WORK PROGRAMME 1996 - FIGHT AGAINST FRAUD - PROTECTION OF THE COMMUNITY' S FINANCIAL INTERESTS
Date: 1996-01-31
Institutions: European Commission
Subjects: Community budget, EU control, action programme, fraud, fraud against the EU

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  31.01.1996 
COM(96)  17  final 

PROTECTION  OF THE COMMUNITY'S FINANCIAL INTERESTS 

FIGHT AGAINST FRAUD 

WORK PROGRAMME 1996 

(presented  by the  Commission) 

Referring explicitly to the work completed in  1995, in particular the comparative analysis 

of  Member  States' reports on  measures taken  to combat  fraud,  the European  Council of 

Madrid  adopted  and  gave  its full  support  to the conclusions  of the  ECOFIN  Council  of 

27 November  1995.  In doing this it called on the Member States  and institutions to take 

the  necessary  measures to ensure an equivalent  level  of protection  of  financial  interests 

throughout  the  Community. 

The Commission's anti-fraud  work programme, while fitting  into the scheme of its general 
programme which was presented to the Council and Parliament in November  19951 takes 

fully  into account  these essential  guidelines. 

The  Commission  will  also ensure that this  major  concern  is taken  into consideration  in 

the course of work  on the  Intergovernmental  Conference. 

1. 

In  its  general  work  programme,  the  Commission,  with  regard  to  its  anti-fraud 

priorities, specified  that : 

"The  measures  to  strengthen  the  legal  protection  of  the  Community's  financial 

interests  will 

be 

amplified.  New 

administrative 

penalties  will 

be 

introduced.Partnership  with  the  Member  States  will  be  strengthened.  Community 

legislation and programmes will be revised to enhance effectiveness,  reduce the risk 

of  fraud  and  give more  flexibility  in  management." 

2. 

In accordance  with  these general  guidelines, the  Commission will present  hereafter 

a detailed  programme of specific  anti-fraud  activities for  1996.  This detailed  work 

programme aims to clarify  further  the guidelines contained in the general programme 

with  a  series  of  selective  activities.  These  activities  are  grouped  around  4  main 

headings  which  the  Commission  developed  in  presenting  its  anti-fraud  strategy  in 

1994, namely  : 

stronger  presence  on  the  ground  and  firmer  support  for  operational  activities, 

concentrating  on  risk  sectors; 

See  COM(95)512  final  of 20 November  1995. 

stronger  partnership  between  the  Commission  and  the  Member  States, 

development  of  information  networks and  better  use of  intelligence; 

improvement  of  Community  legislation  in areas of  activity; 

securing greater  compatibility  between  the  legislations of member  States. 

3.  The  activities  in this  work  programme  are  set  out  under  these  four  main  headings 

and  already  take  account  of  the  need  to  achieve  an  equivalent  level  of  protection 

throughout the Community as the European Council of Madrid expressly requested. 

4.  As in the past, a number of specific activities in the  1996 programme are taken  from 

previous programmes either because they are of a permanent nature and are essential 

for  a  global  approach  to  fraud  prevention  or  because  more  time  is  required  to 

complete  the work  required. 

5.  On the one  hand,  the  new  activities stem  from  the Council  conclusions of  19 June 

1995 adopted  following  discussions on the  1994 annual  report  on the fight against 

fraud;  the  Council,  in the  framework  of  the procedures  for  adopting  the  regulation 

and the Convention on protection  of Community  financial  interests, called  upon the 

Commission to put forward  additional initiatives to finalize these instruments. On the 

other  hand, the activities  follow  on from  the analysis made by the  Commission of 

the  Member  States' reports  on measures taken  to combat  fraud  as well  as from  the 

conclusions  adopted  by  the  Council  of  27  November  1995  on  the  basis  of  this 

analysis. 

6.  A  number  of  guidelines  resulting  from  this  comparative  analysis  require  further 

information  to  be  obtained  to enable  the  Commission  to  carry  out  a more  detailed 

study  (for  example,  prevention,  the  question  of  out-of-court  settlements,  results 

following  inspections and follow-up  action  in fraud  cases, etc.).  In this context, the 

Commission  is  directing  its  work  to  clarifying  further  the  mechanisms  likely  to 

ensure  an  equivalent  level  of  protection  of  financial  interest  throughout  the 

Community.  This  work  will  begin  shortly  but  its  impact  on  anti-fraud  policy  will 

not  be measurable  in  1996. 

7.  While these new activities fall  in the main under the strategic headings of better  use 

of  intelligence,  improvement  of  Community  legislation  and  greater  compatibility 

between the legislation of Member States, it is essential to continue also to highlight 

the  importance  of a presence on  the  ground  and  support  for  operational  activity  as 

advocated  by the  ECOFIN  Council. 

8.  This  detailed  programme  of  activities  responds  to  the  wishes  expressed  by  the 

European  parliament  which  justifiably  insisted 

that  the  Commission's  general 

programme  should  be clarified  in respect of protection  of financial  interests and the 

fight  against  fraud  and  that  it  should  be  presented  in  such  a  way  as  to  enable  a 

regular  assessment of  it to  be easily made. 

* 

* 

* 

1. 

Stronger  presence  on  the  ground  and  firmer  support  for  operational  activities, 

concentrating  on  risk  sectors 

To  increase  the  effectiveness  of  the  fight  against  fraud,  inspections  and  controls 

undertaken  by  the  Commission's  inspectors  must  be  carried  out  within  a  specific  fraud 

prevention  framework  covering  all  the areas of the Community  budget.  The purpose of 

the  Commission  proposal  for  legislative  action  referred  to  at  III,  l.b.  of  the  1996 

programme will be to clarify  the specific material provisions with a horizontal application 

for  on-the-spot  controls  and  inspections  (rights,  obligations,  procedures)  to  enable  the 

Commission's inspectors to carry  out their operational  anti-fraud  missions on the ground 

together  with  the national  authorities. 

Contacts  between  the  different  judicial  authorities  and  between  the  latter  and  the 

Commission must  be strengthened  and made easier.  Initiatives  in the framework  of the 

third  pillar  referred  to at point  IV, 3 meet this  objective. 

2. 

In addition to this legislative activity, the Commission will encourage direct contact with 

the  investigation  departments  and judicial  authorities  in  the  Member  States  as  well  as 

with  the  competent  bodies  in  the  non-member  countries,  in  particular  the  countries  of 

Central  and  Eastern Europe. 

In  the  framework  of  the  'sound  and  efficient'  management  initiative  concerned  with 

implementation  of activities financed  by the Community  for  the benefit  of the countries 

of central  and eastern  Europe and the new independent  States, the  Commission  services 

concerned  will  proceed  to reinforce  their  capacity  to carry  out on-the-spot  controls. 

3. 

The cigarettes and textiles task groups will continue to function.  The olive oil and  "beef 

task  groups  will  move to the operational  stage. 

Teams  will  consist  of  specialists  and  inspectors  from  all  relevant  departments  at  the 

Commission and  in the  Member  States, depending  on the area under  investigation.  The 

object of the task groups exercise is to optimize cooperation between all Commission and 

national bodies acting in partnership to tackle the same problem. The direct links between 

the components  of  a task  group cut  the time  needed  to react  to situations  giving  cause  for 

concern  and  new  forms  of  fraud. 

4. 

The computerization  of transit operations  seeks to  make the procedure  more efficient  and 

to  offer  a  means  of  early  detection  and  effective  prevention  of  fraud.2 

Once  the  requisite  resources  have  been  released,  and  the  remaining  technical  and 

regulatory  questions  resolved, 

transit  operations  should  be  entirely  computerized 

throughout  the  Union  and  EFTA  States  by  1998. 

In  addition  to  computerization,  there  will  have  to  be  an  increase  in  the  number  of 

physical  checks  on  goods  at  offices  of  destination  and  entry  to  avert  the  risk  of  fraud. 

The  use  of  electronic  data-transmission  techniques  will  be  further  developed  and  there 

will  be  more 

thorough  monitoring  of 

the  data 

that  are 

transmitted.  Pending 

computerization  of  the  transit  scheme,  the  Commission  will  in  the  short  term  strengthen 

the  early  warning  system  (direct  contact  between  entry  office  and  destination  office)  for 

high-risk  products  to  make  information  that  is  exchanged  more  readily  usable. 

5. 

In  the  mutual  assistance  arena,  the  SCENT  network  will  be  developed  in  a  systematic 

fashion  to  reflect  the  possibilities  and  needs  of  the  various  user  categories. 

The number  of users  will  be  increased.  The  use of  the communications  infrastructure  and 

technical  facilities  developed  (e.g. e-mail)  could be extended  to other authorities  involved 

in  combating  fraud,  for  matters  falling  with  their  specific  area  of  responsibility  e.g. 

distribution  of  documents,  while  maintaining  strict  compliance  with  their  respective 

competencies. 

6. 

Non-member  countries  and  Community  operators  must  be  made  more  fully  aware  of  the 

impact  of  fraud  in  Customs  regimes  and  preferential  schemes,  in  particular  in the  textile 

sector,  and  reminded  that  importers  are  liable  to  the  Community  for  amounts  evaded. 

See  Council  Resolution  of  23.11.1995  on  the  computerization  of  the  customs  transit  scheme: 
OJ  C  372, 7.12.1995, p. 2. 
System  Customs  enforcement  Network. 

Preferential  concessions are given to stimulate the economic development of non-member 

countries or to tighten  the Community's economic  links with  its partners.  Infringements 

of provisions governing preferential  tariff  schemes are damaging not only to the economy 

of  the  non-member  country  enjoying  the  benefit  of  the  scheme  but  also  to  the 

Community's  financial  interests. 

A Commission communication to be submitted directly to the Parliament and Council on 

the  current  situation  in  the  area  of  preferential  agreements  is  planned.  It  is  aimed  at 

making  them  aware of the  need  to adopt  the  following  measures : 

inform  economic  operators  of the risks  inherent  in the use of preferential  Customs 

regimes and arrangements  and of their  responsibilities; 

inform  non-member  countries  who  benefit  from  Community  preferences  of  the 

obligations arising from  acceptance of the agreements. In addition,  measures aimed 

at assisting operators to overcome risks linked with trade with non-member countries 

will  be  studied. 

inform  Member  States of  "systems control  audit"; 

send  a  questionnaire  to  each  country  benefitting  from  preferential  treatment 

requesting  information  on  inspection  measures which they  have taken; 

put forward  a horizontal  legal  instrument  establishing provisions  for  the  suspension 

from  autonomous  preferential  arrangements  or  concerning  European  Union 

agreements  in accordance  with  the Community's contractual  obligations; 

the  establishment  by  the  Commission  of  a  specific  investigation  mechanism  for 

grievances  and  infringements  of the  provisions  of  EEC  regulation  N°  3281/94  and 

more specifically  article  9; 

improve  the  financial  follow-up  of  investigation  cases. 

7. 

Operational  activities  on  the ground  will  increasingly  be guided  by  risk  analysis  findings. 

The development  of activities here  falls  into the  second  area  of priority  referred  to in  II.6. 

II. 

Stronger partnership  between  the Commission  and the Member States,  development 

of  information  networks  and  better  use  of  intelligence 

1. 

The  approach  to  training  adopted  is  aimed  at  meeting  priority  needs.  The  training  of 

officials  in  the  Member  States  will  be  more  closely  targeted  on  specific  areas  and 

preferably  provided  for  those  services  specializing  in  the  fight  against  fraud  against  the 

Community  budget. 

The  Commission  is  particularly  attentive  to  training  for  staff  and  services  involved  in 

implementing  structural  policies. 

The  Commission  also  feels  that  there  is  much  to  be  gained  from  establishing  contacts 

with  the  countries  of  Central  and  Eastern  Europe,  where  the  Union  supplies  extensive 

project  financing.  It  is  very  much  in  the  Community's  interest  to  cooperate  closely  and 

ensure  that  the  development  of  activities  in  these  countries  and  trade  with  them  proceed 

as  planned. 

These  activities  must  also  be  set 

in  the  perspective  of  enlargement.  National 

administrations  will  be  made  aware  through  training  courses  of  the  risks  of  fraud  in 

certain  areas  of  Community  policy. 

These  actions  correspond  with  the  wishes  expressed  by  these  countries  in  their  contacts 

with  the  Commission. 

2. 

In the merging  and  strengthening  of items used to finance  anti-fraud  measures in the  1996 

budget,  priority  will be attached  to assistance to specialist anti-fraud  departments,  notably 

to enhance their  operational  capacities  in combating  fraud  against  the Community  budget. 

Regarding  EAGGF  Guarantee  Section  expenditure,  the  Commission  will  continue  to 

support  the  Member  States  financially  in  carrying  out  action  plans  to  improve  the 

8 

structure and efficiency  of  inspectorates, following  the criteria and procedures  set out in 

its proposal  to  the Council. 

3. 

Evaluation of the first year of operation of the freephone  number was favourable, and the 

scheme will  continue  to run. 

In  1996 the scheme will  be extended  to the three new Member  States. 

4. 

Communications between the Member States and between the latter and the Commission 
following  the  rules  for  the  implementation  of Council  Regulation  (EC) No  1469/955 of 

29 June  1995 on measures to be taken  with  regard to certain  beneficiaries  of  operations 

financed  by the Guarantee  Section  of the  EAGGF  (black  lists)  : see III.3. 

5. 

The  working  parties  set  up  in  the  appropriate  bodies  will  be  invited  to  investigate  the 

following  matters  in  particular: 

the  system  for  exchanging  mutual  assistance  forms.  If  need  be,  measures  will  be 

taken  to  ensure  optimal  use  of  the  resultant  information  and  thus  boost  its 

effectiveness; 

the establishment of  a central  CIS  database  following  adoption  of the proposal  for 

a Regulation on mutual assistance in customs and agricultural  matters, the aim being 

to  improve  the  efficiency  of  the  use  made  of  information  exchanged  between 

Member  States via  SCENT. 

the consequences to be drawn from  analysis of frauds and irregularities detected with 

a view to enhancement  of the databases. 

6. 

Irene and  Pre-Irene will  be replaced  by a new base, Irene  95, which will  incorporate all 

irregularity  cases detected,  irrespective  of  the  source of  the  information  (Member  State 

report,  MA form,  UCLAF  investigation,  etc.), make cases easier to monitor  (financially 

also) and  make  intelligence  easier  to  exploit. 

COM(95)467 final,  12.10.1995: Proposal  for a Council  Regulation  on the implementation of Member 
States'  action  plans  on  control  of  EAGGF Guarantee  Section  expenditure. 
OJ  L  145, 29.6.1995, p.  1. 
Customs  Information  System. 

7. 

To  intensify  the  use  made  of  intelligence,  studies  will  be  carried  out  by  the  Joint 

Research  Centre  at  Ispra  in  the  context  both  of  its  institutional  support  for  the 

Commission  and  of  its  competitive  support  projects.  An  in-depth  statistical  analysis  of 

cases already  stored  in  Irene  will  be undertaken  to analyse  risk  factors  inherent  in  certain 

types  of  transaction  and  establish  fraud  profiles.  UCLAF  will  evaluate  software  products 

available  on  the  market  so  as  to  equip  itself  with  high-performance  tools. 

8. 

In  relation  to  own  resources,  the  value  of  the  information  contained  in  the  reports 

foreseen  under the amendments  to Regulation  (EC, Euratom) No  1552/897 will clearly  be 

improved  by  the  implementation  of  provisions  which  have  already  been  included  in  a 

Council joint position which will require better co-operation between the Commission and 

national  administrations. 

The  Commission  will  continue  its  sample  case-by-case  monitoring  to  help  the  Member 

States  in  their  efforts  to  recover  receipts  involved  in  major  fraud  cases.  The  aim  is  not 

only  to  accelerate  the  recovery  procedure,  obtain  the  payments  due  in  specific  cases  and 

improve  the  rate  of  recovery  but  also  to  use  individual  cases  to  identify  legislative 

measures  that  might  be  needed. 

The  study  now  under  way  on  the  Member  States'  recovery  arrangements,  referred  to  in 

item  III.2  on transit  (harmonisation  of time  limits  for  recovery  from  principals  for  whom 

guarantees have been given), is aimed  at ensuring the effectiveness  of and equal  treatment 

for  the  protection  of  the  Community's  financial  interests  in  this  area.  If  initiatives  of  a 

legislative  nature  are  deemed  necessary  to  achieve  this,  the  Commission  will  make  the 

proposals  required. 

Various measures taken  in the Community  transit field including  increase of the  guarantee 

for  sensitive goods  should  also  lead to an  improvement  in the recovery  of traditional  own 

resources. 

Adoption  of  the  Council's  common  position  on  17.11.1995  for  the  adaptation  of  Regulation  (EC, 
Euratom) No  1552/89 implementing Decision 88/376/EEC, Euratom on the system ofthe Community's 
own  resources. 

10 

Regarding  the  Structural  Funds,  the  Commission  will  insist  that  Member  States  take 

irregularity  reporting  more  seriously. 

As  requested  by  the  Madrid  European  Council,  the  Commission  will  consider  the 

possibility of extending from  agriculture to other areas the system of disallowing finance. 

This exercise  is to be carried  out within the framework  of action on sound and  efficient 

management  (SEM2000). 

HI. 

Improvement  of Community  legislation  in  areas  of  activity 

1. 

The Council Regulation on protection of the Community's financial  interests having been 
adopted9,  the Commission will: 

(a)  continue the study undertaken of the comparative analysis to respond to the Council 

request  for  the  system  of  administrative  penalties  to  be  extended  to  areas  of  the 

budget  where  they  are  needed,  notably  the  Structural  Funds; 

(b)  work  actively  for  adoption  by  the  Council  of  the  proposal  for  a  Regulation 

"concerning  on-the-spot  checks  and  inspections  for  the  detection  of  fraud  and 
irregularities  detrimental  to the  financial  interests  of the  European  Communities"10 

in the first half of  1996; 

(c)  then update Council Regulation No  165/74 on the powers of authorized  Commission 

representatives  in relation  to own resources; 

(d)  adopt  rules  for  the  implementation  of Regulation (EC) No  1469/95  on measures to 

be  taken  with  regard  to  certain  beneficiaries  of  operations  financed  by  the 

Guarantee  Section  of the  EAGGF (black  list). 

As defined  in article  1(2) of Regulation  (EC, Euratom)  N' 2988/95 of  18.12.95 on the protection  of 
the  European  Communities  financial  interests  :  'Irregularity'  shall  mean  any  infringement  of  a 
provision  of Community  law resulting from  an act or omission  by an economic  operator, which has, 
or would  have, the effect  of prejudicing  the general budget of the Communities  or budgets managed 
by  them,  either  by  reducing  or  losing  revenue  accruing  from  own  resources  collected  directly  on 
behalf  of the  Communities,  or  by  an  unjustified  item  of expenditure. 
Regulation  (EC,  Euratom)  N* 2988/95  of  18.12.95, O.J. N" L 312  of 23.12.95, p.  I. 
Doc. COM(95)690  final. 

11 

2. 

As  announced  in  its  communication  of  29  March  1995  on  the  Community  transit 

scheme, the  Commission  will  make  the  necessary  additional  proposals  in  terms  both  of 

the  practical  application  of the  relevant  provisions and  of the provisions themselves. 

Following  on  from  the  existing  scheme  and  agreements  (amendments  to  provisions 

governing  the  comprehensive  guarantee,  acceleration  of  the  procedures  for  discharging 

transit documents, determination of compulsory routes), the Commission intends to amend 

the relevant  legislation  : 

more  flexible  procedure  for  banning  use  of  the  comprehensive  guarantee  to  cover 

transactions  involving  high  fraud  risk  goods, so that these  transactions are  covered 

for  all  import  duties  concerned; 

acceleration of the procedures for discharging transit documents for  sensitive goods; 

determination  of compulsory  routes (limiting journey  times); 

banning  any  change  in the office  of  destination; 

increase comprehensive  guarantee  to  100%; 

re-examination  of  cases  where  temporary  suspension  of  use  of  the  guarantee  has 

already  been  applied 

reinforcement  of ex post  controls; 

consideration  of  more  appropriate  sharing  of  responsibility  for  the  Customs  debt 

between  the  different  possible debtors  in the transit  area; 

harmonization of time limits for recovery  from  principals for whom guarantees have 

been  given; 

mandatory  use of T2 or T2L  documents  for  Community  goods carried  by  sea. 

In addition,  the  Commission  will  provide  the  necessary  assistance in the  enquiry  which 

Parliament  intends to carry  out  on  fraud  in the transit  regime  under  article  138C of the 

EC Treaty. 

Doc. COM(95)108  final. 
The  Committee  has  already  expressed  approval  of  the  first  four  points.  The  other  points  will  be 
examined  internally  with a view to proposing any amendments to regulations considered  necessary. 

12 

3. 

The Commission will play  its part,  in close co-operation  with the Member  States, in the 

review of the TIR Convention,  with a view to improving  detection  of  frauds  in the TIR 

regime. 

4. 

The Commission will evaluate all positive and negative incentives to the Member  States 

to detect and report fraud  and irregularity  cases to ascertain whether these incentives are 

adequate. 

5. 

The  Commission, as part  of  its action  to achieve  sound  and efficient  management,  will 

ensure  evaluation  of  legislation  in  terms  of  clarity,  enforceability  and  vulnerability  to 

fraud  from  the  initial  proposal  up to the final phase of its adoption 

Regarding  ex post  evaluation,  the  same principles  are  applied  by  identifying  high  risk 
fraud  sectors so as to target  efficiently  examination  of legislation13 

Experience in fraud  prevention, financial  control and risk analysis will be fully  exploited 

to complete these missions successfully.  The views of the competent services in the field 

will  be  systematically  highlighted  so that  account  is  taken  to  ensure  fraud  proofing  of 

legislation. 

6. 

The  Commission  will  continue  its  work  with  a  view  to  adoption  of  the  proposal  for  a 

Regulation on mutual assistance in customs and agricultural matters to replace regulation 

1468/81.  Following  adoption  of  this  proposal,  the  CIS  implementing  rules  for  the 

database will  be  specified  in the  implementing  provisions. 

The  Commission  will  also participate  in the final adoption  of regulation  1552/89. 

13 

In  this  context,  the  Commission  is  planning  to  examine  the  rules  governing  limitation  periods  for 
guarantees in the customs code, [import duties on beef,] the question  of staffing  for  Regulation  (EC) 
No 2048/89  laying down general  rules on controls in the wine sector and the beef export refund,  the 
olive  oil  production  aid  scheme  and  Articles  23  and  24  of  Regulation  (EEC)  No 4253/88  (the 
Structural  Funds  Regulation). 

13 

IV.  Greater  compatibility  between  legislation  of  the  Member  States 

Following  establishment  of  the  Convention  on  protection  of  financial  interests  and  the 

agreement  reached  on  its  protocol  on  corruption  : 

1. 

The  Commission  will  present  the  initiative  decided  on  20  December  1995 

so  that  the 

Council  can  adopt  this  second  instrument  (presented  as  a  protocol  to  the  Convention  on 

the  protection  of  the  Community's  financial  interests  ) before  the  year  is  out.  This  will 

establish the  liability  of corporate  bodies and define  an offence  of laundering  the  proceeds 

of  fraud.  It  contains  specific  provisions  relating  to  judicial  cooperation,  priority 

jurisdiction  to  prosecute  and  the jurisdiction  of  the  Court  of  Justice. 

2. 

The  Commission  will  provide  active  support  in  the  discussion  opened  by  the  Italian 

presidency  on  joint  action  to  establish  a  framework  for  the  exchange  of  liaison 

magistrates.  The  latter  will  be  able  to  contribute  to  an  improvement  in  the  fight  against 

fraud. 

3. 

In  the  area  of  corruption,  the  Commission  will  participate  in  the  finalisation  of  the 

protocol  to  the  Convention  on  the  protection  of  financial  interests  and  will  take  the 

measures  necessary  to  follow  up  the  protocol  while  taking  account  of  the  work  and 

requests  of  the  European  parliament  in  this  field. 

4. 

The  Commission  will  monitor  the  process of ratification  of the  Convention  on  protection 

of  the  financial  interests  of  the  European  Communities  as  well  as  the  procedures  for 

transposition  into  national  legal  systems by  member  States.  It  will  report  to  the  Council 

on  progress  with  transposition  into  national  penal  law. 

14  COM(95)693 final. 
15  OJ  C316, 27.11.95, p. 48. 

14 

m 

ISSN 0254-1475 

COM(96) 17 final 

DOCUMENTS 

EN 

09 

Catalogue number  : CB-CO-96-047-EN-C 

ISBN 92-78-00148-1 

Office for Officiai Publications of the European Communities 

L-2985 Luxembourg