in the Czech Republic and being carried from 
Denmark to non-member countries (Egypt, Hungary, Slovenia, etc.) without payment of 
customs duties. 
The Italian authorities seized three consignments of butter being carried by lorry from 
Denmark; the destination shown on the transport documents was clearly forged. It has 
not yet been possible to identify with certainty the consignor and intermediaries involved, 
but it has been established that a Swiss resident placed most of the orders, which were 
sent from the Czech Republic via Denmark to non-member countries and then invoiced 
to front companies in the Bahamas, the Virgin Islands or Switzerland. 
The investigations coordinated by the Commission following this initial discovery further 
demonstrated that between 31 March 1994 and 27 September 1995, 46 of the 91 
consignments which transited through Denmark and were declared as being re-exported 
to non-member countries were covered by forged declarations of unloading. 
Most of the customs offices through which the goods were leaving the Community were 
in Italy (Trieste, Naples, etc.). The customs documents were discharged by means of 
forged stamps. The goods were then illegally brought back into the Community without 
the customs duties and agricultural levies being paid. 
54 
The investigations are continuing to determine whether export refunds were also paid on 
this butter. 
The investigations launched by the Commission probably put a stop to this traffic. 
However, since 27 September 1995, three new consignments of Czech butter bound for 
Portugal (again under the Community transit arrangements) have attracted the attention 
of the Swedish authorities in Malmô. Two of these consignments were illegally unloaded 
and the third was seized by the Portuguese authorities (on the basis of information 
supplied by the Commission). 
Large amounts of customs duties and agricultural levies are involved. On over 
2 700 tonnes of butter they will come to some ECU 6 million. 
The person behind this fraud is also suspected of being responsible for other illegal 
consignments of butter and sugar from the United Kingdom and the Netherlands which 
were discovered in the past by Italian investigators. 
This case shows how quickly criminal organizations can adapt, once they have seen 
that customs officers in some Member States have their eyes open for consignments 
of this kind, and then find other ways of concealing their illicit trade (e.g. by 
operating via Denmark and Sweden). 
1.9 Removal of beef from the Community transit arrangements 
During the investigations on the diversion of refined sugar,119 it was found that a number 
of containers of beef from Argentina were unloaded in Rotterdam and placed under the 
external Community transit arrangements (Tl documents) for carriage to Croatia. The 
customs documents were discharged in Nice, France, where a local transit agent issued 
new transit documents which were then discharged by means of forged Italian customs 
stamps. The beef was released onto the Italian market without payment of customs 
duties. 
The customs investigations into this transit agent revealed that there had been many other 
similar operations with consignments unloaded in the French port of Le Havre. When 
it entered the Community, the beef belonged to two British companies which sold it to 
Italian and German customers, who claimed to have bought it in good faith on the 
internal market. 
The investigations in Italy showed that this was not entirely true. 
Some 700 tonnes of beef was involved and the duty evaded totalled around 
ECU 3 million. 
Judicial proceedings are in progress in France and Italy. 
19 See the annual report on the fight against fraud for 1993, Chapter 4, Section 1.1. 
55 
1.10 Removal of bananas from the Community transit arrangements 
Bananas from South America were unloaded in various northern ports in the Community. 
They were placed under the Community transit arrangements for carriage by road to 
non-member countries. This operation is covered by Tl documents (all taxes and duties 
being suspended). 
On the basis of information supplied by the Belgian and German customs, investigations, 
coordinated by the Commission, were carried out by specialized departments in these two 
countries. They brought to light a major operation involving the irregular introduction 
of bananas into Italy without payment of customs duties and agricultural levies. 
The Italian authorities discovered in particular that a total of 290 consignments of bananas 
from South America had been smuggled into Italy. That represents some ECU 15 million 
in evaded duties. 
Eight suspected smugglers were arrested and charged with forging customs documents. 
Their personal assets have been seized. 
Additional enquiries are in progress to determine whether consignments of the same type 
have also been sent to other Member States. 
1.11 Fictitious exports of wine to non-member countries 
A close watch was kept on two ships suspected of being involved in fictitious exports of 
wine to non-member countries. Inquiries by Commission departments in Italy, France, 
Greece and Slovenia brought the following irregularities to light: 
Some of the wine carried by these ships was exported by French, Italian and 
Greek firms with payment of export refunds. These consignments were intended 
for Croatia, Slovenia, Bosnia and Romania but were not placed on the market at 
destination. They were placed under a special customs arrangement, similar to 
inward processing, referred to on the documents presented as proof that it had 
been released onto the local market; 
another part of the consignment was never unloaded but diverted to Switzerland, 
for which no export refund is payable. In this case forged evidence of entry for 
home use was presented so that refunds were paid; 
the remainder of the wine turned out to be a substitute product which did not 
satisfy the quality requirements to be eligible for refunds. 
The Italian and Greek authorities have started judicial proceedings against the firms 
involved. The Commission is collaborating with the judicial authorities examining the 
cases. 
Joint action by the Commission and the Member States has produced the following 
results: 
ECU 2 million was recovered for fictitious exports of wine (which failed to reach 
its destination); 
56 
ECU 1.8 million was not paid as the paying agencies had been alerted to the 
fraud; 
recovery procedures are in progress for refunds totalling ECU 3 million. 
Further inquiries are being made. 
1.12 European Social Fund: FLATHUS programme 
The inquiry initiated by the Commission in November 1994 in the new German Lander 
focused on the transnational part of the FLATHUS programme.120 
Inquiries, which continued in 1995, into a vocational training programme for young 
workers in the new Land of Thuringen revealed irregularities. Community funds were 
being diverted by the head of a Danish training institute with the complicity of a German 
national official. 
The investigations have so far brought to light two fraudulent practices: 
1. Before 1993 the head of the institute in question had secured exclusive rights over 
most of the transnational training operations. Subsequently he had obliged 
subcontractors (in France, Ireland and the United Kingdom), by means of a second 
contract, to pay part of the agreed amount either to a bank account in Luxembourg 
in his own name or to a. subsidiary of a German technical assistance association 
in Belgium. 
2. From 1993 onwards fictitious invoices were issued for services allegedly 
performed for the programme. 
Cooperation and coordination of inquiries between the Commission and the national 
administrative and judicial authorities gave rise to suspicions that ESF subsidies were 
being used irregularly. After conducting searches the German judicial authorities obtained 
hard evidence and a German official was arrested. 
Inquiries are still in progress in the Member States concerned. 
1.13 Tourism121 (direct expenditure) 
After the matter was referred to the Belgian and French authorities in 1994, the 
Commission sent the results of the inquiries to the Greek authorities on 13 March 1995 
under the second paragraph of Article 209a of the EC Treaty. 
Research and inquiries into all aspects of tourism policy since it was set up in 1989 have 
required constant coordination by anti-fraud departments and the active assistance of 
judicial departments in the Member States concerned. 
120 
121 FLATHUS: FôrdermaBnahmen des Landes Thuringen mit Unterstùtzung des Europâischen 
Sozialfonds (Programme for the promotion of the Land Thuringen with support from the European 
Social Fund). 
See the annual report on the fight against fraud for 1994, Chapter 5, Section 5.4. 
57 
The procedures set in motion in Belgium and France revealed, in addition to the 
diversions of Community funds detected in 1994, large secret payments to members of 
Commission staff in return for the award of grants. The necessary investigations were 
conducted on Commission premises in Brussels, the Commission's immunity from legal 
proceedings, the inviolability of its documents, buildings and archives and its right to 
business confidentiality were waived. 
On the basis of the findings in France and Belgium five people were taken into custody 
(two Commission officials and three recipients of grants). 
On the basis of the internal audit of the authorizing departments, the Commission began 
disciplinary proceedings against the head of unit managing the policy in question and a 
temporary staff member. The head of unit was removed from his post on 22 June 1995 
and the temporary staff member was dismissed on 28 July 1995. 
At the same time orders were issued for the recovery of ECU 1.4 million from 15 
recipients on the basis of initial controls. 
The specific features of fraud organized both inside and outside the Commission require 
the continuation of close collaboration between the Commission's anti-fraud coordination 
departments and the authorities of the Member States in order to provide evidence of 
responsibilities. 
Closer judicial cooperation in this new area should make it possible to bring all those 
involved in such types of fraud before the Courts. 
1.14 Cigarette smuggling 
Task Forces122 are being set up to combat fraud in particularly sensitive areas. This is 
because many complex and highly elaborate fraud networks have been found to be 
operating in specific sectors with the result that missions are constantly being sent out, 
notably to non-member countries. Task forces are a reflection of the Commission's 
determination, under its strategic work programme, to develop operational cooperation 
between Member States and with non-member countries and to assign a maximum of 
resources to tackling major cases of fraud which frequently have a substantial financial 
impact on the Community budget. 
The Commission set up a first task force (or task group) in 1994 to combat cigarette 
smuggling, as perpetrated by organized gangs.123 This group is made up of officials from 
the Commission and representatives of investigation departments in Member States. 
The role and essential task of this group is to work out an overall strategy, to assess the 
information available, to circulate it within the group so that it can be processed and 
122 
123 These are made up of experts from the Member States and the Commission in a particularly 
sensitive area of trade. Their role is to share information common to a number of fraud files. 
They are to be distinguished from ad hoc groups of investigators (Commission and Member States) 
handling a specific case and internal Commission task forces (TAFI, transit, tax evasion, etc.). 
See the annual report on the fight against fraud for 1994, Chapter 4, Section 3.1.1. 
58 
exploited by the departments directly concerned, which can then select, coordinate and 
become involved in correctly targeted international operations. 
Within this framework a homogeneous strategy has been set up, to apply at Community 
level and based on administrative, operational and technical cooperation. This illustrates 
the response to the fact that the 'other side' is an organization operating not just 
Community-wide but sometimes even world-wide. Combating fraud of this kind demands 
an organized, structured response constructed on an ad hoc basis to correspond to the case 
in hand. 
A number of operations mounted jointly with the Member States, involving international 
investigations, have led to the identification and discovery of a number of major 
smuggling routes, in particular involving transport and illegal trade in cigarettes in the 
southern Member States. 
Some of these operations are in progress; an important feature is investigations on the 
ground in which the Task Group is fully involved alongside the Member States and which 
have led to the dismantling of large smuggling networks and the identification of the 
associated administrative networks. 
Investigations coordinated by the Commission in Denmark, Portugal and Spain identified 
a stock of 92 million cigarettes illegally diverted during the transit procedure from 
Denmark to Portugal. The procedure was discharged by means of forged stamps intended 
as proof that the cigarettes had been through Portuguese customs. The customs duties 
evaded total some ECU 15 million124. Recovery procedures are in progress. 
Similar investigations uncovered a stock of some 102 million cigarettes (with 
ECU 13 million in evaded duty) which had been diverted from Finland and Sweden to 
Spain. The duty is in the process of being recovered. 
Judicial investigations are being conducted in Spain and Portugal with a view to indicting 
the main offenders. 
Other investigations into the fraudulent reimportation into the Community of cigarettes 
initially bound for non-member countries were carried out in Austria, Germany, the 
Netherlands, Greece and Italy. These were part of wider operations designed to breach 
the UN embargo on former Yugoslavia. Some 120 million cigarettes were seized in 
Germany, Italy and the Netherlands. Two aircraft suspected of being used to circumvent 
the UN sanctions were seized by the Dutch authorities. 
The information compiled in the course of these inquiries is directly connected with the 
result of investigations being conducted at the same time in another Member State where 
130 million cigarettes have been seized and those responsible for this smuggling, which 
involves over a billion cigarettes and lost resources of around ECU 100 million, are being 
prosecuted. 
Other inquiries are being coordinated by the Commission, in particular in France, Spain, 
Ireland and the United Kingdom (100 million cigarettes seized and around ECU 10 
124 All the amounts quoted on this case also include an estimate of the national resources involved. 
59 
million in resources lost); another case has been uncovered in Spain (450 million 
cigarettes and ECU 45 million in lost revenue). 
Additional inquiries are in progress in Portugal after 76 lorry-loads of cigarettes bound 
for Eastern Europe failed to turn up at the exit customs offices in Germany, the procedure 
having been discharged by forged German customs stamps (the duties involved come to 
around ECU 76 million). A further seven lorries bound for Switzerland likewise failed 
to reach their destination (amounts involved: around ECU 7 million). Eight containers 
belonging to the same organization were seized in Portugal. 
The Commission is showing that by conducting and coordinating such operations through 
the Task Group it can reasonably hope to secure all guarantees of long-term results, as 
the information compiled at various levels reveals the modus operandi of the criminal 
organization thus helping to identify the authors and put them out of action. 
Similarly the determination to take administrative and judicial action is designed to 
produce a significant improvement in cooperation with the authorities in non-member 
countries. This determination is now beginning to bear fruit. 
Clearly it is indispensable for cooperation between Member States and the 
Commission to be legitimized not only in practice but also by unequivocal legislative 
instruments giving the Commission the power to add value both at the investigation 
stage and at the prosecution stage. It is high time that the judicial cooperation 
instruments conceived in a different environment and now visibly obsolete be 
replaced by something more appropriate.125 
Section 2: MAJOR FRAUDS RELATING TO ORIGIN AND 
PREFERENTIAL AGREEMENTS126 
The measures and privileges accorded in the framework of targeted commercial policies 
which are subject to misappropriation mainly concern the preferential agreements but also 
anti-dumping duties and textile agreements (quantitative limits). 
Frauds committed in these different sectors are increasingly complex and often involve 
several of these provisions at the same time. The inquiries presented in this section 
represent typical examples of the complexity of these frauds not only in their financial 
aspect where the consequences for the Community budget in cases of evaded customs 
duties can be very weighty but also in their economic implications in cases of 
misappropriations which distort the conditions laid down in the commercial policies 
defined between the Community and non-member countries. 
125 See Chapter 1, section 4, beginning at page 18. 
Preferential schemes include the autonomous C 
concessionary schemes set up by agreements with non-member countries. 126 Preferential schemes include the autonomous GSP (Generalized System of Preferences) and all 
60 
2.1 Industrial goods 
2.1.1 Computer diskettes - Macao 
In May 1995 representatives from the Commission and two Member States took part in 
an administrative cooperation mission to Macao to check the origin of more than 
200 million diskettes imported from there since July 1993. 
On-the-spot investigations revealed that the diskettes had been exported from Macao 
under cover of certificates of non-preferential origin,127 although they could not have been 
assembled there. The diskettes must have been imported from China under a false 
description and re-exported from Macao. This trade had continued right up until the 
arrival of the mission in Macao and involved a total of some 126.6 million diskettes. 
The other 73.9 million diskettes had been produced locally, but production consisted 
merely of assembling semi-finished products supplied by Chinese factories (the same 
factories which supplied the re-exported diskettes), using Japanese, Korean and American 
components. 
In these circumstances, anti-dumping duties applicable to diskettes of Chinese origin will 
have to be paid on all these goods, falsely declared to be of Macao origin. The amount 
of own resources at stake runs to ECU 18.7 million for the period from July 1993 to 
April 1995. 
2.1.2 Computer diskettes - Thailand 
In March 1995 a Community delegation, consisting of representatives from the 
Commission and the two Member States chiefly concerned, carried out an administrative 
cooperation mission to determine the origin of more than 50 million diskettes imported 
from Thailand since August 1993. * 
Initial investigations revealed that around 5.4 million diskettes, declared as originating in 
Thailand, but actually shipped from Hong Kong, had been imported using false 
certificates of non-preferential Thai origin. Evidence gathered in subsequent 
investigations showed that these goods, which were not sent from Thailand, had been 
manufactured in China and re-exported via Hong Kong. They should therefore have been 
subject to anti-dumping duties applicable to diskettes of Chinese origin. 
On-the-spot inquiries also revealed that nearly 44.8 million diskettes which had actually 
been exported from Thailand under cover of certificates of preferential origin issued by 
the relevant authorities were not eligible for preferential treatment, either because they 
had previously been imported into Thailand (24.1 million units), or because of the value 
of the imported components used in assembly in Thailand (20.7 million units). 
127 Certificates of preferential origin are issued by the authorities of the exporting country so that 
goods can be imported into the Community at a reduced (or zero) rate of customs duty. These 
certificates are binding on the customs authorities at the office of entry into the Community. 
These certificates are presented to the Community customs authorities (offices of entry), to obtain 
the benefits of the preferential system. Certificates of non-preferential origin are also issued by 
the authorities of the exporting country, to define the origin of goods for whatever purpose may 
be required. 
61 
In view of the assembly conditions in Thailand and the origin of the components used to 
assemble finished products re-exported from Thailand, customs duties will also be applied 
to the diskettes imported into the Community under cover of certificates of preferential 
origin. 
The amount of own resources evaded comprises ECU 617 000 in customs duties for 
44.8 million diskettes and ECU 4 170 000 in anti-dumping duties for imports totalling 
50.2 million diskettes. 
A few months after the mission, the Thai authorities acknowledged that the certificates 
of preferential origin had been wrongly issued. It may therefore be possible to recover 
the customs duties evaded using false descriptions of preferential origin, but recovery of 
the anti-dumping duties which are economically of greater significance than the abuse of 
preferences accorded requires additional investigations to be carried out to determine the 
real (non-preferential) origin of the goods. 
2.1.3 Bicycles from Vietnam 
In April 1995 a Community delegation, consisting of representatives from the 
Commission and the Member States chiefly concerned, undertook an administrative 
cooperation mission to check the origin of 523 241 bicycles exported from Vietnam using 
certificates of preferential origin since April 1992. 
The bicycles had been assembled in Vietnam using imported components supplied by a 
Hong Kong firm, which also exported Chinese bicycles to the Community. Despite 
facing a number of difficulties - the importer in Vietnam tried to prevent access to stocks 
of components and documents - the mission was able to prove that all the materials had 
been imported from China and Hong Kong and that the certificates of preferential origin 
issued for these products since 1992 were incorrect. 
The amount of customs duties evaded runs to ECU 6.85 million. In view of the 
circumstances in which the products were finally assembled, anti-dumping duties totalling 
ECU 9.78 million may be payable. 
At the end of the mission, the Vietnamese authorities, which afforded the Community 
mission all the assistance it required, acknowledged that the certificates of preferential 
origin had been wrongly issued. They have now put a stop to these practices. 
The Commission has identified exports of this kind to France (the principal Member State 
involved), the United Kingdom, Belgium, Germany and Denmark. 
* 
* * 
This information was established following inquiries carried out in non-member countries 
jointly by the member States and the Commission. The latter is committed to carrying 
out inquiries of this kind because, without results or findings on the ground, no concrete 
result is possible. In this regard, it should be noted that other missions planned for 1995, 
at the Commission's initiative or at the request of Member States, had to be postponed 
because of a lack of cooperation on the part of the non-member countries concerned, 
62 
namely Indonesia and Malaysia (computer diskettes) and the Philippines (satellite 
broadcasting receivers). 
Since these delays may jeopardize the subsequent establishment of the own resources 
entitlements at stake, the Commission has urged all the Member States concerned to take 
guarantee measures. 
In addition to false declarations of origin, it has been established that frauds aimed at 
evading payment of anti-dumping duties were committed by groups or linked companies 
by means of false declarations of value, covered by false documents or invoices issued 
by companies established in tax havens. 
The Commission has notified the Member States, under Council Regulation (EEC) 
No 1468/81 (mutual administrative assistance), of certain findings which gave rise to the 
establishment in 1995 of import and antidumping duties evaded by means of false 
declarations affecting the tariff classification, origin or value of goods. 
On the basis of this information alone, the Member States have established that duties 
amounting to an overall figure of ECU 5.7 million were evaded, including ECU 3.85 
million of anti-dumping duties, resulting from false declarations of the value of potassium 
imports. 
It is worth stressing that formal transmission of information to the Commission by the 
Member States is vital for its monitoring of the results of investigations and recovery of 
128 
own resources. 
2.2 Textiles 
2.2.1 Honduras 
Doubts arose as to the true origin of tee-shirts imported into the Community which were 
declared as originating in Honduras. A Community administrative cooperation mission 
went to Honduras in May 1995 to work with the local authorities on checking the validity 
of more than 1 200 certificates of preferential origin apparently issued in Honduras and 
submitted since 1991 on import into the Community (particularly in the Netherlands and, 
to a lesser extent, Germany and Belgium). 
It was found that 1 188 of these certificates were entirely false and that the imported 
goods in question had never been on Hondluran territory, but had in fact been loaded in 
various Asian ports (particularly in China) and shipped direct to the Community. 
Another 52 certificates had actually been issued by the Honduras authorities, but for 
products which had not been manufactured there under the terms of the GSP (General 
System of Preferences) rules of origin. 
All the certificates concerned have therefore been cancelled by the Honduran authorities. 
The amount of duties evaded comes to more than ECU 2 million, relating to more than 
12 million items of clothing. 
128 See 1994 Report, Chapter 1, Section 1 and Chapter 6, Section 3.1. 
63 
Armed with this information, the Member States concerned can now initiate proceedings 
to recover the duties evaded. 
Investigations are continuing into the true origin of the goods which were not 
manufactured in Honduras in order to charge the quantities concerned (more than 10 
million items, mainly tee-shirts) to the quotas of the country of actual origin (probably 
China). 
2.2.2 Nepal 
In July 1995 the Commission organized an administrative cooperation mission to Nepal 
to work with the relevant Nepalese authorities on checking the validity of more than 
500 GSP certificates of origin supposedly issued there, which were submitted on the 
import of textile goods into the Community. 
The investigation revealed that 45 of these certificates of origin, concerning more than 
10 million items, had been falsified. The goods covered by these certificates had never 
been on Nepalese territory, but had been imported into the Community direct from the 
Far East. Inquiries continue to establish the true origin of the goods described on the 
false certificates and to obtain economic compensation with regard to the non-member 
countries concerned (situated in the Far East). 
It was also established that 153 other certificates of origin had been wrongly issued for 
products manufactured in Nepal in breach of the Community's GSP rules of origin. 
Although the manufacturers, who also exported the goods in question, had made written 
statements on the matter, the Nepalese authorities had not deemed it necessary to cancel 
the offending certificates. They were therefore formally requested in writing to check 
once more the validity of the certificates and inform the Commission of their findings, 
within the prescribed time-limit. In the Commission's view, the only possible outcome 
is that the certificates be declared invalid. 
Serious doubts have arisen as to the legality of a further 285 certificates of origin. They 
have been sent to the Nepalese authorities for ex post checks. 
The amount of own resources at stake in connection with the fake or wrongly issued 
certificates comes to ECU 2 million. 
2.2.3 Laos 
A Community delegation to Laos in November 1995, made up of representatives from 
the Commission and five Member States (France, Germany, Denmark, the Netherlands 
and the United Kingdom) found that 300 certificates of origin presented on the import 
into the Community of around 4 million items of clothing had been forged: they had not 
been issued by the Laos authorities. At the same time, 2 700 other certificates of 
preferential origin (concerning 22 million items) had been wrongly issued for goods 
which did not meet the criteria applicable under the GSP. 
The delegation's findings were endorsed by the Laos authorities, which confirmed in 
writing that all the goods inspected were ineligible for preferential treatment on import 
into the Community. The certificates of origin were either fake or issued in error. 
64 
However, as a less-developed country, Laos may ask for a derogation from the 
Community's GSP rules of origin. The authorities have therefore requested permission 
to continue to use fabrics imported from other Asian countries for manufacture. 
The Member States concerned now have the necessary information at their disposal to 
pursue investigations into Community importers and recover the customs duties involved. 
The amount of own resources at stake comes to nearly ECU 7 million. 
However, further investigations will be necessary to identify the true origin of the 
products imported into the Community using the false certificates (about 4 million items) 
so as to obtain a charge on the quantitative limits of this country. 
2.2.4. Textiles from China129 
Consultations were held with China in 1995 with a view to charging certain quantities of 
textiles imported illegally between 1990 and 1993 to the quantitative limits applicable 
under its textiles agreement with the Community. 
Investigations had confirmed that the goods in question were of Chinese origin. They had 
been imported into the Community either as contraband (evading the transit arrangements) 
or as goods supposedly originating in other countries. 
China has agreed that 13 778 000 items may be charged to its quantitative limits for 
1995. This quantity corrresponds to about 20% of the Chinese quota for the year 1995, 
for the category "textile 4" (tee-shirts etc.). 
2.2.5 Textile goods from the United Arab Emirates (TJAE)130 
Investigations have covered a number of different cases and circuits. 
In January 1995 Commission representatives visited the UAE to work out new methods 
of cooperation for identifying the true origin, as opposed to the declared origin, of a large 
number of consignments of textile goods from the UAE to the Community. 
In July the Commission sent the UAE authorities, as agreed, a list supplied by the 
Member States concerned so that the UAE could launch the appropriate preliminary 
investigations. This list contains details of more than 1 300 consignments covering 
around 80 million products, including tee-shirts corresponding approximately to the quota 
for China for 1995 or to 150% of the quota for India for .the same year. However, by 
October on-the-spot investigations had hardly begun and no findings were yet available. 
The Commission therefore reminded the UAE authorities of their obligations in this 
respect. 
On the basis of negotiating briefs approved by the Council, Commission representatives * 
held discussions with the UAE authorities in Abu Dhabi in October 1995 on the 
conclusion of a bilateral agreement on trade in textile goods, which would, among other 
129 See 1994 Report, Chapter 5, Section 3.2.1. 
130 See 1994 Report, Chapter 5, Section 3.2.1. 
65 
things, establish a system for inspecting exports of textiles from the UAE (licences, etc.). 
The agreement was initialled on 11 November 1995. 
2.3 Fishery products 
2.3.1 Salt cod from Iceland 
A Community delegation, consisting of representatives from the Commission and the 
Member State concerned, visited Iceland in April 1995 as part of an administrative 
cooperation mission to check the preferential origin of consignments of salt cod. 
The investigations revealed that several local firms had used fish originating in Russia in 
the manufacture of products which were then exported to the Community, contrary to the 
agreement between the Community and Iceland on preferential tariff treatment. The own 
resources at stake amount to ECU 1 million. 
Other firms importing salt cod from Russia had obviously learned lessons from the 
investigations into the "shrimps" case,131 as they had re-exported the finished products 
manufactured using ingredients not originating in Iceland to non-member countries only, 
thereby justifying the certificates issued for the products exported to the Community. 
The Icelandic authorities have declared the inapplicable certificates of preferential origin 
invalid and have launched recovery proceedings against the importers concerned. 
2.3.2 Canned tuna from Ecuador 
Following Community missions to Ecuador in March and October 1994 the five Member 
States concerned have begun proceedings to recover the customs duties evaded, totalling 
ECU 11 million. 
After the investigations in Ecuador, a Community mission visited the United States to 
gather evidence that importers in three Member States were fully aware that they were 
carrying out illegal imports. 
131 See 1992 Report. 
66 
These Community missions in non-member countries are organized either at the 
request of one or more Member States or at the Commission's initiative (the 
Commission handles relations with such countries). The aim is to seek for all 
evidence that may help as-' îrtain whether exported goods are in a lawful position as 
regards origin and then gather evidence to determine the scope of the fraud and the 
damage it has caused. 
Clearly this is the first stage, still upstream of the heavy burden of investigation 
work needed to provide an assurance that the rules of origin and the various 
preference schemes are being properly applied and to prove what diversions are 
taking place. 
In any event, where there is failure to abide by the terms of preferential 
arrangements established by agreements or on an autonomous basis, the Member 
State will obviously have to proceed to recover amounts due by way of Community 
revenue. 
Moreover, on the basis of findings and reports of Community missions, the national 
authorities will have to pursue inquiries to ascertain whether the fraud was 
intentional and come to the proper conclusions as regards penalties, especially in 
cases of fraud within the definitions of the Convention for the protection of the 
Community's financial interests that must be referred to the criminal courts. 
The Commission will do all that is necessary in 1996 to act in response to the 
current situation and will propose a political initiative in the form of a 
communication concerning preferential schemes as has been done for transit 
arrangements. 
Section 3: OTHER FRAUDS IN AGRICULTURE 
This section covers a selection of inquiries affecting a large variety of measures (export 
refunds, various types of production aid), showing that investigations are being carried 
out into a growing number of sectors. Some of these cases have been found to reflect 
errors of interpretation of Community rules, but in others there has been deliberately 
fraudulent intent, the methods used in such cases revealing sophisticated fraud 
mechanisms. 
67 
3.1 Exports of sugar to Sweden 
In August 1995 the Swedish authorities reported a case of possible commercial 
speculation involving sugar, which had taken place just before Sweden's accession to the 
European Union.132 
A Swedish company, whose main line of business is not trading in sugar, stocked around 
25 000 tonnes of sugar in two warehouses. 
Inquiries in Sweden revealed that 22 000 tonnes of this sugar, which had been exported 
from Germany and France to Sweden in the last two months of 1994, were re-exported 
in 1995 to Germany and Greece. 
Some ECU 6.5 million was paid in export refunds in Germany, Belgium and France. 
Further investigations are in progress in a number of Member States to determine whether 
the export refunds paid were not claimed a second time after the sugar was reimported 
into the Community. 
3.2 Imports of rice into Sweden (taxation of surplus stocks) 
An inquiry was conducted in Sweden concerning the possible taxation of surplus rice 
stocks when Sweden joined the European Union. 
Trade statistics supplied by the Swedish authorities showed an increase in rice imports of 
around 73 000 tonnes in 1994 in relation to average annual imports from 1991 to 1993. 
Five firms were inspected and were found to have large stocks of rice. All five explained 
that the price of rice per kilo was likely to double in the event of Sweden joining the 
European Union, hence the increase in their imports (between October and 
December 1994), the main purpose being to satisfy demand on the domestic market 
before the price increase. 
Commission departments asked the Swedish authorities to examine surplus stocks over 
the three preceding years on a case-by-case basis along with all accounting and 
commercial documents available, in particular documents relating to stockkeeping and 
invoicing (purchases and sales). 
3.3 Imports and re-exports of olive oil (Italy and Austria") 
The Commission received information about imports into Italy of 1 091 tonnes of virgin 
olive oil, originating in Tunisia, and exported direct to Austria on 29 December 1994. 
This quantity was therefore imported into Austria before its accession to the European 
Union and was thus taxable as surplus stock. 
Within the framework of Commission Regulation (EC) No 3108/94 on transitional measures to be 
adopted on account of the accession of Austria, Sweden and Finland in respect of trade in 
agricultural products (OJ L 328, 20.12.1994). 
68 
The Commission's inquiries revealed that 802 440 kg of olive oil had been re-exported 
from Austria to Italy. 
At the Commission's request the Austrian authorities levied a tax of ECU 846 537 on the 
surplus stock. As the Austrian exporter is now bankrupt, there are doubts about whether 
this tax will be recovered. 
As regards the 802 440 kg of olive oil reimported into Italy, the Commission asked the 
Italian authorities to ensure, in accordance with the rules applying in such cases, that no 
application for consumption aid was made. 
Investigations in Italy revealed that this aid had in fact been granted. The Italian 
authorities have taken all the appropriate measures to recover the amount paid. 
The lesson to be learned from these three cases concerning Sweden and Austria is 
that only systematic physical checks conducted by the local authorities under the 
existing rules are capable of detecting irregularities in transactions of this kind 
(import/export of "temporarily sensitive" products). 
3.4 Imports of frozen beef tongue originating in Argentina 
Inquiries in France, Italy and Portugal revealed that at least 450 tonnes of frozen beef 
tongue originating in Argentina was imported into the Community between 
September 1993 and December 1994. This meat was accompanied by forged health 
certificates. When the copies of the authentic certificates archived by the relevant 
departments in Argentina were examined, it was found that the destination of the meat, 
which did not qualify for entry into the Community, was Angola, via Lisbon 
(17 containers). 
Because of health restrictions on imports of offal originating in various countries in South 
America, fraud of this kind poses a real threat for animal health (spread of foot and 
mouth disease). The financial risk is also substantial since, in the event of infection, the 
Member States and the Community will have to bear the cost of combating the disease. 
The matter has been referred to the Portuguese judicial authorities. 
3.5 Exports of Swiss Emmental 
Emmental, gruyère and Sbrinz cheese are entitled to a reduced level of duty on import 
into the Community, provided the minimum price rule is respected. Producers of these 
Swiss cheeses must go through the USF (Swiss Cheese Union) to obtain the guaranteed 
price (on the Swiss market) and a document certifying that the minimum price is 
respected (IMA. 1) for the purposes of export to the Community. For years, however, 
large quantities of Emmental cheese have been exported to companies in France, Germany 
and Italy; the USF has been certifying that prices charged by the exporting companies 
were below the minimum price. But the USF has then been refunding direct to the 
Community importers part of the selling price corresponding to the difference between 
the Community market price and the price charged by the exporters. Hence the minimum 
import price was no longer applied. 
69 
The Commission sent a mission to Berne in May 1995 with the agreement of the Swiss 
Federal Authorities. 
The initial findings enabled the Italian authorities to begin investigations of the main 
importers in Italy. The present indications are that at least ECU 13 million in customs 
duties have been evaded. 
Similar inquiries are currently nearing completion in Germany and France. The German 
customs have sent the files On four importers in Konstanz to the judicial authorities. The 
duties evaded in this specific case are estimated at ECU 1.2 million. French customs, for 
their part, have informed four other importers that procedures have been set in motion for 
the recovery of some ECU 3.9 million. 
3.6 Advance financing of export refunds for meal 
A team of inspectors went to Spain to visit firms which received this type of advance 
financing in 1995. The stocks of durum wheat and meal were checked against the 
quantities declared for advance financing by operators with due allowance for exports in 
the meantime. 
Two of the three firms inspected were found to have been involved in fraud. In the first 
the "missing" quantity was 17 719 tonnes of durum wheat, and for the second 
28 998 tonnes of durum wheat and 616 tonnes of meal were missing. 
These quantities were totally unrelated to what was declared for advance financing and 
also to the storage capacity on site. 
The inadequacy of the physical controls by national authorities enabled certain 
unscrupulous operators to make false declarations and thus receive undue advance 
payments (around ECU 1.49 million) and also to distort the rules of competition in their 
favour. 
These facts confirm the Commission's view that in a case of this type where the 
amount of aid involved is directly linked to the quantity of products, it is essential 
that physical checks be carried out to avert any attempt at fraud. 
3.7 Exports of rice from the United Kingdom to Sweden 
The British authorities informed the Commission of a case of fraud involving a quantity 
of rice exported to Sweden under the inward processing arrangements. 
It had been declared as "unmilled rice", whereas after sampling and testing it was found 
to be broken rice (a product of inferior quality to what had been declared). 
These exports133 were by a British subsidiary of a Dutch company. Incorrect declarations 
had been made allowing an equivalent quantity of rice to be imported from non-member 
countries (under the same customs references) without payment of customs duties. 
133 A system of export ahead of inward processing arrangements. 
70 
The financial loss to the Community is around ECU 5 million (traditional own resources). 
The Commission is coordinating the procedures for recovering the evaded revenue 
(Netherlands and United Kingdom). 
3.8 Olive oil 
The Commission collaborated with the public prosecutor's office at the court of Vasto in 
Italy in a case concerning the sweetening of olive oil which adversely affected the 
Community budget. 
The fraud began in 1990 after a Roman trading and export company took over an olive 
oil producing company. 
The scheme is as follows: the production company has stocks of olive oil, olive-residue 
oil and seed oil.134 It sells seed oil to other companies in return for the purchase of olive 
oil. In actual fact no products are transferred, but fictitious purchase and sales invoices 
are issued (false transport documents are also produced and false invoices are issued by 
transport companies involved in the fraud ring). 
The main protagonists admitted that the oil sold was never pure (mixtures of olive oil, 
olive-residue oil, seed oil and palm oil) and thus did not qualify for payment of the 
refunds received for the exports by the parent company. 
The cost to the Community was a total of ECU 2 million, ECU 1.3 million in 
consumption aid and ECU 0.7 million in wrongly paid export refunds. 
Recovery procedures are now in progress. 
Four people have been convicted. 
3.9 Diversion of butter and milk powder 
This case concerns the export, with refunds, of butter and milk powder from the United 
Kingdom, allegedly to Poland but in fact to Spain. 
The suspected fraudsters guaranteed the exporter the goods at the prices in force for 
non-member countries. The exporter was given forged Polish import documents to 
support the application for export refunds. 
It is estimated that around 150 lorry-loads were diverted between October 1993 and 
May 1994, corresponding to a total of some ECU 3.3 million in wrongly paid refunds. 
The products were probably sold in Spain below the market price and for a substantial 
profit. 
134 Olive-residue oil is obtained by chemical processes from organic matter (or waste) remaining after 
olives (the fruit) have been pressed. Seed oil is a generic term (soya oil, sunflower oil, etc.). The 
largest refunds are paid on exports of olive oil (they are very small for olive-residue oil). 
71 
In June 1994 seven people were arrested. Six of them are to appear in court early in 
1996. The inquiries coordinated by the Commission were carried out in Spain, Poland 
and Germany and evidence was collected in response to a request for judicial assistance. 
The wrongly paid refunds were recovered. 
3.10 Imports of beef at a reduced rate of duty 
Under the GATT135 the Community adopts an annual Community reduced-rate tariff 
quota. To qualify for this facility operators must present a GATT import licence to the 
Community customs office of import. These licences may be transferred within the limits 
of the overall quantities authorized. 
Investigations had to be conducted in various Member States into fraudulent imports of 
frozen beef from outside the Community accompanied by fake GATT certificates 
(showing the Spanish Ministry of Foreign Trade as the issuer). 
Judicial investigations in Italy into cases of forgery, conspiracy, smuggling and obtaining 
by deception revealed that a criminal organization had sold 46 fake GATT certificates 
covering goods exceeding by over 55% the total quota awarded to Spain, where the beef 
was imported. 
The Community lost some ECU 5.4 million in own resources. Three people are in 
custody in Italy and an international arrest warrant was executed in Spain on an 
Argentinian national suspected of masterminding the sale of the forged certificates. 
3.11 Stocks of tobacco in Italy and Greece 
On the basis of information received by the Commission, inquiries into tobacco 
intervention stocks in Italy and Greece were made in late 1995. 
The question of the eligibility and classification of certain lots in stock in Greece had 
been raised. This concerned around 11% of total stocks worth an estimated 
ECU 9 million. 
The Commission finally decided to withdraw this proportion from sale. 
3.12 Sugar quotas in the United Kingdom 
On the basis of information sent in by the British authorities, an inquiry was conducted 
in the United Kingdom into commercial operations concerning the system of sugar quotas 
for the 1992/93 sugar year. It was found that a large number of irregularities had taken 
place concerning the application of the sugar market rules,136 with a serious financial 
impact on the Community budget. 
135 
136 General Agreement on Tariffs and Trade, which was replaced in 1995 by the World Trade 
Organization. 
Council Regulation (EEC) No 1785/81: OJ L 177, 1.7.1981. 
72 
Initial findings are that some 16 500 tonnes of sugar were declared for export on the basis 
of forged licences.137 The monetary compensatory amounts (MCA) were claimed and 
obtained (ECU 500 000). The financial consequences for failure to comply with the 
provisions governing C sugar are being established. 
The inquiries are continuing, in particular into storage costs for 1992/93 and other years. 
The latest information suggests that the false declaration of sugar stocks for the year in 
question will have resulted in around ECU 2 million in aid being wrongly paid to the 
operator. 
3.13 Aid for casein production in the Netherlands 
On the basis of information received, the Commission began inquiries into aid for the 
production of casein in the Netherlands. Following initial investigations an irregularity 
concerning some ECU 3 million was established for failure to comply with the specific 
procedures for the processing of certain types of caseinate as laid down in the Community 
rules.,3* 
This financial correction will be applied in the clearance of accounts procedure. 
Other developments are expected on the basis of the results of the inquiries, notably into 
the use of certain chemicals in the manufacture of caseinate and the application of the 
rules concerned.139 
3.14 Sales of milk outside the quotas in the United Kingdom 
This case received wide press coverage in the United Kingdom and was investigated 
jointly by the Commission and the UK authorities. The initial findings reveal that milk 
outside the quotas, on which no supplementary levy was therefore paid,140 was sold in 
North West England. 
A number of people appeared in court and were fined. 
The UK authorities currently estimate the financial impact at around ECU 1.5 million. 
Recovery procedures will be set in motion. 
Inquiries are continuing, notably in Northern Ireland, into manipulations concerning the 
fat content of milk delivered (1994/95 marketing year), the main result being that the 
supplementary levy was unduly reduced. The inquiries must also determine whether or 
not there was a failure to declare certain consignments under the quota regulations. 
The national authorities have started specific procedures for failure to comply with the 
fat content for the products delivered. The Commission expects to have the findings of 
this inquiry in 1996. 
137 
138 
139 
140 Licences for sugar intended for export to the world market without payment of refunds. 
Council Regulation (EEC) No 2921/90: OJ L 279, 11.10.1990. 
Council Regulation (EEC) No 2921/90 cited above; Council Directive 83/417/EEC: OJ L 237, 
26.8.1983. 
Council Regulation (EEC) No 3950/92: OJ L 405, 31.12.1992. 
73 
3.15 Skimmed milk powder in Italy and the Netherlands 
Following production of a report by the Dutch authorities the Commission began an 
inquiry into a case concerning compound animal feed containing milk powder. This 
product, which was manufactured in Italy, was destroyed in the Netherlands. Around 
1 200 tonnes, for which a Community subsidy would appear to have been paid, was 
destroyed on the instructions of a Dutch subsidiary of the Italian company which received 
the Community premium. 
The Community rules141 provide that payment of aid is dependent on the actual 
incorporation of milk powder in the feed preparation and also on the feeding of the 
product to the animals in question; there is thus an obligation for the feed to be 
consumed. This was clearly not the case here as the products were declared to be unfit 
for animal consumption in the Netherlands. The aid wrongly paid must therefore be 
recovered from the manufacturer concerned. 
In the early stages of the inquiry it became clear that there were serious problems with 
controls to be undertaken in the Member States concerned. 
The Commission is expecting this case to be tied up in the first half of 1996. 
Section 4: OTHER FRAUDS IN RELATION TO STRUCTURAL POLICIES 
4.1 European Social Fund (ESF) 
Most of the structural policies cases currently under investigation by the Commission 
concern the ESF. 
4.1.1 As part of an operation to settle old ESF cases, the Commission sent a mission to 
Portugal in March 1995 to inspect vocational training courses presented by a 
promoter, involving considerable sums of money. 
The inspection revealed large-scale, fraudulent over-invoicing of services rendered 
by subcontractors (non-existent accounting documents, etc.), punishable under 
Portuguese criminal law. The prosecuting authorities (Circulo Judicial de Anadia) 
have ordered a judicial inquiry. 
4.1.2 In another major judicial inquiry, now before the courts in Lisbon, a trade union 
federation and some of its leaders and subcontractors have been indicted for 
diverting Community and national subsidies worth ECU 1.5 million (cases dating 
from 1988 and 1989). 
The fraudsters had presented artificially inflated expenditure and failed to organize 
training courses. The Commission has decided to join a civil claim to the criminal 
proceedings. 
141 Commission Regulation (EEC) No 1725/79: OJ L 199, 26.7.1979. 
74 
Since the same promoter is involved in the first and second Community Support 
Frameworks,142 the Commission has carried out on-the-spot inspections to ensure 
that the measures it presented have been implemented in accordance with the 
applicable rules. 
4.1.3 An investigation was launched into the activities of a British firm in connection 
with technical assistance in the social field. The Commission suspected that the 
contract was being misapplied. Inspections revealed that supporting documents 
in respect of costs incurred were missing and that certain operations had been paid 
for twice. The contract is worth ECU 1.73 million. 
4.2 European Regional Development Fund (ERDF) 
4.2.1 On scrutinizing the administration of the French département of Var in 1994-95, 
the Provence-Alpes-Côte d'Azur regional audit body discovered over-invoicing 
involving more than ECU 5 million in connection with the supply of equipment 
to encourage technical innovation (ERDF co-financing totalling ECU 38 million 
under the Renaval programme for the conversion of shipbuilding areas from 1990 
to 1993). 
The judicial inquiries currently in progress suggest that local councillors received 
under-the-counter payments totalling at least ECU 0.5 to 1 million in exchange for 
falsifying public contracts. 
Further research by the investigating departments should reveal whether the 
practices followed in this département are widespread or constitute an isolated 
case. 
4.2.2 Irregularities in the Liège district in Belgium, relating to the Objective 2 (1992-
93), Résider143 (1990-92) and Konver144 (1993) programmes were detected in 1995 
following inspection missions by the Commission in April and August 1994 and 
by the European Court of Auditors in November 1994. 
Following these inspections, the Commission suspended all financial support for 
the project in question pending final conclusions on the case, in accordance with 
Article 24(1) of Council Regulation (EEC) No 4253/88,145 proposing that a 
significant amount be recovered and several million ECU be decommitted, and 
asking the Member State concerned to submit its comments. Implementation is 
i under way. 
142 
143 
144 
145 Community Support Frameworks are drawn up by the Commission in consultation with the 
Member State and regions concerned, defining priorities for action, the financial n 'ccc > - mired 
and the various forms of intervention. 
Conversion of steel-making areas. 
Diversification of regions dependent on military activities. 
OJ L 374, 13.12.1988, as amended by Council Regulation (EEC) No 2082/93 (OJ L 193, 
13.7.1993). 
75 
Section 5: OTHER FRAUD IN RELATION TO DIRECT EXPENDITURE 
Operational activities in this field, which covers expenditure managed and audited directly 
by the Commission, were stepped up in 1995. 
Investigations have covered a significant number of cases in all sectors of activity. 
5.1 Research 
5.1.1 Acting on the basis of remarks by the Court of Auditors in a sectoral letter to the 
Member of the Commission responsible for information and telecommunications 
technologies, the Commission inspected a group of firms in Belgium and the 
United Kingdom which received funds allocated under the RACE programme.146 
It was found that the main beneficiary had systematically produced false 
statements of expenditure, inflated by an estimated ECU 500 000, in some cases 
using invoices for fictitious services. The firms' directors had also deliberately 
carried out legal, accounting and financial operations designed to create the 
illusion of co-financing which did not in fact exist. 
The Commission terminated contracts still in progress as quickly as possible, drew 
up appropriate recovery orders and referred the matter to the competent legal 
authorities in Belgium so that criminal proceedings could be brought against the 
perpetrators of the fraud. 
5.1.2 A systematic anti-fraud investigation was launched as a result of an analysis of the 
JOULE I and II/APAS-RENA programmes147 and a critical examination of their 
administration by the authorizing departments. The initial results of inspections 
in Germany confirm the existence of irregularities and suggest that fraud has 
indeed been committed in this sector, bearing out the findings of the administering 
departments. 
5.2 Energy 
Following an investigation by the prosecuting authorities in Oristano (Sardinia), a request 
has been made for six persons to be committed for trial on charges of diverting aid 
granted by the Commission and the Sardinian regional authorities for the construction of 
a new, innovative wind-power plant costing an estimated ECU 1.25 million. 
The firms involved had in fact converted an existing plant and used the funds for 
purposes other than those specified in the contract. 
146 RACE - "Research and development programme in advanced communication technologies for 
Europe". 
JOULE - "Joint opportunities for unconventional or long-term energy supply". 
76 
5.3 European Development Fund (EDF) 
The Commission and the Senegal Ministry of Finance discovered that large amounts of 
aid had been diverted from their proper purpose which was to help small businesses in 
the Saint Louis region boost their activity and create jobs. Initial estimates put the amount 
involved at between ECU 2 and 4 million. 
In the legal proceedings currently under way in Senegal a consultant is accused of 
diverting some of the funds for his own personal profit. 
5.4 Environment/Medspa programme (Italy) 148 
It has proved impossible to implement the payment order drawn up in 1994 against the 
Italian firm which benefited from a Medspa project, because of the machinations of the 
firm's directors. The Commission is considering the possibility of referring the matter to 
the Italian police with a view to criminal proceedings against those responsible. 
148 See 1994 Report, Chapter 5, Section 5.1. 
77 
CHAPTER 7 : STATISTICS AND ANALYSES 
The objective of intelligence gathering is to collect the maximum amount of relevant 
information, to combine all accessible sources of information and to give a structured 
form to available information. The purpose of this is to detect as many cases of fraud as 
possible and follow such cases up in administrative, financial and criminal terms 
(enforcement). The exercise might culminate in amendments to existing Community 
legislation or the drawing up of future legislation (prevention). 
The Commission's first source of information is to be found in the reports received from 
Member States under the sectoral rules in force.149 
Another very important source is the exchange of information in the framework of mutual 
administrative assistance.150 
The freephone number set up in November 1994 is another important source.151 During 
its first twelve months of operation,152 the Commission received more than 4 000 calls. 
Around two hundred of these led to further investigations being carried out. Some of the 
calls prompted a formal enquiry involving amounts of more than ECU 30 million. In 
others, the information received was used by the Commission to cross-check information 
from other sources. Likewise, access to different databases, both Community and 
international, and in particular international trade databases, allows this type of cross­
checking to be carried out, suspicious transactions to be detected and on-the-spot 
investigations to be better targeted. 
The Commission is currently developing an integrated information system which will take 
account of these different information sources. This system is based on a new version 
of the IRENE database, which merges two previously separate databases: "IRENE" (for 
cases of fraud reported by the Member States) and "pre-IRENE" (for cases under joint 
investigation by the Commission and the Member States). Furthermore, this new database 
will set up a direct link with "Mutual administrative assistance" messages, where these 
refer to cases with an impact on the Community budget. 
The new database (IRENE 95) will not be a mere database recording information on fraud 
cases but a management tool. Analysis of the data will facilitate the identification of risk 
factors that make fraud against the Community budget possible or easier. 
Section 1 : THE SITUATION IN 1995 
In 1995 the Member States and the Commission detected more than 4.750 cases in all of-
the different budget areas combined. The sums involved came to more than ECU 1.100 
149 
150 
151 
152 Council Regulations (EEC) Nos 1552/89 (own resources), 595/91 (EAGGF Guarantee Section) and 
4253/88 (Structural Funds). 
Council Regulation (EEC) No 1468/81. 
Numbers are listed country by country in the Annex. 
Initially limited to twelve Member States. The new Member States have since been connected. See 
also Chapter 2, Section 2.4 of the 1994 Annual Report on the Fight Against Fraud. 
78 
million. This represents a significant increase in the number of cases but a more modest 
increase in the budgetary impact of those cases (see Table 1). 
These figures include, on the one hand, the cases formally notified by the Member States 
in the framework of their regulatory obligations, and on the other hand, the cases initiated 
by the Commission and cases dealt with in cooperation with the Member States. The 
second category of cases includes the cases which arise from an exchange of information 
between the investigative services of the Member States and the Commission or from 
coordination in the framework of "mutual assistance". The number of cases in this latter 
category continues to increase and these enquiries represent more and more significant 
sums (in 1995 more than 50 % of the budgetary value of irregularities, see Table 2). 
The figures in Tables 1 and 2 concerning cases notified by the Member States in the area 
of traditional own resources only have been extrapolated for the whole year in order to 
allow a uniform overview of the general situation. This extrapolation is based on the 
figures notified for the first half year as well as those indications already available for the 
second half year. Regulation (EEC, EURATOM) no 1552/89, at present, only requires the 
Member States to notify cases once per half year and therefore the statistics for the 
second semester of 1995 are not yet finalised. For the first half year only, the Member 
States notified 1.146 cases with a budgetary impact of ECU 132 million (see Table 3). 
In the realm of EAGGF Guarantee Section expenditure (see Table 4) the Member States 
have notified 1.754 cases with a budgetary impact of ECU 214 million. This amount is 
significantly less than previous years. On the other hand the budgetary impact of the cases 
dealt with by the Commission in cooperation with the Member States has continued to 
increase significantly. If one includes these cases the budgetary impact rises to ECU 316 
million. 
The biggest increase in terms of the numbers and amounts involved is in relation to 
structural measures (see Table 5). Although the number of cases notified by the Member 
States remains low it has increased significantly in comparison with notifications made 
in the past due to the recent putting in place of the Commission regulations in this area. 
This explains also the high number of cases in comparison with 1994 which the 
Commission has obtained knowledge of through other information sources. The total 
amount involved is ECU 67 million, of which ECU 23 million relates to enquiries 
initiated by the Commission. 
A significant increase can also be noticed in the number of cases in the area of direct 
expenditure (see Table 6). In this area there are no cases notified by the Member States 
as this is expenditure managed by the Commission. 
For the first three budgetary areas mentioned above Table 7 gives a division of the cases 
notified by the Member States and those dealt with by the Commission by sub-area. This 
allows a better evaluation of the incidence of irregularities in these areas. 
The number of cases notified and the amounts concerned naturally vary greatly from 
Member State to Member State (see Table 8). Given that the amount of traditional own 
resources that has to be collected by each Member State varies greatly as a function of 
its position in relation to the Community's external trade, and that there are significant 
differences between the expenditure on the Community budget between individual 
Member States, it is necessary to examine the figures for the number of cases uncovered 
79 
and their budgetary impact in the context of the relative position of each Member State 
with regard to own resources and expenditure. 
On average and taking all sectors together, a case of fraud or irregularity notified by a 
Member State involves an amount of approximately ECU 130.000. Only 1,5 % of notified 
cases involve more than ECU 1 million. The average budgetary impact of cases under 
investigation by the Commission, on the other hand, is ECU 1,6 million. This reflects a 
deliberate choice by the Commission to concentrate its efforts on combatting organised 
or sophisticated fraud. Such fraud, the origin of which is often characterised by the 
participation of persons or firms operating from one or many countries is difficult for the 
Member States to identify without the active support which can only be given at the 
Community level. 
Section 2 : TRENDS 
Whereas in previous years the number of irregularity and fraud cases, and their budgetary 
implications rose steadily, in 1995 there was a certain stabilisation of the total amount 
involved. The number of cases uncovered increased nonetheless by about 15 % compared 
to 1994 while the amounts remained practically identical. At the same time the 
Community budget grew by nearly 9 %. 
The evolution within the four important budget areas identified in Section 1 is very 
different. The amounts involved in the EAGGF Guarantee expenditure area have gone 
down while the amounts involved in traditional own resources have increased 
significantly. Nevertheless prudence is necessary in drawing conclusions in relation to 
trends based only on variations between one year and another. A very limited number of 
highly spectacular cases uncovered during any given year can have a major impact on the 
global figures for that year. The date of detection, and communication of an important 
and complex case of irregularity is always uncertain. For example 1994 was remarkable 
for the number of very important cases in the EAGGF-Guarantee expenditure area (7 
cases among the 1.610 notified by the Member States represented more than ECU 200 
million or half of the total amount). 
Another marked change is the number of cases (and notably the budgetary impact of those 
cases) which were dealt with by the Commission, in cooperation with the Member States, 
which has increased significantly. Principally this reflects progress achieved in operational 
activity through the concentration of the efforts of the specialised services of the Member 
States and of the Commission on the most important and sensitive cases identified through 
more efficient and better targetted controls. This is encouraging, even though overall in 
this area, the position remains unsatisfactory. 
For the first time, in 1995 the notifications in the area of EAGGF Guarantee expenditure 
show a considerable reduction in the amounts involved compared to 1994. This could be 
the first reflection of the reform of the Common Agricultural Policy (CAP). It is in fact 
necessary to consider the general evolution of the EAGGF Guarantee expenditure in 1995, 
in particular in two sectors in which high levels of irregularity were recorded in 1994 
(export refunds for cereals and consumption aid for olive oil) where expenditure was 
reduced sharply in 1995. Expenditure on export refunds (all products combined) went 
from ECU 8.159 million in 1994 to ECU 7.802 million in 1995. Olive oil consumption 
aid went from ECU 613 million in 1994 to ECU 263 million in 1995. On the other hand, 
80 
direct aid (including set-aside) went from ECU 10.552 million in 1994 to ECU 13.506 
million in 1995. 
The budgetary impact of irregularities uncovered by the Member States or the 
Commission in the area of traditional own resources continues, however, to rise. This is 
due for the main part to the results of greater efforts by the investigation services of the 
Member States and the Commission, achieved through a better targetting of sectors at 
high risk (products subject to high levels of taxes and excise duties or high import duties). 
Customs duties on industrial products remain the most affected. Whereas in 1994 there 
were more cases involving customs duties than those involving agricultural levies (45 % 
against 30 %), the proportion was inverted in 1995 in favour of the latter (39 % against 
30 %). For the amounts involved evaded customs duties represented nearly 54 % of the 
total in 1995 against only 39 % in 1994 (see Table 7). This reflects in the first instance 
the growing number of cases of fraudulent importation of cigarettes detected. The Task 
Force which has been created by the Commission with the services of the Member States 
has allowed the identification of irregularities with considerable budgetary impact (see 
Table 9). 
In the area of structural actions, the number of cases uncovered and their budgetary 
impact has also grown. This is due, in the first instance, to the entry into force of detailed 
provisions for the notification by Member States as well as the putting in place of 
appropriate investigation structures with the Commission. The number of cases notified 
is highest in the ESF but the EDRF expenditure concerned is the most significant (56 % 
of the total budgetary impact) which reflects the greater financial importance of this fund. 
Section 3 : TRANSIT 
In March 1995 the Commission addressed a Communication to the European Parliament 
and the Council in which it set out a realistic picture of the situation in the transit area, 
noted the shortcomings of the current system and identified short-term and long-term 
solutions. 153 
The loss of own resources and other charges during the period 1990 to 1995 was 
estimated to be at least ECU 975 million for the Community and the Member States. The 
loss of own resources alone was estimated to be ECU 409 million on the basis of cases 
notified by the Member States either in conformity with Regulation (EEC, EURATOM) 
no. 1552/89 or in the framework of Regulation (EEC) no. 1468/81 on mutual assistance. 
Cigarettes are the product that is by far the most concerned by cases of irregularity and 
fraud in the transit area (in the period 1990 to 1995 the cases involving these products 
represented 47 % of the amounts involved). Next come milk products, live animals and 
meat (see Table 10). Given the very high rates of taxes and excise duties applicable (or 
import duties due on such goods) these products are considered as "sensitive". The 
Member States and the Commission have put in place a computerised system to allow the 
rapid exchange of information in these cases (early warning system154) under an 
administrative agreement. 
153 
154 See chapter 2, section 3, point 1, page 23. 
See chapter 2, section 3, point 1, page 25. 
Section 4 : RECOVERY 
The situation regarding recovery in the areas of traditional own resources and EAGGF 
Guarantee remains unsatisfactory. This is of particular concern in that this is an area 
where the Member States have an interest which is at least as important as that of tl • 
Community to see an improvement in the situation as regards its impact on the budget. 
The problems are significant, notably the slowness of internal administrative procedures 
in the Member States and the high percentage of cases in which the economic operators 
concerned contest recovery decisions before national courts. Moreover the figures set out 
in Table 11 to 13 may underestimate the real efforts of the Member States to the extent 
that the latter do not systematically notify the Commission of amounts recovered, in 
particular in the area of traditional own resources. The United Kingdom, in particular, 
supplied figures showing that the recovery rate for traditional own resources (see table 
11) is clearly higher than the figure arrived at using data from the computer base. These 
figures, which are provided each quarter on a global basis, do not enable the updating of 
individual cases which represent the basis used for the production of statistics on recovery 
of traditional own resources. The adoption of the new regulation on this subject in 1996 
should resolve this problem. 
The recovery of customs duties is a particularly difficult area. Indeed questions are 
invariably asked, as to the reasons why a customs debt has arisen and the way in which 
responsibilities in carrying through the recovery process are determined. In order to tackle 
these difficulties the Commission has put in place a specific measure to allow decisions 
to be taken more quickly in this area, and above all within the time limits needed to avoid 
recovery being legally barred. An interservice working group has been charged with the 
examination of contentious dossiers, with bringing together all the necessary elements and 
with presenting the appropriate conclusions. 
To judge the effectiveness of the procedures set up by the member States, the situation 
needs to be looked at with a degree of detachment. It would thus seem more proper to 
analyse the situation as regards recovery of the amounts involved by taking the cases 
notified in the years prior to the period covered by the annual review. Tables 11 to 13 
therefore describe the position with respect to cases notified between 1992 and 1994 in 
detail and sum up the overall situation as regards older cases. 
In 1995, there were still a very large number of old cases pending (in some cases they 
went back as far as the 1970s). On 31 December 1995, in the area of the EAGGF 
Guarantee Section alone, 1.169 cases notified in 1991 or earlier were still open; legal 
proceedings were under way in 419 cases. Two Member States (Italy and Germany) 
brought more than 90 % of all legal proceedings. As announced at the 20 October 1995 
meeting of the committee of the Irregularities and Mutual Assistance Group, the 
Commission, working with the Member States, will do its best to find a way of closing 
the older cases on which no progress is likely to be made and on which a decision as to 
whether the amount at issue is irrecoverable or chargeable to the Member State needs to 
be taken. 
While there exists in the area of EAGGF Guarantee the possibility to hold a Member 
State responsible for any negligence in the recovery of amounts concerned by 
irregularities and to charge the amounts that ought to, and could have been, recovered to 
82 
the Member State involved (in a procedure known as the "clearance of accounts") this 
possibility is not explicitly provided for at this stage in the other budgetary areas. The 
worrying situation which exists in the area of traditional own resources makes all the 
more important the reflection on the extension of the principles of the clearance of 
accounts procedure to the c ier budgetary areas as advocated by the Madrid European 
Council in December 1995. 
Section 5 : ANALYSING LEGISLATION 
As part of its "sound financial management" initiative, the Commission took a number 
of decisions designed to ensure that any new legislative initiative with substantial 
budgetary implications is subjected to prior examination as to any fraud risk it might 
involve and to any measures which will guarantee effective protection of the 
Community's financial interests. In the Illrd phase of this exercise, which is being carried 
out together with the Member States, the question has been put in the same spirit, as to 
how to avoid the situation where changes to Commission proposals which arise during 
Council negotiations could increase the risk of fraud. 
Furthermore, on the basis of available data concerning cases of irregularity detected in 
the past, the Commission will each year draw up a list of rules to be reviewed from the 
point of view of providing more effective protection for the Community's financial 
interests. This work should reinforce the partnership that is indispensible in this area to 
achieve a more systematic use of acquired experience. 
Priority will be given to rules which : 
have substantial budgetary implications such that non-compliance will confer 
added benefits on the economic operators concerned; 
are highly complex and difficult to supervise; 
have been identified in Court of Auditors reports or the Irene and pre-Irene data 
bases as being especially vulnerable to fraud. 
In this context and following the findings established in 1995, the Commission proposes 
to examine, inter alia, the rules on time limits applied to securities in the customs code, 
import duties and export refunds in the beef and veal sector, the staffing of the 
Community wine sector supervisory corps,155 the olive oil production aid system and 
articles 23 and 24 of Regulation (EEC) No 4253/88. 
The Commission is also studying, in partnership with the Member States and in the 
context of the Illrd phase of SEM 2000, other improvements which could contribute to 
a reduction in the risk of irregularities. They involve, for example, the question of a 
clearer definition of the eligibility criteria for expenditure in the area of Structural Funds 
and the audit and control systems put in place for indirect expenditure managed by the 
Member States. 
Council K gulation (EEC) No 2048/89, OJ L 202, 14.07.1989. 
83 
TABLE 1 
ALL SECTORS 
1992 -1995 
TOTAL IMPACT of IRREGULARITIES 
formally communicated by Member States 
and inquiries held by the Commission 
together with Member States 
NUMBER of CASES 
1995 
WÊMmM 
AMOUNTS in MILLION ECU 
1.200 
1.100 
1.000 
900 
800 
700 
600 
500 
400 
300 
200 
100 I 1992 I 1993 I 1994 _j 
. 403 
204 I IliiillllllPlli: 1995 
"1.146 (*) 
(*) Own Resources : including estimation for the second hatf of 1995. 
UCLAF F/2 TAB1.XLS 19/04/96 
TABLE 2 
ALL SECTORS 
1992-1995 
1. IRREGULARITIES FORMALLY 
COMMUNICATED (#) by 
MEMBER STATES 2. INQUIRIES HELD by 
the COMMISSION together 
with MEMBER STATES 
NUMBER of CASES 
4.500 "2 
4.400 
4.300 ~ 
4100~ 
4.100^ 
4.000 
3.750 ~ 
3.500~ 
3.250 ~ 
3.000 ~ 
2.750~ 
2.500 
2.250 
2.000 ~ 
1.750~ 
1.500 ~ 
1-2S0~ 
1.000~ 
800~~ 
600~ 
400~ 
200~ 1992 1993 1994 
2.U6 2.533 3927 1995 
4,396 O 
• ^^ 
i 4.500 ~ 
4.400 " 
4.300 ~ 
4J00~ 
4.100~ 
4.000 ~ 
3. 750 " 
3.500 " 
3-250~ 
t 3.000 ~ 
2.750 ~ 
2.500 ~ 
2.250 " 
2 000 ~ 
1.7S0~ 
1.500~ 
12S0~ 
1.000~ 
eoo~ 
6oo~ 
400 
200~ 1992 1993 1994 
WmosMM] 1995 
362 
AMOUNTS in MILLION ECU 
750 
700 
650 " 
S00~ 
550~ 
S00~ 
450 ~ 
400 
350~ 
300~ 
250 ~ 
200 1992 1993 
204 403 1994 
711 1995 
572 (*) 750 
700 " 
650 ~ 
too' 
550 ~ 
500 ~ 
450 ~ 
400~ 
350~ 
300~ 
250~ 
200~ 1992 1993 1994 
376 1995 
574 
"1 
-fl 
U Cases detected and communicated formally by the Member States on the basis of the regulations, in force during the year indicated 
in the sectors Traditional Own Resources , EAGGF-Guarantee and Structural Actions. 
## Inquiries of the Commission- in cooperation with the specialized services from the Member states 
an irregularity and to evaluate its financial impact during the year indicated. 
(') Own Resources : including estimation (or the second hn!( of 1995. vhich allowed to identify 
85 
TABLE 3 
TRADITIONAL OWN RESOURCES 
1992-1995 
1. IRREGULARITIES FORMALLY 
COMMUNICATED (#) by 
MEMBER STATES 2. INQUIRIES HELD by 
the COMMISSION together 
with MEMBER STATES " 
NUMBER of CASES 
2.600 
2.400 
Z9O0 
2200 
2100 
2.000 
1.9O0 
1.000' 
1.700' 
1.6O0' 
1.SO0\ 
1.400' 
1.300' 
1.200' 
1.100-
1.000-
900-
SOO-
700-
6O0-
500-
400-
3O0-
200' 
100-1992 | 1993 I 1994 | 1995 
120 
lllilllil = 
AMOUNTS in MILLION ECU 
soo" 
47S~ 
450~ 
425~ 
400~ 
37S~ 
3S0~ 
325 
300~ 
275 
2SO~ 
22S~ 
200~ 
175~ 
150 
125" 
100 
75 
60 
25' 1992 1993 1994 
• 
95 1Ç1 289 1995 
\iQw& 
u*w'-?: 
(#) on the basis of Regulation (CEE) 1552/89 
I communications for the first half of 1995 soo 
475 
450 
42S' 
400 
376 
350 
325 
900 
275 
250 
225 
200' 
175 
160 
125 
100 
76 1992 | 1993 I 1994 | 1995 
421 
;:::::::::::::::::::;:::::v:::::::::;::::::::::: ~ 
::?S:ï:-jïï$SS§-S:-?S:5ï : 
:ï:S-:::::::-:v:::::::::::::¥:vSSï — 
|v.-. •.•.•.•.•.•.•••.•.•••.•.•.•.>•••.•.•••.•• j — 
JJIJJIIIIIH estimation for the second half of 1995 
86 
TABLE 4 
EAGGF-GUARANTEE 
1992-1995 
1. IRREGULARITIES FORMALLY 
COMMUNICATED (#) by 
MEMBER STATES INQUIRIES HELD by 
the COMMISSION together 
with MEMBER STATES 
soo 
475 
460 
425 
400 
375 
350 
325 
300 
275 
250 
225 
200 
175 
150 
125 
100 
75 
SO 
25 NUMBER of CASES 
2.000 ~ 
1.900 ~ 
1.300 ~ 
1. 700 ~ 
1.600 ~ 
1.500 " 
1.400 " 
1.300 _ 
1.200 Z 
1.100 " 
1.000 _ 
900 Z 
soo~ 
700 Z 
600 Z 
500 Z 
400 Z 
300 Z 
200 Z 
100~ 1992 1993 1994 
1,02$ 1.284 1.Û1Ù 1995 
1.754 
— —= 
i 2.000 
1.900 
1.800 
1.700 ; 
1.600 
1.500' 
1.400' 
1.300 ; 
1.200' 
1.100' 
1.000 ; 
900 \ 
800' 
700 ; 
600] 
500 \ 
400 \ 
300" 
200" 
100" 1992 1993 1994 1995 
99 
AMOUNTS in MILLION ECU 
1992 1993 
~ 
-
~ 
'_ 109 300 1994 
417 1995 
214 
— 500 
475 
450 
425 
400 ' 
375 ' 
350 ' 
325 ' 
300 ' 
275' 
250 ' 
225 ' 
200' 
ITS' 
ISO' 
125 ' 
100 ' 
7S' 
50 ' 
25 ' 1992 I 1993 | 1994 | 1995 
102 
(#) based on Regulation (EEC) 595/91 
87 
STRUCTURAL ACTIONS 
1992 - 1995 TABLE 5 
1. IRREGULARITIES FORMALLY 
COMMUNICATED (#) by 
MEMBER STATES 2. INQUIRIES HELD by 
the COMMISSION together 
with MEMBER STATES 
NUMBER of CASES 
200 
190' 
ieo' 
170' 
160' 
ISO' 
140 ' 
130' 
120~ 
110' 
100' 1992 1993 1994 
âSeat otoif? 79 1995 
194 
= 
^ 200 
1tO~ 
rso' 
170' 
160' 
no' 
140 ' 
130" 
120" 
110' 
100' 1992 1993 1994 
M 1995 
112 
= 
AMOUNTS in MILLION ECU 
40 
35 ' 
30 ' 
25 ' 
20 ' 
15' 
10 ' 
s' 1992 1993 1994 
2entc ,Mft ^1* 1995 
44 
1 so 
4S' 
40' 
3S' 
30 ' 
25 ' 
20' 
is' 
10 ' 
s' 1992 I 1993 | 1994 | 1995 
- — 23 
(*) before regulation (EEC) 1681/94 and 1831/94 came into force. 
# Cases formally communicated by Member States 
based on regulations (EEC) 1681/94 and 1831/94 
88 
TABLE 6 
DIRECT EXPENDITURE (*) 
INQUIRIES held by the COMMISSION (**) 
AMOUNTS in MILLION ECU 
(*) see CHAPTER <S, section 5 
(**) with the assistance of Member States' services. 
19/04/96 NUMBER of CASES 
89 
TABLE 7 
DISTRIBUTION of the irregularities revealed in 1995 
Irregularities communicated officially by Member States and 
inquiries held by the Commission together with Member States. 
TRADITIONAL OWN RESOURCES 1995 
TRADITIONAL OWN RESOURCES 1995 
ÏS TRADITIONAL OWN RESOURCES 1995: 
amounts 
subdivision of the figures in table 3 
EAGGF- GUARANTEE 1995 
EAGGF GUARANTEE 1995 
cases EAGGF GUARANTEE 1995 
amounts 
subdivision of the figures in table 4 
STRUCTURAL FUNDS 1995 
STRUCTURAL FUNDS 1995 
cases STRUCTURAL FUNDS 1995 
amounts 
EAGGF-
GUIDANCE 
16% 
subdivision of the figures in table 5 
90 
ALL SECTORS 
IRREGULARITIES communicated officially by Member States in 1995 
CO 
Ô 
CO 
o Amounts 
x 1.000 ECU 
BELGIQUE 
DANMARK 
DEUTSCHLAND 
ELLAS 
ESPANA 
FRANCE 
IRELAND 
ITALIA 
LUXEMBOURG 
NEDERLAND 
ÔSTERREICH 
PORTUGAL 
SUOMI /FINLAND 
'SVERIGE 
UNITED KINGDOM 
TOTAL TRADITIONAL (*) 
OWN RESOURCES 
CASES 
communicated 
54 
8 
558 
9 
22 
121 
15 
73 
0 
110 
2 
\ 18 
\ 1 
2 
155 
1.148 AMOUNTS 
communicated 
22.419 
1.213 
39.548 
1.603 
3.342 
28.754 
613 
22.123 
0 
11.600 
33 
2.103 
25 
38 
10.456 
143.870 EXPENDITURES 
EAGGF - GUARANTEE 
CASES 
communicated 
35 
39 
349 
151 
116 
65 
20 
416 
0 
154 
10 
132 
0 
48 
219 
1,754 AMOUNTS 
communicated 
1.613 
3.524 
69.228 
10.838 
17.681 
3.769 
214 
82.716 
0 
9.679 
381 
7.247 
0 
67 
7.148 
214.106 EXPENDITURES 
STRUCTURAL ACTIONS 
CASES 
communicated 
21 
58 
46 
5 
13 
44 
7 
194 AMOUNTS 
communicated 
0 
0 
12.691 
2.597 
20.149 
0 
0 
4.443 
0 
0 
0 
2.576 
0 
0 
1.960 
44.416 
) ONLY FIRST 6 MONTHS of 1995 H 
> 
CO r~ m 
00 
TABLE 9 
" TASK GROUP CIGARETTES " 
CIGARETTES SMUGGLING 1995 
Member State 
FINLAND 
SWEDEN 
AUSTRIA / ITALY 
UNITED KINGDOM 
GREECE 
SPAIN 
BELGIUM 
DENMARK / SPAIN/ PORTUGAL 
IRELAND 
FRANCE/UK 
GERMANY 
NETHERLANDS 
ITALY 
EU Total Cigarettes SEIZED 
4.650.000 
6.750.000 
11.450.000 
13.000.000 
20.000.000 
40.000.000 
51.540.000 
60.000.00Q 
167.534.600 
374.924.600 Cigarettes Involved 
35.000.000 
80.000.000 
426.650.000 
450.000.000 
57.350.000 
92.000.000 
450.000.000 
1.000.000.000 
1.097.810.000 
3.688.810.000 REVENUE Implications (*) 
for MEMBER STA TES 
and OWN RESSOURCES 
in ECU 
3.000.000 
10.000.000 
50.000.000 
45.000.000 
8.888.665 
15.000.000 
45.000.000 
100.000.000 
110.580.000 
387.468.665 
(+) ESTIMATED AMOUNTS 
CIGARETTES SMUGGLING 1995 
1 000.000.000 
800.000.000 
«00 000.000 - • Cigarettes SEIZED 
• Cigarettes Involved 
Q Revenue Implications in ECU 
:±:mi 
92 
TABLE 10 
IRREGULARITIES concerning TRANSIT 
from 1990 until 1995 included (*). 
AMOUNTS concerning TRADITIONAL OWN RESOURCES 
Ul I MILLION l 
PRODUCT ECU 
LIVE ANIMALS 33 
beef/ pork/sheep 
BEEFMEAT and PORKMEAT 33 
MILK PRODUCTS 63 
butter/cheese/milkpowder 
BANANAS 15 
CEREALS 5 
SUGAR 18 
TEXTILES 5 
OTHER PRODUCTS 46 
CIGARETTES 191 
j TOTAL 409 IRREGULARITIES TRANSIT 
OTHER PRODUCTS. 
11% 
TEXTILES /££& 
1% 
MILK PRODUCTS 
15% BEEFMEAT and 
PORKMEAT 
8% CIGARETTES 
48% 
IVE ANIMALS 
8% 
C) Irregularities communicated under regulation (EEC) 1552/89 and 1468/81 
TABLE 11 
RECOVERY Situation on 31-12-1995 
TRADITIONAL OWN 
Situation as to cases(*) 
notified PRIOR to 1992 
AMOUNTS 
X 1.000 ECU AMOUNT 
notified (**) AMOUNT still TO BE RECOVERED^; 
in TOTAL [PENDING INCQURT\% of Q amount notif 
4=2/1 
BELGIQUE 
DANMARK 
DEUTSCHLAND 
ELLAS 
ESPANA 
FRANCE 
IRELAND 
ITALIA 
LUXEMBOURG 
NEDERLAND(+) 
ÔSTERREICH 
PORTUGAL 
FINLAND/SUOMI 
SVERIGE 
UNITED KINGDOM (++) 
TOTAL 8.593 
3.476 
122.737 
1.336 
2.410 
27.564 
270 
4.186 
41 
6.030 
# 
699 
# 
# 
24.228 
201.570 3.606 
2.017 
118.716 
1.336 
1.647 
21.010 
93 
4.186 
41 
5.612 
322 
18.175 
176.761 134 
0 
65.730 
819 
260 
55 
0 
3.719 
0 
2.676 
202 
73.595 42% 
58% 
97% 
100% 
68% 
76% 
34% 
100% 
100% 
93% 
46% 
75% 
88% RESOURCES 
Regulation (EEC) 1552/89 
Situation as to cases(*) notified in 1992+1993+1994 AMOUNT 
notified (**) recovered 
effectively AMOUNT still TO BE RECOVERED <—t 
In TOTAL PENDING IN COURT % of the «mount notlf. 
5 
97.943 
7.005 
127.985 
2.162 
13.267 
80.895 
12.038 
98.620 
89 
9.323 
# 
2.716 
# 
# 
72.606 
524.649 6 
6.555 
2.952 
6.075 
0 
1.615 
957 
6.118 
639 
46 
125 
677 
2.260 28.019 7=5-6 
91.388 
4.053 
121.910 
2.162 
11.652 
79.938 
5.920 
97.981 
43 
9.198 
2.039 
70.346 496;630 8 
50.624 
204 
24^685 
2.037 
2.803 
452 
0 
92.991 
0 
5.090 
1.172 
658 180.716 9 "7/5 
93% 
58% 
95% 
100% 
88% 
99% 
49% 
99% 
48% 
99% 
75% 
97% 95% 
(*]| Cases officially communicated to tho Commission # * not applicable 
(**) Amounts as originally notified or corrected at a later stage 
(•) The Netherlands declared In 1995 having recovered>ca. 58 Million ECU in cases referring to 1993 and 1994 Involving cigarettes. 
(+•) The United Kingdom informed the Commission that the recovery rate is higher than resulting from the Uk communications on irregularities In the database, those communications not being updated. 
(+4.+) -j-he recovery rates are quoted under restriction. Untlll the new regulation has been agreed upon -which Is to be adopted In near future - member states are not obliged to Inform the Commission 
about the recovery of the amounts notified 
TABLE 12 
RECOVERY Situation on 31-12-1995 
EAGGF-GUARANTEE 
Situation as to cases(*) 
notified PRIOR to 1992 
AMOUNTS 
X 1.000 ECU AMOUNT 
notified '(**)' AMOUNT still TO BE RECOVERED (~+, 
in TOTAL PENDING IN COURT /o of the amount 
notified 
U1 BELGIQUE 
DANMARK 
DEUTSCHLAND 
ELLAS 
ESPANA 
FRANCE 
IRELAND 
ITALIA 
LUXEMBOURG 
NEDERLAND 
ÔSTERREICH 
PORTUGAL 
SUOMI /FINLAND 
SVERIGE 
UNITED KINGDOM 
, TOTAL 1 
14.570 
23.252 
155.868 
784 
2.486 
29.248 
13.945 
409.108 
0 
27.980 
# 
1.146 
# 
# 
24.042 2 
4.510 
13.258 
30.510 
253 
1.242 
10.696 
7.316 
393.283 
0 
16.607 
496 
11.196 702.429 489.367 3 
2.550 
11.011 
23.543 
0 
0 
8.891 
2.228 
149.210 
0 
3.471 
0 
492 201.396 4 = 2/1 
31% 
57% 
20% 
32% 
50% 
37% 
52% 
96% 
59% 
43% 
47% 
70% 
(*) Cases officially communicated to the Commission • 
(**) Amounts as originally notified or corrected at a later stage Regulation (EEC) 595/91 
Situation as to cases(*) notified in 1992+1993+1994 
AMOUNT 
notified (**) recovered 
effectively AMOUNT still TO BE RECOVERED^; 
in TOTAL PENDING IN COURT /o of the amount 
notified 
s 
16.593 
9.101 
62.150 
82.914 
79.607 
491404 
2.992 
460.606 
0 
17.204 
# 
14.327 
# 
# 
22.405 
817,303 6 
990 
4.829 
9.949 
56.409 
1.951 
14.877 
1.870 
90.063 
0 
9.684 
1.153 
10.524 202.299 7=5-6 
15.603 
4.272 
52.201 
26.505 
77.656 
34.527 
1.122 
370.543 
0 
7.520 
13.174 
11.881 615.004 8 
43 
1.029 
2.951 
0 
212 
6.474 
0 
114.445 
0 
0 
2.187 
189 
127.530 9 = 7/5 
94% 
47% 
84% 
32% 
98% 
70% 
38% 
80% 
44% 
92% 
53% 
75% 
M * not applicable 
RECOVERY SITUATION on 31-12-1995 
STRUCTURAL FUNDS 
Situation as to cases 
notified PRIOR to 1992 
AMOUNTS 
X 1.000 ECU AMOUNT 
notified (*) AMOUNT still 
to be recovered PENDING IN 
COURT 
CO 
o 
o k) original amount to be recovered after correction(s) BELGIQUE 
DANMARK 
DEUTSCHLAND 
ELLAS 
ESPANA 
FRANCE 
IRELAND 
ITALIA 
LUXEMBOURG 
NEDERLAND 
ÔSTERREICH 
PORTUGAL 
SUOMI 
SVERIGE 
UNITED KINGDOM 
TOTAL . 0 
13 
19 
111 
72 
945 
58 
0 
0 
562 
# 
0 
# 
# 
420 
2.200 0 
13 
12 
35 
60 
945 
23 
0 
0 
444 
# 
0 
# 
# 
356 
1.888 0 
0 
0 
0 
0 
944 
0 
0 
0 
45 
# 
0 
# 
# 
79 
1.068 Situation as to cases notified 
in 1992+ 1993+ 1994 
amount 
notified (*) recovered 
effectively AMOUNT still 
to be recovered % of the amount 
originaly notified 
0 
105 
239 
2874 
397 
0 
0 
1477 
0 
0 
# 
430 
# 
# 
72 
5.594 0 
73 
29 
72 
12 
0 
0 
0 
0 
0 
# 
238 
# 
# 
0 
424 4 "(1-2-3) 
0 
32 
210 
2802 
385 
0 
0 
1477 
0 
0 
192 
72 
5;170 
# = not applicable '0 
97% 
100% 
100% 
dm BE 
DK 
DE 
OR 
ES 
FR 
IE 
IT 
LU 
NL 
AT 
PT 
Fl 
SE 
GB 
> 
CO 
f-m 
CO 
CHAPTER 8: ANTI-FRAUD APPROPRIATIONS 
Section 1: IMPLEMENTATION OF THE 1995 BUDGET 
The budgetary authority adopted ECU 132.618 million in anti-fraud (commitment) 
appropriations for 1995. The appropriations available after transfers156 totalled 
ECU 88.233 million. 
This figure does not include the appropriations at heading B5.800 (Cooperation in the 
field of justice and home affairs) which were used in 1995 to finance projects put forward 
by the Member States under Title VI of the Union Treaty. 
Much of this is to go to national government departments under the Community's various 
support and technical assistance policies. Some of the policies are strictly defined in rules 
governing individual sectors, particularly in agriculture, while others are more flexibly 
defined by way of the granting of subsidies to support monitoring and investigative work 
by the specialist departments in the Member States. All of them have to comply with the 
Commission's self-imposed requirement for sound financial management. 
Details of how the 1995 appropriations were used are given in Table 14. 
Section 2: 1996 APPROPRIATIONS 
The budgetary authority adopted appropriations of ECU 92.165 million for 1996 
(including the amounts entered in the reserve).157 The volume of appropriations is down 
on 1995, especially as regards Part B of the budget. 
The decline is partly the result of the evolution of heading B 1.360 (ECU 29 million at 
the heading, ECU 15 million in reserve), as 1995 was, except in the new Member States, 
the last year of operation of certain cofinancing programmes provided for by Regulations 
(EEC) Nos 307/91 (reinforcement of controls over certain areas of EAGGF Guarantee 
Section expenditure) and 3508/92 (integrated management and accounting system). 
Article B2.150 is a new heading. It regroups the distinct antifraud appropriations for the 
structural policies (headings B2-101, B2-111, B2-121 and B2-131). 
The establishment of a new Title B5.9 (Measures to combat fraud) and an Article B5-910 
(General measures to combat fraud) in the budget subsection for Consumer protection, 
internal market, industry and trans-European networks was called for by the European 
Parliament. They cover expenditure incurred by the Commission in technical support by 
SG/UCLAF to the Member States in agriculture and traditional own resources and 
expenditure generated by the checks carried out by the Unit to prevent undue payments 
and losses of revenue from own resources.158 
156 
157 
158 Internal transfers submitted to the budgetary authority. 
These amounts cannot yet be used but they are expected to become usable in the course of the year 
(after establishment of antifraud budgets). 
In 1995 this expenditure was covered by Article B2-519. 
97 
Tables 15 and 16 give a detailed breakdown of antifraud appropriations for 1996. 
98 
IMPLEMENTATION OF APPROPRIATIONS, 1995 Table 14 
BUDGET 
HEADING 
A-2554 
A-3530 
A-3531 
A-3532 TITLE 
Conferences, congresses and 
meetings in connection with the 
activities of the associations of 
European lawyers for the protection 
of the financial interests of the 
Community 
Unit to coordinate action against 
fraud 
Controls, studies, analyses in 
connection with the fight against 
fraud 
Fraud suppression in the textile 
sector (TAFI) MEASURES FINANCED 
Seminars, meetings and training schemes in the 
Member States 
- Meetings, symposiums, investigations 
- Data bases 
- Information 
- Reg. (EEC) No 4045/89 
- Legal seminars and studies 
- Customs, VAT seminars 
- Investigations and missions 
- Other seminars 
- Report on combating fraud 
- Analyses 
- Data processing and data bases 
- Grants 
- Conciliation body (EAGGF) 
- SCENT 
- Seminars, investigations 
- Grant 
- Cofinancing of a research unit 
- Textile booklets 
TOTAL TO BE CARRIED OVER APPROPRIATIONS 
AVAILABLE AFTER 
TRANSFERS 
260.000 
200.000 
3.308.000 
800.000 
4.568.000 APPROPRIATIONS 
COMMITTED 
259.605 
199.999 
85.615 
24.834 
90.000 
3 244.018 
470.000 
112.904 
90.000 
414.800 
516.246 
31.000 
9.598 
718.120 
418.000 
438.350 
25.000 
740 000 
188.799 
200.000 
300.000 
51.201 
4.443.622 PERCENT-AGE 
USED 
99,9 
100 
98 
93 
99 
o o BUDGET HEADING TITLE MEASURES FINANCED 
CARRYOVER 
A-355 
B1-360 
B2-101 
B2-111 
B2-121 
B2-131 European documentation, coordination 
and study network to control cross-
border crime and fraud 
Measures to combat fraud affecting the 
European Agricultural Guidance and 
Guarantee Fund, Guarantee Section 
Measures to combat fraud affecting the 
European Agricultural Guidance and 
Guarantee Fund, Guidance Section 
Measures to combat fraud affecting the 
Financial Instrument for Fisheries 
Guidance 
Measures to combat fraud affecting the 
European Regional Development Fund 
Measures to combat fraud affecting the 
European Social Fund Establishment of a foundation in 
Dutch law (legal structure of the 
network) involving 5 countries: D, I, 
GR, L, NL 
- Reg. (EEC) No 307/91 & Reg. 
(EC) No 3235/94 
- Reg. (EC) No 165/94 (remote 
sensing) 
- Reg. (EEC) No 3508/92 (SIGC) & 
Reg. (EC) No 3235/94 
Grants 
Grants 
Grants 
TOTAL TO BE CARRIED OVER APPROPRIATIONS 
AVAILABLE AFTER 
TRANSFERS 
4.568.000 
400.000 
65 000 000 
200.000(*) 
50.000(*) 
300.000(*) 
200.000(*) 
70.718.000 APPROPRIATIONS 
COMMITTED 
4.443.622 
62.500 
62.060.000 
10.000.000 
8.700.000 
43.360.000 
10.000 
-
30.000 
19.000 
66,625.122 PERCENT-AGE USED 
16 
95.5 
5 
-
10 
9.5 
(*) The corresponding appropriations were entered in reserve B0-40 with a token entry against each heading. The transfer of these appropriations to their headings was subject to a decision by the 
budgetary authority, on the basis of a report by the Commission (SG/UCLAF). The decision was taken in July 1995; as the appropriations were made available late, it was therefore not possible 
to make the best use of them in 1995. 
o BUDGET HEADING TITLE MEASURES FINANCED 
CARRYOVER 
B2-5110 
B2-519 
B5-3051 
B6-910 
B7-530 Inspection in agriculture 
Campaign against fraud in agriculture 
Matthaeus and Matthaeus Tax 
programmes (vocational training for 
. customs officials and indirect taxation 
officials) 
Actions to combat fraud in the area of 
research (shared-cost) 
Measures to combat fraud in the 
cooperation sector - Inspection and analyses 
- Olive oil agencies 
- Studies, analyses, inspection 
- Grants 
- Consultant's fees 
- Matthaeus 
- Matthaeus Tax 
TOTAL TO BE CARRIED OVER APPROPRIATIONS 
AVAILABLE AFTER 
TRANSFERS 
70.718.000 
12.715.000 
1.650.000C*) 
3.000.000 
50.000 
100.000 
88.233.000 APPROPRIATIONS 
COMMITTED 
66.625.122 
12.668.864 
168.864 
12.500.000 
764.387 
149.387 
590.000 
25.000 
3.000.000 
2.290.570 
709 430 
42.000 
-
83.100.373 PERCENT-AGE USED 
99,6 
46,4 
100 
84 
-
94,2 
(*) The corresponding appropriations were entered in reserve B0-40 with a token entry against each heading. The transfer of these appropriations to this heading was subject to a decision by the budgetary 
authority, on the basis of a report by the Commission (SG/UCLAF). The decision was taken in July 1995; as the appropriations were made available late, it was tliereforc not possible to make the 
best use of them in 1995. 
Table 15 
ANTI-FRAUD APPROPRIATIONS, 1996 BUDGET 
ITEM TITLE AMOUNT (in ECU) 
A-2554 Conferences, congresses and meetings in connection with 290 000 
the activities of the associations of European Lawyers for 
the protection of the financial interests of the Community 
A-3530 Unit to coordination action against fraud 200 000 
A-3531 Controls,l studies, analysis in connection with the fight 4 000 000 
against fraud 
A-3532 Combating fraud in the textile sector (TAF1) 800 000 
A-355 European documentation, coordination and study network to 350 0001 
control cross-border crime and fraud 
B1-3 60 Monitoring and preventive measures concerning the 29 000 0002 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section 
B2-150 Action against fraud in the field of structural action 750 000 
B2-301 Measures to combat fraud affecting the Cohesion Fund 300 000 
B2-511 Inspection in agriculture 15 500 0003 
B5-3051 Matthaeus and Matthaeus Tax programmes (vocational 3 200 000 
training for customs officials and indirect taxation officials) 
B5-910 General measures to combat fraud 4 175 000 
B6-910 Actions to combat fraud in the areas of research (shared- 50 000 
cost) 
B7-650 Measures to combat fraud in the cooperation sector 50 000 
These appropriations are all entered against Chapter A0.10 of the budget (reserve, Part A of the 
budget). 
An appropriation of ECU 15 million has been entered in reserve BO-40. 
An appropriation of ECU 13 million has been entered in reserve BO-40. — 
102 
TABLE 16 
ANTI-FRAUD BUDGET 1996 
Subdivision by domaines 
MILLION 
Domaine budget post ECU 
1. EAGGF - GUARANTEE I B1-360 ~~ 44,00 
2. STRUCTURAL FUNDS + COHESION FUND B2-150 / B2-301 1,05 
3. AGRICULTURAL CONTROL MEASURES B2-511 28,50 
4. TRAINING for TAX and CUSTOMS officers B5-3051 3,20 
5. COORDINATION and GENERAL ACTIONS for A2554/'A-353/A-355> 
FIGHT AGAINST FRAUD | B-910/B6-910/B7-650 9,92 
TOTAL J 86,67 
ANTI-FRAUD BUDGET 1996 
COORD.+ GENERAL 
ACTIONS FIGHT 
AGAINST FRAUD 
11% 
TRAINING for TAX and 
CUSTOMS officers 
4% 
AGRICULTURAL 
CONTROL MEASURES 
33% EAGGF- GUARANTEE 
51% 
STRUCTURAL FUNDS 
COHESION FUND 
1% 
103 19/04/96 
ANNEX: FREEPHONE NUMBERS IN THE MEMBER STATES 
Austria 
Belgium 
Denmark 
Finland 
France 
Germany 
Greece 
Ireland 
Italy 
Luxembourg 
Netherlands 
Portugal 
Spain 
Sweden 
United Kingdom 06605845 
080012426 
80018495 
0800112595 
05917295 
0130820595 
008003212595 
1800553295 
16788495 
08003595 
060224595 
0505329595 
900993295 
020791695 
0800963595 
104 
GLOSSARY 
EEC : European Economic Community 
EC : European Community (term used since the entry into force of the treaty on 
European Union) 
IGC : Intergovernmental Conference 
SEM 2000: ... Commission.programme to improve by the year 2000 the management of 
Community appropriations (Sound and Efficient Management) 
SG/UCLAF or 
UCLAF : Unité de Coordination de la Lutte AntiFraude (Directorate featuring in the 
Staff organisation of the Commission's Secretariat General) - in English, Unit 
for the Coordination of fraud prevention 
OJ : Official Journal of the European Communities (OJ L: series L, OJ C: series 
Q 
TIR : Transport International Routier - in English: International Road Transport 
SCENT : System for a Customs Enforcement NeTwork 
CIS : Customs Information System 
VAT : Value Added Tax 
COCOLAF: ÇOmité Consultatif pour la coordination dans le domaine de la Lutte 
AntiFraude (French acronym), in English: Advisory committee for the 
coordination of fraud prevention * 
TAFI : Textile Antifraud Initiative 
GSP : Generalized system of preferences 
GATT : General Agreement on Tariffs and Trade 
ESF : European Social Fund 
ERDF : European Regional Development Fund 
CSF : Community support framework 
EDF : European Development Fund 
IRENE. IRregularités, ENquêtes, Exploitation - irregularities, investigations, 
exploitation 
EAGGF: European Guarantee and Guidance Fund (guarantee section: EAGGF-
Guarantee, guidance section: EAGGF-Guidance) 
FIFG: ' Financial Instrument for Fisheries Guidance _ 
105 

ISSN 0254-1475 
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ISBN 92-78-03989-6 
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