REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Protection of the European Union's financial interests-Fight against fraud-Annual Report 2009
Date: 2010-07-14
Institutions: European Commission
Subjects: EU statistics, activity report, financial control, fraud, fraud against the EU, statistics

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EUROPEAN COMMISSION 

Brussels, 14.7.2010 
COM(2010)382 final 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

Protection of the European Union's financial interests-Fight against fraud-Annual 
Report 2009 

SEC(2010)897 
 SEC(2010)898 

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TABLE OF CONTENTS 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT Protection of the European Union's financial interests-Fight against fraud-
Annual Report 2009 ................................................................................................................... 1 

Introduction ................................................................................................................................ 4 

1. 

1.1. 

Results of the fight against fraud: statistics on fraud and other irregularities.............. 5 

Statistics on fraud and other irregularities reported by the Member States and 
Commission departments in 2009................................................................................ 5 

1.2. 

Revenues ...................................................................................................................... 6 

1.2.1.  Traditional own resources (TOR) ................................................................................ 6 

1.3. 

Expenditure — overall analysis ................................................................................... 8 

1.3.1.  Agricultural expenditure .............................................................................................. 8 

1.3.2.  Cohesion Policy ......................................................................................................... 11 

1.3.3.  Pre-accession funds.................................................................................................... 13 

1.3.4.  Statistics on expenditure directly managed by the Commission................................ 15 

1.4. 

Statistics on OLAF’s activities................................................................................... 15 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

3.2. 

4. 

The international dimension of the protection of the European Union's financial 
interests ...................................................................................................................... 17 

Anti-corruption multilateral agreements .................................................................... 17 

Negotiation of bilateral anti-fraud agreements .......................................................... 17 

Negotiation of anti-fraud provisions to be included in Association Agreements (AAs) 
and Partnership and Cooperation Agreements (PCAs).............................................. 18 

Fight against international illicit tobacco traffic ........................................................ 19 

Ratification process for protection of financial interests (PFI) instruments .............. 19 

Other operational support measures taken by the Commission in 2009: progress in 
the customs area ......................................................................................................... 20 

The joint customs operation Diabolo II ..................................................................... 20 

Deployment of improved databases — Customs Files Identification Database (FIDE)
.................................................................................................................................... 20 

Results of the questionnaire regarding cooperation with the Member States 
concerning on-the-spot checks................................................................................... 21 

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4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

5. 

National conditions for gaining access to information .............................................. 22 

National procedural requirements for on-the-spot checks and for drawing up 
administrative inspection reports ............................................................................... 23 

Assistance of national authorities in the event of opposition by economic operators 24 

National precautionary measures to prevent loss or destruction of evidence ............ 25 

General conclusions ................................................................................................... 25 

Recovery .................................................................................................................... 25 

5.1. 

Measures for securing the recovery of irregular amounts.......................................... 25 

5.1.1.  National legislation on recovery of EU funds............................................................ 26 

5.1.2.  Registration of irregularities and recovery of debts within the national administration

.................................................................................................................................... 26 

5.1.3.  Conclusions ................................................................................................................ 27 

5.2. 

Recovery of irregular amounts in 2009...................................................................... 27 

5.2.1.  Traditional own resources .......................................................................................... 27 

5.2.2.  Agriculture ................................................................................................................. 28 

5.2.3.  Cohesion policy.......................................................................................................... 29 

5.2.4.  Pre-accession funds.................................................................................................... 30 

5.2.5.  Direct expenditure...................................................................................................... 30 

5.2.6.  Recovery following an OLAF case............................................................................ 31 

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INTRODUCTION 

The protection of the EU’s financial interests and  the  fight  against fraud are areas  in  which 
responsibility is shared between the European Union and the  Member  States.  Each  year  the 
Commission,  in  cooperation  with  the  Member  States,  produces  a  report  presenting  statistics 
and  the  new  measures  they  have  taken  to  meet  their  obligations  in  this  field,  in  accordance 
with Article 325 (5) TFEU. The report is sent to the European Parliament and the Council and 
is published1. This year’s report also analyses two special topics that the Commission and the 
Member States have agreed to present in the 2009 report and to which Member States have 
contributed via a questionnaire2. These topics are ‘Cooperation between the Commission and 
the  Member  States  concerning  on-the-spot  checks’  and  ‘Measures  taken  by  the  Member 
States for the recovery of irregular amounts’. Both topics are of particular relevance for the 
EU institutions3 as well as to the national competent authorities. 

The first part gives a summary of the statistics on irregularities reported by the Member 
States  in  those  areas  where  Member  States  implement  the  budget  (agricultural  policy, 
cohesion policy and pre-accession funds, i.e. around 80 % of the budget) and for the collection 
of the EU’s traditional own resources. It also gives an estimate of irregularities in the field of 
expenditure  managed  directly  by  the  Commission  and  an  overview  of  the  operational 
activities  of  the  European  Anti-Fraud  Office  (OLAF).  The  statistics  must  be  read  and  used 
with  great  care:  a  reported  irregularity  is  not  in  most  cases  a  possible  fraud  (which  is  a 
deliberate act). A reported suspicion of fraud is not necessarily a fraud confirmed by a court 
judgment.  All  the  irregularities  presented  are  being  dealt  with  and  are  subject  to  different 
forms of follow-up, as described in parts 1 and 5. 

The  second  part  focuses  on  the  international  dimension  of  the  protection  of  the  EU’s 
financial interests and presents the state of ratification of the protection of financial interests 
(PFI) instruments.  

In  part  3  the  report  deals  with  administrative  measures  taken  by  the  Commission  to  fight 
fraud and irregularities in the customs area. 

Part 4 gives an overview of the results of the questionnaire regarding cooperation between 
the Commission (OLAF) and the Member States concerning on-the-spot checks4.  

The  final  part  of  the  report  deals  with  recoveries  made  in  2009  in  all  budget  areas  and 
presents the measures that Member States take for securing the recovery of irregular amounts. 

The report is accompanied by two Commission working papers5. 

1 
2 

3 

4 

Previous years’ reports: http://ec.europa.eu/anti_fraud/reports/anti-fraud_en.html. 
The complete results of the questionnaire are presented in the document ‘Implementation of Article 325 
TFEU in 2009 by the Member States’ (Accompanying document 1 to this report). 
See  also  the  Resolution  of  the  European  Parliament  of  24  April  2009  on  the  protection  of  the 
Communities’ financial interests and the fight against fraud — Annual report 2007 (2008/2242(INI)). 
See Accompanying document 1 ‘Implementation of Article 325 TFEU in 2009 by the Member States. 

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1. 

1.1. 

RESULTS  OF  THE  FIGHT  AGAINST  FRAUD:  STATISTICS  ON  FRAUD  AND  OTHER 
IRREGULARITIES 

Statistics on fraud and other irregularities reported by the Member States and 
Commission departments in 2009 

In the fields where Member States implement the budget and for the collection of the EU’s 
own  resources,  EU  legislation  requires  the  Member  States  to  report  suspicions  of  fraud  and 
other detected irregularities affecting the EU’s financial interests.  

Distinguishing  between  fraud  and  other  irregularities  is  important.  An  irregularity  is  any 
infringement  of  an  EU  provision  by  an  economic  operator  which  has,  or  would  have,  the 
effect  of  prejudicing  the  EU’s  financial  interests6.  Fraud  is  an  irregularity  committed 
intentionally  which  constitutes  a  criminal  offence7.  The  Member  States  must  identify 
whichever irregularities constitute suspected fraud. The real financial impact of fraud can be 
measured only at the end of legal proceedings. 

The Commission working paper Statistical evaluation of irregularities8 presents an in-depth 
analysis of the information reported by the Member States and includes statistics on fraud and 
other  irregularities  detected  by  Commission  departments  in  the  areas  of  the  budget  under 
centralised direct management. 

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7 

8 

For references, see cover page of the report. 
Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection 
of the European Communities’ financial interests (OJ L 312, 23.12.1995). 
Article  1(1)(a)  of  the  Convention  of  26  July  1995  on  the  protection  of  the  financial  interests  of  the 
European Communities (OJ C 316, 27.11.1995). 
Second Accompanying document to this report. 

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Table 1: Number of irregularities and amounts — 2009 

Area 

Number of irregularities 
reported 

20089 

Agriculture 

1 133 

2009 

1 621 

Total estimated financial 
impact of irregularities, 
including suspected fraud (€ 
million) 

Estimated financial impact of 
suspected fraud only (€ 
million) 

200810 

2009 

2008 

2009 

102.3 (0.24 % 
of allocations) 

125 ( 0.24 % 
of allocations) 

4 (0.01 % of 
allocations) 

13.3 (0.03% of 
allocations 

Cohesion 
Policy 

Pre-accession 
funds 

4 007 

4 931 

585.2 (~0.11 % 
of allocations) 

1 223 (2.53% 
of allocations) 

57 (~0.11 % of 
allocations) 

109 (~0.23 % 
of allocations) 

523 

706 

61(~0.9 % of 
allocations) 

117 (~ % 0.78 
of allocations 

13 (~0.9 ~% of 
allocations) 

57 (0.38~% of 
allocations) 

Direct 
expenditure 

932 

705 

34.7 (~0.17 % 
of allocations) 

27.5 (~0.17 % 
of allocations) 

3.2 (~0.02 % 
of allocations) 

1.5 (~ 0.01 % 
of allocations) 

Total 
expenditure 

6 595 

7 963 

Own 
resources11 

6 075 

4 648 

783.2(~ 0.07 % 
of the 
expenditure in 
the four areas) 

1.492.5 
(1.13% of the 
total 
expenditure in 
the four areas) 

77.2 (~ 0.07 % 
of the 
expenditure in 
the four areas) 

180.8 (0.13 % 
of the 
expenditure in 
the four areas) 

375 (~0.46 % 
of the total 
amount of own 
resources)12) 

343 (~0. 23 % 
of the total 
amount of own 
resources) 

75 (~0.46 % of 
the total 
amount of own 
resources) 

99 (~0.68% of 
the total 
amount of own 
resources) 

1.2. 

Revenues 

1.2.1. 

Traditional own resources (TOR) 

 375 million in 2008 to €

The  number  of  cases  of  irregularities  reported  in  2009  was  23 %  lower  than  in  2008  (4 648 
cases in 2009, compared with 6 075 in 2008), while the estimated amount is also 8.5 % lower 
(from €
 343 million in 2009). The number of communications from 
the ten new Member States showed continued growth since their accession in 2004 until 2007. 
In  2008  the  growth  stopped  and  2009  shows  2 %  less  communicated  cases  compared  with 
2008 although the amount of TOR increased by 20 % from 2008 to 2009.  

Suspected fraud accounted for approximately 19 % of cases of irregularities reported, with an 
estimated financial impact of approximately €

 99 million.  

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The figures have been updated for certain sectors since the 2008 report. 
Idem. 
Customs duties and agricultural levies. 
This percentage is based on an estimate of traditional own resources in the 2009 general budget, and not 
on accounts. 

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The methods of detection of irregularities vary between Member States; however, in 2009 the 
vast majority of cases (75 %) were detected by means of either primary national inspections or 
post-clearance control audits. A large group of Member States13 mostly use ‘ex-post controls’ 
to  detect  irregularities.  Primary  inspections  are  used  in  particular  in  Denmark,  Slovenia, 
Romania, Malta and Greece.  

Chart  1  illustrates  by  which  methods  OWNRES14  cases  —  in  amounts  —  have  been 
discovered by the Member States in 2009. For reasons of presentation the following methods 
are  included  in  the  term  ‘ex-post  controls’:  audit  of  the  accounts,  Commission  inspections, 
inspections  by  anti-fraud  services,  inspection  visits,  national  post-clearance  audits  and  tax 
audits.  

Chart 1: Detection of irregularities in 2009 — methods 

The goods involved in irregularities and frauds demanding Member States’ attention are very 
diverse. TVs and monitors, clothing and of course tobacco keep their relevance in 2009 and 
like in previous years are the most important goods involved in registered cases of irregularity 
or  fraud.  The  origin  of  the  goods  concerned  is  likewise  varied,  although  some  countries 
remain continuously at the top of the rankings (China, the United States, Japan). 

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BG, CY, AT, SE, HU, SK, BE, EE, LT, DE, ES, PT, FR, IE, UK. 
OWNRES is an abbreviation for own resources; the OWNRES database is a key tool for obtaining data 
for global analysis of fraud and irregularities affecting traditional own resources. 

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1.3. 

Expenditure — overall analysis 

The  report  analyses  four  main  headings  on  the  expenditure  side  of  the  EU  budget: 
Agriculture,  Cohesion  policy,  Pre-accession  assistance  and  Direct  expenditure,  covering 
different policies ranging from research and development to humanitarian aid. 

8%

2%

8%

705

706

1 621

N° of irregularities
4 931

Irregular am ounts
82%

Agriculture Cohesion Policy

Pre-Accession Direct expenditure

Chart  2:  Proportion  of  the  above-mentioned  four  budget  areas  in  terms  of  reported 
irregularities  and  suspicions  of  fraud  (inner  circle)  and  the  related  financial  amounts 
(outer circle) in 2009. 

The  Cohesion  Policy  and  Pre-Accession  Assistance  present  a  share  of  the  irregularities  that 
exceeds by far their share of resources on the overall budget, showing that they remain sectors 
were the management and control systems need further improvements. 

In general, for what concerns the reporting of irregularities for the expenditure part of the EU 
budget,  2009  should  be  regarded  as  a  transition  year  due  to  the  introduction  of  the  internet 
based  reporting  system  (IMS-  Irregularity  Management  System)  which  may  have  caused 
problems in relation to the reporting, registration and migration of irregularities into the new 
system.  However,  the  new  reporting  system  has  improved  the  overall  conditions  for 
irregularity reporting. It is therefore welcomed by the majority of the Member States which 
have already used it for the 2009 reporting year. All Member States should fully implement 
the IMS and be ready to use the system for the 2010 reporting exercise.  

1.3.1. 

Agricultural expenditure 

In 2009, Member States reported 1 621 new cases with a total amount affected of about €
 125 
million. An increase of 43 % of reported cases is registered in comparison to 2008, as well as 
an increase of 23 % in the irregular amounts reported. A reason for this increase is the entry 
into operation of IMS, which allowed far more users to process communications, thus having 

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a direct impact on the number of cases reported. Spain reported the highest number of cases 
(404) and Italy reported the highest amounts affected (€

 54 million).  

Compliance by Member States has improved with the introduction of the new internet-based 
reporting  system,  although  some  attention  still  needs  to  be  paid  to  issues  such  as  timely 
reporting, personal data and measures affected.  

Therefore,  the  Commission  calls  upon  Member  States  to  further  improve  compliance  with 
special reference to the latter issues, by using the newly introduced internet reporting system. 

For expenditure from the financial years 2006-09, Member States have reported so far 2 086 
cases  of  irregularities,  with  a  total  affected  amount  of  €
 97  million.  The  highest  number  of 
cases  was  reported  by  Spain  (377)  and  the  highest  amounts  affected  by  irregularities  were 
reported by Italy (€
 14 million). The highest expenditure was made by France (20 %), while 
the  number  of  irregularity  cases  (127)  and  the  corresponding  amounts  affected  by 
irregularities  (€
 9  million,  representing  0.09 %  of  expenditure)  communicated  by  France 
remain rather low compared to the expenditure. For the same financial years, Member States 
 12 million.  
have communicated 288 cases of suspected fraud, with a total amount affected of €

Sectors with a rather high irregularity rate are ‘sugar’, ‘pig meat, eggs and poultry’, ‘cereals’, 
‘rural development’ and ‘fruits and vegetables’. These figures should be considered as a half-
time result, as cases of irregularities concerning the  2006-2009 expenditure will continue to 
be reported in the coming years. 

Definitive figures can only be determined for years that can be considered as ‘finalised’. The 
financial year 2004 is the latest financial year to be considered as finalised. Audit plans have 
been executed, recovery procedures have been started and irregularities have been reported. 

The total expenditure for 2004 was about €
cases with a total amount affected of about €
0.23 %.  

 43 billion. Member States reported in total 2 216 
 99 million. This implies an irregularity rate of 

Chart  3  provides  an  overview  of  the  irregularity  rates  per  Member  State15  in  2004.  The 
irregularity rate varies considerably between the Member States. This may be an indication of 
the  effectiveness  of  the  control  systems  in  place  and  it  is  a  question  that  will  necessitate 
further monitoring. Member States classified 37 cases as suspected fraud, of which 23 cases 
Italy. 
(62 %) 

reported 

were 

by 

15 

CY and MT are not indicated on the map, the reason being that they had no expenditure for this sector 
in 2004. 

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Chart 3: Irregularity rate per Member State-EU-25, in 2004 

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1.3.2. 

Cohesion Policy 

 1.22  billion. 
In  2009,  4 931  irregularities  were  reported,  involving  an  overall  amount  of  €
Reported irregularities and related financial amounts have been increasing in relation to 2008. 
The increase has been significant in terms of both number of reported irregularities (+23 %) 
and irregular amounts (+109 %). A number of factors could explain these increases: reported 
irregularities concern three different programming periods (1994-99, 2000-06 and 2007-13); 
Romania  and  Bulgaria  have  both  reported  irregularities;  the  closure  of  the  2000-06 
programming period is approaching and there is an increase in checks and audits linked to this 
event. 

In  particular,  the  last  argument  seems  the  most  pertinent,  considering  also  that  a  similar 
situation has been encountered (and with even higher differences in relation to the previous 
year) for the closure of the 1994-99 programming period. 

However, given the multi-annual nature of the programmes run under the cohesion policy, the 
analysis by programming period provides more interesting indications than an analysis based 
on yearly budgets. 

Throughout  the  2000-06  programming  period,  which  is  approaching  its  closure  (2010),  the 
overall  irregularity  rate  is  almost  1.6 %,  while  the  fraud  rate  is  about  0.25 %.  These  rates 
exclusively  represent  the  estimated  impact  on  the  payments  from  the  Commission  to  the 
Member States of, respectively, irregularities (including suspected and established fraud) and 
suspected  fraud  (alone).  In  both  cases,  therefore,  these  rates  fail  to  indicate  what  the  real 
dimension  of  irregularities  and  fraud  is.  These  rates  represent  the  results  of  the  checks  and 
audits by national competent authorities and no extrapolation is allowed unless the size of the 
audited and checked sample is known. 

The  highest  irregularity  rates  concern  the  European  Regional  Development  Fund  (ERDF)16 
and Objective 2 programmes (aimed at revitalising areas facing structural difficulties). For the 
ERDF the most plausible explanation is that this fund finances projects of a higher value and 
therefore irregularities tend also to involve a greater amount. For the Objective 2 programmes, 
the very high irregularity rates of the UK and the Netherlands, which mainly benefit from this 
type of programmes, may have influenced the overall rate. 

In  terms  of  suspected  fraud  rate,  the  ERDF  remains  the  most  affected  fund  (0.29 %). 
Objective  1  programmes  (supporting  developments  in  less  prosperous  regions)  present  the 
highest rate (0.30 %), followed by Objective 3 programmes (which support the adaptation and 
modernisation of education, training and employment policies and systems in non-Objective 1 
regions) with 0.17 %17.  

16 

17 

The ERDF finances direct aid to investments in companies (in particular SMEs) to create sustainable 
jobs;  infrastructure  projects  linked  notably  to  research  and  innovation,  telecommunications,  the 
environment, energy and transport; financial instruments (capital risk funds, local development funds, 
etc.) to support regional and local development and to foster cooperation between towns and regions; 
technical assistance measures. 
Given the fact that regions benefiting from the Objective 1 programmes are the less prosperous regions 
and those benefiting from Objective 3 programmes are the richest, need and greed seem the principal 
drivers behind fraud.  

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Italy, Poland, Estonia and Slovakia present the highest suspected fraud rates among Member 
States as shown in Chart 4: 

Chart 4: Fraud rate per Member State (EU-25) for the 2000-06 programming period 

However, higher suspected fraud rates may not necessarily mean that more fraudulent activity 
affecting the EU’s financial interests is taking place in certain Member States. It is rather an 
indication that the anti-fraud systems in place are performing well (capable of detecting fraud 
and willing to report it), which always produces higher results. The Commission will further 
monitor these results and analyse the relationship between the anti-fraud systems in place and 
the suspected fraud rates reported. 

Among  the  Member  States  with  very  low  suspected  fraud  rates  Spain  and  France  stand  out 
(especially in relation to their size and to the financial support received). In particular, those 
results could indicate either a lower fraud detection capability or the fact that a proportion of 
any detected fraud remains unreported. 

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Finally, data related to the Cohesion Fund remain too fragmented to provide a reliable picture. 
The Commission is working on the full deployment of IMS also for the Cohesion Fund and 
this is expected to improve the situation in the coming years. Member States18 which have not 
yet introduced the new reporting system are invited to deploy all the necessary efforts for its 
implementation.  

In  order  to  simplify  the  irregularity  reporting  process,  on  1  September  2009  Commission 
Regulation  (EC)  No.  1828/200619  was  amended20.  The  main  objectives  of  the  amendments 
introduced  were  to  clarify  the  existing  provisions  based  on  the  experience  gained  by  the 
Commission  and  the  Member  States  with  regard  to  the  application  of  Regulation  (EC)  No. 
1681/94 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 
field21, by making the reporting easier while ensuring that important data for risk analysis are 
not lost, and to align reporting  provisions concerning structural funds to a large extent with 
the provisions applicable to the agricultural sector.  

1.3.3. 

Pre-accession funds  

In  2009,  706  newly  detected  irregular  cases  with  an  affected  amount  of  €
 117  million  were 
reported  by  the  national  authorities  in  14  reporting  countries.  An  increase  of  35 %  in  the 
number  of  cases  is  recorded.  It  demonstrates  that  detections  in  the  area  of  pre-accession 
assistance  are  not  phasing  out  but  rather  shifting  towards  a  smaller  group  of  countries,  i.e. 
EU–2 and candidate countries. Bulgarian and Romanian irregularities together make up 81 % 
of  cases  and  93 %  of  irregular  amounts  reported  in  2009.  Yet,  the  rising  tendency  is  only 
applicable to Bulgaria, with an increase of 134 % in cases. Consequently, the trends are highly 
influenced by their reporting patterns and thus the focus of analysis is narrowed down. 

The  EU  amounts  affected  keep  rising  and  thus  accumulate  with  reference  to  the  whole 
programming period, while allocations remain fixed and payments are gradually declining. As 
a consequence irregularity and suspected fraud rates show a rising trend. 

Five  Member  States  (Bulgaria,  Hungary,  Poland,  Romania,  Slovakia)  and  Turkey  reported 
suspected  fraud  cases  in  2009.  The  number  of  cases  of  suspected  fraud  was  262,  with  a 
financial impact of €

 57 million.  

The highest number of suspected fraud cases was reported by Bulgaria. Suspected fraud cases 
detected for the SAPARD22 fund clearly dominate the picture. They make up 67 % of all the 
cases from this country. In fact, Bulgarian SAPARD cases account for 92 % of all SAPARD 
suspected  fraud  in  2009  reported  to  OLAF.  Bulgarian  authorities  were  requested  by  the 
Commission to enhance control systems and carry out additional checks and this is reflected 
in  the  rising  figures  of  detected  and  reported  suspected  fraud  cases.  The  drastically  rising 
share  of  suspected  fraud  is  expected  to  decline  following  the  finalisation  of  judicial 
procedures and communication of updated reports in the coming years. 

18 
19 
20 
21 
22 

Spain and France did not use the IMS in 2009 and Sweden and Ireland have still to fully implement it. 
OJ L 371, 27.12.2006. 
OJ L 250, 23.9.2009. 
OJ L 172, 7.7.1994. 
This programme has supported agricultural and rural development in candidate countries. 

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The total suspected fraud rate for the whole programming period of SAPARD is at the level 
of 2.8 %. The Bulgarian fraud rate for SAPARD is 20 %, while the Czech Republic, Estonia, 
Latvia and Slovakia have a zero fraud rate which puts, for instance, in question the reliability 
of the reported information or the fraud detection capability in the SAPARD sector.  

Chart 5 shows the fraud rate for SAPARD by country. 

Chart  5:  suspected  fraud  rate  for  SAPARD  programme  per  Member  State  and  per 
Candidate Country in 2009. 

Controls  seem  to  be  well  spread.  Control  of  documents  and  audit  are  the  most  frequently 
applied methods of detecting irregularities in 2009. The majority of suspected fraud cases in 
Bulgaria  were  detected  by  audit.  The  exceptional  situation  in  Bulgaria  points  to  some 
weaknesses in the national anti-fraud system. 

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The  Member  States  and  Candidate  countries  are  invited  to  report  irregularities  via  the  new 
Pre-accession Assistance Module of IMS as soon as this module becomes operational23.  

1.3.4. 

Statistics on expenditure directly managed by the Commission 

This year’s analysis of irregularities in this area was based on data held in the Commission’s 
accounting  system  ABAC,  which  is  a  transverse,  transactional  information  system  allowing 
all  budgetary  and  accounting  operations  to  be  executed  and  monitored  by  the  Commission. 
One  of  the  functionalities  of  the  ABAC  system  is  the  ‘recovery  context’,  which  gathers 
detailed information on recovery orders issued by the Commission departments and registered 
in  ABAC.  The  recovery  context  is  a  relatively  new  functionality  within  the  system.  The 
collection of data from the Commission departments only started recently and the current data 
available  in  ABAC  refer  to  recovery  orders  issued  since  2008.  The  data  presented  should 
therefore be treated with particular caution and not as empirical evidence of the level of fraud 
and irregularity. 

The number of recovery orders relating to cases of irregularities and suspected fraud in this 
area came to 705, with a presumed financial impact of €
 1.5 million of which 
was  accounted  for  by  15  reported  cases  of  suspected  fraud.  Irregularities  in  the  sector  of 
external  action  accounted  for  €
 23.1 
million.  

 4.4  million  and  in  the  area  of  internal  policies  for  €

 27.5 million, €

1.4. 

Statistics on OLAF’s activities 

Once a preliminary evaluation has been made of information received, OLAF may open any 
of five types of cases: an internal investigation, an external investigation, a coordination case, 
a criminal assistance case or a mutual assistance case. The number of cases opened each year 
is  stable  (220  in  2009,  204  in  2008  and  201  in  2007).  Since  2004,  the  number  of 
investigations opened by OLAF on its own initiative (internal and external investigations) has 
equalled then exceeded the number opened by OLAF to provide assistance and coordination 
to national authorities (coordination cases and criminal assistance cases). Since 2005, OLAF’s 
own-initiative investigations have accounted for around 75 % of all cases opened. The number 
of active cases has increased (455 at the end of 2009, compared with 425 at the end of 2008). 
The table below provides a snapshot of the situation at the end of 2009. The slight increase in 
the number of active investigations as compared to 2008 is partially due to the introduction of 
a de minimis policy, whereby OLAF is focussing its operational resources on more complex 
fraud cases which by their nature require longer periods of investigation. 

23 

Once  the  module  becomes  fully  operational  it  will  manifest  a  number  of  advantages  like  improved 
compliance,  less  technical  nature  mistakes,  possibility  for  reporting  authorities  at  different  levels  to 
access information on all the (open) irregularities already reported. 

EN 

15 

   EN 

 
                                                 
Table 2: Cases ongoing as at 31 December 2009 by sector, and their financial impact 

Sector 

Cases under active investigation 
31 December 2009 

Financial impact from investigation (€ 
million) 

Agriculture 

Cigarettes 

Customs 

Direct expenditure 

institutions  and 

EU 
bodies 

External Aid 

Structural funds 

Trade 

Total 

79 

32 

36 

47 

133 

86 

43 

1 

457 

106.48 

65.31 

245.23 

65,41 

25.07 

153.31 

658.19 

0.29 

1319.29 

For  more  details  and  a  comparison  with  previous  years,  see  the  OLAF  report.24

24 

http://ec.europa.eu/comm/anti_fraud/reports/index_en.html. 

EN 

16 

   EN 

 
                                                 
2. 

THE INTERNATIONAL DIMENSION OF THE PROTECTION OF THE EUROPEAN UNION'S 
FINANCIAL INTERESTS  

The protection of financial interests and the fight against fraud and corruption are tasks for the 
European  Union  that  go  beyond  its  borders  and  need  therefore  to  be  reflected  in  the 
international  agreements  that  the  Union  is  concluding  with  third  countries  or  in  the 
multilateral conventions to which it becomes a party.  

To  effectively  combat  fraud,  corruption,  smuggling  of  cigarettes  and  other  illegal  activities 
detrimental to its financial interests, the EU on its behalf and on behalf of the Member States 
is  negotiating  anti-fraud  agreements  with  third  countries  and  takes  part  in  multilateral 
agreements or conventions.  

2.1. 

Anti-corruption multilateral agreements  

The European Commission on behalf of the European Union negotiated the conditions for the 
implementation  of  the  United  Nations  Convention  against  Corruption  (UNCAC)  at  the  3rd 
Conference  of  the  States  Parties.  Alongside  Member  States,  the  European  Union  is  a  ‘state 
party’ to the Convention within its area of competence (prevention measures in the public and 
private  sectors,  such  as  the  establishment  of  anti-corruption  bodies,  and  transparency  and 
accountability  in  matters  of  public  finance,  effective  asset  recovery  and  international 
cooperation).  Parties  are  required  —  inter  alia  —  to  take  measures  which  will  support  the 
tracing, freezing, seizure and confiscation of the proceeds of corruption. The Conference also 
adopted the terms of reference of the review mechanism for the Convention. It will require the 
European Union to assess its compliance with the standards of the UNCAC and prepare itself 
for the review in the coming years. 

The  Commission  also  takes  part  in  the  activities  of  the  European  anti-corruption  network, 
which was created by the Council in 200825. It was formally established in November 2009 at 
a meeting of the European Partners against Corruption (EPAC) in Slovenia, where the rules of 
procedure  were  adopted  and  the  management  bodies  set  up.  The  Commission  (OLAF)  is  a 
formal member of EPAC.  

2.2. 

Negotiation of bilateral anti-fraud agreements 

In the context of the reinforced commitment of the EU and the G-20 to establish a high level 
of international cooperation with the financial centres and tax havens in third countries which 
match the OECD standards on tax cooperation, and following the Ecofin Council meeting of 
February 2009, the Commission amended its proposal, adopted on 10 December 2008, for a 
Council Decision on the signing and on the conclusion of a cooperation agreement between 
the  European  Community  and  its  Member  States,  of  the  one  part,  and  the  Principality  of 
Liechtenstein, of the other part, to combat fraud and any other illegal activity to the detriment 
of their financial interests.  

25 

Council Decision 2008/852/JHA of 24 October 2008 on a contact-point network against corruption (OJ 
L 301, 12.11.2008). 

EN 

17 

   EN 

 
                                                 
The  amended  proposals26  were  adopted  in  November  2009  and  take  on  board  the  recent 
standards for provisions on exchange of information in the field of taxation and the changes 
imposed by the entry into force of the Lisbon Treaty.  

This agreement would bring considerable added value in so far as its scope covers not only 
tax  evasion,  tax  fraud  and  any  other  illegal  activities  affecting  the  financial  interests  of  the 
parties, but also the exchange of information on tax matters, in line with the OECD standard, 
thereby  preventing  banking  secrecy  being  relied  on  as  an  exception  that  would  prevent 
information  exchange.  The  agreement  contains  provisions  on  administrative  assistance,  in 
particular  on  assistance  on  request  (requests  for  information,  for  surveillance  and  for 
investigations) and on special forms of cooperation and recovery. However, it also allows for 
mutual legal assistance in all matters of tax offences. 

This agreement is of the utmost importance as it should also serve as a model for anti-fraud 
agreements  with  other  third  countries  (Andorra,  Monaco,  San  Marino  and  the  Swiss 
Confederation),  along  the  lines  of  the  recommendation  adopted  by  the  Commission  in  June 
2009. The agreement should therefore be signed without delay and the Council should give its 
approval. 

2.3. 

Negotiation  of  anti-fraud  provisions  to  be  included  in  Association  Agreements 
(AAs) and Partnership and Cooperation Agreements (PCAs) 

In line with its enhanced European Neighbourhood Policy (ENP), the European Commission 
is  currently  conducting  negotiations  for  a  new,  comprehensive  agreement  with  Ukraine,  a 
priority  partner  country  within  the  ENP.  Relations  between  the  EU  and  Ukraine  have  since 
1998  been  based  on  the  Partnership  and  Cooperation  Agreement  (PCA),  which  provides  a 
comprehensive framework for cooperation between the two parties.  
At  the  Paris  Summit  between  the  EU  and  Ukraine  in  September  2008,  an  agreement  was 
reached to start negotiations on an EU and Ukraine Association Agreement (AA), which is to 
be  the  successor  agreement  to  the  PCA.  The  AA  should  renew  the  EU-Ukraine  common 
institutional  framework,  facilitating  the  deepening  of  relations  in  all  areas,  including  the 
protection of the EU’s financial interests and the fight against fraud and corruption affecting 
EU funds. 
The provisions in the financial cooperation chapter negotiated with the Ukrainian counterparts 
represent  the  most  comprehensive  and  broadest  set  of  anti-fraud  and  control  provisions  in 
relation to the Commission’s competences in this area. The chapter consists of a wide range 
of stipulations  regarding the exchange  of  information  and  further  cooperation  at  operational 
level,  the  prevention  of  irregularities,  fraud  and  corruption,  the  communication  of 
irregularities, on-the-spot checks, administrative measures and penalties, etc.  

The  Commission,  through  OLAF,  is  currently  leading  several  PCA  and  AA  negotiation 
processes27  with  respect  to  financial  cooperation  and  protection  of  the  EU’s  and  its  partner 
countries’  financial  interests.  The  financial  cooperation  chapter  within  the  EU-Ukraine 
Association Agreement could be used as a solid basis for future negotiations.  

26 
27 

COM(2009) 644 final, 23.11.2009 and COM(2009) 648 final, 2.12.2009. 
Armenia, Azerbaijan, Brunei, China, Georgia, Iraq, Libya, Malaysia, Moldova, Mongolia, Philippines, 
Russia, Ukraine and Vietnam. 

EN 

18 

   EN 

 
                                                 
2.4. 

Fight against international illicit tobacco traffic  

Illicit  trade  in  tobacco  products  is  a  criminal  activity  with  a  number  of  particularly harmful 
aspects.  The  Commission,  through  OLAF,  not  only  assists  and  supports  law  enforcement 
authorities throughout the EU with their operational cases, but also coordinates major tax and 
criminal  investigations  with  the  Member  States  and  third  countries.  OLAF  organises  and 
coordinates Europe-wide and world-wide customs operations to target specific problems, such 
as Operation Diabolo in 2007 (aimed at intercepting counterfeit products from China which 
are  smuggled  in  shipping  containers  to  the  EU);  Operation  Mudan  in  2008  (to  address  the 
growing  problem  of  smuggling  of  cigarettes  by  post),  and  Diabolo  II  (which  had  the  same 
objective as the first Operation Diabolo) in September 2009.  

In 2009, the Commission continued to play a leading role in the negotiations on a protocol to 
eliminate  illicit  trade  in  tobacco  products.  This  protocol  is  based  on  the  WHO  Framework 
Convention  on  Tobacco  Control,  an  international  treaty  with  currently  168  parties.  The 
Commission  (represented  by  OLAF  and  DG  SANCO)  has  worked  closely,  and  effectively, 
with  the  Member  States  and  the  Council,  in  the  context  of  the  Working  Party  on  Customs 
Union  (Legislation  and  Policy) 
these 
intergovernmental  negotiations.  Central  to  this  coordinated  position  is  the  provision  of 
Article 7 (Tracking and tracing). The Commission views this particular provision as being the 
core of the Protocol and an essential instrument in the fight against the illicit trade. 

the  position  of 

to  coordinate 

the  EU  for 

The Commission invites Member States to continue joint efforts to make these negotiations a 
success. 

2.5. 

Ratification process for protection of financial interests (PFI) instruments 

The  second  Protocol  to  the  Convention  on  the  Protection  of  the  European  Communities’ 
Financial  Interests28,  which  contains  in  particular  provisions  on  liability  of  legal  persons, 
confiscation  and  money  laundering,  entered  into  force  on  19  May  2009,  after  the  Member 
States concerned notified their ratification29. 

Hungary  ratified  the  Convention  and  its  protocols30  on  18  January  2010,  with  a  single 
declaration  with  regard  to  the  protocol  on  the  interpretation  of  the  Convention  by  the 
European  Court  of  Justice  (ECJ).  Estonia  has  yet  to  ratify  this  latter  protocol.  The  Czech 
Republic  and  Malta  remain  the  only  Member  States  that  have  not  yet  ratified  either  the 
Convention  on  the  Protection  of  the  European  Communities’  Financial  Interests  or  its 
protocols.  With  regard  to  the  follow-up  of  the  second  report  on  the  implementation  by  the 
Member States of these instruments31, the Commission has engaged in further analysis on the 
conformity  of  national  provisions,  in  particular  as  regards  Austria,  Belgium,  France, 
Germany, Ireland, Italy and Luxembourg. 

28 
29 

30 

31 

OJ C 316, 27.11.1995. 
See also Communication from the Commission on the entry into force on 19 May 2009 of the second 
PFI protocol, OJ C 219, 12.9.2009. 
First  Protocol  of  27  September  1996  (OJ  C  313,  23.10.1996),  Protocol  of  29  November  1996  on  the 
interpretation, by way of preliminary rulings, by the CJEC of the Convention (OJ C 151, 20.5.1997) and 
Second Protocol of 19 June 1997 (OJ C 221, 19.7.1997). 
COM(2008) 77 final, 14.2.2008. 

EN 

19 

   EN 

 
                                                 
The  Member  States  are  invited  to  proceed  with  the  ratification  of  these  legal  instruments 
without delay.  

3. 

OTHER  OPERATIONAL  SUPPORT  MEASURES  TAKEN  BY  THE  COMMISSION  IN  2009: 
PROGRESS IN THE CUSTOMS AREA  

Further  progress  was  achieved  in  2009  in  the  customs  area,  with  the  deployment,  in 
accordance  with  the  new  Regulation  766/200832,  of  a  new  customs  database  and  the  joint 
customs operation Diabolo II.  

3.1. 

The joint customs operation Diabolo II 

This joint customs operation led to the seizure of more than 65 million counterfeit cigarettes 
and  369 000  other  counterfeit  items  (shoes,  toys,  cameras,  headphones,  hats,  caps,  gloves, 
handbags,  etc.)  representing  over  20  different  trademarks.  It  also  resulted  in  further 
international  investigations  into  criminal  activities.  The  operation,  coordinated  by  the 
European  Commission  through  the  European  Anti-Fraud  Office  (OLAF),  was  named 
‘Diabolo II’ following the successful 2007 joint customs operation ‘Diabolo I’.  

The success of this joint operation highlights the importance of maintaining close cooperation 
among all  partners  to  combat  the global  trade in counterfeit goods and to protect legitimate 
trade  in  genuine  products.  This  operation  is  an  excellent  model  for  future  operational 
cooperation,  built  on  confidence  and  trust,  involving  all  ASEM  (Asia–Europe  meeting)33 
partners. 

ASEM,  with  its  45  European  and  Asian  members,  again  proved  an  effective  platform  for 
cooperation among customs administrations. Diabolo II targeted the smuggling of counterfeit 
cigarettes  and  other  counterfeit  goods  within  the  framework  of  ASEM.  The  operation  took 
place  in  September/October  2009,  coordinated  by  OLAF  with  the  support  of  Europol  and 
Interpol.  

The operation’s success is due to cooperation and effective work involving customs officials 
from 13 Asian countries and 27 EU Member States and constitutes an encouragement for the 
conduct of further common operations.  

3.2. 

Deployment  of  improved  databases  —  Customs  Files  Identification  Database 
(FIDE) 

The objective of FIDE (a new database used by the Member States’ customs authorities) is to 
help prevent operations in breach of customs and agricultural legislation applicable to goods 
entering  or  leaving  the  customs  territory  of  the  EU  and  to  facilitate  and  accelerate  their 
detection  and  prosecution.  A  decision  was  adopted  by  the  Council  on  30  November  2009, 
replacing the CIS Convention and its FIDE protocol34. 

32 
33 

34 

OJ L 218, 13.8.2008. 
ASEM members: Brunei, Cambodia, China, India, Indonesia, Japan, Korea, Laos, Malaysia, Mongolia, 
Myanmar,  Pakistan,  Philippines,  Singapore,  Thailand,  Vietnam,  ASEAN  secretariat,  all  EU  Member 
States and the European Commission. 
Decision 2009/917/JHA, OJ L 323, 10.12.2009. 

EN 

20 

   EN 

 
                                                 
FIDE  enables  the  national  authorities  responsible  for  carrying  out  customs  investigations 
when  opening  a  file  on  or  investigating  one  or  more  persons  or  businesses  to  identify 
competent  authorities  of  other  Member  States  which  are  investigating  or  have  investigated 
those persons or businesses in order to coordinate their investigations. FIDE acts as a registry 
of persons or companies subject to investigation without revealing details on the investigation.  

Member States that are not yet using the FIDE database are invited to do so in order to better 
coordinate their investigations. 

4. 

RESULTS  OF  THE  QUESTIONNAIRE  REGARDING  COOPERATION  WITH  THE MEMBER 
STATES CONCERNING ON-THE-SPOT CHECKS 

On-the-spot  checks  and  inspections  are  one  of  the  most  powerful  tools  available  to  the 
Commission  to  conduct  administrative  investigations  outside  the  EU  institutions  and  bodies 
with  a  view  to  achieving  the  objective  of  combating  fraud  and  other  illegal  activity 
undermining the EU’s financial interests. An on-the-spot check is an inspection carried out on 
the premises of an economic operator. The power to conduct such checks was conferred on 
the Commission by Regulation 2185/199635. The responsibility was then confirmed by the EU 
legislator  with  the  establishment  of  OLAF,  which  exercises  the  powers  conferred  on  the 
Commission under Regulation 2185/199636.  

The implementation of this Regulation is based on close two-way cooperation between OLAF 
and  the  competent  national  authorities37.  The  participation  of  Member  States’  investigative 
authorities  is  desirable  because  it  facilitates  and  increases  the  effectiveness  of  checks  and 
inspections,  in  particular  in  the  event  of  opposition  by  economic  operators,  when  binding 
measures of national law and possible emergency procedures may be applied. Cooperation is 
vital,  starting  with  the  pre-operational phase of the inspection, when the competent national 
authority has to be notified by OLAF of the object, purpose and legal basis of the check that 
OLAF intends to conduct. For that, OLAF needs to correctly identify the competent national 
authority  and  this  has  at  times  proved  challenging,  particularly  in  the  field  of  direct 
expenditure.  

To solve this problem Member States have communicated to OLAF — via a questionnaire — 
the complete contact details of national authorities for all expenditure fields, including direct 
expenditure38,  thus  enabling  the  OLAF  investigators  to  identify  and  contact  the  competent 
authority in good time before the check. OLAF will remain in close contact with the Member 
States for the continuous updating of this information.  

The designation of a national administrative and judicial authority with competences extended 
to the field of direct expenditure in all Member States is strongly recommended. 

35 

36 

37 
38 

Regulation 2185/1996 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 irregularities (OJ 
L 292, 15.11.1996). 
Pursuant to Article 3(1) of Regulations 1073/1999 and 1074/1999 concerning investigations conducted 
by the European Anti-fraud Office (OLAF). 
See Article 4 of Regulation 2185/1996. 
Not all Member States have designated a central authority dealing with direct expenditure, but most of 
them have reported that they have an investigative service responsible for this field, with the exception 
of Germany, Spain and the UK. 

EN 

21 

   EN 

 
                                                 
Following  the  preparatory  steps  for  the  inspection,  effective  involvement  of  the  national 
competent authorities on the ground and assistance to the OLAF investigators in the event of 
opposition  by  the  economic  operator  are  essential  in  order  to  ensure  the  success  of  the 
inspection. During the conduct of an  on-the-spot check and in as much as EU law does not 
provide  specific  rules,  OLAF  inspectors  are  required  to  comply  with  the  rules  of  procedure 
laid  down  by  the  law  of  the  Member  State  concerned.  It  is  therefore  important  for  the 
Commission  to  better  understand  the  national  laws  and  practices  and  administrative 
procedures  in  conducting  these  checks  and  for  this  purpose  Member  States  have  provided 
information  on  these  topics  via  a  questionnaire.  The  complete  answers  provided  by  the 
Member  States  to  the  questionnaire  are  included  in  the  staff  working  document39 
accompanying this report and represent useful background information regarding the national 
requirements and practices for the OLAF investigators when preparing on-the-spot checks in 
the Member States. 

4.1. 

National conditions for gaining access to information 

Under  Article  7  of  Regulation  2185/1996,  Commission  inspectors  have  access  to  all 
information  and  documentation  on  the  operations  concerned  under  the  same  conditions  as 
national administrative inspectors. All Member States have reported that national legislation 
grants  inspectors  full  access  to  information  and  documentation  available  on  the  operation 
concerned.  In  cases  where  the  operator  is  the  beneficiary  of  an  EU  grant,  the  obligation  to 
provide  access  to  documentation  and  information  is  inserted  as  an  obligation  in  the  grant 
contract40  and  thus  constitutes  an  important  precautionary  measure.  Particular  conditions 
apply to enforcement measures such as searching or seizures, where a judicial warrant issued 
by a law-enforcement agency is necessary41. As a general rule, national inspectors also have 
access  to  information  located  elsewhere  than  on  the  economic  operator’s  premises  and  they 
may  check  such  premises;  however,  checks  in  private  residences  are  not  possible  without  a 
judicial  warrant,  in  line  with  the  European  Convention  on  Human  Rights  (ECHR)  and 
constitutional  provisions42  regarding  fundamental  rights  and  freedoms.  Where  applicable  in 
certain  Member  States43,  the  main  legal  limitations  in  obtaining  the  information  relevant  to 
on-the-spot checks from documents, electronic resources or interviews mentioned were data 
protection requirements, banking secrecy rules and professional secrecy rules.  

In  order  to  safeguard  the  chain  of  custody  and  continuity  of  possession  over  the  records 
selected during the on-the-spot checks, national inspectors may make copies of records (either 
on paper or electronic records), and items can be photographed and filmed. In many Member 
States, inspectors have the authority to seize and detain original documents pertaining to the 
scope of the control, in justified cases, where there is a risk that evidence may be hidden or 
destroyed or because it is necessary to retain the originals for further examination44.  

In general, the presence of a lawyer during administrative on-the-spot checks is not provided 
for by national legislation. Therefore, national provisions do not allow the operator concerned 
by  the  check  to  delay  access  to  information  until  he  consults  his  lawyer.  However,  most 

39 
40 
41 
42 
43 
44 

See Accompanying document 1 ‘Implementation of Article 325 TFEU in 2009 by the Member States'. 
LT,UK, AT. 
DE, LU. 
As especially highlighted by DE. 
BE, CZ, DE, EE, IE, EL, IT, CY, HU, PL, RO, SK, SE, UK. 
BE, IE, EL, FR, CY, HU, MT, AT, PT, RO, LU, SI, SK, FI, UK. 

EN 

22 

   EN 

 
                                                 
national legislations45 recognise the lawyer-client privilege to be applicable to administrative 
checks,  under  conditions  which  vary  from  one  Member  State  to  another46.  In  all  Member 
States national inspectors have access to information and documentation pertaining to the on-
the-spot check and they may retain original documents or take copies of the originals. Certain 
limitations are imposed by the necessity of a warrant for searches and seizures.  

Regarding the forensic examination of computers, OLAF has  recently designed a leaflet for 
the  information  of  economic  operators.  This  document  advises  economic  operators  on  their 
rights and details the procedure for the forensic examination of computers during OLAF’s on-
the-spot  checks.  The  leaflet  is  of  particular  relevance  in  Member  States  which  do  not  have 
specific legislative provisions with regard to this procedure.  

As  a  general  rule,  whenever  the  economic  operator  subject  to  an  on-the-spot  check  is  the 
beneficiary  of  a  EU  grant,  the  grant  contract  should  include  the  obligation  of  the  economic 
operator to give access to information to OLAF inspectors in order to facilitate the check. 

4.2. 

National  procedural  requirements  for  on-the-spot  checks  and  for  drawing  up 
administrative inspection reports 

Article 6(1) of Regulation 2185/1996 requires the Commission inspectors to comply, during 
on-the-spot  checks,  with  the  rules  of  procedure  laid  down  by  the  law  of  the  Member  State 
concerned.  Member  States  have  indicated  that  these  procedures  are  usually  provided  by 
manuals  and  instructions  to  the  national  inspectors.  Among  these  procedural  requirements, 
Member  States  have  mentioned:  non-notification  of  checks  except  where  necessary, 
restrictions on access to private residences (see above), observance of the law on the use of 
languages47. Inspectors should produce a written authorisation or inspection order and special 
identification  card48;  the  check  should  take  place  in  the  presence  of  the  economic  operator 
concerned49  and  during  certain  hours,  depending  on  national  legislation50.  An  inspection 
report must be drafted and, in certain cases, a final discussion with the liable party should take 
place before the report  is  drawn  up51. Certain procedural  requirements apply to the national 
administrative  reports:  in  most  Member  States,  national  inspectors  use  a  standard  template 
and  the  content  usually  describes  the  irregularities  noted,  the  legal  provisions  infringed  and 
the  results  of  the  check.  The  report  must  be  signed  in  all  cases  by  the  national  inspectors 
conducting the check and in some cases by the economic operator. If the economic operator 
refuses  to  sign,  this  will  be  mentioned  in  the  report.  The  report  is  usually  approved  by  the 
hierarchical superior of the inspector in charge of the check. In general, Member States have 
indicated that there are no restrictions regarding the admissibility of administrative inspection 
reports  in  administrative  or  judicial  proceedings.  Exceptions  included  situations  where 
irregularities have been committed while collecting the information contained in the report52 

45 
46 

47 
48 
49 
50 
51 
52 

Exceptions: ES, LV, LT, PL. 
See document  ‘Implementation of Article 325 TFEU in 2009 by the Member States’ (Accompanying 
document 1 to this report). 
As especially highlighted by BE. 
CY, IE. 
PL. 
PL, HU. 
SI. 
HU, BE, UK. 

EN 

23 

   EN 

 
                                                 
and  where  national  law  provides  that  evidence  obtained  during  administrative  procedures 
cannot be used in criminal proceedings53. 

In  order  to  be  admissible  in  administrative  or  judicial  proceedings,  national  administrative 
reports  drafted  following  an  on-the-spot  check  must  likewise  meet  certain  requirements, 
including  signature  by  the  national  inspectors.  It  has  been  OLAF’s  experience  that  the 
signature  of  the  report  by  the  national  inspector  has  on  occasion  been  delayed  or  refused 
without giving specific reasons during joint inspections.  

It is therefore essential that the national inspector participating in an OLAF on-the-spot check 
also  signs  the  OLAF  report  without  undue  delay,  thus  avoiding  the  risk  of  it  being  non-
admissible or having lower evidentiary value in administrative or judicial proceedings.  

4.3. 

Assistance  of  national  authorities  in  the  event  of  opposition  by  economic 
operators 

Assistance  by  the  national  authorities  is  important  and  it  is  not  conditional  on  the  national 
authority’s  participation  in  the  check.  The  need  for  the  support  of  national  authorities 
becomes even more pressing in cases where the economic operator opposes the check by the 
Commission  inspectors.  The  assistance  and  support  of  the  national  authorities  is  extremely 
important  regardless  of  the  type  of  EU  expenditure  concerned  (direct  expenditure  or  shared 
management  of  EU  funds).  The  same  kind  of  support,  particularly  for  the  safeguarding  of 
evidence, must be made available when checks regarding direct expenditure are conducted, in 
order to ensure the same level of protection of EU funds for all expenditure areas.  

In cases where the economic operator opposes the check, certain Member States54 indicated 
that the Commission inspectors may enter the premises of the economic operator concerned 
even without his prior consent during an on-the-spot check. In cases where there is opposition 
by  an  economic  operator  hampering  the  check,  Member  States’  competent  authorities  may 
assist Commission inspectors by issuing a judicial or administrative warrant55, or assist them 
if necessary — with reasonable force — to access the premises of the economic operator. In 
such  cases  of  opposition  by  the  economic  operator,  police  or  national  inspectors  may 
intervene  and  assist  the  Commission  inspectors56.  Other  measures  that  Member  States  may 
take include suspending or terminating payments in the case of beneficiaries of EU grants or 
applying fines. In the event that the operator concerned refuses to grant access to information, 
the  inspectors  may  seal  the  premises57  and  take  and  retain  in  their  custody  both  books  and 
other paper or electronic records, with a judicial or administrative warrant58. They may apply 
a formal interrogation procedure to the representatives of the economic operator59. Criminal 
sanctions  such  as  fines  or  suspension  of  payments  to  the  beneficiary  of  EU  grants  may  be 
applied when the economic operator refuses to grant access to information. 

Member  States  have  adopted  binding  measures  in  their  national  law  to  ensure  that  OLAF 
investigators  conducting  on-the-spot  checks  can  benefit  from  the  assistance  of  the  national 

53 
54 
55 
56 
57 
58 
59 

EE. 
BE, CZ, IT, CY, LT, MT. 
BE, BG, CZ, DE, FR, CY, LV, LU, PT, UK. 
DK, RO, PL, UK. 
BE, BG, CZ, IE, EL, ES, FR, IT, CY, LT, AT. 
BE, BG, CZ, DK, IE, EL, ES, FR, CY, LV, LT, LU, AT, SI, UK. 
CZ, IE, EL, FR, MT, ES, CY, LT, AT. 

EN 

24 

   EN 

 
                                                 
competent authorities in cases where the economic operator opposes the check. Some of these 
measures,  such  as  issuing  a  judicial  or  administrative  mandate,  seizures  of  documents  or 
interrogation  procedures,  give  immediate  results  and  should  be  favoured  by  national 
legislation.  

The  active  participation  of  national  authorities  on  the  ground  can  contribute  greatly  to  the 
success  of  the  operation.  Therefore,  national  inspectors  should  be  actively  involved  in  the 
inspection,  rather  than  participating  as  simple  observers,  which  some  national  authorities 
chose  in  some  OLAF  cases  as  declared  status during on-the-spot checks. The same level of 
assistance  to  OLAF  inspectors  should  be  ensured  for  shared  management  as  for  direct 
expenditure. 

4.4. 

National precautionary measures to prevent loss or destruction of evidence 

Emergency  measures  such  as  sealing  business  premises  and  photographing  or  filming 
installations, circuits and other objects are allowed by most national legislations. Sometimes 
these measures can be taken only in the context of a judicial procedure60. Other precautionary 
measures  include  taking  samples,  with  judicial  authorisation,  seizing  documents  or  seeking 
police  assistance  when  needed.  These  measures  may  be  taken  in  situations  where  there  is  a 
threat  of  disappearance,  concealment  or  modification  of  documents  or  where  there  are 
suspicions that a crime has been committed61. The reasons for taking such measures must be 
recorded. In most Member States there is a possibility of appeal against such measures. 

4.5. 

General conclusions 

Following  this  exercise  it  may  be  concluded  that  Member  States  have  taken  a  number  of 
measures  to  consolidate  the  implementation  of  Regulation  2185/1996;  however,  in  practice, 
some improvements can still be made in  that area, including in cooperation between  OLAF 
and the national authorities, as outlined above. 

The  Commission  will  continue  to  monitor  the  implementation  of  these  recommendations  in 
future reports. 

5. 

RECOVERY 

5.1.  Measures for securing the recovery of irregular amounts 

Member  States  were  asked  about  their  national  provisions  on  the  recovery  of  irregular 
amounts,  with  a  focus  on  legal  instruments  and  measures  against  financial  loss  or  damage, 
and about the registration of irregularities and recovery of debts. In its Resolution of 24 April 
2009 on the protection of the Communities’ financial interests and the fight against fraud — 
Annual report 2007 (2008/2242(INI)) the European Parliament noted that recovery rates are 
still  low,  especially  in  sectors  where  Member  States  manage  recoveries.  The  European 
Parliament considered that more appropriate and faster recovery procedures were needed and 
binding and precautionary elements should be included in future legislation concerning shared 
management so that irregular amounts can be recovered at the end of the recovery procedure. 
This way, the recovery of taxpayers’ money could be more efficiently secured. 

60 
61 

BE. 
DE, LV, AT, SK. 

EN 

25 

   EN 

 
                                                 
5.1.1. 

National legislation on recovery of EU funds 

Member  States’  replies  show  that  all  Member  States  have  provisions  within  their  national 
legislation  for  securing  the  recovery  of  irregular  amounts  as  regards  the  revenue  and 
expenditure side of the EU budget in areas where no rules on recovery are laid down by EU 
legislation.  The  provisions  relate  to  mechanisms  of  offsetting,  precautionary  enforcement, 
seizure and forced recovery. 

Regarding  expenditure,  to  secure  the  recovery  of  irregular  payments  included  in  contracts 
involving EU funds,  most Member States62 use legal instruments, such as different types of 
guarantees,  promissory  notes,  security  deposits,  personal  or  joint  sureties,  offsetting,  bank 
bonds, mortgages or insurances. 

Two  thirds  of  the  Member  States63  are  using  legal  instruments  and  measures,  such  as  on-
demand guarantees, offsetting and suspension of payments, in order to speed up the recovery 
of amounts irregularly paid. 

The national legislation of most of the Member States64 contains provisions on protective and 
precautionary  measures  that  can  be  taken  after  the  detection  of  suspected  irregular  amounts 
(revenue and expenditure). Such measures are: confiscation, administrative seizure, retention 
of  goods  subject  to  tax,  financial  penalties,  suspension,  refusal  or  adjustments  of  further 
payments,  termination  of  the  project  financing  and  repayment  of  the  funds  paid,  reduced 
funding.  

Member States’ national legislation provides the possibility (not specifically an obligation) for 
the  national  administration  to  stand  as  offended/injured  party  in  criminal  proceedings  for 
frauds against the EU budget.  

5.1.2. 

Registration  of  irregularities  and  recovery  of  debts  within  the  national 

administration 

Although  individual  errors  cannot  be  categorically  ruled  out,  according  to  the  information 
received via the questionnaire, the Member States can in principle guarantee the completeness 
of the registration of irregularities. 

In all Member States the recovery figures are audited on a national level after the recoveries 
are completed. Checks and audits are primarily made by various national authorities, such as 
internal audit services of the respective institutions (managing authority, certifying authority, 
intermediate bodies, implementing bodies), customs authorities and national audit office. 

As regards EU revenues and expenditure, two thirds of the Member States65 have at national 
level  a  legally  regulated  threshold  under  which  there  is  no  recovery  order.  This  threshold 
 100,  sometimes  not  being  uniform  within  the  same  country  for  all  the 
varies  from  €
funds used or areas concerned (agriculture, structural funds, and customs). 

 3  to  €

62 
63 
64 
65 

BE, BG, CZ, DK, DE, EE, IE, EL, ES, FR, IT, LV, HU, PL, PT, RO, SI, SK, FI, UK. 
BE, BG, CZ, EE, EL, ES, FR, IE, LV, LT, LU, HU, NL, AT, PL, PT, RO, SI, UK. 
BE, BG, CZ, DK, EE, IE, EL, ES, FR, IT, CY, LV, LT, HU, MT, AT, PL, PT, RO, SI, SK, UK. 
BE, DK, DE, EE, ES, FR, IT, CY, LV, LT, LU, MT, NL, AT, PL, PT, SI, SK, FI. 

EN 

26 

   EN 

 
                                                 
In some of the Member States66 the recovery order is not enforceable. 

Only a few Member States67 would to a certain extent use the revenues forecast as a method 
for  making  a  preliminary  estimate  of  a  potential  irregularity  amount  to  be  recovered  before 
the recovery actually starts. When doing so, the estimates would normally be provided within 
the monitoring and accounting systems used for the management of EU funds.  

5.1.3. 

Conclusions 

As  regards  the  recovery  of  illegal  amounts  the  legal  instruments  and  measures  against 
financial loss or damage and concerning the registration of irregularities and recovery of debts 
are as a matter of principle incorporated within the national legislative systems. This way the 
Member States show that security measures are in place, but certain improvements can still be 
made.  

Member States’ legislation should give priority to the enforceability of recovery orders, which 
has an important role in speeding up recovery procedures. To secure the recovery of irregular 
payments  included  in  contracts  involving  EU  funds,  all  Member  States  should  provide  for 
legal instruments, such as different types of guarantees, promissory notes, security deposits, 
personal or joint sureties, offsetting, bank bonds, mortgages or insurances, in the contracts.  

To support speedy recovery procedures additional binding and precautionary elements should 
be considered for future EU legislation concerning shared management. 

5.2. 

Recovery of irregular amounts in 2009 

5.2.1. 

Traditional own resources 

The Member States have to recover established amounts, including those they register in the 
shared  database  OWNRES.  The  amount  to  be  recovered  following  irregularities  detected  in 
2009 is approximately €

 343 million.  

An  established  amount  may  not  be  recovered  completely,  despite  Member  States’  efforts. 
Amounts established may change because of additional information or judicial procedures, or 
the debt may be deemed irrecoverable because of the debtor’s financial problems. 

At  present,  the  recovery  rate  for  irregularities  occurring  in  2009  is  44 %  (approximately 
 152 million). This is an average starting position, although higher than last year’s of 38 %. 
The recovery rate for all years (1989-2009) is 45.1 %. 

When non-recovery of an established debt is not attributable to a Member State, the Member 
State  may  request  that  the  irrecoverable  amount  be  written  off.  In  2009  the  Commission 
refused Member States’ write-off requests in 61 cases totalling some €
 11.5 million because it 
deemed that non-recovery was attributable to the Member States. 

Moreover,  certain  Member  States  were  held  financially  responsible  for  a  total  of  more  than 
 9 million because they did not establish customs debts where they should have done so. 

66 
67 

BG, DE, CY, MT, AT, PL, SI, SE. 
BE, CZ, AT, PT, SK. 

EN 

27 

   EN 

 
€
€
                                                 
5.2.2. 

Agriculture 

Article  32  of  Council  Regulation  (EC)  No  1290/2005  provides  for  an  automatic  clearance 
mechanism  for  unsuccessful  recoveries  of  unduly  paid  amounts.  If  a  Member  State  fails  to 
recover  an  unduly  paid  amount  from  the  beneficiary  within  four  years  of  the  primary 
administrative or judicial finding (or, in the case of proceedings before national courts, within 
eight years), 50 % of the non-recovered amount is charged to the budget of the Member State 
concerned within the framework of the annual financial clearance of the EAGF and EAFRD 
accounts. Even after the application of this mechanism, Member States are required to pursue 
their recovery procedures and to credit 50 % of the amounts effectively recovered to the EU 
budget.  If  they  fail  to  do  so  with  the  necessary  diligence,  the  Commission  may  decide  to 
charge the entire outstanding amounts to the Member State concerned. 

Undue  payments  that  are  the  result  of  administrative  errors  committed  by  the  national 
authorities  have  to  be  deducted  from  the  annual  accounts  of  the  paying  agencies  concerned 
and, thus, excluded from EU financing. 

In the year 2009, the 50/50 mechanism was applied by the financial clearance decision for the 
financial year 200868 to all pending non-recovered cases dating from 2004 or 2000 (cases that 
 31.4 million  was  charged  to  the 
were  four  or  eight  years  old  respectively).  A  total  of  €
 20.1 million  was  borne  by  the  EU  budget  for  reasons  of 
Member  States  in  this  way  and  €
irrecoverability.  A  further  €
 0.8 million  was  charged  to  the  Member  States  by  a  subsequent 
decision69 that cleared the accounts for financial year 2008 of those paying agencies that were 
disjoined in April 2009. 

 167.3 million and the outstanding 
During the financial year 2009 Member States recovered €
amount  still  to  be  recovered  from  the  beneficiaries  at  the  end  of  that  financial  year  was 
 1 136.2 million. 

The  financial  consequences  of  non-recovery  for  cases  dating  from  2005  or  2001  was 
 22.8 million to 
determined in accordance with the 50/50 rule mentioned above by charging €
the  Member  States  concerned70.  Moreover,  €
 20.3 million  was  borne  by  the  EU  budget  for 
cases reported irrecoverable during financial year 2009. For those paying agencies for which 
the  2009  accounts  were  disjoined  from  the  financial  clearance  decision,  a  further 
 11.9 million will be charged by subsequent Commission decisions. 

Due  the  application  of  the  50/50  mechanism  since  its  introduction  in  2006  the  amount 
outstanding  from  the  Member  States  towards  the  EU  budget  has  been  reduced  to 
 830 million71. 

During  the  years  2007-09  the  Commission  audited  the  correct  application  of  the  new 
clearance  mechanism  through  15  on-the-spot  checks  covering  14  paying  agencies  in  11 
Member States.  

68 
69 
70 
71 

Commission Decision 2009/367/EC (OJ L 111, 5.5.2009). 
Commission Decision 2010/56/EU (OJ L 32, 4.2.2010). 
Commission Decision 2010/258/EU (OJ L 112, 5.5.2010). 
The  amount  includes  updated  financial  information  provided  by  the  Member  States  for  the  financial 
year 2009. 

EN 

28 

   EN 

 
€
€
€
                                                 
In  general  the  Member  States’  authorities  have  adequate  procedures  in  place  to  protect  the 
financial interests of the European Union. Deficiencies found during these on-the-spot checks 
are being followed up in the context of conformity clearance procedures. 

5.2.3. 

Cohesion policy 

For  the  Structural  Funds,  recovery  from  the  beneficiaries  of  amounts  unduly  paid  owing  to 
irregularity or suspected fraud is mainly a matter for the Member States. Member States must 
also deduct from a future payment claim any amount which was previously unduly claimed 
from the EU budget.  

The  programmes  co-financed  by  the  Structural  Funds  are  multiannual  and  based  on  interim 
payments. Recovery of amounts unduly paid may take place before or after conclusion of the 
programme.  

For  the  1994-99  programming  period,  the  deadline  for  requesting  final  payment  from  the 
Commission  was  31 March  2003.  In  that  period,  the  EU  co-financed  around  1 000 
 159 billion in total72. The Commission’s authorising and managing 
programmes worth some €
departments,  assisted  by  OLAF,  are  responsible  for  administrative  and  financial  follow-up 
once these programmes have been concluded.  

For  the  1994-99  programming  period,  the  Member  States  communicated  11 046 cases  of 
 1.51 billion73  for  the  EU 
irregularities  (21  in  2009)  with  a  financial  impact  estimated  at  €
contribution (€

 1.84 million for 2009). 

Of  these  cases,  7 049  have  been  closed  definitively  at  Commission  level  and  an  amount  of 
 742 million  was  taken  into  account  during  final  payment  or  decommitted  after  closure  or 
reimbursed  to  the  EU  budget.  Member  States  indicated  that  administrative  and  judicial 
procedures had been finalised at national level in a further 566 cases, with a financial impact 
 52 million  for  the  same  period.  The  Commission  has  started  reconciliation  procedures 
of  €
with a view to closing these cases. 

In 2009, the Commission adopted seven decisions on how to treat 241 cases of irregularities 
for  which  the  Member  States  concerned  asked  the  Commission  to  bear  the  financial 
consequences  of  the  irrecoverable  amounts.  Three  decisions  concerning  217  ERDF 
notifications  totalling  €1  773 541  and  four  decisions  concerning  the  ESF  for  a  total  of 
€130  785 were charged to the EU budget. 

For the 2000-06 programming period, the Member States have so far communicated 20 991 
cases of irregularities (4 679 in 2009) with a financial impact of some €
 3.49 billion for the EU 
contribution (€

 1.12 billion for 2009).  

The  Member  States  have  informed  the  Commission  that  administrative  and/or  judicial 
procedures  have  been  finalised  at  national  level  for  10 655  of  these  cases  and  that  some 
 1.73 billion has been recovered. 

72 

73 

These  are  multiannual  programmes.  This  figure  does  not  include  projects  directly  financed  under  the 
Structural Funds and Cohesion Fund. 
Situation according to the data in the ECR database as at 15 April 2009. 

EN 

29 

   EN 

 
€
€
                                                 
Recovery  rates  throughout  the  2000-06  programming  period  are  good  (exceeding  50 %  — 
almost as good  as  for  the 1994-99 programming period, which is 53 %) but may  be heavily 
influenced  by  the  practice  of  excluding  projects  found  to  be  irregular  from  the  expenditure 
declaration  to  the  Commission.  In  this  way  EU  resources  can  be  re-used  to  finance  other 
eligible projects and the burden of recovery is shifted onto national budgets.  

Member States should deploy further efforts for the recovery of irregular amounts.  

 2 510 million (€

At  the  end  of  2009,  the  total  amount  of  financial  corrections  concerning  the  1994-99  and 
2000-06 programming periods was €
 5 119 million 
(€
 1 806 million in 2009) respectively. These are the result of audits by the Commission and 
the European Court of Auditors, OLAF investigations and the closure procedure for the two 
programming  periods.  They  consist  of  expenditure  affected  by  irregularities  which,  for  that 
reason, must be excluded from co-financing by the EU budget. On  top of that, the Member 
States also effect corrections following their own audits or Commission and European Court 
of Auditors audits. These are not registered in the Commission’s accounting system, but the 
information is reported by the Member States to the Commission once a year.  

 515 million in 2009) and €

5.2.4. 

Pre-accession funds 

In 2009 amounts reported as to be recovered increased by 135 %. The highest amount to be 
recovered  comes  from  SAPARD  (€ 61.6  milli on,  out  of  which  € 41  million  has  to  be 
recovered by Bulgaria). For PHARE almost € 7 million needs to be recovered and for ISPA 
€ 4  million.  The  recovery  rate  decreased 
2009.  

in  comparison  to  2008,  reaching  only  27.2 %  in 

Analysis of the recovery rate for suspected fraud reveals a rate of only 4.6 % for the whole 
programming period.  The  recovery process in cases undergoing prosecution is complex and 
lengthy. Administrative procedures and criminal investigation do not go hand-in-hand in most 
countries, a fact which influences recovery rates.  

As  recovery  rates  are  low,  safeguard  measures  should  be  implemented  for  suspected  fraud 
cases (in the form of seizure of assets, suspension of payments, bank guarantees, etc. — see 
point 5.1.3. above) to make sure that recovery can still take place after the final court ruling. 
The Member  States  concerned should pay  special attention to the recovery of pre-accession 
funds. 

5.2.5. 

Direct expenditure  

In  the  areas  where  funds  are  managed  directly  by  the  institutions,  amounts  unduly  paid  are 
recovered  directly  by  them,  without  the  intervention  of  the  Member  States.  The  Financial 
Regulation and its implementing rules set out the different stages in the recovery procedure: 

– estimation and establishment of the entitlement by the authorising officer (who must ensure 
that the claim is certain, of a fixed amount and due); 

– establishment of a recovery order (instruction from the authorising officer to the accounting 
officer to proceed with recovery) followed by a debit note to the debtor; and 

– recovery by the accounting officer, who will, if possible, effect the recovery by offsetting if 
the debtor has a claim on the Communities that is certain, of a fixed amount and due. 

EN 

30 

   EN 

 
If, after reminders and letters of formal notice have been sent out, the debtor has not paid the 
debt and the accounting officer has not been able to recover the amount due by offsetting or 
calling in a bank guarantee provided by the debtor, the authorising officer determines, without 
delay, what method of enforced recovery should be applied to the debt. 

There are two mutually exclusive ways of obtaining an enforcement order: 

– a decision constituting an enforcement order within the meaning of Article 256 of the EC 
Treaty  (formalises  the  establishment  of  the  entitlement  in  a  decision  which  constitutes  an 
enforcement order); 

– an order before the national or EU courts. This also includes a civil action within criminal 
proceedings in jurisdictions where this is possible. 

In  cases  where  recovery  orders  concerning  irregularities  and  cases  of  fraud  were  launched 
during 2009, full or partial recovery has already been announced in 478 reported cases. The 
Commission  has  recovered  € 15.5  million.  In  463  cases  the  full  irregular  amount  has  been 
recovered. An amount of € 12 million still rema ins to be recovered, concerning 242 cases. 

The Commission will continue procedures for the full recovery of these amounts. 

5.2.6. 

Recovery following an OLAF case 

Where the final report on an OLAF case concludes that certain amounts have probably been 
paid to a beneficiary against the rules or that amounts that should have been collected have 
not  been,  the  relevant  authorities  (generally  the  authorities  in  the  Member  States  or  third 
countries  concerned)  must  recover  the  amounts  in  question.  OLAF  monitors  the  course  of 
these recovery proceedings.  

In  2009,  OLAF  formally  closed  the  financial  follow-up  procedure  for  more  than  € 249.2 
million. In total € 137.2 million was recovered in  the agricultural sector and € 49.1 million in 
the field of structural funds.  

OLAF  will  continue  to  work  together  with  the  authorising  Directorates-General  within  the 
Commission  responsible  for  the  budget  sectors  concerned  to  further  improve  recovery 
following OLAF cases.  

EN 

31 

   EN