European Parliament resolution on the Commission annual report 2000 on the protection of the Communities' financial interests and the fight against fraud (COM(2001) 255 — C5-0469/2001 — 2001/2186(COS)) and on the Commission communication on protecting the Communities' financial interests, Fight against fraud, Action plan for 2001-2003 (COM(2001) 254 - C5-0470/2001 - 2001/2186(COS))
Date: 2001-11-29
Institutions: European Parliament
Subjects: European Union, action programme, cooperation policy, financial control, fraud, public finance

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Thursday 29 November 2001

8.
Takes the view that health and safety at work should be another priority in any strategy to foster
quality in work; expects to be consulted by the Commission on a draft action plan in this field as soon as
possible;

Calls upon the Commission to conduct a cost-benefit analysis of the measures to improve quality in

9.
work so as to make the economic benefits of higher quality more visible;

On implementation

10.
Acknowledges that benchmarking on the basis of commonly defined indicators and exchange of
good practices may be the most appropriate policy for some aspects of social and employment policy at
European level; stresses, however, that the open coordination method may complement other policy
instruments, in particular legislation, but must not replace them; takes the view that a quality-oriented
policy should in fact result in gradual improvements in guaranteed minimum standards; in this context,
draws attention to the proposals for supplementary actions contained in its resolution of 25 October 2000
on the Social Policy Agenda;

11.
Notes that, unless the majority voting in Council is considerably extended, the open co-ordination
method may become the standard instrument in social and employment policy in an enlarged European
Union;

12.
Insists on the full involvement of the European Parliament as well as national parliaments in the
various methods of open co-ordination; with regard to its own involvement, calls for a consultation pro-
cedure along the lines of those preceding the European Employment Strategy;

13.
Takes the view that the Social Policy Agenda needs to be added to and adapted in the light of the
new priority of fostering quality; stresses that the monitoring of policy implementation, including the
control of full transposition of European legislation, needs to be reinforced;

14.

Instructs its President to forward this resolution to the Commission and the Council.

*

*

*

22. Protection of the Communities’ financial interests

A5-0393/2001

European Parliament resolution on the Commission annual report 2000 on the protection of the
Communities’ financial interests and the fight against fraud (COM(2001) 255 $ C5-0469/2001 $
2001/2186(COS)) and on the Commission communication on protecting the Communities’ finan-
cial interests, Fight against fraud, Action plan for 2001-2003 (COM(2001) 254 $ C5-0470/2001 $
2001/2186(COS))

The European Parliament,

1 having regard to the Commission annual report (COM(2001) 255 1 C5-0469/2001),

1 having regard to the Commission communication (COM(2001) 254 1 C5-0470/2001),

1 having regard to Articles 276(3) and 280(5) of the EC Treaty,

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1 having regard to Rule 47(1) of its Rules of Procedure,

1 having regard to the report of the Committee on Budgetary Control (A5-0393/2001),

A. whereas the scale of the fraud and irregularities established by the Member States and the European
Anti-Fraud Office OLAF increased dramatically in the year 2000 to a record level of approximately
€ 2,03 billion, which is double the figure for previous years and whereas this amount can be broken
down as follows:

1 Revenue side:

Traditional own resources: € 1 143 million

1 Expenditure side:

Agricultural Guarantee Fund: € 576 million
Structural policy measures: € 139 million
Internal policies: € 13 million
External policies: € 156 million

B. whereas detected fraud and irregularities on the revenue side (primarily from customs duties and other
levies) now account for 7,5 % of total traditional own resources, but there was also a sharp increase in
the figures on the expenditure side, in particular in the case of expenditure managed directly by the
Commission,

C. whereas the scale of the fraud and irregularities reported in the case of agricultural expenditure is far

greater than in previous years at € 576 million,

D. whereas although the increase is partly attributable to greater efforts to combat fraud, the figures are

nonetheless alarming,

E. whereas the undisclosed figure for fraud and irregularities not detected must be significantly higher,

F. whereas underreporting must be significantly higher partly because, according to Court of Auditors
Special Report No 10/2001 (1) concerning financial control of the Structural Funds, Member States
fulfilled their obligation to report irregularities only to an extremely limited extent in the case of the
Structural Funds, so that there are actually two types of underreporting, namely cases that are not
detected at all and cases that are detected in the Member States but are not reported to OLAF,

G. whereas, as in the past, only a small proportion of the amounts defrauded can be recovered and in the
case of own resources the average rate of collection has fallen by more than 50 % since 1998 to only
13,85 %,

H. whereas it is not the detection of fraud and irregularities in itself that undermines the confidence of
citizens in the European Union and its institutions, but rather the fact that in most cases the lost funds
cannot be retrieved and that those responsible are not punished,

Calls, in view of these worrying figures, for a real improvement in efforts to combat fraud, with the

1.
following priorities being included or given greater emphasis in the Commission Action plan:

(a)

creation of a European Public Prosecutor for financial matters by mid 2002,

(b) effective protection of the Communities’ financial interests in the candidate countries,

(1) OJ C 314, 8.11.2001, p. 26.

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(c) better monitoring of the Member States’ efforts by the Commission and rigorous disclosure of all

shortcomings,

(d)

fraud-proofing of all new and amending legislative proposals which have budgetary implications;

Thursday 29 November 2001

Action plan for 2001-2003

2. Welcomes the four strategic objectives of the Commission 2001-2003 Action plan to combat fraud
as well as the specific measures detailed therein which represent a major advance in a concerted and
coordinated fight against fraud; asks to be kept regularly informed of progress in each of the measures
outlined in the Action plan;

3.
Underscores, in the light of past experience, the importance of objective 1.2.2 on improving financial
follow-up and penalties; recalls that Parliament is still awaiting clarification on the application of the
principle of proportionality as regards the imposition of fines; is of the opinion furthermore, that the
proposal for a regulation for a ‘blacklist’ mechanism for the EAGGF Guarantee Section should be presented
earlier than the 2003 deadline proposed in the action plan and should be complemented by a similar
approach with regard to the Structural Funds;

4.
Agrees that a comprehensive interinstitutional approach is important to prevent and combat cor-
ruption (objective 3.1) but considers that the proposed memoranda of understanding between OLAF and
Commission departments should not take as long as two years to put together and should preferably
contain a more formal mechanism for consultation and cooperation in suspected cases of irregularity;

Cooperation between the Commission and the Member States

Draws attention to the importance of the efforts made by the Member States to combat fraud and

5.
irregularities and recover amounts wrongly paid;

6.
Draws attention, for example, to the backlog in recovery in Italy and the irregularities alleged by the
European Court of Auditors in the United Kingdom in connection with the import of New Zealand butter,
which have contributed significantly to the losses on the revenue side;

7.
Notes with concern that the information compiled by the Commission in its annual report does not
make it possible to establish to what extent more effective and uniform protection of the Community’s
financial interests has been achieved in all Member States;

8.
Calls on the Commission in future not merely to list the steps taken by the Member States without
comment, but to make a comparative analysis and assessment of those steps, to disclose the shortcomings
found and thus spur the Member States on to greater efforts;

Financial control of the Structural Funds

9.
Notes that the situation must be described as disastrous if the Court of Auditors, in paragraph 106 of
its Special Report No 10/2001, concludes that, more than six years after entry into force of the Commis-
sion Regulation (EC) No 1681/94 (1) on the reporting of irregularities, the data forwarded to OLAF by
Member State authorities was in many cases incomplete, unreliable, misleading, out-of-date and therefore
of little value;

(1) OJ L 178, 12.7.1994, p. 43.

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10.
Notes with incomprehension the Court of Auditors’ observations in paragraphs 120 and 121 of its
Special Report No 10/2001 that, both within the Structural Funds DGs and between OLAF and the rel-
evant DGs, there is no agreed and documented system for the follow-up of irregularities communicated by
the Member States, so that analysis or further processing of reported cases is delayed considerably or does
not take place at all;

11.
Points out to the Commission right now that Parliament will return to the issue of inadequate
financial control of the Structural Funds in the context of the forthcoming discharge procedure and calls
on the Commission to submit to it by 15 December 2001 at the latest a list of all irregularities reported
since entry into force of Regulation (EC) No 1681/94 indicating for each case the size of the financial loss
and whether it has been possible to recover any money, and, if so, how much;

Cooperation with the candidate countries

12.
Notes that establishing effective protection of the Community’s financial interests in the candidate
countries will be one of the major challenges of the years ahead and, in view of the likely rapid increase in
payments from the Community budget and the existing potential risk,
it is necessary to adopt new
approaches;

13.
Highlights the case of corruption involving EU funds in Slovakia which emerged in Spring 2001
and the latest reports from Poland that serious irregularities took place when the system for the adminis-
tration and control of agricultural expenditure was set up; stresses that these cases must be fully investi-
gated and those responsible must be punished where appropriate; emphasises also that it views the treat-
ment of such cases by the candidate countries as an important test for their membership of the European
Union;

Calls on OLAF to set up similar units in all the candidate countries by mid 2002, in accordance

14.
with the principle of decentralisation (1) long advocated by Parliament;

Requests the European Court of Auditors to submit to it by the start of 2003 at the latest an
15.
opinion on each candidate country showing whether the system of financial control in place in these
countries is able to work in a way that will allow the shift to decentralised management of Community
funds on accession without jeopardising the Community’s financial interests;

OLAF investigation activity

16.
Notes that, at the end of May 2001, OLAF had recorded a total of 2343 cases in its Case Manage-
ment System, but that, according to the OLAF Supervisory Committee (Chapter III, paragraph 3.2 of the
most recent OLAF Supervisory Committee Progress Report), could not give any precise details as to the
action taken by the competent national authorities in the individual cases or as to whether administrative
or criminal penalties had been imposed and monies had been recovered;

17.
Notes with concern the OLAF Supervisory Committee’s observations (Chapter IV, paragraph 3.1.1)
that only in very, very few of these cases has OLAF forwarded reports or information to the competent
national judicial authorities, although a large number of the cases processed by OLAF include aspects that
are covered by criminal law;

Notes with concern that, so far, only in two out of altogether 92 internal cases investigated have

18.
the accused been sentenced by national courts;

(1) Paragraph 3(n) of its resolution of 7 October 1998 on the independence, role and status of the Unit for the Coor-
dination of Fraud Prevention (UCLAF) (Court of Auditors Special Report 8/98 concerning the Commission depart-
ments responsible for fighting fraud) (OJ C 328, 26.10.1998, p. 95).

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19.
Notes with concern the observation made by the OLAF Supervisory Committee (in Chapter V,
paragraph 3, of its report) that EU bodies and institutions evidently inform OLAF of suspected cases
more or less as they see fit and are thus in breach of Article 7 of European Parliament and Council
Regulation (EC) No 1073/1999 of 25 May 1999 concerning investigations conducted by OLAF (1), pur-
suant to which all information relating to possible cases of fraud or corruption or other illegal activity
must be forwarded to OLAF without delay; expects that this rule will now be strictly complied with;

Suspected cases of fraud and favouritism in the Commission

20.
Notes with incomprehension that the Commission, in spite of an announcement by Vice-President
Kinnock on this matter in March 2001, has still not complied with the call Parliament made (in para-
graph 14 of its resolution of 4 April 2001 (2) on implementation of the 1998 general budget) for the
Commission to appear as joint plaintiff in the PerryLux affair so that it would be able to gain access to
the files;

Recalls that a former Member of the Commission has been accused of misusing official vehicles for

21.
private purposes, and that another former Member of the Commission has been accused:

(a) of irregular conduct as regards the award of several contracts to a firm with which she had connec-

tions, shortly before taking up office as a Commissioner;

(b) of having an expensive apartment in Brussels made available free of charge to one of her advisers;

(c) of having contracts for inconsequential studies and research awarded to a German lawyer as cover so
that he could visit her office and possibly gain access to and influence sensitive cases (LEUNA affair)
with which the Commission was dealing at that time;

22.
Points out to the Commission that whilst it might not be possible to take action in respect of such
conduct under Belgian criminal law, it can and must be punished as a breach of obligations within the
meaning of Article 213 of the EC Treaty; reaffirms therefore the call (3) it made for the European Court of
Justice to be invoked where appropriate if it were to be confirmed that Members of the previous Commis-
sion had breached the obligations of their office; calls explicitly on the Commission to abandon its wait-
and-see approach and to initiate the relevant investigations;

European Public Prosecutor

23. Welcomes the latest progress in creating Eurojust; expects that the 15 members of Eurojust sec-
onded by the Member States will by mid-2002 at the latest be joined by a European Public Prosecutor for
financial matters, because Eurojust can contribute effectively to protecting the financial interests of the
European Union only in cooperation with a public prosecutor with such a remit;

24. Welcomes the Commission’s support for the idea of a European Public Prosecutor and expects the
Commission in the Green Paper it has announced also to examine how, in accordance with paragraph 8 of
its Resolution of 14 March 2001 (4) on the 1999 report on the fight against fraud, a European Public
Prosecutor’s Office for financial matters can be set up on the basis of the EU Treaty whose jurisdiction
would be limited initially to internal investigations and which would have a purely advisory and suppor-
ting role vis-à-vis the national judicial authorities without any authority to issue instructions; points out
that the call to set up such an office, whose remit would initially be confined to internal investigations, is
endorsed by the OLAF Supervisory Committee in its latest progress report and cited as one of the precon-
ditions for ensuring the legality and legitimacy of OLAF’s investigations;

25. Welcomes and supports as a necessary second step the Commission proposal to amend the EC
Treaty at the earliest opportunity and thereafter to confer more extensive powers on the European Public
Prosecutor for financial matters;

(1) OJ L 136, 31.5.1999, p. 1.
(2)
‘Texts Adopted’, Item 3.
(3) Paragraph 18 of its abovementioned resolution of 4 April 2001.
(4)

‘Texts Adopted’, Item 11.

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Considers also that ultimately the demands it made back in 1998 (1) will have to be acted upon and

26.
that arrangements should be introduced, on the basis of Article 280 of the EC Treaty, for dealing with:

(a)

cooperation between Union bodies and the national judicial authorities,

(b) OLAF’s exercise of its powers which have not yet been explicitly regulated, in particular as regards the

power to bring proceedings, protect files and adopt measures to restrict a person’s freedom,

(c)

judicial scrutiny of the work of OLAF,

(d)

the requirement for officers of OLAF to take the oath;

Cigarette smuggling

27. Welcomes the fact that the Commission is maintaining its action against tobacco companies in the
USA, without whose involvement the smuggling of cigarettes in Europe on a vast scale over recent years
would not be possible; regrets that Denmark, Ireland, Luxembourg, Austria and the United Kingdom,
unlike the other ten Member States, have not joined this action;

28.
Believes that, regarding the objective of fighting cross-border smuggling of cigarettes in the EU, and
into the EU from non-member countries, and tax fraud, greater convergence of tax rates is an insufficient
approach in itself for tackling the problem and requests the Commission to put forward effective proposals
as soon as possible;

29.
Stresses that, in parallel with the continuing legal action in the USA, efforts must be stepped up
within the European Union to combat cigarette smuggling with the aim not only of stemming the flow of
consignments of smuggled goods by means of border checks but also of taking targeted action before such
consignments are dispatched, i.e. by stepping up checks on manufacturers, warehouse keepers and firms
that misuse the official transit procedure as a legal cover for fraud;

Calls on the Commission to ensure that the Italian authorities now report without delay on the
30.
steps they took after evidence, including precise details of those organising the smuggling of consignments,
was forwarded to them following two UCLAF missions to Montenegro in 1996 and 1997;

Cooperation with Switzerland

31.
Points out that European taxpayers are incurring losses amounting to billions because cooperation
with Switzerland in combating international organised smuggling, particularly involving high-risk goods
(cigarettes, alcohol, precious metals, electronic goods) is not operating properly; notes that Parliament
cannot approve further agreements with Switzerland unless there is an improvement in cooperation in
the area of organised crime;

Notes that the fight against organised crime also concerns the credibility of Member States and in

32.
this connection points by way of example to:

(a)

(b)

recent changes in the law in Italy, where the introduction of new formal procedural requirements has
made cross-border legal assistance with Switzerland in the case of offences such as money laundering
and arms, drug and cigarette smuggling more difficult or even impossible,

the recent report drawn up for the French National Assembly, according to which European public
prosecutors and judges are complaining of serious difficulties encountered in cooperation with the UK
in the fight against money laundering;

(1) Paragraph 4 of its abovementioned resolution of 7 October 1998.

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Further development of OLAF

Reiterates its call (1) for OLAF, as an office with a horizontal and interinstitutional remit, also to set
33.
up units in Luxembourg and draws attention in this context to the importance of Luxembourg for the
Community’s financial operations and its institutions and services (almost 7000 officials);

Recalls that OLAF has the task of carrying out investigations in all Community institutions if
34.
necessary; stresses, in view of OLAF’s interinstitutional remit, that it is in the interests of all Community
institutions to make full use of the scope offered by the Staff Regulations and to second officials tempor-
arily to OLAF or the secretariat of the OLAF Supervisory Committee;

Calls on the Italian government to stop blocking leave of absence for Italian public prosecutors to

35.
take up executive functions with OLAF;

Calls for those responsible to be identified and punished if it should be confirmed that OLAF’s
36.
predecessor, UCLAF, misinformed or misled the Commission about the status of certain cases or that
files were tampered with in order to impede or prevent investigations;

Information for the European Parliament

37. Welcomes the fact that, following its resolution of 14 March 2001 (2) on fight against fraud (para-
graph 22), OLAF is now forwarding reports on its internal and external investigations and has allowed
them to be examined in full accordance with Annex VII of its Rules of Procedure (confidential access to
reports for all committee members); invites OLAF to indicate the date when the allegation was received,
the overall cost, the main problems identified and the recommendations to the Commission and/or other
parties; calls on the Commission to follow this example and accordingly to open up access, on request
from Parliament and according to the rules on confidentiality, to its internal audit and monitoring reports;

Reminds the Director of OLAF that Parliament and its competent committee regularly need mean-
38.
ingful information and statistics which indicate the results of OLAF’s investigations, the criminal and dis-
ciplinary follow-up measures taken and the extent to which it has been possible in individual cases to
recover undue payments;

39.
Notes with great concern that the Director of OLAF is clearly being put under pressure to abandon
his former practice and, in future, no longer to submit to Parliament a list of current internal investi-
gations; recalls that, as things stand, internal OLAF investigations are not subject to scrutiny by judges or
public prosecutors and that, for that very reason, effective parliamentary scrutiny is of particular signifi-
cance; recalls, further, that such scrutiny is carried out in strict compliance with Annex VII to its Rules of
Procedure (Procedure for the consideration of confidential documents communicated to the European
Parliament); instructs its President, on the basis of Parliament’s right to information laid down in Arti-
cle 276 of the EC Treaty, to initiate the appropriate legal procedure, should the appropriate committee of
the European Parliament not have received a complete list of current internal investigations by 1 January
2002;

*

*

*

Instructs its President to forward this resolution to the Council, the Commission, the Director of

40.
OLAF, the Court of Justice and the Court of Auditors.

(1) Paragraph 3(n) of its abovementioned resolution of 7 October 1998.
(2)

‘Texts Adopted’, Item 11.