Activity report for the period 1 June 2000 to 31 May 2001
Date: 2001-12-20
Institutions: European Anti-Fraud Office, European Commission
Subjects: European Anti-fraud Office, activity report

20.12.2001

EN

Official Journal of the European Communities

C 365/31

ACTIVITY REPORT

for the period 1 June 2000 to 31 May 2001

(2001/C 365/02)

CONTENTS

FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

Chapter 1

Investigation activity (1 June 2000 to 31 May 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

1.1.

Past year’s trends in investigations and operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

1.2.

Internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

1.3.

Direct expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.1.

External aid and enlargement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3.2.

Internal policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

39

40

1.4.

Structural measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

1.5.

Customs/agriculture external trade/taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5.1. General review of activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5.2. Agricultural external trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5.3.

Fishery/industrial products (textiles and footwear) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5.4. Drug precursors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5.5.

Indirect taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

41

42

42

43

43

C 365/32

EN

Official Journal of the European Communities

20.12.2001

1.6.

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.6.1.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.6.2.

Irregularities in the flax regime, Spain.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.7.

Cigarettes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.7.1.

Priorities of the sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.7.2. Description of a case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

44

44

44

44

45

1.8.

Statistical overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45

Chapter 2 OLAF procedures in the institutional set-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

2.1.

Relations with the Commission departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1.1.

The functional autonomy of the Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1.2.

The administrative and budgetary organisation of the Office . . . . . . . . . . . . . . . . . . . . . . . .

2.1.3. An anti-fraud training policy and a communication policy aimed at the public . . . . . . .

2.2.

Relations with the other EU institutions and bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2.1.

The institutional environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2.2.

The legal framework of internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

50

50

52

53

53

54

2.3.

New management instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54

2.3.1.

Information and communication policy towards other institutions and the Member
States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3.2.

The OLAF manual

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3.3. An effective IT system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3.4. Cooperation and prevention instruments — two examples . . . . . . . . . . . . . . . . . . . . . . . . .

2.3.5. A public complaint mechanism (the freephone) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

55

55

57

58

2.4.

The follow-up of operational files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58

Chapter 3

Evolution of the instruments for support to the operational activity . . . . . . . . . . . . . . . . . . .

59

3.1.

The OLAF manual

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59

3.2.

Adoption of a code of conduct concerning interinstitutional relations . . . . . . . . . . . . . . .

60

3.3.

Establishing a policy on handling operational information . . . . . . . . . . . . . . . . . . . . . . . . .

60

3.4.

Enhanced mutual assistance and customs cooperation instruments . . . . . . . . . . . . . . . . . .

60

20.12.2001

EN

Official Journal of the European Communities

C 365/33

3.5.

Organisation of the follow-up of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

3.6.

Setting up a structure in charge of intelligence, operational strategy and information
technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

3.7.

A Community platform of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

Chapter 4

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

ANNEX — OLAF organisation chart — 1 October 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63

C 365/34

EN

Official Journal of the European Communities

20.12.2001

FOREWORD

The following Activity Report gives an overview of the first business year for which I am totally
responsible. It is characterised by the difficulties stemming from the transformation from UCLAF to
OLAF.

The first report, from May 2000, was more a stock-taking of the inheritance from UCLAF. During 2001
it emerged that this inheritance, which was outlined in the first report, was harder to deal with than had
previously been expected. A fundamental restructuring, especially with regard to internal investigations,
was necessary.

The first structural changes were undertaken with the aim of breaking up the somewhat inflexible
structure of the investigation units and setting up a flexible, transparent working structure. This is now in
place and is fully accepted especially by the new staff in OLAF.

New arrivals have been faced with many administrative obstacles, in particular in filling the management
posts, and they could not be completed within the foreseen deadline. In the mean time, numerous OLAF
officials have left. Of course, the Commission had to be in agreement with this plan. Therefore it is only
now possible to speak about a true new beginning.

The main priority of the work inside OLAF is therefore the completion of the organisational changes and
the re-defining of the tasks of the Office. The Office therefore is now in a position to carry out its
operational missions in complete independence with the unfailing support of the Supervisory Committee.

While OLAF is an administrative investigation body, the results of its investigations must be able to be
used in different proceedings, for example during possible disciplinary proceedings, administrative
proceedings (recovery) or even penal proceedings. Therefore close cooperation with the different
authorities of the Member States and the Judiciary is necessary. Only through this close, international and
multidisciplinary cooperation can we achieve the aim of obtaining investigation results which may be
effectively exploited.

The adaptation to the new requirements of OLAF was particularly problematic with internal investigations.
The investigation methods had to be completely revised, and they have been brought to an acceptable
standard for an investigation body aiming to achieve successful results, without disregarding the principles
of the rule of law. This process is on the right track with the latest staff changes.

The mistrust of the officials of the institutions comes from the experiences linked to the resignation of
the last Commission. It is to be hoped that this mistrust can be overcome and the importance of the
investigations of OLAF be better understood.

The goal of all these internal reforms is to put OLAF in a stronger position to protect the interests of
Europe. An important role in this is the service function that OLAF offers in the cross-border pursuit of
the misuse of public money and the resulting economic crime. Open borders are a chance for Europe,
but the investigation bodies are still not in a position to overcome quickly the still existing boundaries of
competence. This can be accelerated with the help of OLAF and the experiences gained should be included
in the future reflections on the improvement of cooperation. The Member States, along with the
Candidate Countries and non member Countries are already making ample use of the possibilities which
OLAF can offer in terms of providing the necessary information and bringing them into contact with the
different investigation and enforcement bodies.

20.12.2001

EN

Official Journal of the European Communities

C 365/35

In an ever-growing Europe the cooperation of investigation bodies, including the judiciary, has accelerated
during the last years independently of the tragic events of 11 September 2001. While the negotiations on
Eurojust, a coordination unit for judicial cooperation which should start its activities next year, are still
ongoing, a provisional unit has already been put into place. In addition to this very visible project there
are many other efforts to improve cooperation. I hope on the basis of the Green Paper on the European
public prosecutor which the Commission will produce in late autumn to have an open dialogue about
this overall project. In this framework, great efforts are required to bring together the different proposals
into one overall project to develop an effective system of cooperation and collaboration.

Independently of the cooperation and collaboration established, we should strive for a solution which
makes it possible for the ever growing Europe, despite the multiplicity of investigation bodies and the
different legal systems, to combat irregularities, economic crime and other forms of crime detrimental to
our communities’ interests as effectively as possible.

Today everybody will be called on to think and act globally. But the investigation bodies are unfortunately
excluded from this to a large degree. OLAF will actively participate and contribute with the collected
experiences of its investigators and judicial experts. The candidate countries should be involved in this
dialogue at a very early stage, so as to prepare the overall project for the future.

Franz-Hermann BRUENER
Director-General OLAF

C 365/36

EN

Official Journal of the European Communities

20.12.2001

INTRODUCTION

— the rigid division of operational activities and the lack of

objective and transparent working methods,

The European Anti-fraud Office is required to report on its
operational activities (1). The first report of this kind, covering
the period from 1 June 1999, the date of the establishment of
OLAF, to 31 May 2000, was adopted on 23 May 2000 (2): it
analysed the Office’s powers and procedures under the relevant
legislation. The report also analysed operational activities in
statistical and quantitative terms and presented a series of
questions to serve as a basis for future guidelines.

— the nature of the expertise available, which is itself also

inherited from the former structure,

— the actual timing of the budgetary procedure which
explains that the 2000 budget was prepared by the
former structure before new guidelines were formulated,

The present report covers the period from 1 June 2000 to
31 May 2001 and documents the major changes which have
been or are about to be made to the Office’s organisation and
working methods in view of
the
Community’s financial interests and to fight fraud and other
illegal activities affecting the interests of the Community.

its mission to protect

The first part of the report gives account of the Office’s past
operational activity, as regards the protection of financial
interests. It presents the specific activity in each of the main
sectors of the Communities’ policies with a summary of some
exemplary cases. Because of the protection accorded to people
under investigation and the need to respect the confidentiality
of investigations cases presented here are either known to the
public or closed. This presentation is followed by a detailed
statistical analysis which takes account of the mass of existing
information and uses it in accordance with the new method-
ology adopted to process files.

This account of last year’s operational activity is the summary
of an exercise which was largely predetermined by a number
of contingencies, in particular:

— the large number of files inherited from UCLAF,

— the structural inertia resulting from the transfer en bloc

of human resources,

(1) Regulation (EC) No 1073/1999 of the European Parliament and
of the Council Regulation (Euratom) No 1074/1999 (OJ L 136,
31.5.1999). The Commission, in accordance with Article 280(5)
of the EC Treaty, is further required to give account, in its annual
report, of its overall activity to protect the Communities’ financial
interests and the fight against fraud. Until now, two reports of
this kind have been submitted: the Annual Report 1999 adopted
on 8 November 2000 (COM(2000) 718 final) and the Annual
Report 2000 adopted on 23 May 2001 (COM(2001) 255 final).

(2) The Report is available at the Internet address

http://europa.eu.int/comm/anti–fraud/reports/commission.

— the complexity of budgetary negotiations for 2001/2002,

due in particular to the freezing of several posts,

— the heavy burden of recruitment to be carried out in the

period in question,

— the slowness of the redeployments to be carried out

without affecting the continuing of activities,

— the lack, finally, of a material law of Community level, in
investi-

particular for offences in the area of internal
gations.

It is consequently only at the end of this period that the
Director-General will have most of the necessary resources for
the implementation of the new policy. The period 2000 to
2001 is largely dominated by the change of direction of the
Office, on the basis of procedures, resources and methods,
whose adaptation will have only come into effect at the end of
the period in question.

The second part opens with a summary of the main stages in
the establishment of the Office. This transitional period was
marked by reflections on new organisation, in cooperation
with the Supervisory Committee (3), which plays an important
role in consolidating the Office’s operational independence.
The report subsequently focuses on the role of the Office, in
particular the efforts deployed to modernise working methods
and internal procedures and to ensure that investigations and
their follow-up are effective and proactive. The third part takes
stock of progress made to set up the necessary instruments for
defining the Office’s future operational strategy, based on the
new structure and a culture of proactive action and co-
operation with the Member States. Finally, the report sets out
the Office’s major orientations for future activities.

(3) Committee set up by Article 11 of Regulation (EC) No 1073/1999
the
and Regulation (Euratom) No 1074/1999 to monitor
implementation of the Office’s investigative function and to
consolidate is independence.

20.12.2001

EN

Official Journal of the European Communities

C 365/37

Our objective

1.1. Past year’s trends in investigations and operations

The mission of the European Anti-fraud Office (OLAF) is to
protect the interests of the European Union, to fight fraud,
corruption and any other illegal activity, including misconduct
within the European institutions. In pursuing this mission in
an accountable, transparent and cost-effective manner, OLAF
aims to provide a quality service to the citizens of Europe.

Our methods and means

The European Anti-fraud Office achieves its mission by
conducting, in full independence, internal and external investi-
gations.
It also organises close and regular cooperation
between the competent authorities of the Member States, in
order to coordinate their activities. OLAF supplies Member
States with the necessary support and multidisciplinary techni-
cal know-how to help them in their fight against economic
and financial crime. It strives to contribute to the design of the
European strategy for the fight against
fraud and illegal
activities and takes the necessary initiatives to strengthen the
relevant legislation.

Our principles

The Office’s activities will be carried out with integrity,
impartiality and professionalism, and will, at all times, respect
the rights and freedoms of individuals and be fully consistent
with the law.

An important part of the past year’s investigative and oper-
ational activity (5) dealt with files that existed before the setting
up of the Office. To implement the new policy decided by the
legislator, the Office did not in fact start ex nihilo but had to
reconstruct by means of redeployment and recruitment over
time its resources and internal expertise. Moreover,
the
resources available which had been transferred en bloc when
the Office was established, were devoted by way of priority to
establishing new investigative procedures. This reallocation of
means affected activities on the ground, but led to adoption of
the OLAF manual and full implementation of the new case
management system (CMS) (6).

This work was carried out within the new Investigations and
Operations Directorate, set up in September 2000 composed
of two pools, responsible for investigations and operations
respectively.

By setting up such an operational structure and such instru-
ments, the Office aims at the definition of an investigation
policy that will be based on the contribution of all services and
particularly of the new Directorate for Intelligence. Within
the immediate transition context, guidelines for operational
activity have been based on a harmonisation of criteria for
processing information and on a pragmatic targeting of
activities.

Two pools of investigators from the new operational Director-
ate continued ongoing tasks in the following areas:

CHAPTER 1

I n t e r n a l i n v e s t i g a t i o n s

INVESTIGATION ACTIVITY (4) (1 JUNE 2000 TO 31 MAY
2001)

The following is a presentation of the period in question,
mainly devoted to the continuation of work under way, the
setting up of the new operational structure, the adaptation of
the expertise and the definition of new working methods.

According to the priority themes defined by the overall
strategic approach (7), by Parliament’s guidelines in its resol-
utions, and by the Supervisory Committee’s recommendations,
internal investigations focusing on the European institutions
and bodies constituted the main priority in the operational
area.

that

(4) It concerns ‘administrative investigations’,

is all checks,
inspections, and other measures undertaken by employees of the
Office in the performance of their duties, in accordance with the
relevant Regulations with a view to strengthening the fight against
fraud, corruption, and any other illegal activity harmful
to
the Community’s financial interests and to establishing, where
necessary, the irregular nature of the activities under investigation.
These investigations shall not affect the powers of the Member
States to bring criminal proceedings.

(5) Apart

from investigations,

the Office’s operational activities
include coordination of action to protect financial interests and
assistance, particularly to Member States’ criminal prosecution.

(6) The system is presented in detail at point 2.3.3.
(7) It is the third theme, defined as ‘an interinstitutional approach to
preventing and fighting fraud and corruption’ (COM(2000) 358
final of 17 July 2000; COM(2001) 254 final of 15 May 2001).

C 365/38

EN

Official Journal of the European Communities

20.12.2001

D i r e c t e x p e n d i t u r e

In the area of direct expenditure, operations were mainly
based on the need to reinforce work on cases with internal
ramifications. Priority was given to cases of a complex
transnational nature and cases involving cooperation with
judicial authorities within and outside the European Union,
with a view notably to establishing a basis for further work in
2001/2002 in the areas of expenditure on enlargement and in
the European Development Fund.

They are usually complex cases of fraud committed either by
well-organised people or by isolated individuals or individual
actions which may constitute a breach of the obligations
of officials. These cases show the diversity of behaviour
(misappropriation of funds, forgery, manipulation of tenders,
transmission of
information on tenders liable to lead to
criminal prosecution, concealed activities) of officials or ser-
vants of the various institutions.

S t r u c t u r a l a c t i o n s

S p e c i f i c i n v e s t i g a t i o n s

For structural actions, priority was given to cases with
significant transnational or financial impact.

C u s t o m s / t r a d e

In this sector, activity was mainly concerned with:

— protecting preferential customs regimes,

— cases involving sugar and banana imports, due to high

rates of duties,

— export refunds, in particular on exports to the Russian

Federation (8).

A g r i c u l t u r e

Processing and production aid notably for olive oil, tomatoes,
flax and dairy products, based on risk identification.

C u s t o m s a n d e x c i s e d u t i e s

Combating cigarette and alcohol smuggling and other illegal
activities.

1.2.

Internal investigations

Thirty-six investigations were opened during the period,
including eight concerning Community institutions, bodies
and agencies other than the Commission. Reports have been
produced in nine investigations. These reports concern the
Commission, the Economic and social Committee as well as
the Translation Centre for the bodies of the European Union
and the European Parliament; eight investigation reports were
followed by decisions to refer the case to the national judicial
authorities.

(8) Already identified in the 1999/2000 Activity Report, p. 42.

Two specific investigations in cases that actually came to
judgement, with assistance from the Office, bear witness to the
difficulties in cooperation among all the authorities or services
concerned, but they also illustrate the evolution of procedures.
These two files remarkably show the need for coordination of
the actions in the fight against fraudulent practices.

S t o c k h o l m r e p r e s e n t a t i o n O f f i c e c a s e

In November 1999, alleged financial malpractice was reported
at the Commission Representation in Stockholm. Because of
the specific limitations resulting from the Protocol on the
Privileges and Immunities and the Staff Regulations,
the
Swedish judicial authorities asked for the assistance of the
Office, which has the necessary powers to carry out investi-
gations inside the Commission. OLAF accomplished this task
and, on 24 May 2000, submitted its report both to the
Commission and to the Swedish authorities. On the basis of
the findings of the investigators of the Office, the judicial
services were able to continue their work without any delay,
also with the assistance of OLAF.

The Prosecutor for Stockholm launched the hearings and acts
necessary for prosecution purposes. On 28 June 2001, the
Commission started disciplinary proceedings.

This case illustrates the risks inherent in decentralised manage-
ment of Community finance and the need to ensure sound
financial management particularly in the delegations.
In
addition, the case has demonstrated an excellent cooperation
between OLAF and the Swedish judiciary. Public interest and
the press coverage in this particular case have been unusually
high not only in Sweden but also in other Member States. A
rigorous and professional treatment of such an internal case
by OLAF is extremely important for the credibility of the
European institutions.

20.12.2001

EN

Official Journal of the European Communities

C 365/39

T o u r i s m c a s e / F r a n c e

1.3.1.1. Typology of frauds

A first ruling was given in France by the Tribunal de Grande
Instance of Paris on 22 September 2000 concerning fraud
detected in the field of tourism. The Commission (UCLAF) had
reported the fraud in December 1994. Sentences ranging from
of
one
EUR 304 898 were passed against the five principal defendants
and the Community was
awarded civil damages of
EUR 1 029 030.

imprisonment

years’

fines

four

and

to

As the parties concerned have appealed, the Paris Court of
Appeal will retry the case (hearings scheduled for the end of
2001).

Other proceedings under way in the same case, in particular in
Belgium, also commenced in 1994, should come to judgment
in the near future.

This case shows the obstacles preventing national authorities
from advancing rapidly in cases involving transnational fraudu-
lent operations whose complexity may be made even greater
because of the Commission staff’s status. It is regrettable that
the judicial investigations have not evolved to the same degree
in all the Member States.

This kind of investigation clearly shows the need for complete
cooperation between Community and national services, as
well as between the national services themselves, which may
ensure the attainment of satisfactory results within a reasonable
period of time for all parties concerned. Generally, in order to
improve cooperation and to get results as fast as possible, the
Office has adopted the policy of using its own criminal law
expertise and addressing the national judicial authorities at the
earliest possible stage of investigations.

1.3. Direct expenditure

1.3.1. External aid and enlargement

in this area are recognised as
Although investigations
important, the priority given to internal cases and to reorganis-
ing and overhauling procedures has for the moment necessarily
reduced the available resources. It is important that OLAF
co-operate with other donor organisations (World Bank,
International Monetary Fund, United Nations Agencies, etc.)
particularly with their investigation and anti-fraud services,
because of the complementarity of funding programmes and
synergies that can be found in cooperation and information
sharing. The Office has also been able to benefit from close
cooperation with non governmental organisations (NGOs),
for example Transparency International, by supporting their
actions to strengthen the civil society and the fight against
fraud and corruption. As OLAF and NGOs have many
common objectives,
it is expected liaisons will be further
developed.

The types of fraud encountered in these two areas are the same
as those identified in the Office’s report for 1999/2000. But in
the period 2000/2001, the Office identified specific problems
in relation to public procurement.

An important portion of the EU budget is used for technical
assistance to non-member countries, including the acceding
countries. Most of these funds are spent through service
contracts with specialist firms that bid for public tenders issued
by the responsible EU departments or by recipient authorities
under the supervision of the EU services.

As in all public procurement situations, there are various
possibilities for fraud and irregularities. The rules to avoid
fraud and ensure fair competition so that the best services can
be obtained at the best prices are the result of the combined
experience of many years.

Cases in which OLAF was involved concern the suspicion of
undue influence on members of committees who are respon-
sible for evaluating the quality of offers made by tenderers. A
number of allegations concern bribes and kickbacks to these
persons in order to win an undue advantage over competitors.
Other allegations concern conflicts of interest between experts
who have been involved in designing projects and formulating
terms of reference and tenders. The applicable rules are
designed to ensure a level playing field for all competitors;
information leaking out to potential bidders about the techni-
cal requirements at an early stage may have an adverse effect
on fair competition.

OLAF will strengthen its efforts to work closely with the
responsible services to increase their ability to detect potential
cases of tender fraud and to further develop the rules and
structures to fight irregularities with regard to procurement.

1.3.1.2. Development and humanitarian aid

The signing of the Cotonou Agreement in June 2000 ushered
in a new 20-year-partnership between the Community and the
African, Caribbean and Pacific (ACP) countries, replacing the
Lomé Convention. The partnership seeks to create a more
favourable context for sustainable development and poverty
reduction and to reverse the processes of social, economic
and technological marginalisation. It also establishes special
consultation procedures and penalties for dealing with serious
corruption.

C 365/40

EN

Official Journal of the European Communities

20.12.2001

The Office has examined a number of cases involving financing
under the Lomé Convention and has undertaken investigations
to support actions by judicial authorities concerned by fraud
in certain ACP countries. The Office considers that it is
important to build on this experience in the context of the
commitments made under the Cotonou Agreement to boost
action against fraud.

The Office is currently providing assistance to Kenya in
connection with a criminal
investigation into serious alle-
gations of irregularity in a tendering procedure. This file is
ongoing and is considered to be a useful test case on what can
be achieved, given the legal constraints on direct action by the
Office.

1.3.1.3.

Enlargement

It is necessary to ensure an appropriate protection of financing
prior to accession; therefore, the Office focused on aid to
national administrations in the fight against fraud. Some
examples follow of work undertaken with the cooperation of
national administrations in the conduct of investigations

P u b l i c p r o c u r e m e n t

OLAF handled two cases in Romania in 2000, in the area of
public procurement. One concerned alleged fraud with regard
to a technical assistance project in favour of the Romanian
authorities. The tender was cancelled and re-launched after
being completely rewritten.
information
received has led OLAF to believe that tenderers may have
influenced members of the independent evaluation committee.
The file was transmitted to the Romanian Prosecutor General.
The OLAF Magistrates and Judicial Advice Unit has been
ensuring continuing cooperation with Romanian authorities.

In another case,

M a n a g e m e n t o f P h a r e f u n d s

In 2001 OLAF initiated an investigation with regard to
allegations of corruption in relation to the handling of Phare
funds in Slovakia. OLAF is assisting the national investigators
responsible in this case and provides expert advice on Phare
programming and tendering structures that the investigators
need in order to understand the actions to be taken. A monthly
workshop with the national authorities has been organised
during which the interim results of the investigation and
the workplan are discussed. OLAF also assists in providing
information necessary for the investigators from files under
the control of the European Union departments.

J O P p r o g r a m m e

Finally, the Office has worked on cases in close co-operation
with Commission departments. An example of the type of
work undertaken concerns a number of cases in a joint venture
programme funded by Phare.

In the JOP programme, the Directorate-General for Economic
and Financial Affairs made a significant number of checks and
inspections at the recipient firms. The findings highlighted the
involvement of certain consultancy firms, including some in
the European Union, and gave an overall view of their action.
Together with the financial operations department, OLAF
analysed all the files concerned and proposed a progressive
strategy, taking account of the various facts emerging from the
investigation, so as to be able to determine the fraud mechan-
ism involved and to take the most effective actions to penalise
those responsible.

1.3.2.

Internal policies

OLAF is responsible for conducting investigations into alle-
gations of serious irregularity or fraud in the sector of the
European budget concerned with what are termed ‘Internal
policies’. These policies, which include such areas as transport,
education and culture, research and technological development
and which account for some 6 % of the budget, are implement-
ed and managed by different Commission departments and
involve no formal responsibility of the Member States such as
exists, for example, in agriculture and Structural Funds.

As far as possible OLAF is increasingly seeking to cooperate
with the responsible Commission departments at all stages of
such programmes to prevent and detect irregularity and fraud.
Initiatives taken include: consultation at initial stages on the
inclusion of appropriate anti-fraud measures in the terms on
which grants and payments are approved; joint collection and
evaluation of information; joint controls (depending on the
legal basis), and coordination of financial recoveries as appro-
priate.

In March 2000, acting on information received from a
Commission department, OLAF launched an investigation into
a non-profit making organisation which had been receiving
funds from a number of Commission departments for a
number of years. OLAF, in close association with two different
Commission departments, prepared and undertook a compre-
hensive inspection of the range of different funds advanced to
the organisation. Besides a remarkable number of ineligible
operations, the Office found out that the non-profit organis-
ation had applied to the Commission for reimbursement of
costs that it had not incurred and costs of services for which
there were no invoices or statements. Interim findings have
confirmed that EUR 300 000 must
to be recovered by
Commission departments with OLAF’s assistance. Moreover,
the case has now also been formally transmitted to the Member
States’ judicial authorities for action on allegations of fraud
and deception.

A lesson that can be drawn from this investigation is that,
when the European Commission finances a non-profit making
organisation on a long-term basis, such financing may create
de facto dependence, since these organisations rarely have
the resources to finance their permanent assets (building,
equipment, staff).

20.12.2001

EN

Official Journal of the European Communities

C 365/41

1.4. Structural measures

In consideration of the central role played by the Member
States in the field of the Structural Funds, the Office focused
its efforts on its own investigations and on high-risk areas.
Nevertheless, it was particularly vigilant regarding the follow
up action taken by them in cases of systematic irregularities
with major financial implications.

In this framework, OLAF cooperated closely with the Com-
mission authorising services and with the Member States, in
order to ensure the coordination of the activities aiming to
protect financial interests, combat fraud and remedy persistent
weaknesses.

Since December 2000, the Office has been using a new
communication software, set up in the context of Regulation
(EC) No 1681/94 (9) which, in making on-line communication
between Member States and the other departments concerned
possible, will boost the effectiveness of administrative and
financial follow-up.

Moreover, the Office transmitted full information on criminal
activities to competent judicial and police authorities for the
opening of criminal proceedings and gave them its full
cooperation and assistance. Several coordination and assist-
ance cases were opened on this basis.

For its more operational activity, OLAF paid close attention to
the cases where the activity of the Member States alone proved
insufficient or impossible, including cases where:

— transnational irregularities or irregularities may involve
economic operators acting in several Member States,

— inadequate answers are given by the Member State to the

Office’s requests,

— the recipient had received Community funds from differ-
ent sources (direct financing and Structural Funds).

During a routine control carried out by one of the authorising
departments of the Commission in a Member State on a
project partly financed by a Structural Fund, OLAF’s attention
was drawn to expenditure statements submitted by the ben-
eficiary on the basis of documents issued by a contractor based
in another Member State. The contractor in question, who was
also the direct beneficiary of Community financing, was the

(9) Commission Regulation (EC) No 1681/94 of 11 July 1994
concerning irregularities and the recovery of sums wrongly paid
in connection with the financing of the structural policies and the
organisation of an information system in this field (OJ L 178,
12.7.1994, p. 43).

subject of an on-the-spot inspection by OLAF on the basis
of Regulation (EC, Euratom) No 2185/96 (10). The Office
ascertained facts showing that expenditure presented in the
part-financed project had been inflated and, in particular, that
a part of the over-invoiced amount had been used to pay
money to a company established in a tax haven. The inspection
report and all relevant documentation were immediately
transmitted to the judicial authorities of the Member State
where the part-financed project was submitted. Searches and
seizures carried out afterwards in cooperation with the Office
enabled the situation previously suspected to be confirmed.

1.5. Customs/agriculture external trade/taxation

1.5.1. General review of activities

The Customs Union and the common commercial policy
fall within the exclusive responsibility of the Community
(Articles 23 and 131 of the EC Treaty). The Commission
accordingly has the power to take action against operations
which constitute or appear to constitute breaches of the
customs legislation. Regulation (EC) No 515/97 (11)
is the
basic Regulation containing provisions on mutual assistance
between Member States and between Member States and the
Commission. OLAF is responsible for the application of this
Regulation.

implementing Regulations (12) and inter-
On the basis of
national agreements, OLAF has the highest responsibility for
organising an effective cooperation at all
levels in order
to ensure a good application of customs and agriculture
Regulations. To that end, it exchanges information, coordinates
actions undertaken in the Member States, takes part in checks
and inspections in the Member States and non-member
countries and carries out on-the-spot checks.

All customs investigations concern exchange of goods between
the European Community and non-member countries (import,
export,
transit, warehousing, processing) on the basis of
information on established or suspected breaches of customs
legislation.

(10) Council Regulation (Euratom, EC) No 2185/96 of 11 November
1996 concerning on-the-spot checks and inspections carried
out by the Commission in order to protect
the European
Communities’ financial interests against fraud and other irregu-
larities (OJ L 292, 15.11.1996, p. 2).

(11) Council Regulation (EC) No 515/97 of 13 March 1997 on
mutual assistance between the administrative authorities of the
Member States and cooperation between the latter and the
Commission to ensure the correct application of the law on
customs and agricultural matters (OJ L 82, 22.3.1997, p. 1).
(12) In particular Regulation (EC) No 515/97 and Regulation (EC)

No 2185/96.

C 365/42

EN

Official Journal of the European Communities

20.12.2001

In the fight against VAT fraud, the legal basis (Regulation (EEC)
No 218/92 (13) and Directive 77/799/EEC (14)) provides for
the Member States (15). But
the primary responsibility of
Article 280(3) of the EC Treaty contains the obligation for the
Member States to coordinate their actions to protect the
Community’s financial interests and to ‘organise, together with
the Commission, close and regular cooperation between the
competent authorities’.

The Commission, which already has an operational experience
in this field, plays a coordination and stimulation role,
particularly in the exchange of information, in the most serious
intra-Community frauds, with ramifications in many Member
States. OLAF therefore intervenes in international VAT cases
only if they require Community coordination at operational
level and its assistance is explicitly requested by a national
administrative or judicial authority.

1.5.2. Agricultural external trade

In matters of agricultural trade with non-member countries,
priorities include the examination of matters concerned with
the payment of export refunds, the recovery of customs duties
due on certain agricultural imports and the application of
preferential agreements in agriculture. OLAF conducted spec-
ific enquiries in the following high risk sectors: beef (exports
to Russia), fruit and vegetables (investigation into banana
imports — see detailed description below), milk and milk
products (investigation into adulterated butter), and wine and
alcohol exports.

E n q u i r y i n t o b a n a n a i m p o r t s

Following joint checks by OLAF and the Italian and Belgian
authorities, in the framework of both criminal and administrat-
ive enquiries, it was established in mid-2000 that false AGRIM
import licences were being used at customs clearance for
free circulation of bananas coming from South and Central
America. Investigations are continuing and have now been
extended to several other Member States (France, Portugal and
Spain).

quota when covered by AGRIM import licences. Imports of
such bananas outside the tariff quota are currently subject to
the payment of EUR 680/tonne. Bananas mainly entered the
Community via Belgian and Italian ports, although similar
operations have been identified in Spain, Portugal, Greece and
Germany. So far it has been established that between early
1998 and mid-2000 at least 160 000 tonnes of bananas were
imported covered by false French AGRIM licences, whereas
approximately 60 000 tonnes were covered by false Spanish
AGRIM licences. Evaded customs duties are estimated at
approximately EUR 160 million so far. Following the detection
of this large-scale banana fraud, the Commission immediately
enacted Regulation (EC) No 1632/2000, to boost the control
measures (16).

The investigations into the network for the production of false
French and Spanish certificates have been carried out in close
cooperation with the national judicial services. They showed
how criminal organisations exploit the loopholes of inter-
national cooperation to make huge profits at
low risk.
Bringing to the fore these activities demonstrates the excellent
cooperation between the Member States and OLAF (in both
judicial and administrative circuits) and is evidence of the very
positive results of their collaboration, carried out in a spirit of
for the purpose of
partnership and information sharing,
protecting the Community’s financial interests.

1.5.3.

Fishery/industrial products (textiles and footwear)

In the field of fishery and industrial products (including textiles
and footwear), priority was given to the files requiring action
at Community level and meeting one or more criteria:

— involvement of international groups aiming to capture

markets by fraudulent practices,

— high customs duties or a combination of customs and

anti-dumping duties,

— threats

to other Community policies or

to health

measures,

Banana imports from South and Central America are eligible
for reduced customs duties (EUR 75/tonne) under an annual

— need to check the correct application of the preferential

arrangements,

(13) Council Regulation (EEC) No 218/92 of 27 January 1992 on
administrative cooperation in the field of indirect taxation (VAT)
(OJ L 24, 1.2.1992, p. 1).

(14) Council Directive 77/799/EEC of 19 December 1977 concerning
mutual assistance by the competent authorities of the Member
States in the field of direct taxation (OJ L 336, 27.12.1977,
p. 15).

(15) To strengthen administrative cooperation in the field of VAT,
the Commission has proposed a new Parliament and Council
Regulation and Directive (COM(2001) 294 final of 18 June
2001).

— undervaluation, and abuse of the transit system, especially

in the field of footwear and textiles,

— massive diversion of trade protection.

(16) See point 2.3.1 of the annual Commission report on protection
interests and the fight against

of the Communities’ financial
fraud, (COM(2001) 255 final/2 of 23 May 2001).

20.12.2001

EN

Official Journal of the European Communities

C 365/43

In the field of fishery, these actions revealed significant frauds
particularly concerning:

the fraudulent use of Malaysian Certificates of Origin for textile
products — principally denim jeans.

— canned tuna imported with the undue benefit of preferen-
tial treatment reserved for ACP (Africa, Caribbean, Pacific)
countries,

— shrimp and squid imported with the undue benefit
of GSP (generalised system of preferences) preferential
treatment, also in order to circumvent prohibitive health
measures aimed at certain Indian producers,

— salted cod imported from Iceland with the undue benefit
of preferential arrangements provided for in the EEA
(European Economic Area) Agreement.

In the field of industrial products, the actions carried out
allowed significant irregularities to be identified on:

— Brazilian, Canadian and Russian aluminium imported
duty-free (abuse of the procedure granted to the overseas
territories),

— metal-silicon falsely declared to be of Swiss or Russian
origin to avoid the anti-dumping duties on Chinese
products,

— silicon carbide falsely declared to be of Czech origin to
avoid the anti-dumping duties on Russian and Ukrainian
products,

— clothing products imported from Malaysia and declared
to be of Malaysian origin while unduly benefiting from
GSP preferential arrangements and circumvention of the
quotas applicable to the true country of origin (Vietnam),

A single importer, based in Germany but with business
interests in other Member States and a number of other
countries, had undertaken a systematic assault on the Com-
munity’s import restrictions by presenting false documents
misstating origin and value of the products involved. Accord-
ing to the analysis of one Member State (the Netherlands), the
resultant
imports from Malaysia alone,
approached 10 % of total annual Community imports for the
products concerned. Similar fraudulent imports had taken
place earlier claiming the origin of
the products to be
Cambodia, Laos, Myanmar, Vietnam and Lesotho. The overall
minimum economic impact is EUR 30 million, with own
resources at risk of EUR 4,5 million.

for illegal

fraud,

As a consequence of increased surveillance by OLAF and the
Community’s customs services, the principal suspect fled from
the jurisdiction of the European authorities, but not before
defrauding European banks and a certain African Govern-
ment’s
than
EUR 60 million.

Trade Development

of more

Board

This case illustrates the fraudulent activity of a single individual,
working in the context of a highly-organised international
criminal network, capable of obtaining and producing false
origin, commercial and transport documents at will. Its effects
are far greater than the immediate impact of false claims to
tariff preference (import duties) and evasion of value added
tax. It has an immediate detrimental effect on the trading and
business activities of legitimate Community importers and on
Community trade policy, and it places an undue burden
trade agreements and
on the Community’s international
administrative cooperation arrangements which is dispro-
portionate to the direct financial benefit to the fraudster.

— shoes imported under a false origin to exceed the
quantitative limits and/or to avoid the anti-dumping
duties in force with regard to Chinese origin,

1.5.4. Drug precursors

— the removal of Asian textile products from the Com-
munity transit procedure to avoid the payment of the
customs duties due and exceed existing quantitative
limits,

— the release for free circulation (without payment of VAT)
of Asian textile products in a first Member State on the
basis of a false invoice and consequently on the basis of a
reduced declared value; thereafter, the recipients in the
other Member States pay the correct amounts to the
suppliers in the non-member countries. In this way, the
customs services in the importing Member State are not
in a position to establish the correct value at the time of
import; moreover, a check on the subsequent payment of
VAT is very difficult.

T e x t i l e s : a s p e c i f i c c a s e

As a result of an investigation and administrative cooperation
mission organised by OLAF, joint enquiries have been carried
out with the competent authorities of Malaysia in relation to

In the field of drug precursors, priority was given to coordinat-
ing the efforts of the Member States to seize/prevent the use of
these products for the illegal manufacture of drugs. The
communication of information to the Member States is aimed
at avoiding ‘shopping around’ by persons and companies. The
preparation of the worldwide monitoring of acetic anhydride
(‘Operation Topaz’) was another priority, along with cooper-
ation with international organisations (for example United
Nations International Narcotics Control Board and World
Customs Organisation).

1.5.5.

Indirect taxation

In this field, falling primarily under the responsibility of the
Member States, OLAF provides coordinated assistance aimed
at protecting the financial interests of the Community and
fighting fraud, in agreement with the Member States and at
their request. Evident in this activity, in compliance with the
mandate laid down in Article 280(3) of the EC Treaty, is
the prefiguration of the Communities’ platform of services
described at point 3.7.

C 365/44

EN

Official Journal of the European Communities

20.12.2001

Priority was given to measures enabling the Member States to
coordinate their actions to combat fraud which:

flax (see below) and alleged breaches of the application of the
milk quota rules by companies in several different Member
States.

— involves high amounts,

— is organised via carrousels, involving intra-Community

trade and in certain cases imports/exports,

1.6.2.

Irregularities in the flax regime, Spain

— is organised by criminal organisations, and/or

— is connected with fraud in other fields (cigarettes, money

laundering, etc.).

Given these criteria, actions focused especially on cars, mobile
telephones, electronic components and metals.

V A T — c o o r d i n a t i o n o f

i n v e s t i g a t i o n s i n t o

p r e c i o u s m e t a l s ( s i l v e r , g o l d , e t c . )

Precious metals are one product category, amongst others used
by internationally organised criminal groups for the systematic
evasion of VAT. The raw material for the production of
precious metals (for example silver) is found or traded in
worldwide markets, where it is processed and traded in the
form of ingots or grains. The international price is fixed daily
at the London Metal Exchange (LME).

Refining or wholesale companies sell the goods to intermediate
companies following two different procedures:

— the goods are cleared through customs for free circulation
in the Community without payment of VAT at the time
of clearance. After clearance,
the goods are sold in
another Member State, allowing the importer to recover
the tax on the basis of the false invoice, delivered by the
buyer in the Member State of destination (who will
become a ‘missing trader’),

— the same system is used in case of intra-Community sales.

VAT evasion gives an undue competitive advantage to the
economic operators who take part in it and it distorts the
internal European market. As VAT is not harmonised, a course
of transactions in the Member States multiplies the impact of
VAT evasion at each stage. The resultant tax loss is very high.

At the request of the competent authorities in the Member
States, OLAF is assisting in the coordination of the actions by
the national authorities using its expertise on the VAT and
criminal legislation, as well as the organisational structures of
each Member State.

1.6. Agriculture

1.6.1.

Introduction

Following reports from Spain in 1999 about suspected
irregularities in the operation of the flax regime, which is fully
funded by the Community budget, OLAF contacted the
appropriate Spanish authorities. The Spanish Fiscalı´a Especial
Anti-Corrupcio´ n (SFAC, Special Anti-corruption Prosecution
Service) then opened an inquiry. OLAF also opened its own
administrative enquiry under Regulation (EC) No 2185/96 in
May 2000. In December 2000, OLAF received a copy of the
final report of the SFAC, and OLAF’s own enquiry was finalised
in mid-March 2001.

In essence this involved the overdeclaration of the production
of flax straw from parcels of land cultivated for flax and the
submission of false grant claims to the Spanish authorities.
Such claims were accompanied by false declarations of pro-
cessing, certified by the flax processing units. In the report
period 1998/1999 and 1999/2000 Spain received financial
transfers amounting to over EUR 100 million. The OLAF
administrative investigation was extended to Belgium, targeting
an economic operator linked to the Spanish processors. Other
investigations are ongoing in Portugal and in the United
Kingdom in the same field.

On its completion in mid-March 2001, OLAF sent a copy of
its report to the Spanish judicial authorities for appropriate
action, to FEGA (the Spanish Paying Agency) with appropriate
recommendations and to Directorate-General Agriculture,
Clearance of Accounts Unit, for consideration of a financial
correction to be imposed on Spain in the clearance of accounts
procedure for possible failings in the controls operated in the
flax regime during the periods in question (17).

This investigation illustrates the complexity of the actions to
be carried out under different aspects: recovery in respect of
operators, financial corrections to the Member States’ funds,
judicial assistance to national authorities for suspected corrup-
tion.

1.7. Cigarettes

1.7.1. Priorities of the sector

The protection of the Community’s financial interests against
organised international cigarette fraud was one of the Office’s
priorities during the year. Cigarette smuggling is a problem for
all Member States and for many non-member countries,
causing serious losses to Community and national budgets.
The organisers of the frauds make enormous profits, and

In the Community internal agricultural market, OLAF was
particularly concerned with checks and inspections regarding

(17) Council Regulation (EC) No 1258/1999 of 17 May 1999 on
financing the common agricultural policy (OJ L 160, 26.6.1999).

20.12.2001

EN

Official Journal of the European Communities

C 365/45

cigarette smuggling is often linked to other illegal activities
such as VAT fraud, money laundering and drugs. Particularly
concerning cigarettes, fraudsters treat fraud as a global business
for which they have huge resources and very sophisticated
infrastructures.

Smuggled cigarettes have often been warehoused in the
European Union at an earlier stage before they are exported,
or declared as having been exported, to non-member countries.
The export procedures and the subsequent customs procedures
in non-member countries are usually strictly legal, but the
quantities of cigarettes being exported to certain destinations,
and the brands of the cigarettes involved, should raise concerns
about the possible subsequent intentions for these cigarettes.
It is only by improving cooperation, enhancing the awareness
of the situation and exchanging information and intelligence
that it will be possible to take more effective preventive action
to reduce cigarette smuggling. The Office therefore contributes
to combating cigarette fraud through the coordination of
investigations within and outside the Community and by
providing services to the Member States’ enforcement and
judicial authorities to assist them in investigating, preventing
and prosecuting the fraud.

The Office is also contributing fully to the Commission’s civil
action in the American Courts against two American cigarette
manufacturers. In addition, under the terms of the EC-USA
Customs Mutual Assistance Agreement, the Office’s Director-
General and the US Customs Commissioner arranged for two
colleagues from the US Customs to work in OLAF for three
months in order to enhance cooperation in the fields of
common interest. This has proved to be very useful and may
well be repeated in the future.

There are really no new methods of committing fraud in the
cigarette area: the smuggling mainly arises through misdescrip-
tion, diversion and ‘pure’ smuggling (totally undeclared con-
signments). However, the organisation of the frauds changes
to take account of changing circumstances. If the control of
the sourcing and movement of cigarettes becomes tighter in a
particular country, the fraudsters simply relocate their oper-
ations to another country. Because of the huge profits involved,
the fraudsters are ready to store or move cigarettes for a
considerable period of time, hoping to reduce the interest of
the enforcement authorities in the cigarettes, before smuggling
them into the Community.
In the light of trends in the
movement and storage of cigarettes, a primary objective of the
Office will therefore be to improve cooperation with certain
key countries so that information about cigarette movements
is rapidly available and can be used to prevent the smuggling
of cigarettes into the Community.

1.7.2. Description of a case

In a recent case the Office provided support to a Member State
needing to gather evidence for the prosecution of a major
fraudster who has been involved in serious smuggling activities

into the European Union over a number of years. Members of
the Office led Community missions in countries of the former
Yugoslavia in order to establish the routes and means of
transport used for the movement of the cigarettes, as well as
the identity of the consignees and warehouses involved in the
movements. The missions also established the declared final
destinations for the cigarettes for their return to the European
Union, the dates of these movements, the vessels used and the
names of the crew of these vessels.

In cooperation with the authorities in these countries the
missions were also able to examine commercial documentation
relating to the various consignments and their financing.
Copies of a very large number of documents were also
obtained which can be used by the Member States to prosecute
frauds in the European Union. In addition, these documents
will be analysed in the Office to see what further information
can be gleaned which would be helpful to other Member States
which did not take part in the missions. The Community’s
agreements with non-member countries in general, and the
Office’s relationships with the appropriate authorities in these
countries in particular, enable the Office to provide a service
over and above that which the Member States could perhaps
obtain merely through bilateral agreements with the countries
concerned.

1.8. Statistical overview

Statistics for operational activities in the period 1 June 2000
to 31 May 2001 are produced hereunder. The figures provided
in the tables below have been extracted from the case
management system and they reflect the past year’s trends.
Note also that figures have been rounded up or down to the
nearest percentage point. The overview which is provided here
has been established by the staff still in place, on the basis of
old files. It is therefore not representative of the new oper-
ational policy, even if the statistics are based on the new
method and the transparency requested by the Director-
General. To ensure continuity in handling files it has been
necessary to adapt this method to existing files.

The headings used in the statistical breakdown of cases are
evaluation, investigation and closed.

E v a l u a t i o n

Evaluation does not
involve any investigation activity. A
complaint, whether received by letter, phone call, email or
formal report and whether from a private citizen, economic
operator, national authority or Community institution will be
first assessed by an investigator with responsibility in the
subject area. He can use the information available within the
Office and contact European institutions, agencies and bodies,
competent national authorities and the source of the infor-
mation to confirm the alleged facts. The Adviser who deals
with that sector will make an evaluation and refer the case to
the Board of the Operations Directorate. The Board which is
constituted by the Operations Director, all Advisers and the
Head of the Magistrates and Judicial Advice Unit will prepare
an opinion for the Director-General who then decides whether
or not to open an investigation. The Office does try to ensure

C 365/46

EN

Official Journal of the European Communities

20.12.2001

the evaluation is carried out as expeditiously as possible and
that the resources allocated are adequate. One of the aims of
this phase is to weed out the unreliable information and to
close these files. This screening work enables the office to close
a large number of files at this stage.

I n v e s t i g a t i o n

This signifies that a formal investigation in accordance with
Regulation (EC) No 1073/1999 or Regulation (Euratom)
No 1074/1999 has been formally opened by the Director
General. At the end of this stage a final investigation report is
presented which may recommend follow up action. On the
basis of this report the Director General takes the formal
decision to close the case. This marks the end of
the
investigation phase and the file is then considered to be
completed from an operational point of view.

C l o s e d

The same procedure and level of scrutiny used to open a case
is adopted in closing it, though the decision is usually based
on evaluation of the investigators’ final case report. The file
although closed from an operational point of view still
requires, generally speaking, a financial, administrative or
judicial follow up (see point 3.1 on the revised version of the
OLAF manual).

Cases were closed during the reporting period for a variety of
reasons. Typically there were cases where after investigation it
was found the allegation could not be substantiated. Evidence
was not available or after assessment, it failed to support the
matters alleged. Equally there were cases in which the facts

Situation as at 1 June 2000 (18)

were substantiated but there was no criminality or financial
irregularity to be found. Accusations may be withdrawn, an
essential witness may decline to cooperate or the subject
matter may be found to be outside the competence of OLAF.
There have also been cases which have been statute barred
because of the interval between the commission of the offence
and its referral to OLAF or the Office’s ability to dispose of the
matter within the time allowed. On this latter point it should
be noted that as the Office recruits more staff and better
management systems take effect it is not expected there will
be any case discontinued as a result of dilatory treatment of
the complaint.

Following the adoption of the OLAF manual and after drawing
up an inventory and verifying the files to be transferred from
the old database (see point 2.3.3) during the activity period,
the Office has adopted a new statistical methodology based on
the systematic and complete recording of files. Prior to the
introduction of CMS, there was no procedure in place for
encoding changes in the database when the Director-General
officially opened or closed a case. The changing of the status
of a case (from evaluation to open and from open to closed,
etc.) was based on the judgement of the investigative staff.
Since the implementation of CMS in May 2001,
internal
procedures have been put in place to ensure that all cases
formally opened or closed by the Director General are encoded
in the CMS.

Consequently cases listed as opened or closed during the
period are a mixture of those whose status was changed by
OLAF staff and those officially opened or closed by the
Director-General of the Office.

(18) With regard to the abovementioned statistics, OLAF has not in this report classified offences by type because very often there is no definition
of what constitutes an offence common to all Member States. Furthermore, classification can only safely be made at the conclusion of the
matter.

20.12.2001

EN

Official Journal of the European Communities

C 365/47

Situation at 1 June 2000

Evaluation

Open

Closed

Total at 1 June 2000

% of total number of cases

(1) Including external aid.

Internal
investi-
gations

9

26

16

51

3

Direct expen-
diture (1)

Structural
actions

Customs and
trade

Agriculture

Cigarettes

Total

% of cases by
stage

136

58

110

304

17

3

94

248

345

19

395

395

113

903

49

30

22

92

144

8

39

41

5

85

5

612

636

584

1 832

100

33

35

32

100

The total number of cases at the start of the period is
characterised by:

— a roughly equal breakdown of cases between cases in
evaluation (33 %), cases being investigated (35 %) and
cases closed (32 %),

customs and trade cases), direct expenditure (45 % of all
direct expenditure cases) and cigarettes (46 % of all
cigarettes cases). This reflects the large number of cases
created that had not been actively pursued due to lack of
resources or other cases having greater priority,

— a large number of cases in evaluation in the area of
customs and external agricultural trade (44 % of all

— customs and trade cases making up almost half (49 % of

total) of the total cases.

Flows during the period (1 June 2000 to 31 May 2001)

Flows during activity period

Internal

inves-

tigations

Direct
expenditure

Structural
actions

Customs and
trade

Agriculture

Cigarettes

Total

Evaluation

Open

Closed

% cases by sector

37

36

15

8

166

96

96

22

99

69

89

16

162

188

427

43

30

32

20

7

17

20

12

4

511

441

659

100

C 365/48

EN

Official Journal of the European Communities

20.12.2001

During the period considered in the table, 511 new files
have been created (evaluation), 441 cases moved on to the
investigation stage and 659 files were closed. The total flow
therefore includes former cases already appearing as at 1 June
2000 and new cases created in the period.

The movement in the number of cases during the period is
characterised by:

— a high degree of activity in the area of internal cases

which represent 8 % of the cases created thus reflecting
the priority nature of this work for the Office,

— the large number of cases closed, notably in the area of
customs and trade (65 % of the total cases closed); this
reflects the efforts devoted to revalidating and updating
all cases migrated from the previous database system
mentioned at point 2.3.3 of this report.

Situation as at 31 May 2001

Situation at 31 May 2001

Evaluation

Open

Closed

Total at 31 May 2001

% cases by sector

Internal
investi-
gations

8

49

31

88

4

Direct expen-
diture

Structural
actions

Customs and
trade

Agriculture

Cigarettes

Total

% of cases by
stage

154

110

206

470

20

24

83

337

197

328

540

27

35

112

26

59

17

436

664

1 243

20

28

52

100

444

1 065

174

102

2 343

19

45

8

4

100

When combining the opening figures at 1 June 2000 with the movements for the period under review, the situation at 31 May
2001 is as illustrated above. A comparison of the situation between the beginning and the end of the period is presented below.

20.12.2001

EN

Official Journal of the European Communities

C 365/49

Comparison between beginning (1 June 2000) and end of period (31 May 2001)

The situation at the end of the period is best compared with
that at the start of the period and is characterised by:

— an absolute increase in the total number of cases from
1 832 to 2 343, an increase of 28 % during the period
which represents a relatively high level of activity. This is
partly due to the more rigourous system of registration
of cases introduced by the CMS and also to an increased
awareness of the activities of OLAF by the EU institutions
and the general public and improved cooperation with
the Member States,

— a significant fall in the total number of cases in evaluation
which fell from 612 to 436. This represents a fall as a
proportion of all cases from 33 % to 19 % over the
period. As mentioned previously, this development is
largely related to the extensive work carried out in the
Office to progress customs and trade cases referred to
above,

— a small increase in the total number of cases in investi-
gation which rose from 636 to 664 although this
represents a fall as a proportion of all cases from 35 % to
28 % over the period,

— a large increase in the number of cases closed from 584
to 1 243, this represents an increase in the proportion of
all cases from 32 % to 52 % over the period. This
development is largely related to the extensive work
carried out in the Office on old cases referred to above.

— the increase in the number of internal cases (absolute
increase from 51 to 88 cases which represents an increase
from 3 % to 4 % of all cases) and direct expenditure
(absolute increase from 304 to 470 cases which rep-
resents an increase from 17 % to 20 % of all cases),

— the reduction, as a proportion of all cases, in customs and
trade cases (absolute increase from 903 to 1 065 cases but
overall a fall from 49 % to 45 % of all cases) and cigarettes
(absolute increase from 85 to 102 cases but overall a fall
from 5 % to 4 % of all cases).

CHAPTER 2

OLAF PROCEDURES IN THE INSTITUTIONAL SET-UP

2.1. Relations with the Commission departments

Articles 2 and 3 of the Commission Decision 1999/352/EC,
ECSC, Euratom (19) distinguish between the investigation mis-
sion of the Office which it carries out in full independence and
the other missions which it carries out as a department of the
Commission.

As regards the breakdown of all cases between areas of
investigation, the following should be noted between the
beginning and the end of the period:

(19) Commission Decision 1999/352/EC, CECA, Euratom of 28 April

1999 (OJ L 136, 31.5.1999) creating the Office.

C 365/50

EN

Official Journal of the European Communities

20.12.2001

2.1.1. The functional autonomy of the Office

The Office enjoys administrative and financial autonomy
within the Commission and follows the line laid down by the
Decision of 28 April 1999. For its internal organisation
measures: in so far as they are compatible with the provisions
concerning its operational independence, the Office applies
the Commission’s internal organisation rules. To take into
account this particular status, the Commission, in full agree-
ment with the Director-General and the Supervisory Com-
mittee amended the composition of the advisory committee for
management staff appointments. In his capacity as appointing
authority, the Director-General decides on the organisation of
his department and informs the Commission of his decisions.

In financial matters, the Director-General of the Office prepares
the preliminary draft budget and informs the Directorate
General for Budgets (20). Parliament and the Council adopt the
Office’s budget and establishment plan on this basis. The
Director General is the authorising officer for the implemen-
tation of the specific line of the general budget reserved for
OLAF. In practice, a more or less formal inventory of the
expenditure to be managed directly by the Office was drawn
up together with the Directorate General for Budgets and
the Directorate-General for Administration, the Commission
departments and an allocation of management functions on a
pragmatic basis has been carried out. The object of this exercise
from economies of scale without affecting
is to benefit
the independence of the Office. The decentralisation of the
functions provided for by the Financial Regulation (authorising
officer, accounting officer,
internal auditor) is nearly com-
pleted.

The legislator (21) wanted OLAF to have an independent power
of administrative investigation in particular within all the
Community institutions and bodies. The Director General and
the Supervisory Committee are the guardians of this functional
independence (22).

2.1.2. The administrative and budgetary organisation of

the Office

2.1.2.1. A new structure to put the new guidelines into practice

The Commission presented its overall strategy for the fight
against fraud to the European Parliament and the Council

during the second half of 2000 (23). The Supervisory Com-
mittee’s opinions and annual report stressed the need for
OLAF’s structure and establishment plan to be adjusted in line
with its tasks and priorities. These priorities were then set out
in the 2001 to 2003 action plan approved by the Council in
Göteborg on 15 June 2001 (24).

In organisational terms, this overall approach entails a clearer
distinction between operational functions: intelligence, activi-
ties on the ground, assistance and administrative, legislative,
judicial and financial follow-up. This differentiation not only
avoids the cumulation of functions and conflicts of interest
within the same structure, but also aims to organise work on
a horizontal basis and support complementarity.

In this spirit and to take account of transfer of all the staff
from UCLAF and ensure the transition to the Office and a new
operational culture, a first reorganisation in September 2000
set up two Directorates to mark the transition from UCLAF.
One of these Directorates is responsible for investigations and
operations; the other is a horizontal Directorate responsible
both for proposing political and legislative initiatives and for
providing the operational pole with support and advice. The
structure of the Investigations and Operations Directorate
groups the sectoral advisers into two teams, one dealing
with internal investigations, direct expenditure and structural
measures and the other with other external investigations and
operations. In accordance with the guidelines laid down, the
objective was to replace the existing sectoral structures with
teams that were flexible and versatile and to allow a policy of
adjustable priorities. The horizontal Directorate is designed to
strengthen the legal and judicial dimension and the cohesion
of operational action with national administrative and judicial
authorities.

(23) COM(2000) 358 final of 28 June 2000, approved by the
Economic and Financial Affairs Council of 17 July 2000 and by
the European Parliament in its resolution of 13 December 2000.
(24) COM(2001) 254 final of 15 June 2001. The above mentioned

priorities are the following:
— the conception of an overall anti-fraud legislative policy

based on a strengthened legislative framework,

(20) In accordance with Article 6 of Decision 1999/352/EC, ECSC,

— a culture of cooperation with all the institutions and the

Euratom.

(21) Regulations (EC) No 1073/1999 and (Euratom) No 1074/1999
of 25 May 1999 concerning investigations conducted by the
European Anti-fraud Office (OLAF) (OJ L 136, 31.5.1999).

(22) Articles 11 and 12 of the Regulations referred to above.

national authorities,

— an interinstitutional approach to preventing and fight fraud,

corruption and other illegal activities,

— strengthening of

the criminal dimension of operational

activities.

20.12.2001

EN

Official Journal of the European Communities

C 365/51

The purpose of this transitional structure was to allow the
overall transfer of resources after a period of observation
the organisation was capable of
intended to ensure that
adapting to new orientations and organising the staff’s
redeployment. At the end of the first half of 2001, the
reorganisation of administrative structures continued with the
creation, currently ongoing, of a third Directorate responsible
for strategic and operational intelligence; these departments
previously reported direct to the Director-General. The Com-
munity level is to be an information hub prefiguring a future
economic and financial crime monitoring centre and helping
to establish priorities for operational action. The new structure
will combine information gathering and processing activities,
including information technology, and will be mainly respon-
sible for strengthening the relevance and impact of investi-
gations and operations undertaken by OLAF. This pole will
also make its expertise available internally (Commission
departments and other institutions) and externally (Member
States) to secure complementarity with the Office’s work.

The following either were or are being established:

— a financial follow-up and recovery unit in the General
Affairs and Legislation Directorate, for the Office files,

— a unit to provide support to the applicant countries,
reporting to the Director General. Its task is to establish
close cooperation with these countries so that in the run
up to accession they can become prepared to ensure a
level of protection of the Communities’ financial interests
equivalent
the
Community,

to the level achieved in the rest of

2.1.2.2. The adaptation of human and financial resources

In past years, the budgetary authority strengthened substan-
tially the financial and human resources of the Office (25). In
its mid-2000 opinion (26), the Supervisory Committee however
expressed its concern at the delays noted in the establishment
of the conditions necessary for the independence of the Office
and its administrative and budgetary autonomy. Recruitment,
in the Office, has revealed itself to be a heavy and complex
procedure, owing to two principal factors: first, the new
Director had to manage the change of direction of the Office,
while the draft 2000 budget was drawn up by UCLAF (27);
second, successive amendments were made to the establish-
ment plan during the 2001 budgetary procedure. Moreover,
the organisation of the selection procedures for the recruitment
of temporary staff (1 200 candidates) constituted a very heavy
workload, before the reserve lists of successful candidates
could be established.

To follow the guidelines laid down by the legislator and the
High-level Working Group set up by the European Council (28),
the budgetary authority, in adopting the 2001 budget, substan-
tially amended the OLAF establishment plan, in particular by
increasing the number of temporary staff in categories A and
B (123 temporary posts authorised in 2001, while temporary
posts passed from 143 in 2000 to 109 in 2001) and the
number of B posts in relation to A posts. Moreover, the
availability of the 76 new posts provided for in the initial
2001 budget has been ‘frozen’ while awaiting the conditions
laid down in the resolution of 16 May 2000 on the Protection
of financial interests and the fight against fraud to be met; the
release of some of the posts is envisaged within the framework
of the amended budget for 2001 (29). This involved redeploying
A grade officials to vacant posts in other Commission depart-
ments while taking care to avoid any break in the continuity
of activity and the level of expertise.

— a financial auditor responsible for improving financial
management and evaluation in accordance with the new
guidelines laid down by the Commission,

— an adviser responsible for security and data confiden-

tiality.

(25) The Office has a specific budget heading inside part A of the
section of the general budget of the European Union; the detailed
contents as well as a list of the posts assigned to the Office are
annexed to this part.

(26) OLAF’s supervisory Committee opinion 2/2000 on the initiatives

of the institutions regarding OLAF’s future.

(27) This was done before the new guidelines were laid down by the
legislator and the Commission’s overall Strategic Approach was
established.

(28) This High-level Working Group comprised three representatives,
from the Commission, Parliament’s Committee on Budgetary
Control and the Presidency.

(29) Resolution of 16 May 2000 on the protection of financial

interests and the fight against fraud.

C 365/52

EN

Official Journal of the European Communities

20.12.2001

A

B

Permanent
staff

Temporary
staff

53

69 (1)

+16

1

20

+19

Total

54

89

+35

Permanent
staff

Temporary
staff

32

37

+5

1

18

+17

Total

33

55

+22

On 1 June 2000

On 1 June 2001

Progression

(1) Of which 11 persons have been redeployed to Commission departments on the 1 October 2001.

C

D

Totals

Permanent
staff

Permanent
staff

Permanent
staff

Temporary
staff

Grand Total

Authorised
manpower

On 1 June 2000

On 1 June 2001

Progression

20

36

+16

3

3

—

108

145

+37

2

38

+36

110

224

183 (1)

300 (2)

+73

(1) As the present report was adopted (October 2001), this figure rose to 199, out of which 64 were temporary agents (that is

26 units more).

(2) Of which 76 posts are subject to the prior authorisation of the budgetary authority.

This table gives an indication of the degree of change which
has occurred in the period. An increase of almost 70 % in the
number of staff, while at the same time redeploying some of
the staff and not jeopardising the organisation’s cohesion and
the continuity of the service, constitutes a real challenge for
any organisation.

With regard to Directors, the head of Directorate A (Policy,
Legislation and Legal Affairs) was appointed on 1 April 2001.
The Directors of Directorates B (Investigations and operations)
and C (Intelligence, operational strategy and information
technology), are expected to take up their posts respectively in
October and November 2001.

in all, however,

the three-year plan adopted by the
All
legislative authority in 1999 to raise the staff recruited under
the Staff Regulations to 300 in 2001 continued in the report
period. In order to have highly qualified and versatile staff,
most of whom are experts from the Member States, the Office
carried out several temporary staff selection procedures in
two to recruit A and B grade
2000 and spring 2001:
investigators specialised in complex fraud cases,
including
internal investigations, and two more to recruit Magistrates
specialising in criminal law and particularly in economic and
financial crime.

Once these selection procedures were completed, reserve lists
were drawn up in November 2000 and the first appointments
were made.

Once all the management posts have been filled, on the basis
of actual occupation of the new posts in 2001, the Office
will carry out a careful examination, post by post, of the
correspondence between its resources as at the end of 2001
and its tasks. The purpose of this will be to ensure that the
Office can perform its operational tasks (investigations and
operations), its new tasks (intelligence, administrative, judicial,
financial and legislative follow-up, in particular from the point
of view of fraud-proofing) and its more traditional tasks as a
Commission department.

2.1.3. An anti-fraud training policy and a communi-

cation policy aimed at the public

A s p e c i f i c t r a i n i n g a c t i o n

For the reasons outlined above, the Office will only be in a
position to finalise the Magistrates’ and Judicial Advisers’
recruitment (two thirds of the pool) in the second half of
2001. Thus, between now and the end of 2001, the Office will
be able to have Magistrates specialised in criminal law and the
fight against serious economic and financial crime. Their
expertise is necessary to cover all the national judicial systems
and it will contribute to make the disciplinary, administrative,
judicial and civil dimension of
the Office’s action more
effective.

In view of its specific character the Office has developed a
training strategy specific to the field of the fight against fraud,
regarding its sphere of activity, its status and its means of
action. Internally, the arrival of large numbers of new staff
requires an effort by the Office to provide them with basic
training to make them operational as soon as possible in a
multicultural, multilingual and multi-procedural environment.
In addition, the Office cooperates closely with Member States,
taking part in their training schemes, for instance.

20.12.2001

EN

Official Journal of the European Communities

C 365/53

Some of these actions (13 for the report period) have been
(co)organised and/or (co)financed by the Office. In this case,
the priorities and methods of intervention of OLAF were
determined. Moreover, Office agents are frequently invited to
take part, as participants or speakers, in conferences, seminars
or conferences. 74 interventions of this type took place
between June 2000 and May 2001.

enforcement and judicial authorities (31), and give its technical
assistance to the other institutions, agencies and bodies and
the national authorities. It also fulfils for the Commission a
role of technical and operational assistance in the field of
mutual legal assistance on criminal matters (32). It is with the
view to fully implementing these missions that the Office
intends to be a ‘Community platform of services’ (33).

C o m m u n i c a t i o n t o w a r d s t h e p u b l i c

OLAF’s work is frequently very technical, and it needs to
be explained in an intelligible way to the general public.
Consequently, the Office has set up a policy of information on
its operational activity. It aims to set up transparent procedures
which also respect the principles and limits governing the
disclosure of sensitive information affecting both individuals’
rights and the effectiveness of investigations.

To this end, the unit charged with communication, public
relations and the co-ordination of training devised public
information tools. This involves the timely transmission of
information to specific information media, presented in a form
enabling them to play their role. The public was also informed
of the activities of the Office and its achievements, thanks to
cooperation with the national investigation agencies.

With regard to operational activities, connected with the
independent status of OLAF, only the Office’s Spokesman and
Director-General are entitled to be in contact with the media.
Public relations relating to the activities of the Office which do
not concern its operational independence are ensured by the
Commission’s Press and Communication Service, in particular
by the spokesman for the Commissioner concerned.

A ‘network of anti-fraud communicators’ was set up.
It
includes the various spokespersons and persons responsible
for public relations in the main national investigation agencies
with which OLAF cooperates. Its goal is to create synergies and
to establish permanent contacts between the communication,
public relations and training coordination unit of OLAF and
its national counterparts (30).

2.2. Relations with the other EU institutions and bodies

2.2.1. The institutional environment

As provided by Article 280 of the EC Treaty, the legislator and
the Commission wanted the Office to provide its support to
including their law
the cooperation with Member States,

(30) This network is linked to the planned Community platform of

services (see point 3.7).

Moreover, the Office has clear competencies and a well-defined
mandate. It is subject to the control of the Court of Auditors,
the Court of Justice, as well as the political control of the
European Parliament and the Council. In addition, the follow-
up of its investigation reports comes under the responsibility
of the national jurisdictions. The Office has been granted the
means to incorporate the dynamics at Community level
(Article 280 of the EC Treaty) with the need for an intergovern-
mental approach in relation to the goal of a judicial area
(Article 2 of the EU Treaty). Whenever necessary to accomplish
their respective missions, OLAF co-operates with Europol or
with the provisional unit of Eurojust. It is currently negotiating
an agreement with Europol in order to set up a framework for
their co-operation which takes into account the specific needs
of mutual assistance in the field of activity of OLAF.

The regulatory provisions require the European Anti-fraud
Office and the Community institutions, bodies, offices and
agencies to exchange information in accordance with their
respective rights and duties, in compliance with the confiden-
tiality rules, with respect for the legitimate rights of individuals
and in compliance with national law. The power of internal
investigation is supported by regulation obligations of the
members or staff of the institutions to give information and
cooperation, in compliance with their duties and guarantees
under the European Convention for the Protection of Human
Rights, the Staff Regulations and the Protocol on Privileges
and Immunities (34).

(31) Commission Decision 1999/352/EC, ECSC, Euratom (Article 2)
of 28 April 1999 (OJ L 136, 31.5.1999) creating the Office and
Regulations (EC) No 1073/1999 and (Euratom) No 1074/1999
(Article 2).

(32) Explanatory report on the Second Protocol of the Convention
on Protection of the European Communities’ Financial Interests
(OJ C 91, 31.3.1999). Second Protocol, (OJ C 221, 19.7.1997).

(33) This is a priority in the action plan 2001 to 2003.
(34) Regulations (EC) No 1073/1999 and (Euratom) No 1074/1999,
Articles 1, 3 and 4 of the Commission Decision of 2 June
1999 relating to the conditions and procedures for internal
investigations.

C 365/54

EN

Official Journal of the European Communities

20.12.2001

However, certain aspects of the role of the Office in operational
matters as well as practices in the area of cooperation with the
investigations who are
institutions concerned by internal
responsible for the protection of financial interests (Parliament,
Court of Auditors, Council) are worth specifying: exchange
of information and processing of operational
information,
including in the framework of internal and external investi-
gations (35), interlinking of the Office’s internal investigations
with disciplinary and administrative procedures (36). These
aspects are tackled in a draft code of conduct and draft
guidelines for a communication policy for the European Anti-
fraud Office (see points 3.2 and 3.3).

2.2.2. The legal framework of internal investigations

the institutions,

interests. This last point, which is essential to strengthen the
credibility of
is also a priority for the
Directorate of the office. It will have to be examined in the
framework of
the joint reflections with the Supervisory
Committee.

The Council examining the Commission annual reports (40),
has also noted that there are delays in ratification of the
Convention of 26 July 1995 for the protection of the financial
interests of the European Communities and of its additional
protocols by the Member States (41). These delays constitute a
serious danger for the legal framework of the protection of the
financial interests of the European Union, and in particular
they are a barrier to the judicial follow-up of the Office’s
administrative investigations.

In its first management report (37), the Supervisory Committee
stressed certain gaps in the legal and institutional provisions
of the Office, in particular in the sensitive field of internal
administrative investigations.

In this framework, the Director General is willing to consider
any means that may make it possible to offer a better response
to the question raised by the Parliament and the Supervisory
Committee.

The European Parliament asked the Commission to present a
draft amendment to regulation (EC) No 1073/1999 aiming to
establish a European prosecutor in the field of
internal
investigations (38). The Commission, after a first proposal (39)
that the Nice European Council did not adopt, proposed to
revive the debate on a European public prosecutor responsible
for the protection of financial interests by means of a broad
consultation of the interested parties (Green Paper), within the
context of a Treaty amendment.

The Office shares this concern and strives to enhance the
legitimacy of internal investigations pending the results of this
wide consultation on the establishment of the European Public
Prosecutor for the protection of the Communities’ financial

(35) Articles 1 and 2 of regulation (EC) No 1073/1999 and (Euratom)

No 1074/1999.

(36) Carried out in particular by the investigation and discipline office,
a permanent team responsible for inquiries in the area of
professional misconduct. A reform of the Staff Regulations,
including in the area of discipline and the rights of the defence,
is foreseen in the White paper on Reform to be submitted to the
Council in December 2001.

(37) OJ C 360, 14.12.2000.
(38) Resolution of the European Parliament on the protection of the
financial interests of 13 December 2000 (paragraph 12) and
Resolution on the annual report 1999 of the Commission on the
protection of the financial interests, in particular item 8.

(39) Complementary contribution of the Commission (COM(2000)

608 final of 29 September 2000).

2.3 New management instruments

functional

separation

The setting up of the European Anti-fraud Office raises a
number of issues as to its independence and organisation.
Transparency and complementarity in the framework of the
operational,
(intelligence/investi-
gation/assistance/follow-up) are central management prin-
ciples in the Office’s new operational strategy. In this spirit, a
number of new instruments have been prepared. The objectives
are to improve the management of operational activity and
organise proper information flows. Analysis and internal
communication of strategic and operational
information
should make for clear definition of priorities in work on
the ground while facilitating the administrative and judicial
monitoring of investigations. Moreover, the Office needs its
own communication strategy, based on effective mechanisms
to manage information which is by definition sensitive.

(40) Particularly, in its Göteborg conclusions of 15 June 2001.
(41) See for example the conclusions, item 10, of the Economic and
Financial Affairs Council of 17 July 2000 again calling on
Member States which have not done so to ratify the 1995
Convention and its protocols. At the end of February 2001, five
Member States had not yet notified their ratification of the
Convention on the protection of financial interests.

20.12.2001

EN

Official Journal of the European Communities

C 365/55

2.3.1.

Information and communication policy towards
other institutions and the Member States (42)

In addition to the information obtained thorough its oper-
ational activities,
the Office mainly has the information
supplied to the Commission by the Member States on the
basis of sectoral rules and information from the European
institutions and third parties. Community and national pro-
visions on confidentiality and data protection (Article 8 of
Regulation (EC) No 1073/1999), professional secrecy and
protection of basic rights (Articles 286 and 287 of the Treaty)
all apply here. Moreover, the legislator has adopted rules and
standards by means of a new regulation on the protection of
individuals with regard to the processing of personal data and
access to documents (43).

Proper information flows mean that OLAF’s obligations must
be clarified and its own communication strategy must be
defined. Communication criteria and mechanisms have to be
worked out so that data held by the Office can be precisely
identified (44). Moreover,
the different persons entitled to
receive information in accordance with their tasks (and their
responsibility in the event of dissemination of confidential
information) must also be clarified.
Information is often
sensitive and rules must be in place to regulate its communi-
cation. The Office also needs a reliable system for gathering,
recording and processing operational data which makes it
possible to meet the requirements of effectiveness, availability,
transparency and controlled access, while respecting the
constraints and limits necessary for the protection of individual
rights. The validation of such a system is within the remit of
the new Intelligence Directorate.

2.3.2. The OLAF manual

The OLAF manual was created with the aim of improving
working methods and procedures within the Office and is
based on the laws and regulations applicable to OLAF. It is
only intended for internal use by OLAF staff, covering existing

(42) This should not to be confused with the communication policy

towards the public presented in point 2.1.3.

(43) The right of access of the public to the documents of the
institutions is provided for by Article 255 of the EC Treaty and
Regulation (EC) No 1049/2001 of the European Parliament and
of the Council of 30 May 2001 (OJ L 145, 31.5.2001). The
protection of
individuals with regard to the processing of
personal data by the Community institutions and bodies and on
the free movement of such data is covered by Regulation (EC)
No 45/2001 of the European Parliament and of the Council of
18 December 2000 (OJ L 8, 12.1.2001).

(44) See point 3.3 below, on the draft guidelines for a communication

policy of the Office.

legislative and internal provisions without creating rights and
obligations for third parties. The guiding principle is to ensure
that the work of OLAF is carried out in a transparent and
effective manner, respecting fully the appropriate legal bases
and respect of human rights.

The Manual focuses primarily on the operational activities of
OLAF. Casework is the primary function of OLAF and the
manual sets out the administrative procedures to be applied
through all stages of casework, from initial receipt of infor-
mation through to case closure. The OLAF manual outlines
internal policy in a number of key areas, it defines roles and
responsibilities internally and provides specific guidance on a
variety of relevant topics.

2.3.3. An effective IT system

The new operational policy attaches priority to the rational
use of information (intelligence) and the strengthening of the
criminal-law dimension of work on the ground. In accordance
with the mandate defined by the Commission Decision of
28 April 1999, and in particular Article 2(5), the Office’s
Information Technology Unit has developed a work plan to
implement an infrastructure, ensure the collection and use of
information and give its technical support to the institutions,
bodies or agencies and the competent national authorities. The
purpose of IT activities is to organise control systems related
to work procedures and to support services intended for the
outside (Community institutions and departments, national
authorities).

The Office has undertaken the development of a new case
handling system, replacing the old database (Irene) for the
2 300 cases dealt with since it was created. The 2 300 cases
are made up largely of cases migrated from the Irene system.

P r e v i o u s d a t a b a s e s y s t e m ( I r e n e )

The decision to replace Irene by CMS was taken for the
following reasons:

— the need to have a case handling system adapted to the

procedures laid down in the new OLAF manual,

— there was a need to have a more centralised database
which would guarantee a more homogeneous and con-
sistent encoding of case related information throughout
the lifecycle of cases, thus enabling progress in cases to
be monitored more easily and to serve as a management
tool,

C 365/56

EN

Official Journal of the European Communities

20.12.2001

— the need to have a database which was technically more
stable and more adaptable to the developing requirements
of the Office.

— encoding and maintenance tasks in CMS,

I m p l e m e n t a t i o n
S y s t e m

o f

C a s e

M a n a g e m e n t

From an organisational point of view, a steering committee
was set up to oversee the introduction of this project in
October 2000. A project team was designated to implement
the project. The development, by internal staff only, took six
months and the new database system (case management
system — CMS) came into operation in May 2001.

The CMS has essentially two objectives:

— it functions as a case-handling tool, helping the investi-
gations staff to maintain an exhaustive record of cases,

— it functions as a management tool enabling management
and investigators to keep track of cases by means of its
reporting functionality.

The main features of the CMS are as follows:

— a separate administrative entity (Support Unit) has
responsibility for examining all incoming information
about alleged frauds to decide whether to create a CMS
file (previously this important function was decentralised
to investigations staff),

— more complete data about cases is encoded in CMS than

in the previous database system,

— in CMS, most of the data input is carried out by the
Support Unit, previously it was entirely decentralised to
investigations staff,

— in CMS, all authorised staff have access with an audit trail
keeping track of all read and write accesses (previously
access conditions were more restrictive),

— CMS has an enhanced reporting and analysis tool.

All cases stored in the Irene system have been migrated to
CMS. The following actions have been taken:

— revalidation and updating of all cases migrated from the
previous database system. This was necessary due to the
fact that the range of information stored in Irene was not
always updated and the Office has undertaken a number
of corrective actions to improve the quality of this data.
Given the volume and complexity of the information
transferred from Irene to CMS and the fact that the
updating task must be carried out manually, this task is
still ongoing,

— development/improvement of CMS based on users’ needs
analysis. In particular, it is planned to expand the database
to monitor follow-up activities, including financial recov-
ery, administrative and judicial follow-up.

The system became operational on 1 May 2001, as a result of
close cooperation between the Information Technology unit
and the Investigations and Operations Directorate. Precise
procedural guidelines improve the quality of the data processed
by the Office and the production of statistics and reports
based on it. The plan is to extend the system by creating
administrative and judicial follow-up modules for closed cases.

E x t e r n a l s y s t e m s

Regarding external systems, several developments should be
noted. A new system for recording communications received
from the Member States (ECR — electronic communication
registry) has been set up. It gives the Office a more reliable
means of recording, validating and using the data provided
under sectoral rules, formerly stored in the Irene database.
Since the implementation of this system in October 2000,
access by the other Commission departments concerned is
now possible. The Intelligence Unit, responsible for access
authorisations, checks this limited access.

Another improvement has been the development of AFIS,
the anti-fraud information system transferred to OLAF on
1 January 2000. This system is used to exchange electronic
information with partners in the fight against fraud, particu-
larly in relation to irregularities detected in the various sectors,
and on specific sensitive products. These new applications
make it possible to store information provided under sectoral
rules in particular (45).
In addition, a new version of the
customs information system, dealing with third pillar activities
has been set up.

(45) In particular, Council Regulation (EEC) Nos 595/91 on EAGGF
Guarantee Section, Regulation (EC) No 1681/94 for the Structural
Funds, Regulation (EC) No 1834/94 for the Cohesion Fund, the
early warning system for movements of products subject to
excise duties and Ciginfo for cigarette seizures.

20.12.2001

EN

Official Journal of the European Communities

C 365/57

2.3.4. Cooperation and prevention instruments — two

— training: building up operational capacity for the staff of

examples

the new structure and related departments.

C o o p e r a t i o n i n t h e e n l a r g e m e n t f i e l d

The Office is responsible for supporting on the Commission’s
behalf, cooperation with the Member States in the fight
against fraud (46), so as to protect financial interests effectively.
Consequently,
the candidate countries must demonstrate,
before their accession, that they have the operational capacity
to combat fraud and irregularities affecting the Community
budget effectively (47).

In the candidate countries, competencies in the field of
combating fraud and irregularities are generally divided
between several administrative and judicial entities for whom
it is difficult to measure their operational capacity to protect
effectively the Community budget. It appears also that for the
most part these services do not coordinate their activities with
one another, so cooperation with the Member States and the
Commission is not guaranteed either.

OLAF has therefore consistently endeavoured during the past
few years to have a central contact point in each candidate
country, competent to coordinate administrative investigations
into irregularities and fraud affecting the Community budget,
and of cooperating with OLAF on an operational level. By
designating such a coordinating body, the candidate countries
demonstrate their willingness for fulfilling this part of the
acquis and to implement operational cooperation before the
accession date.

A memorandum of understanding was signed on 20 December
2000 between OLAF and the Polish Ministry of Finance setting
out the practical arrangements for the implementation of this
project. As provided in the project and to help the Polish
authorities to take on the Community acquis in the area of the
fight against fraud, four experts from the Member States are
currently working within the General Inspectorate of Customs
(GIC), the Polish service designated to be responsible for the
protection of the Communities’ financial interests and as such
the beneficiary of the finance from this project. In addition to
the four officials and to stress the importance of the project,
OLAF decided to send one of its own officials to work on
detachment in Poland and coordinate the work of this anti-
fraud structure for which it has overall responsibility.

The technical investment for strengthening the operational
capacity of the GIC and the staff-training programme are
under way as planned. The institutional part of the project also
began when the GIC set up within its service a special unit for
the fight against fraud. It is now important to lay down
operational provisions between the services in Poland respon-
sible for Community funds and the GIC to achieve effective
operational cooperation. The Phare programme will come to
an end in September 2002. However, it would seem already
necessary to envisage the prolongation of the project beyond
this date so as to be able to strengthen further the structure
established and improve operational cooperation with the
Commission.

This pragmatic approach has been implemented in Poland.
Contacts have been taken with the other candidate countries
with a similar objective.

C o o p e r a t i o n i n t h e i n t e l l i g e n c e f i e l d w i t h
n o n - m e m b e r c o u n t r i e s

The Phare programme for Poland for the year 1999 contained
a project, drawn up in co-operation with OLAF, aiming to
develop a horizontal anti-fraud structure in Poland. This
project involving EUR 3,5 million covers three main activities:

— institution building: the establishment of a multidisciplin-
ary anti-fraud structure within the Polish civil service
specifically responsible for the protection of the Com-
munities’ financial interests,

— investment: provide the necessary technical and computer

equipment for the new structure,

(46) The Office accomplishes this function, laid down by article 280
of the EC Treaty, in accordance with Article 2(2) of Commission
decision 1999/352/EC, ECSC, Euratom of 28 April 1999 (OJ
L 136, 31.5.1999).

(47) This capacity of the candidate countries is evaluated in the
framework of accession negotiations (Chapter 28 — Financial
control).

The collection and structured use of information permit the
drawing of a clear operational policy and definition of a
strategy of complementary priorities for Member States’ action.
The setting-up of this capacity will enable the implementation
of the future platform of services that the Office wishes to
create. The aim of this platform is to enable the Office to fulfil
all its missions in close partnership with the institutions, and
in particular with the national authorities.

For several years now, the Russian market has been the EU’s
most important destination for exports in the agricultural
sector in particular animal products. There is a resulting risk
of misappropriation of and trafficking in goods which may be
evaluated and prevented by a monitoring of the flows of goods
and the detection of forged documents. The Office has detected
major problems concerning the meat sector: they consisted,
on the one hand of false customs documents delivered by
Community exporters in order to obtain the payment of
export refunds from the Community and on the other hand of
false import declarations of goods exported to Russia. Follow-
ing discussions with the competent services of the Commission

C 365/58

EN

Official Journal of the European Communities

20.12.2001

and the Member States, the Office has set up a ‘mutual
information system’
(MIS) with the Russian authorities,
allowing the arrival and the correct customs clearance of
supplies to Russia to be followed. In this regard, an administrat-
ive arrangement was signed on 5 July 2000 with the State
Customs Committee of the Russian Federation (SCC).

Under this system, implemented in February 2001 (48), each
Member State designates a central body that communicates
certain information provided by the meat exporter to OLAF.
OLAF forwards this information to the SCC and processes its
reply. Each reply received is forwarded to the central body of
the Member State concerned. In cases where the SCC is unable
to confirm the safe arrival of the goods, or if discrepancies are
established, enquiries are undertaken on both the Russian and
the EU sides, in accordance with the administrative agreement.

Of these 1 118 calls were considered to be of potential
relevance and have undergone a first assessment by OLAF
in
officials. These triggered a more detailed assessment
47 instances and resulted in a formal decision by the Office
Director-General to open a formal inquiry in 24 cases. In
addition, OLAF is currently reflecting on the consequences to
be drawn from the consultative document on ‘raising concerns
about serious wrongdoing’ (49).

2.4. The follow-up of operational files

In order to improve the results of investigation work with a
suitable follow-up the Office has put in place a follow-up
structure based on the separation of operational functions,
which will be reflected in the Manual.

By the end of May 2001, more than 1 100 messages had been
processed by the system, of which 1 % are under investigation
by the Member States competent authorities.

The overall follow-up to be ensured for investigation activities
consists of:

From the early feedback already received from the Member
States, the MIS appears to offer great practical advantages in
speeding up the payment procedure. Furthermore, it is a good
way of improving cooperation with the Russian customs as a
fraud prevention system and as a repressive system; the SCC is
also keen to maintain this system for the exchange of
information. An in-depth evaluation will be carried out later
in 2001.

2.3.5. A public complaint mechanism (the freephone)

For the European citizen a ‘freephone’ system is in place that
can be used by anybody in the Member States to contact the
Office free of charge to provide information about fraud and
irregularities that might be of interest for the protection of the
financial interests of the Community. All the calls are recorded
and listened to by officials from the Office who make a
first assessment about the seriousness and relevance of the
information given. The Office may, depending on the pertinen-
ce and importance of the information, open a case or refer the
information to its partners for their consideration.

During the period 1 January 2000 to 31 August 2001, in
total 3 867 calls were received by the Office freephone system.

(48) Commission Regulation (EC) No 2584/2000 of 24 November
2000 establishing a system for the communication of infor-
mation on certain supplies of beef, veal and pig-meat by road to
the territory of the Russian Federation (OJ L 298, 25.11.2000,
p. 16).

the obligations which result

— administrative follow-up: this consists of drawing non-
financial conclusions from operational activity, in particu-
from
lar in respect of
Community or national law (50), including measures to
ensure that the Member States apply the administrative
penalties provided for by Community or national law,
laid
taking the
down (51) and, where necessary, proposing amendments
or reinforcements of the structure or procedures, on the
basis of findings made,

appropriate disciplinary measures

— financial

follow-up: the aim is to participate in the
financial follow-up of accounting procedures with the
competent Commission departments (authorising offi-
cers, accounting officers, OLAF for direct expenditure)
and recovery by the competent authorities (usually
national, sometimes Community) of the amounts of
revenue evaded or expenditure unduly paid, including
interest on these amounts, provided for by Community
Regulations,

— judicial follow-up: this is particularly aimed at liaison
with the judicial authorities, so as to get results that can
be exploited by national courts and to improve the
application of civil and criminal penalties by national
procedures,

(49) Communication from Mr Kinnock to the Commission of 29 No-

vember 2000, SEC(2000)2078/6.

(50) In accordance with the principle of assimilation of the Communi-
ties’ financial
interests and of
interests to national financial
equivalence of the protection of these Communities’ financial
interests in the Member States, as stated in Article 280(2) and (4)
of the EC Treaty.

(51) Both concerning the Staff Regulations of Officials and the
Conditions of Employment of Other Servants of the European
Communities, and Regulations relating to Members and mana-
gerial staff of Community institutions and bodies not subject to
the Staff Regulations, following the conclusions of the Office.

20.12.2001

EN

Official Journal of the European Communities

C 365/59

— legislative follow-up: this consists of proposing amend-
ments to either Community or national
legislation,
drawing lessons from operations when they are com-
pleted or, in an emergency, where they are ongoing. This
function has similarities with fraud-proofing (52).

— enhanced instruments for co-operation and assistance
with the national authorities, especially concerning mutu-
al assistance with the administrations, particularly cus-
toms ones, including in non-member countries,

CHAPTER 3

EVOLUTION OF THE INSTRUMENTS FOR SUPPORT TO THE
OPERATIONAL ACTIVITY

The reference period of this second activity report of the Office
marks a new stage in the transition towards a coherent
structure of
the Office reflecting the legislative intention
conceived to define in a visible manner its new strategy and
operational priorities. In this period, the Office laid the first
bases of this structure aiming to guarantee its independence,
the transparency of its operations and a greater and more
targeted operational effectiveness while enabling it to function
as a Commission department.

The structural supports that are described below are to be put
in place in the near future. They will make it possible for the
Office to have a better grasp, based on pre-established means
and parameters, of its priority areas of activity and to define a
new operational strategy. The Office will therefore be able to
support the Member States and the institutions, particularly in
their fight against corruption. The establishment of a well-
targeted operational action plan actually requires:

— clear and easy rules of procedure to be followed during
investigations, in the respect of people’s rights; that is the
goal of the OLAF manual,

— implementing rules for its independence in the relations
with the other relevant institutions in the protection of
financial
interests; that is the purpose of the future
interinstitutional code of conduct,

— guidelines to handle operational information and guaran-
tee transparency and respect of people’s rights, of pro-
fessional secrecy, and of data protection; that is the
purpose of the draft ‘Guidelines for a communication
policy for the European Anti-fraud Office’ (53),

— ways and means to finalise the investigations conducted
and to organise an effective administrative, financial and
it is to this end that the Office is
judicial follow-up;
reorganising the operational
the future
functions of
structure,

— a proactive analysis capacity to establish an operational
strategy for internal use and an assistance to the external
authorities who take part in the protection of financial
interests and the fight against economic and financial
crime, the objectives of the future Intelligence Direc-
torate (54),

— a culture of operational cooperation with all structures
and authorities that fight against economic and financial
crime, in order to allow the Office to become a real
Communities’ ‘platform of services (55)’.

With these essential elements, the Office, after having adapted
its structures and procedures, will be in the best position to
provide its assistance to the Member States in the fight against
economic and financial crime and to the institutions in the
fight against corruption and to define in the best possible way
its operational missions with the resources at its disposal.

3.1. The OLAF manual

The OLAF manual, available since 15 February 2001, is a work
in progress that will continue to be revised. The next edition,
taking into account the practical experiences of the first
months of its application, is planned for the end of 2001. This
edition will not only improve the operational procedures,
organise synergies between the services (investigation, intelli-
judicial advice), but will also lay down the internal
gence,
policy for follow-up and case-management. Preparation of this
new version is well under way.

(52) This kind of follow-up has been carried out in order to amend
the legislation concerning some customs treatments (guarantee
in transit, preferential arrangements, warehouses) and some
agricultural products (bananas in particular).

(53) Not to be confused with the communication policy towards the

public presented in point 2.1.3.

(54) In accordance with the second theme of the overall strategic
approach of
the Commission and the action plan on the
protection of financial interests (respectively COM(2000) 358
final of 17 July 2000 and COM(2001) 254 of 15 May 2001.

(55) Idem.

C 365/60

EN

Official Journal of the European Communities

20.12.2001

3.2. Adoption of a code of conduct concerning interinsti-

tutional relations

Certain aspects of the role of the Office and of the Com-
mission’s tasks to guarantee the autonomy of the Office need
to be clarified (see above). In particular, it is important to
independence of
specify the conditions for the functional
the Office and for its cooperation with other Commission
departments.

To this end a draft code of conduct is currently being finalised
in cooperation with the Supervisory Committee. This draft
recalls the legislation applying at inter-institutional level and
governing the mutual obligations of
the Office and the
Community institutions, agencies or bodies, in particular in
the context of internal investigations and the fight against
corruption. In addition, it makes suggestions for the practical
organisation of the Office in its relations with other Com-
mission departments and analyses the way in which its
autonomy is to operate in terms of management and adminis-
tration.

3.3. Establishing a policy on handling operational infor-

mation

There are specific rules of Community legislation and national
law governing access to and the transmission of operational
information; they provide guarantees particularly in respect of

— the right of access to documents by Union citizens
the EC Treaty and Regulation (EC)

(Article 255 of
No 1049/2001),

— professional secrecy, applicable to information communi-
cated or obtained
investigations
during
(Article 8(2) of Regulation (EC) No 1073/1999) or
external investigations (Article 8(1) of Regulation (Eura-
tom, EC) No 2185/96) or under Article 287 of the EC
Treaty,

internal

— the protection of individuals with regard to the processing
of personal data, as provided for by Article 286 of the EC
Treaty, implemented by Regulation (EC) No 45/2001,
which entered into force on 1 February 2001 (56),

— national provisions concerning confidentiality of judicial

investigations.

The Office must fully control compliance with the legal and
technical limits inherent in the communication process. In this
context, having regard to the sensitive nature of information
held in the context of its operational activities and to the

Director-General’s specific communication rights, the Office
needs to develop its own communication strategy to ensure
good cooperation between the Community institutions and
the competent national authorities.

This is the object of the draft ‘Guidelines for a communication
policy for the European Anti-fraud Office’, which are being
elaborated in cooperation with the Supervisory Committee.
The Office will set the guidelines identifying the objective
criteria and the mechanisms required, in order to comply with
these rules and with the standards set by the Treaty and
Community legislation,
inter alia the new regulation on
protection of individuals with regard to the processing of
personal data and access to the documents.

3.4. Enhanced mutual assistance and customs cooperation

instruments

The creation of a common technical architecture for the
storage of sensitive data in order to prevent, detect and pursue
irregularities against Community customs (and agricultural)
Regulations and non harmonised customs Regulations was
entrusted to OLAF in January 2000 (57). In order to overcome
the lack of resources, OLAF obtained, provisionally,
the
detachment of three national experts, to implement the system
(for strategic fraud analysis and expertise production) and to
prepare an operational procedure manual for the system (CIS,
customs information system).

Concerning mutual assistance in customs matters, the recent
entry into force of the mutual assistance agreements on
customs matters, whose negotiations fall now under the
competence of OLAF, brings up to 37 the number of
non-member countries with whom OLAF and the customs
authorities of the Member States exchange information, either
spontaneously or on request, in order to prevent, detect and
pursue irregularities in the customs field. During the second
half of 2001, OLAF will strive to conclude new agreements.
They represent an important instrument for cooperation with
non-member countries.

Moreover, the Office will support all the initiatives, in particular
legislative, aimed at strengthening cooperation with all the
authorities responsible for combating economic and financial
crime.

(56) See footnote 43. A transitional period of one year is planned for

practical application by the Office.

(57) It is part of the implementation of Title V of Council Regulation
(EC) No 515/97 of 13 March 1997 and of the convention on the
use of information technology in the customs field (CIS).

20.12.2001

EN

Official Journal of the European Communities

C 365/61

3.5. Organisation of the follow-up of investigations

3.7. A Community platform of services

The Office strives to organise the work of assistance and
administrative, financial and judicial follow-up of its investi-
gations in order to ensure an optimal complementarity with
operational activities and intelligence, based on the repartition
of tasks. Moreover, based on acquired experience and lessons
from the past, it will ensure that the various consequences of
investigations be effectively drawn.

3.6. The setting-up a structure in charge of intelligence,
operational strategy and information technology

In the new structure of the Office a new Directorate C
‘Intelligence, Operational Strategy and Information Tech-
nology’ has been created and has been operational since
summer 2001, to implement the guidelines of the overall
strategic approach adopted by the Commission in June 2000
and approved by the Council.

The creation of this Directorate underlines the importance the
Office gives to an enhanced use of intelligence and information
technology in the fight against fraud.

This new Directorate will have three main areas of responsi-
bility:

— information management: for the assistance to external
partners in the Member States as well as for the Office’s
internal operational and strategic requirements. This
includes collecting, analysing and dissemination of all
kinds/types of
information originating from various
sources, using modern up to date tools (e.g. forensic
computing),

— establishing and managing computerised information
networks via the AFIS network (anti-fraud information
system)
for official communications and information
requests from our partners in the Member States in the
areas of agriculture, customs and Structural Funds (58),

— development and management the Office internal IT-
structure (hardware and software) according to the
Office’s requirements.

As a consequence of the platform of services approach, the
above mentioned tasks are essential to give the Office a more
proactive role in the fight against fraud. They provide the
Office with the necessary means in the ongoing process of
defining operational and strategic priorities for internal usage
and support to external partners.

The Office supports cooperation among Member States (59),
and with them, including their police and judicial authorities.
It gives in particular its technical support to other institutions,
bodies or agencies and to the competent national authorities
in the different fields of operational actions, including internal
investigations. And the Office fulfils a specific of technical and
operational role in mutual assistance in criminal matters on
behalf of the Commission.

The new structure of the Office will enable it to give concrete
expression to the concept of a platform of services for the
Communities, which is a central component of the culture of
operational cooperation already described in the Commission’s
overall strategic approach and in the 2001 to 2003 action
plan (60). From the point of view of method,
the Office
proposes to associate the relevant authorities, in particular the
national authorities, in the development, implementation and
final evaluation of rules. This goal will be attained, by boosting
the role of the Advisory Committee for the Coordination of
Fraud Prevention (61) to a more proactive orientation to the
activity on the ground, and for a better evaluation of legislation
onder the point of view of prevention.

CHAPTER 4

CONCLUSION

The European Anti-fraud Office recognises that, when fraud
or misconduct is found within the European institutions, this
harms their credibility and the confidence which European
citizens have in them. Corruption is not restricted to illicit
payment of money. The financial interests of the EU can also
be damaged by gross incompetence and unfair practices.
Notwithstanding the problems of recruitment and the present
shortage of staff, the clear priority in dealing with cases opened
by the Office is towards internal cases. It is essential that
OLAF’s response to suspected internal corruption, whatever
form it takes, is prompt, thorough, and fair.

(58) AFIS is made available to our partners in the Member States and

(59) See Article 280 of EC Treaty, and notably paragraphs 1 and 3.
(60) COM(2001) 254 final of 15 May 2001.
(61) Established by Commission Decision 94/140/EC of 23 February

selected non-member countries.

1994 (OJ L 61, 4.3.1994).

C 365/62

EN

Official Journal of the European Communities

20.12.2001

At the same time the important work on external cases will
continue to be carried out, in accordance with a well-developed
strategy, and more use will be made of administrative and
judicial authorities in the Member States. It is an essential
strength of OLAF that
is able to offer assistance to
national authorities in their investigations and to coordinate
investigations where there are several Member States involved.
The platform of services is being extended to reflect this. There
is scope for the Office to improve its cooperation in the field
of follow-up as well as in cases where there is a disciplinary or
judicial procedure arising from an investigation.

it

The success of OLAF’s investigations, particularly with regard
to internal cases, is dependent in large measure on a high level
of cooperation with the institutions’ departments. Similarly
co-operation with Member States can be the key to the
successful conclusion of an internal or external case. This
means that there must be sufficient resources made available
within the Commission departments and Member States to
help OLAF in its investigations. With regard to disciplinary
proceedings following internal investigations, there is still a
need for reform in this area and OLAF has a clear role to play
by contributing to the debate.

Access to documents and witnesses, proper regard for confi-
internal corruption is
dentiality and a shared view that

intolerable are essential. OLAF ensures with regard to the
Commission that its requests for information are given priority.
Similar arrangements are envisaged with other institutions and
will be communicated immediately after their finalisation. In
the White Paper on Reform, the Commission is embarking on
a course of raising awareness in order to ensure that no official,
agent or member of the institutions is in doubt about OLAF’s
resolve that the policy of zero tolerance towards internal
corruption will be rigorously applied.

The Office now benefits from its own legal framework. This
provides the clear legal base from which to proceed. It has its
own manual of procedures, a case management tracking
system, an in house team of Magistrates and Judicial Advisers
whose work includes helping to ensure that
the OLAF
investigation of cases pays scrupulous regard to the rights of
people under investigation, the correct recording of interviews
and documentary evidence as well as taking into account any
legal requirements peculiar to the jurisdiction where the case
may end up.

The effect of the changes in practice and attitude should lead
to improved confidence in the ability of the Office to discharge
its responsibilities. This in turn should encourage a higher level
of confidence in the Community at large that the financial
interests of the EU are vitally important and must benefit from
the highest level of protection.

.

2
0
1
2
2
0
0
1

.

A
N
N
E
X

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n

C
o
m
m
u
n
i
t
i
e
s

C
3
6
5
/
6
3