REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union’s financial interests — Fight against fraud 2014 Annual Report
Date: 2015-07-31
Institutions: European Anti-Fraud Office, European Commission
Subjects: EU programme, common strategy, crime, fight against crime, financial control, fraud, fraud against the EU

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 31.7.2015  COM(2015) 386 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union’s financial interests — Fight against fraud 2014 Annual Report {SWD(2015) 151 final} {SWD(2015) 152 final} {SWD(2015) 153 final} {SWD(2015) 154 final} {SWD(2015) 155 final} {SWD(2015) 156 final}  
 
 
TABLE OF CONTENTS 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE 
COUNCIL Protection of the European Union’s financial interests — Fight against fraud 2014 
Annual Report ..............................................................................................................................  

EXECUTIVE SUMMARY ........................................................................................................ 4 

1. 

2. 

INTRODUCTION........................................................................................................ 7 

ANTI-FRAUD POLICIES AT EU LEVEL ................................................................ 7 

2.1. 

Anti-fraud policy initiatives taken by the Commission in 2014 .................................. 7 

2.1.1.  Proposal for a Directive on the fight against fraud detrimental to the Union’s 

financial interests by means of criminal law ................................................................ 7 

2.1.2.  Proposal for a Council Regulation on the establishment of a European Public 

Prosecutor’s Office....................................................................................................... 8 

2.1.3.  Proposal for a Regulation of the European Parliament and of the Council amending 
Regulation (EU, EURATOM) No 966/2012 on the financial rules applicable to the 
general budget of the Union ......................................................................................... 8 

2.1.4.  Fighting corruption in the EU ...................................................................................... 8 

2.1.5.  Reporting of irregularities — provisions in the Multiannual Financial Framework 

(MFF) 2014-2020 expenditure field ............................................................................. 9 

2.1.6.  Anti-fraud policy in customs ........................................................................................ 9 

2.1.7.  Fight against illicit trade in tobacco products ............................................................ 10 

2.1.8.  Fight against VAT fraud ............................................................................................ 11 

2.1.9.  Anti-fraud provisions in international agreements ..................................................... 11 

2.1.10.  Public procurement rules ............................................................................................ 11 

2.1.11.  Directive on the protection of the euro and other currencies against counterfeiting by 
criminal law ................................................................................................................ 12 

2.1.12.  Commission Anti-fraud Strategy (CAFS) .................................................................. 12 

2.1.13.  Hercule and Pericles Programmes ............................................................................. 12 

2.2. 

2.3. 

Advisory Committee for Coordination of Fraud Prevention (COCOLAF) ............... 13 

Follow-up to European Parliament Resolutions on the Protection of the EU’s 
financial interests — Fight against fraud — Annual Reports 2012 and 2013 ........... 14 

2.3.1.  European Parliament resolution of 3 July 2014 on the protection of the EU’s 

financial interests — Fight against fraud — Annual Report 2012 ............................. 14 

2.3.2.  European Parliament resolution of 11 March 2015 on the protection of the EU’s 

financial interests — Fight against fraud — Annual Report 2013 ............................. 14 

3. 

MEASURES TAKEN BY MEMBER STATES TO COUNTER FRAUD AND 
OTHER ILLEGAL ACTIVITIES AFFECTING THE FINANCIAL INTERESTS OF 
THE EU ...................................................................................................................... 15 

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3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

Measures to combat fraud and other irregularities affecting the financial interests of 
the EU......................................................................................................................... 15 

Application by the Member States of definitions contained in the provisions for 
irregularity reporting .................................................................................................. 16 

Implementation of 2013 recommendations ................................................................ 17 

FRAUD AND OTHER IRREGULARITIES............................................................. 18 

Reported irregularities and overall trends 2010-2014 ................................................ 18 

Irregularities reported as fraudulent ........................................................................... 19 

4.2.1.  Revenue ...................................................................................................................... 21 

4.2.2.  Expenditure ................................................................................................................ 22 

4.2.3.  Natural resources (agriculture, rural development and fisheries) .............................. 23 

4.2.4.  Cohesion policy (in the 2007-2013 and 2000-2006 programming periods) .............. 24 

4.2.5.  Pre-accession policy (Pre-accession assistance (PAA) and the Instrument for Pre-

Accession (IPA)) ........................................................................................................ 25 

4.2.6.  Expenditure directly managed by the Commission ................................................... 25 

4.3. 

Irregularities not reported as fraudulent ..................................................................... 25 

4.3.1.  Revenue ...................................................................................................................... 26 

4.3.2.  Expenditure ................................................................................................................ 26 

4.4. 

5. 

5.1. 

Results from activities of the European Anti-Fraud Office (OLAF) ......................... 27 

RECOVERY AND OTHER PREVENTIVE AND CORRECTIVE MEASURES .. 27 

Expenditure: preventive mechanisms ........................................................................ 28 

5.1.1. 

Interruptions in 2014 .................................................................................................. 28 

5.1.2.  Suspensions ................................................................................................................ 28 

5.2. 

5.3. 

6. 

6.1. 

Expenditure: financial corrections and recoveries in 2014 ........................................ 28 

Recovery relating to own resources revenue ............................................................. 29 

CONCLUSIONS AND RECOMMENDATIONS .................................................... 29 

Improved coordination and cooperation: a new impetus in the fight against fraud ... 29 

6.1.1.  Reinforced legal and administrative structures for enhanced cooperation ................ 29 

6.1.2.  Measures to fight fraud and corruption in public procurement .................................. 30 

6.1.3.  Sectoral measures: expenditure .................................................................................. 30 

6.1.4.  Sectoral measures: revenue ........................................................................................ 31 

6.1.5.  What lies ahead .......................................................................................................... 31 

6.2. 

Increasing detection: results and open issues ............................................................. 31 

6.2.1.  Expenditure ................................................................................................................ 31 

6.2.2.  Revenue: Updating control strategies ........................................................................ 32 

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EXECUTIVE SUMMARY 

The annual report on the protection of the European Union’s financial interests is presented 
by the Commission in cooperation with the Member States under Article 325 of the Treaty on 
the Functioning of the European Union (TFEU). It covers measures taken by the Commission 
and the Member States in the fight against fraud, and their results. This is the first report to be 
presented by the current Commission which took up office on 1 November 2014. In line with 
the political priorities set out by President Juncker, the new Commission is pursuing a more 
focused  agenda,  which  attaches  particular  importance  to  the  principles  of  sound  financial 
management.  The  conclusions  and  recommendations  included  in  the  report  are  based  on 
analysis  of  the  information  available  for  the  past  five  years  and  the  problems  and  risks 
identified during this time. 

Measures taken at EU level to protect the EU’s financial interests, 2014 

In 2014, the Commission successfully completed the priority actions of its multi-annual Anti-
Fraud  Strategy  (CAFS),  adopted  in  June  2011.  As  a  result,  all  Commission  services  and 
agencies now have an anti-fraud strategy in place, which is a major achievement. 

The Commission has continued to support the Member States in their fraud prevention efforts. 
As  the  Member  States  manage  approximately  80 %  of  the  EU’s  budget,  it  is  of  utmost 
importance for the Commission to continue assisting them to develop their own national anti-
fraud strategies. The Anti-Fraud Coordination Services (AFCOS) of each Member State could 
play a major role in this regard. 

In  2014,  two  proposals  aiming  to  reinforce  and  increase  the  efficiency  of  criminal  law 
regarding  the  protection  of  the  EU’s  financial  interests,  were  further  discussed  by  the 
European Parliament and the Council, namely: 

 

 

a  draft  directive  on  the  fight  against  fraud  by  means  of  criminal  law,  proposed  in 
July 2012, which should remove loopholes in Member States’ anti-fraud legislation 
that impede the effective prosecution of fraudsters; 
a  draft  regulation  on  the  establishment  of  a  European  Public  Prosecutor’s  Office 
(EPPO),  proposed  in  July  2013.  The  setting  up  of  the  EPPO,  as  proposed  by  the 
Commission, would represent a very significant step forward in the drive to protect 
the EU’s financial interests. 

Moreover, the adoption in 2014 of revised public procurement and utilities directives, and a 
new concessions directive, greatly enhances transparency and strengthens the anti-fraud and 
anti-corruption  provisions  by  defining  ‘conflict  of 
interest’,  making  e-procurement 
mandatory,  and  by  introducing  monitoring  and  reporting  obligations  in  order  to  curb 
procurement fraud and other serious irregularities. 

On  18  June  2014,  the  Commission  adopted  a  proposal  to  partially  revise  the  Financial 
Regulation  to  align  it  with  the  revised  public  procurement  Directive.  This  involves  the 
strenthening  of  the  rules  of  exclusion  of  economic  operators  and  establishing  a  new  early 
detection and exclusion database.  

On  the  expenditure  side  of  the  EU’s  budget,  in  2014  the  modalities  for  the  reporting  of 
irregularities of shared management funds for the new programming period 2014-2020 were 
discussed and agreed upon with the Member States. Their adoption is scheduled for 2015. 

On the revenue side of the budget, significant progress was made in 2014 to further protect 
the EU’s financial interests: 

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 

 

The  revised  Regulation  515/97  on  mutual  administrative  assistance  in  the  customs 
area  (which  should  enter  into  force  in  2015)  creates  an  EU  database  on  goods 
entering,  transiting  and  leaving  the  EU.  Furthermore,  it  was  shown  in  2014  that 
mutual  assistance  notices  issued  following  Joint  Customs  Operations  (JCOs) 
conducted  by  OLAF  are  an  important  source  of  information  for  the  detection  of 
irregularities in transactions involving certain types of goods. 

The  fight  against  cigarette  smuggling  and  other  forms  of  illicit  trade  in  tobacco 
products  remains  a  high  priority  for  the  EU  as  well  as  for  the  Member  States.  The 
Commission  continued  in  2014  to  actively  implement  the  action  plan  of  the 
‘Communication  on  stepping  up  the  fight  against  cigarette  smuggling  and  other 
forms  of  illicit  trade  in  tobacco  products’,  in  close  cooperation  with  the  Member 
States. 

The Hercule III Programme, adopted in 2014, will contribute to strengthening the operations 
and administrative capacities of customs and police forces in the Member States. 

With these measures, the Commission is helping to reshape anti-fraud policy at EU level. 

Detection  and  reporting  of  fraudulent  and  non-fraudulent  irregularities  that  affect the 
EU budget 

In 2014, 1 649 irregularities were reported by the Member States as fraudulent (both suspected 
and  established  fraud),  involving  EUR  538  million  in  EU  funds.  The  number  of  reported 
fraudulent irregularities has been increasing on the revenue side. On the expenditure side, the 
number  decreased  slightly  in  2014  compared  with  2013,  while  the  related  amounts  have 
increased. Differences still exist among Member States in detection and reporting, although to 
a lesser extent than in previous years. 

Some  trends  have  grown  stronger  in  the  past  two  years:  the  involvement  of  administrative 
bodies in detecting fraudulent irregularities has continued, while the most commonly detected 
modus operandi is the use of falsified documentation. 

Irregularities  not  reported  as  fraudulent  have  increased,  both  in  terms  of  amounts  and  in 
number.  This  largely  reflects  the  progressive  implementation  of  the  various  spending 
programmes  and  the  fact  that  the  control  systems  of  the  European  institutions  and  national 
audit services have been strengthened. 

Preventive and corrective measures 

In  2014,  the  Commission  took  steps  to  ensure  that  EU  resources  are  spent  according  to  the 
principle  of  sound  financial  management  and  that  the  EU’s  financial  interests  are  duly 
protected. It made 193 decisions to interrupt payments (involving over EUR 7.7 billion) in the 
cohesion policy and rural development areas. Of these, 145 were still open at the end of 2014 
(involving  about  EUR  4.8  billion  of  interrupted  payments).  The  Commission  also  made 
sixteen new suspension decisions. 

The  Commission  made  financial  corrections  of  over  EUR  2.2  billion  and  issued  recovery 
orders for EUR 736 million. 

The  corrective  measures  taken  in  2014  show  that  the  Union’s  financial  interests  are  well 
protected. National budgets, however, may bear the risk of not recovering amounts that have 
already been unduly paid out to beneficiaries but are subject to financial corrections. 

5 

 
 
 
Measures taken by the Member States 

At the end of 2014, all Member States had designated their AFCOS. Structured coordination 
between anti-fraud bodies and other national authorities has proved to be a best practice. 

Throughout  2014,  Member  States  also  took  a  large  number  of  other  anti-fraud  measures, 
regarding  public  procurement,  financial  crime,  conflict  of  interest,  corruption,  the definition 
of fraud and whistle-blowers.  

Application  by  the  Member  States  of  definitions  contained  in  the  provisions  for 
irregularity reporting  

This  year’s  report takes  a  specific  look  at  the Member  States’  application  of  the  definitions 
related  to  irregularity  reporting  (fraudulent  and  non-fraudulent)  and  the  timing  of  the 
reporting.  Despite  efforts  to  streamline  the  application  of  rules  on  the  reporting  of 
irregularities  among  the  Member  States,  differences  have  been  identified.  Based  on  the 
provisions on the reporting of irregularities for the new programming period, currently being 
adopted,  and  the  information  collected  and  analysed  in  the  framework  of  this  report,  the 
Commission  will  guide  the  Member  States  towards  a  harmonised  approach  in  the 
interpretation of such definitions, thus enhancing the comparability of the data reported by the 
Member States.  

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1. 

INTRODUCTION 

Each  year,  under  Article  325(5)  of  the  Treaty  on  the  Functioning  of  the  European  Union 
(TFEU),  the  Commission,  in  cooperation  with  the  Member  States,  submits  to  the  European 
Parliament and the Council a report on measures taken to counter fraud and any other illegal 
activities affecting the EU’s financial interests. 

The EU and the Member States share responsibility for protecting the EU’s financial interests 
and  fighting  fraud.  National  authorities  manage  approximately  80 %  of  EU  expenditure  and 
collect Traditional Own Resources (TOR). The Commission oversees both of these areas, sets 
standards and verifies compliance. It is essential that the Commission and the Member States 
work closely together to ensure that the EU’s financial interests are effectively protected. One 
of the main aims of this report is to assess how well this cooperation was conducted in 2014, 
and how it could be improved. 

This  report  describes  the  measures  taken  at  EU  level  in  2014  and  provides  a  summary  and 
evaluation of the actions taken by Member States to counter fraud. An analysis of the main 
achievements  of  national  and  European  bodies  in  detecting  and  reporting  fraud  and 
irregularities  relating  to  EU  expenditure  and  revenue  is  included.  The  report,  in  particular, 
highlights  how the  provisions for the reporting of irregularities  are applied  in  each Member 
State,  as  the  analytical  part  of  this  report  is  based  on  the  information  received  from  such 
reporting. 
The  report  is  accompanied  by  six  Commission  Staff  Working  Documents1.  The  documents 
include,  among  others:  ‘Implementation  of  Article  325  by  Member  States  in  2014’, 
‘Recommendations  to  follow  up  the  Commission  report  on  protection  of  the  EU’s  financial 
interests  —  fight  against  fraud,  2013’  and  ‘Statistical  analysis  of  irregularities’,  containing 
tables summarising the results of each Member State’s anti-fraud actions. 

2. 

ANTI-FRAUD POLICIES AT EU LEVEL 

2.1. 

Anti-fraud policy initiatives taken by the Commission in 2014 

2.1.1.  Proposal  for  a  Directive  on  the  fight  against  fraud  detrimental  to  the  Union’s 

financial interests by means of criminal law 

The Commission submitted a proposal for a Directive on the protection of the EU’s financial 
interests by means of criminal law2 in July 2012. The aim of the proposal is to strengthen the 
existing  legal  framework  by  creating  common  minimum  rules  for  the  definition  of offences 
affecting the Union’s financial interests, as well as the sanctions and the time limitations for 
these  cases.  Negotiations  between  the  European  Parliament  and  the  Council  commenced  in 
the  second  half  of  2014,  following  the  adoption  of  a  general  approach  by  the  Council  on  6 
June 2013 and a first reading in the European Parliament on 16 April 2014. 

1  

2  

Implementation of Article 325 by the Member States in 2014; (ii) Statistical evaluation of irregularities reported for 
2014  own  resources,  natural  resources,  cohesion  policy  and  pre-accession  assistance;  (iii)  Recommendations  to 
follow  up  the  Commission  report  on  protection  of  the  EU’s  financial  interests  —  fight  against  fraud,  2013; 
(iv) Methodology regarding the statistical evaluation of reported irregularities for 2014; (v) Annual overview with 
information  on  the  results  of the  Hercule  III  Programme  in  2014;  (VI)  Implementation  of  the  Commission  Anti-
Fraud Strategy (CAFS). 
COM(2012) 363 final 

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2.1.2.  Proposal  for  a  Council  Regulation  on  the  establishment  of  a  European  Public 

Prosecutor’s Office 

On 17 July 2013 the Commission adopted a proposal for a Regulation on the establishment of 
a  European  Public  Prosecutor’s  Office  (EPPO)3,  as  a  major  initiative  in  the  Commission’s 
overall strategy to improve the protection of the EU’s financial interests. 

The main objective of the proposal is to establish a coherent and effective European system 
for  the  investigation  and  prosecution  of  offences  affecting  the  EU’s  financial  interests,  as 
defined in the proposed Directive on the fight against fraud by means of criminal law (point 
2.1.1). 

At the end of 2014, negotiations in the Council were still ongoing. The European Parliament 
adopted a first interim report in March 20144 and a second report in April 20155, expressing 
support for the main elements of the EPPO. 

2.1.3.  Proposal for a Regulation of the European Parliament and of the Council amending 
Regulation  (EU,  EURATOM)  No  966/2012  on  the  financial  rules  applicable  to  the 
general budget of the Union 

On  18  June  2014,  the  Commission  adopted  a  proposal6  to  partially  revise  the  Financial 
Regulation  to  align  it  with  the revised  public  procurement  Directive.  The  main  objective  of 
the  proposal  is  to  reinforce  the  protection  of  the  Union's  financial  interests  by  setting  up  a 
system, to be operated by the Commission, to facilitate the early detection of risks threatening 
the Union's financial interests and the exclusion of an economic operator so that they can no 
longer  obtain  EU  funds  and/or  the  imposition  of  a  financial  penalty  on  such  an  economic 
operator. 

The  legislative  authority  agreed  on  this  proposal  in  June  2015  and  the new  rules  will  apply 
from January 2016. 

2.1.4.  Fighting corruption in the EU 

2014  saw  the  Commission  publish  its  first  EU  Anti-Corruption  Report,  which  included  a 
chapter  on  corruption  in  public  procurement.  The  report  assesses  how  each  Member  State 
tackles corruption, examines how laws and policies work in practice and suggests how each 
country can enhance its anti-corruption work.  

Following  on  from  the  report,  the  Commission  set  up  a  network  of  Member  State  National 
Contact Points, and incorporated anti-corruption objectives in the European Semester process 
of  economic  governance.  In  2014,  twelve  Member  States  received  corruption-related 
recommendations  under  the  European  Semester,  which  were  discussed  during  subsequent 
country visits. 

The  Commission  also  made  preparations  for  the  launch  of  an  '‘Experience  Sharing 
Programme’ in spring 2015. 

3  

4  

5  
6  

COM(2013) 534 final 
P7_TA(2014)0234 - European Parliament resolution of 12 March 2014 on the proposal for a Council regulation on 
the establishment of the European Public Prosecutor's Office (COM(2013) 0534 – 2013/0255(APP)) 
A8-0055/2015 (APP) 29/04/2015 
(COM(2014)358) 

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2.1.5.  Reporting  of  irregularities  —  provisions  in  the  Multiannual  Financial  Framework 

(MFF) 2014-2020 expenditure field 

In the framework of the new programming period 2014-2020, the modalities for the reporting 
of irregularities needed to be defined in delegated and implementing acts for all areas under 
shared  management7.  In  2014,  the  Commission  negotiated  four  delegated  and  four 
implementing Regulations, which were discussed and agreed at Member States’ expert level. 
Their adoption is scheduled for 2015. In order to achieve maximum clarity whilst imposing 
minimal administrative burden on the Member States, the provisions are harmonised as much 
as possible across all of the EU’s expenditure fields. The information reported by the Member 
States is presented in the annual Commission report under Article 325 TFEU. 

2.1.6.  Anti-fraud policy in customs  

2.1.6.1.  Mutual administrative assistance (proposal for amendment of Regulation 515/97) 
The  Commission  adopted  a  proposal  for  the  amendment  of  Regulation  515/978  in  2013. 
Throughout 2014 negotiations with the European Parliament and the Council of the EU were 
conducted. This  resulted  in  a  political  agreement  being  reached  on  18 December  2014.  The 
institutions welcomed the deal, which closes certain loopholes in the current rules on mutual 
assistance between the Member States and the Commission.  The proposal aims to  create an 
EU  database  on  goods  entering,  transiting  and  leaving  the  EU.  In  addition,  the  proposal 
envisages  a  container  monitoring  system,  which  will  allow  the  European  Anti-Fraud  Office 
(OLAF)  to  analyse  container  movements  in  order  to  identify  potentially  fraudulent  activity. 
The  Regulation  is  expected  to  enter  into  force  in  mid-2015,  and  the  relevant  secondary 
legislation will be adopted by early 2016. 

2.1.6.2.  Joint Customs Operations (JCOs) 

JCOs  are  coordinated  and  targeted  operational  measures  implemented  by  the  customs 
authorities of Member States and third countries over a limited time period, to combat illicit 
cross-border trafficking of goods. 

In 2014, OLAF worked together with Member States in seven JCOs by providing intelligence, 
technical and/or financial support, ensuring the secure access to and exchange of information 
via the AFIS platform, and making available its permanent operational coordination facilities 
to smooth the work of the JCOs involving a large number of participants: 

JCO  REPLICA9:  This  operation  focused  on  the  importation  of  goods  infringing  intellectual 
property rights, with emphasis on dangerous goods posing a risk to the environment or to the 
safety  or  health  of  citizens.  As  a  result  of  the  operation,  1.2  million  counterfeit  goods, 
including  perfumes,  car  and  bicycle  spare  parts,  toys,  fashion  accessories  and  electronic 
devices, and 130 million cigarettes were seized. The seizures of cigarettes alone prevented the 
loss of EUR 25 million in customs duties and taxes. 

-  JCO  SNAKE10:  This  JCO  targeted  the  undervaluation  of  imported  textiles  and  footwear 
from China. The operation resulted in the detection of more than 1 500 containers, where the 

7  

8  
9  

10  

Article 122 of Regulation (EU) Nos 1303/2013, OJ 347, 20.12.2013, p. 320, Articles 48 and 50 of Regulation (EU) 
No 10306/2013, OJ 347, 20.12.2013, p. 549, Article 30 of Regulation (EU) No 223/2014, JO 72, 12.03.2014, p.1 
and Article 5 of Regulation (EU) No 514/2014, OJ 150, 20.5.2014,  p. 112. 
OJ L 82, 22.3.1997, p. 1–16 
Coordinated by OLAF and organised within the Asia-Europe Meeting (ASEM) framework, as part of joint efforts 
in the fight against counterfeit goods. It had the participation of all EU Member States, Norway, Switzerland and 11 
other non-EU international partners, as well as Europol, Interpol and the World Customs Organisation. 
Coordinated  by  OLAF  and  the  Anti-Smuggling  Bureau  of  the  General  Administration  of  China  Customs,  it 
involved the customs administrations of all EU Member States, as well as of the People's Republic of China. 

9 

 
                                                 
customs value was heavily underdeclared, and prevented estimated losses of over € 80 million 
in customs duties. 

- JCO ERMIS11: The aim of this operation was to detect counterfeit goods coming into the EU 
in small parcels, via mail from third countries. Over 70 000 items of various nature, such as 
mobile  phones,  sunglasses,  and  small  vehicle  spare  parts,  medicines  and  pharmaceutical 
products were seized. 

-  JCO  ATHENA  IV12:  This  JCO  targeted  the  detection  of  undeclared  cash,  as  well  as  the 
prevention of money laundering within the territory of the European Union. As a result of the 
operation, over EUR 1 200 000 in cash was detained and seized. 

- JCO WAREHOUSE II13: This JCO aimed to combat smuggling and excise fraud related to 
tobacco products and alcohol. The final results of the operation are still being evaluated. 

-  Regional  JCO  ‘ICARE’14:  This  was  a  maritime  surveillance  operation,  coordinated  by 
French customs, and targeted the detection of illicit trafficking of sensitive goods by sea, in 
the Atlantic area. 

- Regional JCO ‘ISIS 2014’15: A maritime operational action coordinated by Spanish customs, 
aimed at fighting the illicit trafficking of sensitive goods in the Mediterranean Sea. It resulted 
in the seizure of 39.3 kg of cannabis. 

2.1.6.3.  The Anti-Fraud Information System (AFIS) 

The  Anti-Fraud  Information  System  (AFIS)  is  a  set  of  anti-fraud  applications  operated  by 
OLAF,  aimed  at  the  timely  and  secure  exchange  of  fraud-related  information  between 
Member  States’  administrations,  as  well  as  the  storage  and  analysis  of  relevant  data.  It 
encompasses  two  major  areas;  mutual  assistance  in  customs  matters,  and  irregularity 
management. 

In  2014,  a  total  of  6 560  cases  were  registered in  the  AFIS  mutual  assistance  databases  and 
modules. The transit information database (ATIS) received information on seven million new 
transit consignments, representing a total of 31.5 million goods movements. The irregularity 
management system (IMS) received 23 735 communications. Seven JCOs were conducted in 
2014,  using  the  AFIS  system’s  Virtual  Operations  Coordination  Unit  (VOCU)  as  a 
communication tool. 

The programme’s budget for 2014 was EUR 6.4 million. 

2.1.7.  Fight against illicit trade in tobacco products 

The  2013  ‘Communication  on  stepping  up  the  fight  against  cigarette  smuggling  and  other 
forms of illicit trade in tobacco products’16 was accompanied by a comprehensive action plan. 
Since  then,  the  Commission  has  been  actively  implementing  the  action  plan,  in  close 
cooperation  with  Member  States.  Three  meetings  dedicated  to  this  topic  took  place  with 
Member States’ experts in 2014. 

11  

12  

13  
14  

15  
16  

Coordinated  by  the  Greek  Customs  Administration  and  OLAF,  with  the  participation  of  the  EU  Member  States, 
FYROM, Montenegro, Serbia, Turkey. 
Coordinated  by  the  National  Customs  Board  of  the  State  Revenue  Service  of  Latvia  and  OLAF,  with  the 
participation of all EU Member States and Europol. 
Coordinated by the Italian Customs and Monopolies Agency and OLAF. 
Coordinated by French Customs, with the participation of the customs authorities of Ireland, Portugal, Spain, the 
UK, Germany, Italy and the Netherlands. 
Coordinated by French Customs, with the participation of the Italian and Spanish customs services. 
COM(2013) 324 final, 6.6.2013.  

10 

 
                                                 
2.1.8.  Fight against VAT fraud 

A  mandate  to  start  negotiations  with  Norway  for  an  EU  agreement  on  administrative 
cooperation and recovery of taxes in the field of VAT was granted to the Commission by the 
Council  in  December  2014.  Negotiations  are  due  to  start  in  June  2015.  The  Benelux 
countries’  pilot  project  to  introduce  cross-border  fraudulent  network  analysis  within  the 
context  of  the  Eurofisc  network  was  presented  to  all  Member  States  in  June  2014. 
Subsequently, a large majority within the Eurofisc group requested that this pilot be extended 
to all Member States. The Eurofisc network continues to exchange operational information on 
cross-border  fraud  and  seeks  new  sources  of  information,  such  as  vehicle  registration  data. 
Furthermore,  a  Fiscalis  project  group,  aimed  at  improving  cooperation  between  tax  and 
customs authorities, has made substantial progress. In relation to new threats coming from e-
commerce, a project group was set up to gather best practice from national tax administrations 
in this field. 

2.1.9.  Anti-fraud provisions in international agreements 

Many  of  the  EU’s  international  agreements  contain  provisions  on  mutual  administrative 
assistance (MAA) in customs matters and, in the case of preferential agreements, also contain 
measures on the enforcement of preferential treatment. 

In  2014,  48  agreements  including  MAA  provisions  for  71  third  countries  were  in  force  and 
negotiations were under way with 49 countries, including major trading partners, such as the 
USA and Japan. Negotiations with Canada and Vietnam were finalised. Free trade agreements 
with  Georgia  and  Moldova  became  operational.  The  entry  into  force  of  the  Deep  and 
Comprehensive Free Trade Area (DCFTA) with Ukraine is scheduled for 1 January 2016. All 
of these agreements contain MAA provisions and measures on the enforcement of preferential 
treatment. 

The Commission aims to include anti-fraud provisions in other EU international agreements, 
such  as  Association  Agreements  and  Partnership  Agreements.  In  2014,  OLAF  successfully 
negotiated  anti-fraud  provisions  in  the  Partnership  and  Cooperation  Agreement  (PCA)  with 
Kazakhstan. Negotiations on similar provisions in the PCA with Malaysia continued. 

2.1.10.  Public procurement rules 

In  April 2014 the revised  public procurement and utilities directives and a new concessions 
directive  entered  into  force17.  The  new  directives  enhance  transparency  and  strengthen  the 
anti-fraud  and  anti-corruption  provisions,  by  defining  ‘conflict  of  interest’,  making  e-
procurement  mandatory  and  introducing  monitoring  and  reporting  obligations  to  curb 
procurement  fraud  and  other  serious  irregularities.  The  transposition  of  the  new  directives 
gives each Member State the opportunity to boost effectiveness, close loopholes, make their 
procurement  processes  more  efficient  and  clean,  and  strengthen  the  necessary  control  and 
sanctioning mechanisms, without hindering the efficiency of the process. 

The  Commission  assists  Member  States  in  the  transposition  of  the  public  procurement 
package and works closely with some Member States on specific country approaches. 

17  

Directive  2014/23/EU  of  the  European  Parliament  and  of  the  Council  of  26  February  2014  on  the  award  of 
concession contracts, Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on 
public procurement and repealing Directive 2004/18/EC and Directive 2014/25/EU of the European Parliament and 
of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal 
services sectors and repealing Directive 2004/17/EC 

11 

 
                                                 
2.1.11.  Directive on the protection of the euro and other currencies against counterfeiting by 

criminal law 

Directive  2014/62/EU18  on  the  protection  of  the  euro  and  other  currencies  against 
counterfeiting by criminal law was adopted in May 201419.  

The  directive  builds  on,  and  replaces,  the  Council  Framework  Decision  2000/383/JHA  on 
increasing  the  protection  against  counterfeiting  by  using  criminal  penalties  and  other 
sanctions,  which  was  adopted  upon  the  introduction  of  the  euro.  The  Directive  introduces 
provisions for the following elements:  

  effective investigative tools are made available in cases of currency counterfeiting;  
  common maximum penalties for the most serious counterfeiting offences;  
 

transmission of seized  counterfeit  euro  notes and coins to  National Analysis Centres 
and National Coin Analysis Centres during ongoing judicial proceedings for analysis 
and identification, to enable the detection of counterfeit euros in circulation; and  
  an  obligation  to  report  every  two  years  to  the  Commission  the  number  of 

counterfeiting offences committed and the number of persons convicted. 

2.1.12.  Commission Anti-fraud Strategy (CAFS) 
2014 is the second year that the Commission reports on the implementation of the CAFS20.  

In the 2013 report, the main emphasis was placed on the three priority actions of the CAFS: 

1. Inclusion of anti-fraud clauses in legislative proposals for the MFF 2014-2020 
2. Development of anti-fraud strategies at Commission level 
3. Revision of the procurement directives 

In  2014,  anti-fraud  strategies  at  Commission  level  were  extended  to  the  EU  agencies.  In 
addition,  two  guidance  documents  were  developed  within  the  framework  of  the  Advisory 
Committee  for  Coordination  of  Fraud  Prevention  expert  group.  One  of  the  guidance 
documents aims to assist Member States in establishing national anti-fraud strategies. To date, 
five Member States have developed such strategies. The second guidance document outlines 
the  role  of  auditors  in  the  field  of  fraud  prevention  and  detection.  Both  documents  were 
developed in close cooperation with Member States’ experts. 

Throughout  2014,  the  Commission  organised  a  series  of  conferences  and  contributed  to 
seminars organised by the Member States or Agencies, in order to raise awareness of fraud as 
part of their sectoral Anti-Fraud Strategies. 

2.1.13.  Hercule and Pericles Programmes 

2.1.13.1.  Implementation of Hercule Programme 
The  Hercule  III  Programme21  (2014-2020)  promotes  activities  to  counter  fraud,  corruption 
and  any  other  illegal  activities  affecting  the  financial  interests  of  the  European  Union.  In 
2014,  a  budget  of  EUR  13.7  million  was  available  for  funding  actions  to  strengthen  the 
operational  and  administrative  capacity  of  customs  and  police  forces  in  the  Member  States, 
for training activities, conferences and for IT support22. 

18  
19  

20  

21  
22  

OJ L 151, 21.5.2014, p. 1. 
In 2014 this competency moved from OLAF to DG ECFIN. 
See the SWD (vi) on the implementation of the CAFS. 
Regulation (EU) No 250/2014 of the European Parliament and of the Council of 26 February 2014. 
See SWD (v) on Annual overview with Information on the Results of the Hercule III Programme in 2014. 

12 

 
                                                 
During  the  first  year  of  implementation,  Hercule  III  funding  was  provided  for  21  technical 
assistance activities undertaken by law enforcement agencies in the Member States (EUR 8.7 
million). The actions consisted of, for example, the purchase of x-ray scanners deployed at the 
EU’s external borders to examine containers, trucks and other vehicles. The scanners helped 
to  detect  substantial  amounts  of  smuggled  and  counterfeit  cigarettes  and  tobacco  and  also 
revealed the presence of liquor, drugs and arms. 

Hercule III funding was also provided for 34 grants and contracts for the organisation of 55 
conferences  and  training  seminars  in  2014,  enabling  law  enforcement  staff  from  different 
Member States and third countries to meet and share information on best practices in the fight 
against irregularities, corruption and fraud. 

The  Hercule  II  Programme23,  which  ended  in  2013,  was  evaluated  during  2014  by  an 
independent  evaluator.  The  evaluation  confirmed  that  the  programme  delivered  its  intended 
impact  at  a  reasonable  cost,  was  well  received  by  stakeholders,  and  was  successful  in 
providing added value. Based on this evaluation, the Commission adopted its report24 on the 
achievement of the objectives under Article 7 of the Hercule II Programme on 27 May 2015. 

2.1.13.2.  Implementation of Pericles Programme 
In March 2014, Regulation (EU) No 331/201425 was adopted, establishing the Pericles 2020 
Programme;  an  exchange,  assistance  and  training  programme  to  protect  the  euro  against 
counterfeiting. The proposal for a Council Regulation extending the application of Regulation 
(EU) No 331/2014 to non-participating Member States is expected to be adopted in 2015. 

Under  the  Pericles  Programme  for  the  protection  of  euro  banknotes  and  coins  against  fraud 
and  counterfeiting,  the  Commission  committed  to  ten  activities,  including  conferences, 
seminars and staff exchanges, organised by it and/or by Member States. These events focused 
specifically on increasing networking and regional cooperation in sensitive areas, as well as 
strengthening  cooperation  between  different  professionals  engaged  in  protecting  the  euro 
against counterfeiting. By the end of 2014, 94.5 % of the Pericles Programme’s EUR 924 200 
budget had been committed26. 

2.2. 

Advisory Committee for Coordination of Fraud Prevention (COCOLAF) 

The  2014  meeting  of  the  Advisory  Committee  for  Coordination  of  Fraud  Prevention 
(COCOLAF)27  with  Member  States  experts  gave  the  opportunity  to  discuss,  inter  alia,  the 
main developments regarding the fight against illicit trade in tobacco products, as well as the 
reporting  of  irregularities  in  relation  to  the  use  of  EU  funds  for  the  new multi-
annual financing framework 2014-2020. 

Four  COCOLAF  subgroups  met  in  2014,  allowing  for  the  negotiation  of  the  reporting  of 
irregularities,  and  to  prepare  guidelines  as  mentioned  under  paragraph  2.1.11.  Newly 
appointed AFCOS also exchanged experiences and best practice in anti-fraud activities. 

23  

24  

25  

26  

27  

Decision 878/2007/EC of the European Parliament and of the Council of 23 July 2007, OJ L 193, 27.7.2007, p. 18. 
COM(2015) 221  final  of  27  May  2015:  Report  from  the  Commission  to  the  European  Parliament  and  to  the 
Council on the achievement of the objectives of the Hercule II programme. 
OJ L 103, 5.4.2014, 1 
See footnote 18. 
Commission Decision 94/140/EC of 23 February 1994, amended on 25 February 2005. 

13 

 
                                                 
2.3. 

Follow-up  to  European  Parliament  Resolutions  on  the  Protection  of  the  EU’s 
financial interests — Fight against fraud — Annual Reports 2012 and 2013 

2.3.1.  European  Parliament  resolution  of  3  July  2014  on  the  protection  of  the  EU’s 

financial interests — Fight against fraud — Annual Report 2012 

In  response  to  the  Parliament’s  request  for  a  distinction  between  fraud,  errors  and 
irregularities,  the  Commission  underlined  the  difference  between  irregularities  reported  as 
fraudulent (which include suspicions of fraud, as well as established fraud) and irregularities 
not reported as fraudulent. The definition of ‘irregularity’ encompasses intentional (for cases 
of  suspected  and  established  fraud)  and  non-intentional  infringements  of  EU  rules,  with  a 
financial impact on the EU budget. The concept of ‘error’ is not defined in EU law, but stems 
from auditing practices and is not part of the reporting obligations under Article 325 TFEU. 
As from 2012, information is given on the proportion of irregularities reported as fraudulent 
in cases where Member States have indicated that fraud has actually been established. 

The Commission has acknowledged that differences exist in the way in which Member States 
approach fraud detection and prosecution. It has, however, in recent years invested time and 
resources to raise the fraud-awareness of all parties involved in the detection and prevention 
of fraud affecting the EU budget. 

The obligation of managing authorities (MAs) to put in place effective and proportionate anti-
fraud  measures,  based  on  fraud  risk  assessments,  was  introduced  in  the  legal  framework 
concerning EU funds disbursed under shared management for the period 2014-2020. National 
audit authorities are also obliged to verify the compliance of MAs with these obligations, i.e 
the putting in place of the effective and proportionate anti-fraud measures taking into account 
the risks identified. 

Regarding  corruption,  the  Commission  has,  since  2012,  included  in  its  reports  on  the 
protection of financial interests a reference to the number of reported cases of corruption with 
an impact on the financial interests of the EU. In addition, the Commission will publish the 
EU  Anti-Corruption  Report  every  two  years  and  will  continue  to  cooperate  closely  with 
Member States for better implementation of anti-corruption policies. 

It  was  also  clarified  that  the  OLAF  annual  report  will  contain  an  analysis  of  incoming 
information of investigative interest referred to OLAF, including a breakdown between public 
and private sources and a breakdown by Member State. 

The  Parliament  has,  since  2012,  received  a  comprehensive  annual  overview  on  the 
implementation of the Hercule II Programme. The Commission will continue to provide the 
Parliament with such an overview. The Hercule III Regulation provides a solid legal basis for 
the  Commission  to  request  information  from  the  Member  States  on  the  results  of  the 
implementation of the programme. 

2.3.2.  European  Parliament  resolution  of  11  March  2015  on  the  protection  of  the  EU’s 

financial interests — Fight against fraud — Annual Report 2013 

Concerning the lifespan of detected irregularities, the Commission indicated that it would take 
into  account  the  suggestions  of  the  European  Parliament  in  relation  to  the  minimum, 
maximum and average duration under each policy sector in shared management. 

The  Commission  agreed  to  conduct  a  mid-term  assessment  in  2018  of  whether  the  new 
regulatory  architecture  of  the  cohesion  policy  further  prevents  and  reduces  the  risk  of 
irregularities. 

14 

 
In  response  to  the  Parliament’s  request  for  financial  support  for  cross-border  investigative 
journalism,  the  Commission  pointed  out  that  it  is  providing  funding  for  the  work  of 
independent  organisations  engaged  in  the  fight  against  corruption,  such  as  the  ‘European 
Corruption  Observatory’,  which  is  dedicated  to  encouraging  pan-European  tracking  of 
corruption-related news and fostering awareness of corruption. 

The  Commission  acknowledged  the  need  for  enhanced  cooperation  with  Member  States.  It 
pointed out, however, that a comprehensive database of irregularities already exists, namely, 
the Irregularity Management System (IMS). Member States report on detected irregularities, 
including suspected fraud, via IMS. Streamlining of IMS has been taking place since October 
2014 and a new version will be available to national authorities by the end of 2015. This will 
enable further rationalisation of the reporting and analytical processes. 

Regarding  VAT,  the  Commission  sponsors  studies  to  quantify  the  ‘VAT  gap’  in  Member 
States. This will help to address policy to improve VAT compliance and enforcement, and the 
figures can serve as a benchmark against which progress in this field can be measured. 

3. 

MEASURES  TAKEN  BY  MEMBER  STATES  TO  COUNTER  FRAUD  AND 
OTHER 
ILLEGAL  ACTIVITIES  AFFECTING  THE  FINANCIAL 
INTERESTS OF THE EU 

3.1.  Measures  to  combat  fraud  and  other  irregularities  affecting  the  financial 

interests of the EU 

Member  States  reported  that  they  took  a  large  number  of  measures  in  2014  concerning  the 
protection of the EU’s financial interests and the fight against fraud, reflecting the adoption of 
the bulk of Union legislation for the new programming period 2014-2020. 

Member  States’  measures  covered  the  whole  anti-fraud  cycle,  mostly  in  the  area  of  public 
procurement,  followed  by  measures  concerning  conflict  of  interest,  financial  crime, 
corruption,  the  Anti-Fraud  Coordination  Service  (AFCOS),  and  measures  regarding  the 
definition of fraud and whistle-blowers. By the end of 2014 all Member States had designated 
an AFCOS. 

In  2014,  half  of  the  Member  States  adopted  fraud  prevention  measures  or  procedures 
regarding  the  management  of  EU  funds28.  Furthermore,  seven  Member  States  adopted 
measures  on  the  reporting  of  irregularities29  and  seven  Member  States  conducted  fraud 
awareness training30. 
Five  Member  States31  adopted  a  National  Anti-fraud  Strategy  (NAFS)  for  the  programming 
period 2014-2020. Nine Member States32 reported national anti-fraud measures with regard to 
the cohesion policy funds33, while six Member States34 adopted national anti-fraud measures 
pertaining to agriculture funds35. A national fraud prevention strategy for public procurement 

28  

29  

30  

31  

32  

33  

34  

35  

Germany,  Ireland,  Greece,  Italy,  Latvia,  Lithuania,  Hungary,  Netherlands,  Austria,  Poland,  Slovenia,  Slovakia, 
Finland, Sweden. 
Bulgaria, France, Croatia, Austria, Portugal, Slovakia, Sweden.  
Denmark, Germany, Ireland, France, Hungary, Portugal, Sweden. 
Bulgaria, Greece, Croatia, Malta and Slovakia (NAFS concerning structural actions: Greece, Croatia, Malta, while 
NAFS concerning all sectors: Bulgaria and Slovakia). 
France, Croatia, Lithuania, Hungary, Netherlands, Portugal, Romania, Finland, United Kingdom. 
Article 125, 4. (c) of Regulation (EU) No 1303/2013, OJ 347, 20.12.2013, p. 320. 
Germany, Ireland, Hungary, Portugal, Slovakia, United Kingdom. 
Article 58, of Regulation (EU) No 1306/2013, OJ 347, 20.12.2013, p. 549. 

15 

 
                                                 
was adopted in one Member States36 and a national anti-corruption programme was adopted 
in two others37. 
Thirteen  Member  States38  reported  fraud  detection  and  six  Member  States39  reported 
investigation measures. Nine Member States40 introduced criminal sanctions and penalties in 
relation to fraud. 

3.2. 

Application by the Member States of definitions contained in the provisions for 
irregularity reporting  

This  year’s  specific  emphasis  was  on  examining  the  Member  States’  application  of  the 
definitions relating to irregularity reporting (fraudulent and non-fraudulent) and the timing of 
the  reporting.  The  information  collected  is  analysed  by  OLAF,  with  the  aim  of  guiding  the 
Member  States  toward  a  harmonised  approach  in  the  interpretation  of  such  definitions  and 
increasing the comparability of the data reported by the Member States. 

Almost  all  Member  States  made  reference  to  their  Civil  Servants  Code  or  Penal  Code 
regarding  legal  obligations  for  public  officials  to  refer  to  law  enforcement  or  a  judicial 
authority on any crime an official becomes aware of in the execution of their tasks, while four 
Member States41 have no such provision in their national legislation. 

All  Member  States  reported  the  existence,  and  use,  of  guidelines  on  irregularity  reporting. 
Twenty  Member  States42  provided  details  on  which  definitions  are  specifically  included  in 
their internal guidelines. Seven Member States43 reported the application of the definition of 
‘economic operator’ in line with the relevant EU sectoral Regulations and guidelines44, which 
is  also  consistent  with  the  Council  Regulation  on  the  protection  of  the  EU’s  financial 
interests45,  with  the  exception  of  a  Member  State  exercising  its  prerogatives  as  a  public 
authority. 

The  analysis  highlighted  the  fact  that  there  are  some  differences  in  the  Member  States’ 
application  of  the  ‘primary  administrative  or  judicial  finding’  according  to  the  sector  and 
irregularity. 
As regards the reporting of ‘suspected fraud’, all except two Member States46 pointed out that 
they do not request authorisation from the judicial authority before reporting suspected fraud. 
Eight Member States47 use the definition of ‘suspected fraud’, as set out in EU legislation, in 
their national guidelines. 
Sixteen  Member  States48  make  explicit  reference  in  national  legislation  to  fraud  against  the 
EU budget, while twelve Member States49 say that their national legislation contains general 
definitions of the behaviour, without any specific reference to the ‘victim’. 

36  

37  

38  

39  

40  

41  

42  

43  

44  

45  

46  

47  

48  

Bulgaria. 
Italy, Lithuania.  
Bulgaria,  Czech  Republic,  Greece,  Ireland,  Italy,  Latvia,  Luxembourg,  Netherlands,  Austria,  Poland,  Romania, 
Slovenia and the United Kingdom. 
Estonia, France, Italy, Hungary, Netherlands, Poland. 
Belgium, Estonia, Greece, Spain, France, Hungary, Malta, Portugal, Romania. 
Denmark, Ireland, Sweden, United Kingdom. 
Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Greece, Croatia, Italy, Cyprus, Latvia, Lithuania, Hungary, 
Malta, Netherlands, Poland, Romania, Slovenia, Slovakia, Finland and Sweden. 
Belgium, Czech Republic, Estonia, Latvia, Netherlands, Poland, Romania. 
Regulations (EC) Nos 1828/2006 and 1848/2006. 
Article 7 of Regulation (EC, Euratom) No 2988/95. 
Italy requests authorisation systematically and Romania does so on a case-by-case basis. 
Belgium, Bulgaria, Czech Republic, Estonia, Greece, Latvia, Romania and Slovakia. 
Belgium,  Bulgaria,  Czech  Republic,  Denmark,  Greece,  Spain,  Croatia,  Italy,  Cyprus,  Hungary,  Malta,  Portugal, 
Romania, Slovenia, Slovakia and Sweden. 

16 

 
                                                 
Half  of  the  Member  States50  use  an  internal  system  for  signalling  suspected  irregularities 
outside of the Irregularity Management System (IMS), used for reporting of irregularities by 
the  Member  States  to  the  Commission.  Ten  Member  States51  rely  upon  IMS  only  and  four 
Member States52 do not use internal IT systems for signalling suspected irregularities at all. 

There  are  differences  in  relation  to  the  reporting  of  cases  subject  to  criminal  proceedings: 
eight  Member  States53  report  the  follow-up  to  the  Commission  after  indictment,  seven 
Member  States54  report  the  follow-up  after  the  initial  sentence,  fifteen  Member  States55  say 
that  they  do  so  after  the  definitive  sentence  (final  court  decision)  and  seventeen  Member 
States56 specify an ‘other’ practice of follow-up reporting. 

3.3. 

Implementation of 2013 recommendations 

In the 2013 report on the protection of the EU’s financial interests, the Commission made a 
number of recommendations to the Member States on the following subjects; designating the 
national Anti-Fraud Coordination Service (AFCOS); transposition of the public procurement 
directives  into  national  legislation;  implementation  of  anti-fraud  measures;  the  adoption  of 
legislative  proposals  on  the  directive  on  the  fight  against  fraud,  on  EPPO,  and  on  the 
amendment  of  Regulation  (EC)  No  515/97;  measures  to  strengthen  customs  controls;  the 
timely reporting of and updating of fraud and irregularity cases; and improving low levels of 
reporting.  Implementation  of  these  recommendations,  presented  during  the  2014  reporting 
exercise, was generally adequate, although some concerns were not fully addressed. 
The four Member States57 that were requested specifically to establish an AFCOS during the 
2013 reporting exercise did so in 2014, all of which were given coordination powers and one 
AFCOS was given both coordination and investigative powers58. All  Member States had an 
AFCOS by the end of 2014. 
The  majority  of  Member  States59  began  preparing  for  the  transposition  of  the  package  of 
public procurement directives into national law. Preparations undertaken include; drafting the 
necessary  national  legislation,  launching  consultations  and  establishing  working  groups. 
However, some Member States are yet to take action on this point. 

While  most  Member  States  implemented  anti-fraud  measures  in  2014,  only  five  Member 
States60  submitted  a  National  Anti-Fraud  Strategy  (NAFS)  to  the  Commission,  while  three 
others61 began the process of developing a NAFS. 

Negotiations on two (EPPO and directive on the fight against fraud by means of criminal law) 
out  of  the  three  (and  mutual  administrative  assistance  in  the  customs  area)  legislative 

49  

50  

51  

52  

53  

54  

55  

56  

57  

58  

59  

60  

61  

Germany, Estonia, France, Latvia, Lithuania, Luxembourg, Netherlands, Ireland, Austria, Poland, Finland, and the 
United Kingdom 
Belgium,  Bulgaria,  Czech  Republic,  Estonia,  Spain,  Croatia,  Cyprus,  Latvia,  Lithuania,  Luxembourg,  Hungary, 
Malta, Romania and Slovakia 
Germany, Ireland, France, Italy, Netherlands, Austria, Portugal, Slovenia, Finland and Sweden 
Denmark, Greece, Poland and the United Kingdom  
Belgium, Denmark, Germany, Greece, Latvia, Poland, Romania and Finland 
Belgium, Germany, Greece, Latvia, Austria, Romania and Finland 
Belgium,  Denmark,  Germany,  Greece,  Spain,  Latvia,  Luxembourg,  Hungary,  Malta,  Austria,  Poland,  Romania, 
Slovenia, Slovakia and Finland 
Belgium,  Bulgaria,  Czech  Republic,  Estonia,  Ireland,  France,  Croatia,  Italy,  Cyprus,  Lithuania,  Netherlands, 
Austria, Poland,  Portugal, Slovenia,  Sweden, United Kingdom 
Ireland, Spain, Luxembourg, Sweden 
United Kingdom  
Belgium,  Bulgaria,  Denmark,  Germany,  Estonia,  Ireland,  Greece,  Spain,  France,  Cyprus,  Latvia,  Lithuania, 
Luxembourg, Hungary, Malta, Italy, Slovenia, Sweden, Finland 
Bulgaria, Greece, Croatia, Malta, Slovakia 
Italy, Romania, Slovenia  

17 

 
                                                                                                                                                         
proposals  are  still  ongoing.  Several  Member  States  provided  detailed  information  on  the 
actions taken by them in respect of these proposals in 2014. 
In  order  to  detect  fraudulent  import  operations  more  successfully,  ten  Member  States62 
improved,  or  are  in  the  process  of  updating,  the  information  systems  used  in  the  customs 
domain, while six Member States63 focused on developing a strategic control plan in this area. 
However, several Member States reported no changes. 
Six Member States64 introduced, or are in the process of introducing, new specific guidelines, 
instructions  or  training  on  the  reporting  in  OWNRES  and  eight  Member  States65  have 
developed, or are in the process of developing, improved internal rules and processes which 
will  ensure  that  the  data  in  the  system  are  accurate,  reliable  and  up-to-date.  Furthermore, 
several Member States66 believe that their quality and timeliness of reporting in OWNRES at 
present is sufficient and no new measures are necessary. 

Several Member States described the interactions between the relevant managing authorities, 
audit  authorities  and  anti-fraud  bodies.  In  particular,  eight  Member  States67  reported  on  the 
collaboration that takes place between relevant managing authorities and AFCOS. As regards 
the IT tools currently in use, seven Member States68 69made reference to tools that they are in 
the process of developing, and some Member States70 noted, more specifically, that they are 
exploring the possibility of introducing the ARACHNE risk management tool. 
Regarding  the  low  level  of  reporting  of  irregularities,  some  Member  States71  named  in  the 
recommendation  stated  that  this  reflects  the  low  levels  of  fraud  that  these  countries 
experience, as well as reflecting measures taken to prevent fraudulent activity. In the area of 
cohesion policy, both France and Hungary outlined their efforts to improve the low levels of 
reporting,  while  Lithuania,  Portugal  and  Finland  described  their  efforts  in  the  area  of 
agriculture. 

4. 

FRAUD AND OTHER IRREGULARITIES 

4.1. 

Reported irregularities and overall trends 2010-2014 

involving  a 

In  2014,  16 473  (fraudulent  and  non-fraudulent)  irregularities  were  reported  to  the 
Commission, 
total  amount  of  approximately  EUR  3.24  billion,  with 
approximately  EUR  2.27  billion  concerning  the  expenditure  sector  of  the  EU  budget. 
Detected  irregularities  represent  1.8 %  of  payments  on  the  expenditure  side,  and  4.46 %  of 
gross total TOR collected. 

Compared  to  2013,  the  number  of  irregularities  detected  increased  by  48 %  and  the 
corresponding financial amounts saw an increase of 36 %. 

Between  2010  and  2014,  the  number  of  reported  irregularities  increased  by  9 %,  while  the 
related amounts increased by 80 %. 

62  

63  

64  

65  

66  

67  

68  

69  

70  

71  

Belgium, Bulgaria, Estonia, Greece, Spain, Cyprus, Latvia, Lithuania, Italy, Sweden.  
Denmark, Germany, Croatia, Romania, Slovenia, United Kingdom.  
Denmark, Estonia, Greece, France, Cyprus, Latvia. 
Latvia, Cyprus, Czech Republic, Hungary, Malta, Belgium, Slovakia, Sweden.  
Italy, Czech Republic, Germany, Ireland, Lithuania, Poland. 
Belgium, Denmark, Croatia, Italy, Cyprus, Latvia, Malta, Slovakia. 
Bulgaria, Czech Republic, Finland, Greece, Italy, Hungary, Slovakia. 
The Italian  Guardia di Finanza is developing a specific IT tool called Anti-Fraud Information System (SIAF), to 
prevent  fraud  against  the  EU's  financial  interests.  The  development  is  co-funded  by  OLAF  under  the  Hercule  II 
program. 
Bulgaria, Spain, Croatia, Cyprus, Netherlands, Slovenia. 
Denmark, Ireland, Luxembourg, Netherlands. 

18 

 
                                                 
Several factors lie behind this increase: firstly, it is linked to the resources available to the EU 
budget, which in 2014 were over 10 % higher than in 2010; secondly, cyclical circumstances 
play a role, such  as the approaching closure of the programming  period  2007-2013; thirdly, 
the  control  over  the  management  of  EU  funds  by  the  appropriate  institutions  (European 
Commission and Court of Auditors) and national services is constantly improving, as can be 
seen from the data concerning corrective and preventive measures72. 

4.2. 

Irregularities reported as fraudulent 

The  number  of  irregularities  reported  as  fraudulent  (which  include  cases  of  suspected  and 
established fraud) and the related amounts are not strictly in correlation with the level of fraud 
affecting  the  EU  budget.  They  tend  to  indicate  the  level  of  detection  of  cases  of  potential 
fraud attained by Member States and EU bodies. The final decision on whether a case actually 
constitutes  fraud  is  the  responsibility  of  the  relevant  authorities  of  the  Member  State 
involved73. 

In  2014,  1 649  irregularities  were  reported  as  fraudulent  involving  EUR  538.2  million, 
covering both expenditure and revenue.  Significant differences are recorded between sectors, 
as shown in Table 1. 
In comparison with 2013, the number of fraudulent irregularities74 reported in 2014 increased 
by 2 %, while their financial impact increased by 68 %.  

Chart 1 shows the overall trends over the last five years, highlighting a decrease in the number 
of  reported  cases  and  amounts.  Nonetheless,  it  should  be  noted  that  after  the  significant 
decrease  between  2010  and  2011,  the  subsequent  years  show  a  rising  trend  in  terms  of  the 
number  of  fraudulent  irregularities  detected  and  reported,  while  the  related  amounts  have 
fluctuated  greatly.  It  should  be  noted  that  the  variation  in  the  number  of  cases  is  more 
informative than the variation in the amounts involved, since the latter vary greatly from year 
to year, as they can be affected by individual cases involving high values. 

72  

73  

74  

See paragraph 6. 
This  implies  that  the  cases  initially  reported  by  Member  States  as  potentially  fraudulent  may  be  dismissed  by 
judicial authorities. 
See Staff Working Document IV  

19 

 
                                                 
Chart 1: Irregularities reported as fraudulent and the related amounts, 2010-14 

There  are  also  differences  between  the  revenue  trend  (showing  a  slight  increase  by  number 
but  a significant increase by amount  in  2014)  and the expenditure trend (where fluctuations 
appear  to  be  linked  to  the  progression  of  the  multi-annual  programming  cycles  and  where 
there has been a slight decrease in the number of cases after two years of increase). 

20 

 
 
Table 1: Irregularities reported as fraudulent in 201475 

* The calculation includes estimated amounts reported 

A breakdown of all fraudulent irregularities reported in 2014, by Member State and by budget 
sector, is set out in Annex 1. 

4.2.1.  Revenue 

The  number  of  irregularities  reported  as  fraudulent  for  2014  (710)  is  2 %  lower  than  the 
average number reported for the years 2010-2014 (726). The total established amount of TOR 
reported for 2014 (EUR 157 million) is 54 % higher than the average for the years 2010-2014 
(EUR 102 million).76 

In 2014, most of the fraudulent cases (40 %) were discovered during customs controls carried 
out  at  the  time  of  the  clearance  of  goods,  while  36 %  were  discovered  during  inspections 
carried out by anti-fraud services. In terms of amounts involved, 43 % of all TOR amounts for 
fraudulent  cases  were  established  during  post-clearance  controls,  27 %  during  inspections 
carried out by anti-fraud services and 15 % by tax audits. 

75  

76  

The high percentage of amounts for which irregularities were reported as fraudulent, relative to the total payments 
for Pre-accession assistance (last column of Table 1), is entirely due to the fact that payments for this sector were 
very  limited  in  2014  (EUR  75  million),  as  the  assistance  programmes  were  almost  complete.  Fraudulent 
irregularities detected and reported in 2014 relate to actions financed under previous financial years.  
For comparability reasons, figures for the period 2010-13 are based on the data used for the reports of those years. 

21 

Budget sector (expenditure)N° of irregularities reported as fraudulentVariation in relation to 2013Involved amounts (in million EUR)Variation in relation to 2013As % of paymentsNatural resources519-12%68.6-10%0.13%Agriculture market support and direct payments166-41%48.50%0.11%Rural development33582%13.70%0.11%Both7-93%4.3N/AN/AFisheries11-52%2.1-79%0.29%Cohesion Policy306-5%274.276%0.51%ESIF 2014-200-0.0-0.00%Cohesion 2007-20132594%250.4102%0.48%Structural funds 2000-2006 (Cohesion fund included)47-36%23.8-25%8.56%Pre accession31-26%14.47-7%1.74%Pre accession assistance (2000-2006)22-33%14.40%19.16%Instrument for Pre-Accession (2007-2013)90%0.1-92%0.01%Direct expenditure83232%4.7292%0.03%Total expenditure939-4%362.046%0.26%Budget sector (revenue)N° of irregularities reported as fraudulentVariation in relation to 2013Involved amountsVariation in relation to 2013As % of gross amount of TOR collected for 2014Revenue (traditional own resources)71012%176.2191%0.80%*TOTAL1 6492%538.274%/ 
 
                                                 
Charts 2 & 3: Method of detection — by number of cases and established amount 

The analysis shows a decreasing trend in the number of fraudulent cases over the period 2010-
2013 and an increase of 12 % in 2014 in comparison with the previous year. 

The increase in the established amounts is due in part to one specific case detected by Italy 
amounting to EUR 44 million. 

4.2.2.  Expenditure 

For  EU  expenditure,  there  was  a  minor  decrease  of  4 %  in  the  number  of  irregularities 
reported in comparison with 2013. The decrease is seen across all sectors of the budget, with 
the  exception  of  direct  expenditure.  However,  some  significant  differences  between  sectors 
should  be  noted;  natural  resources,  market  support,  direct  payments  and  fisheries  all  show 
significant  decreases,  while  rural  development  shows  an  increase  of  82 %  (see  paragraph 
2.2.2.1).  Decreases  were  also  seen  in  the  cohesion  (-5 %)  and  pre-accession  (-26 %)  policy 
sectors.  The  fluctuations  in  the  amounts  involved  are  usually  less  informative,  as  already 
explained. However, the amounts involved have increased in comparison with 2013, with the 
exception of agriculture (-10 %) and pre-accession (-7 %) funds. 

Charts 4 and 5 show the irregularities reported as fraudulent and their associated amounts, by 
budget sector. 

For the second consecutive year the largest proportion of irregularities reported as fraudulent 
(55 %) was detected in the agricultural sector. As in previous years, however, the bulk of the 
related monetary amounts (64 %) comes from cohesion policy. 

22 

 
 
Charts  4  &  5:  Irregularities  reported  as  fraudulent  by  budget  sector  (expenditure)  —  by  number  and 
amount 

The use of false or falsified documentation or declarations remained the most common type of 
fraud.  Six  of  the  irregularities  reported  as  fraudulent  were  related  to  corruption77  in  the 
cohesion policy sector. 

About 28 % of irregularities reported as fraudulent in 2014 were detected by anti-fraud bodies, 
or  during criminal  investigations, or via other external controls; this  percentage increases to 
47 % if detections following OLAF investigations are taken into account. 46 % were detected 
by  the  administrative  control  systems  provided  for  under  sector-specific  regulations.  This 
underlines  the  importance  of  external  controls  in  the  fight  against  fraud  and  the  need  for 
strong coordination with managing and audit authorities. Anti-fraud or criminal investigations 
detect cases of potential fraud involving large financial amounts, which reflects the efficacy 
of the investigations and the strong investigative capabilities of the authorities concerned. 
Detection continues to vary between Member States, but the differences have narrowed78. In 
2014,  only  two  Member  States,  Austria  and  Luxembourg,  did  not  classify  any  of  their 
irregularities  as  fraudulent.  Very  few  fraudulent  irregularities  (less  than  three  for  all 
expenditure sectors) were reported by Croatia, Malta and Finland, while in 2013 nine Member 
States reported very few cases. The Member States which detected and reported the highest 
number  of  fraudulent  irregularities  are  Hungary,  Poland,  Romania,  Germany  and  Italy 
(between  65  and  208).  In  terms  of  amounts  involved,  the  highest  figures  were  reported  by 
Poland, Czech Republic, Romania, Hungary and Greece (between EUR 8.5 million and EUR 
210 million). These differences are caused by several factors and reflect different approaches 
among Member States and among various administrations in the same Member State. 

During the period 2010-2014, 8 % of irregularities reported as fraudulent were established as 
fraud.  In  this  area,  Bulgaria  and  Germany  reported  the  highest  number  of  procedures 
concluded. 

4.2.3.  Natural resources (agriculture, rural development and fisheries) 

The  rural  development  sector  accounted  for  the  largest  number  of  reported  irregularities  in 
2014,  showing  the  biggest  increase  in  comparison  with  2013.  The  other  sectors  show  a 
significant decrease. 

77  

78  

Four Member States reported that they had detected such cases: Estonia, Lithuania, Poland, Romania. 
See Annex 1. 

23 

 
 
                                                 
Similar to 2013, the irregularities notified by four Member States (Hungary, Poland, Romania 
and Italy) represent about 71 % of the total number of irregularities reported as fraudulent. 

For Hungary, the reported cases originated from an investigation of the European Anti-Fraud 
Office (OLAF). 

Poland,  Ireland, Latvia, Lithuania, Portugal and the United Kingdom  reported an increasing 
number of fraudulent cases. 
The increase in irregularities reported as fraudulent concerns the Rural Development Fund79, 
while  the  European  Agricultural  Guarantee  Fund80  shows  a  significant  decrease.  For  2014, 
only  1 %  of  reported  cases  concern  both  funds.  The  corresponding  percentage  over  the  last 
five years, however, was 12 %. 

The  most  recurrent  types  of  fraudulent  irregularities  are the  use  of  incorrect  documents  and 
operators  not  possessing  the  required  capabilities,  and  the  implementation  of  operations 
prohibited during the measure concerned (almost 28 % of all fraudulent irregularities). These 
infringements constitute a recurrent modus operandi detected by OLAF in the framework of 
the  investigation  in  Hungary  outlined  above.  The  second  most  frequently  detected  modus 
operandi involves the use of false or falsified documents or declarations. 

In 2014, control activities performed by EU bodies (and in particular OLAF) represented the 
second most successful type of control, after administrative controls which detected 39 % of 
the total irregularities reported as fraudulent. 

Of  the  irregularities  reported  as  fraudulent  over  the  last  five  years,  8 %  are  described  as 
established  fraud.  Over  the  same  period,  4 %  of  the  cases  have  been  dismissed.  Regarding 
established  fraud,  Bulgaria  and  Germany  reported  the  highest  number  of  procedures 
concluded. 

4.2.4.  Cohesion policy (in the 2007-2013 and 2000-2006 programming periods) 

For the second consecutive year, cohesion policy was not the area of budgetary expenditure 
with  the  highest  number  of  irregularities  reported  as  fraudulent.  The  related  amounts, 
however, accounted for the largest proportion of the total. 

In  line  with  the  trend  shown  in  recent  years,  the  European  Regional  Development  Fund 
(ERDF)  accounted  for  the  largest  proportion  of  reported  fraudulent  irregularities  in  2014. 
However, in terms of amounts involved, the Cohesion Fund accounted for the largest figure 
(59 %). 

Most of the fraudulent irregularities (64 %) were detected by the control system provided for 
in  EU  legislation.  This  continued  the  trend  already  highlighted  in  2012,  but  represents  a 
striking  change  from  the  previous  programming  period  (2000-2006),  when  fraudulent 
irregularities were almost exclusively detected during anti-fraud and criminal investigations. 

In  terms  of  financial  amounts,  however,  the  most  significant  results  were  obtained  during 
criminal and anti-fraud investigations (66 %). 

Fraudulent cases are, on average, reported within twelve months of their detection. Irregular 
practices are detected, on average, six and a half years after they began. 

During the period 2010-2014, 10 % of irregularities reported as fraudulent were established as 
fraud  (this  figure  stood  at  11 %  in  201381).  1 %  of  the  cases  were  dismissed.  Regarding 

79  

80  

81  

EAFRD 
EAGF 
This decrease is mainly due to the fact that Greece corrected the information from some cases initially reported as 
established fraud. 

24 

 
                                                 
established fraud, Germany, Poland and Slovenia reported the highest number of procedures 
concluded. 

4.2.5.  Pre-accession  policy  (Pre-accession  assistance  (PAA)  and  the  Instrument  for  Pre-

Accession (IPA)) 

The  number  of  irregularities  reported  as  fraudulent  in  PAA  and  their  related  amounts 
decreased  in  2014,  in  comparison  with  the  previous  year.  Romania  and  Bulgaria  are  the 
countries 
in  PAA,  mostly  concerning  rural 
irregularities 
development82. 

that  reported  fraudulent 

The number of fraudulent irregularities related to the IPA remained stable, while the amounts 
concerned  decreased,  in  comparison  with  2013.  Most  of  the  fraudulent  irregularities  were 
reported by Turkey. The highest fraudulent amounts were recorded in relation to cross-border 
cooperation and rural development. 

4.2.6.  Expenditure directly managed by the Commission 

Expenditure  directly  managed  by  the  Commission  is  analysed  on  the  basis  of  data  on  the 
recovery orders issued by Commission services. 

In 2014, according to the accrual-based accounting system (ABAC), there were 83 recoveries 
classified as irregularities reported as fraudulent (i.e. ‘OLAF notified’ cases). They accounted 
for EUR 4.67 million — almost four times more than in the previous year. This is due to the 
high number of investigations closed by OLAF. 

4.3. 

Irregularities not reported as fraudulent 

In  2014,  the  Commission  was  notified  of  14 824  irregularities  not  reported  as  fraudulent 
(about  5 %  more  than  in  2013).  The  figures  increased  for  all  of  the  most  important  sectors, 
while  they  decreased  for  pre-accession  and  direct  expenditure.  The  related  financial  impact 
also  increased  to  approximately  EUR  2.71 billion  (47 %  more  than  in  2013  –  see  paragraph 
2.3.2), as shown in Table 2. 

82  

SAPARD 

25 

 
                                                 
Table 2: Irregularities not reported as fraudulent in 201483 

* The calculation includes estimated amounts reported 

Annex 2 shows a breakdown of all non-fraudulent irregularities reported in 2014, by Member 
State and by budgetary sector. 

4.3.1.  Revenue 

The  number  of  irregularities  not  reported  as  fraudulent  for  2014  (4 475)  is  currently  10 % 
higher  than  the  average  number  reported  for  2010-2014  (4 073).84  The  total  established 
amount  of  TOR  involved  (EUR  802  million)  is  101 %  higher  than  the  average  of  the 
established amount for the years 2010-2014 (EUR 398 million). 

In particular, infringements with a specific pattern involving substantial financial impact were 
detected by the United Kingdom. This affected the overall established amount for all Member 
States  and  can  be  considered  as  a  result  of  the  Commission’s  work  in  the  field  of  customs 
valuation. 

In 2014, post-clearance controls were the most important method for detecting irregularities 
not  reported  as  fraudulent  in  terms  both  of  numbers  (54 %  of  the  irregularities)  and  of 
established TOR amounts (81 %). 

4.3.2.  Expenditure 

The  increase  in  the  number  of  irregularities  not  reported  as  fraudulent  concerns  the  main 
expenditure sectors of the EU budget (agriculture and cohesion policy). Irregularities related 
to pre-accession and direct expenditure have decreased.  

This  increase  is  mirrored  by  a  significant  rise  in  the  related  financial  amounts.  The  control 
activities  performed  by  European  institutions  (Court  of  Auditors  and  Commission)  play  a 
significant role, as shown by the results of the preventive and corrective measures described 

83  

84  

See footnote 77. 
For  comparability  reasons,  figures  for  the  period  2010-2013  are  based  on  the  data  used  for  the  reports  of  those 
years 

26 

Budget sector (expenditure)N° of irregularities not reported as fraudulentVariation in relation to 2013Involved amounts (in million EUR)Variation in relation to 2013As % of paymentsNatural resources3 41818%237.514%0.42%Agriculture market support and direct payments1 16213%108.0-2%0.24%Rural development2 11221%120.258%1.03%Other / N/A5351%2.735%Fisheries9121%6.6-68%1.37%Cohesion Policy4 9777%1 561.333%2.88%ESIF 2014-200-0.0-0.00%Cohesion 2007-134 68711%1 463.145%2.83%Structural funds 2000-2006 (Cohesion fund included)290-35%98.2-41%35.32%Pre-accession140-25%9.2-80%1.10%Pre-accession assistance (2000-2006)54-64%6.5-86%8.67%Instrument for Pre-Accession (2007-2013)86121%2.7125%0.34%Direct expenditure*1 814-18%96.1-69%0.81%Total expenditure10 3494%1 904.19%1.54%Budget sector (revenue)N° of irregularities not reported as fraudulentVariation in relation to 2013Involved amountsVariation in relation to 2013As % of gross amount of TOR collected for 2014Revenue (traditional own resources)4 4758%802.4146%3.66%*TOTAL14 8245%2 706.547%/ 
 
                                                 
in  paragraph  5.  All  detected  irregularities  are  followed  up  with  corrective  measures  by 
national authorities, aiming to protect the EU’s financial interests. 

4.4. 

Results from activities of the European Anti-Fraud Office (OLAF)85 

In 2014, OLAF opened 234 investigations and 54 coordination cases. In the same period, 307 
investigations and coordination cases were concluded and 397 recommendations were issued. 

OLAF sent 101 recommendations for judicial action to national authorities and recommended 
that approximately EUR 901.0 million be recovered, of which EUR 133.7 million related to 
revenue and EUR 767.3 million to expenditure (see Table 3). 

Table 3: Amounts recommended for recovery in 2014 following OLAF investigations86 

5. 

RECOVERY AND OTHER PREVENTIVE AND CORRECTIVE MEASURES 

An important aspect of protecting the EU’s financial interests involves the use of mechanisms 
to  prevent  and  correct  fraud  and  other  irregularities,  so  as  to  ensure  that  the  budget  is 
implemented in accordance with the principles of sound financial management87. 

Under shared management, the Commission may adopt the following measures: 

 

 

85  

86  

87  

88  

89  

90  

preventive  measures:  interruption  of  payments  (moving  the  payment  deadline  back 
by up to six months)88; suspension of all or part of the interim payments to a Member 
State89; 

corrective  measures:  if  a  Member  State  does  not  take  the  required  measures,  the 
Commission may decide to impose a financial correction90. Expenditure that is not in 
accordance  with  applicable  rules  is  either  the  subject  of  a  recovery  order  or  is 
deducted  from  a  subsequent  request  for  payment,  or,  for  cohesion  policy,  the 
irregular expenditure can be replaced by new expenditure. 

For  a  full  description  see  ‘The  OLAF  report  2014’.  http://ec.europa.eu/anti_fraud/documents/reports-
olaf/2014/olaf_report_2014_en.pdf  
Idem, Figure 24, page 21. Structural Funds EUR 5 million concerned the European Social Fund. 
Data presented in this section reflect those included in the provisional EU annual accounts, i.e. in Explanatory Note 
No 6 of the Accounts of the Union, pending the audit by the European Court of Auditors. 
Cases where there is a significant deficiency in a Member State's management and control systems in 2007-13, or 
of certified expenditure being linked to serious irregularities. 
Applied  in  three  cases:  evidence  of  serious  deficiency  in  the  management  and  control  system with  no  corrective 
measure  taken;  certified  expenditure  linked  to  serious  irregularity;  a  Member  State’s  serious  breach  of  its 
management and control obligations. 
Financial  corrections  follow  three  main  steps:  (a)  in  progress:  subject  to  change  not  formally  accepted  by  the 
Member  State;  (b)  confirmed/decided:  agreed  by  the  Member  State  or  decided  via  a  Commission  decision;  (c) 
implemented: the financial correction is carried out and undue expenditure corrected. 

27 

Recommended amountmillion EURStructural Funds476.5External Aid174.0Customs and trade132.2Agricultural Funds75.9New financial instruments27.4Centralised expenditure13.0Tobacco and counterfeit goods1.5EU staff0.5TOTAL901.0Sector 
 
                                                 
Data on Member States’ direct recoveries from beneficiaries are only partially available91 and 
are  included  in  the  Commission  staff  working  document  on  ‘Statistical  evaluation  of 
irregularities’. 

Data  on  management  types  other  than  shared  management  (particularly  direct  expenditure) 
mainly concern recovery orders issued by Commission departments or deductions from cost 
claims. 

5.1. 

Expenditure: preventive mechanisms 

5.1.1. 

Interruptions in 2014 

In  2014,  the  Commission  took  193  decisions  to  interrupt  payments  in  the  cohesion  policy 
area, involving over EUR 7.7 billion, and closed 181 cases for an overall amount involved of 
almost  EUR 4.9 billion. There were still 145 cases open at the end of 2014, involving over 
EUR 4.8 billion. 

Table 4 shows the interruption cases handled in 2014 and the significant prevention activity 
carried out, particularly in relation to the ERDF/Cohesion Fund, which represents more than 
68 % of open cases and about 80 % of the total amounts concerned. 

Table 4: Interruption cases handled by the Commission services in 2014 

Suspensions 

5.1.2. 
Five92  suspension  decisions  concerning  the  ERDF  were  still  in  force  at  the  end  2013.  Two 
were  lifted  during  2014,  while  the  other  three  remained  in  force.  Four  new  suspension 
decisions were adopted in 2014 and two were still in force at year-end. 

Concerning the ESF, one suspension decision adopted in 2011 was still ongoing at the end of 
2014. Out of the 11 suspension decisions adopted in 2013, seven were still ongoing at the end 
of 2014. During 2014, 11 new suspension decisions were adopted and still effective at year-
end. 

One suspension decision was taken in 2014 for EFF following a deficiency identified in the 
management  and  control  system  of  one  Member  State  related  to  the  EU  measure  to  reduce 
fishing overcapacity. 

There were no suspension decisions taken in 2014 for EAFRD. 

5.2. 

Expenditure: financial corrections and recoveries in 2014 

In  2014,  corrective  measures  decided  by  the  Commission  vis-à-vis  Member  States  and 
beneficiaries  increased  in  comparison  with  the  previous  year  (by  38 %),  while  those 
implemented  decreased  (by  11 %),  mainly  in  the  cohesion  policy  area  (by  25 %)  and  in 
particular in relation to the ESF (where they decreased by 67 %, see Table 5). 

91  

92  

Subsequent  amendments  to  the  legal  framework  have  significantly  changed  the  reporting  rules  for  the  current 
programming period. 
In one particular case, the decision for lifting the suspension was taken in 2013 but officially notified in 2014. 

28 

Number of casesAmount (million EUR)Number of casesAmount (million EUR)Number of casesAmount (million EUR)Number of casesAmount (million EUR)Number of casesAmount (million EUR)Open at 31.12.2013211011 6082027210971331 978New cases 201415791346 227311 323131031937 732Closed cases during 201410751373 99819625151861814 884Open cases at 31.12.201475983 837329708141454 826Programming period 2007-2013ERDF/Cohesion FundESFEFFTotalEAFDR 
 
                                                 
Table 5: Financial corrections and recoveries per budgetary sector, 2014–13 

5.3. 

Recovery relating to own resources revenue 

The bulk  of  the total  TOR amount  established  in 2014 was  collected  without any particular 
problem. Member States have an obligation to recover the remaining unpaid amounts of TOR 
and  to  register  them  in  the  OWNRES  database.  For  2014,  the  amount  to  be  recovered  in 
respect of all irregularities, i.e. reported as fraudulent and non-fraudulent, involving TOR of 
over EUR 10 000 was EUR 958 million; EUR 229 million of this has already been recovered 
by Member States for cases detected in 2014, giving a recovery rate of 24 % for 2014. This is 
a starting point for the recovery process. Analysis shows that lengthy recovery procedures are 
often required in complex cases, fraudulent cases or cases with huge financial impact, owing 
particularly to the ongoing administrative and judicial procedures. 

In addition, Member States continued their recovery activities for cases detected and reported 
in previous years. In 2014, Member States recovered a combined total of approximately EUR 
204 million relating to irregular cases detected between 1989 and 2013. 

The  overall  historical  recovery  rate  (1989-2011)  stands  at  80 %  when  the  calculation  only 
takes  into  account  closed  cases  for  which  Member  States  have  completed  their  recovery 
efforts. 

Member States’ activities to recover TOR are monitored by means of inspections. 

6. 

CONCLUSIONS AND RECOMMENDATIONS 

In  2014,  the  new  regulatory  framework  for  the  spending  programme  2014-2020  was  put  in 
place, with special emphasis on anti-fraud measures. This coincided with the establishment of 
the new Commission, bringing with it a renewed impetus in the fight against fraud. 

6.1. 

Improved  coordination  and  cooperation:  a  new  impetus  in  the  fight  against 
fraud 

6.1.1.  Reinforced legal and administrative structures for enhanced cooperation 

Significant  steps  were  taken  in  2014  to  enhance  the  Commission’s  and  the  Member  States’ 
protection of the EU’s financial interests. 

In 2014, the Commission successfully completed the priority actions of its multi-annual Anti-
Fraud  Strategy  (CAFS).  While  the  focus  of  CAFS  is  primarily  upon  developing  anti-fraud 

29 

Financial correctionsRecoveriesTotalVariation 2014/13Financial correctionsRecoveriesTotalVariation 2014/13Agriculture1 8693782 24754%8823171 19921%EAGF1 6492131 86274%79615094649%Rural Development2201653850%86167253-30%Cohesion Policy2 016352 05138%1 357321 389-25%ERDF1 3301 330293%823182432%Cohesion Fund29229233%191191-31%ESF3421343-61%2891290-67%FIFG/EFF392968100%412566136%EAGGF Guidance13518500%1351813%Other0-100%0-100%Internal policy areas5293298-25%5274279-30%External policy areas12712737%108108-16%Administration55-17%55-17%Total in 20143 8908384 72838%2 2447362 980-11%Total in 20132 4959413 4362 4728623 334Variation 2014/1356%-11%38%-9%-15%-11%Budget sectorConfirmed/decided (million EUR)Implemented (million EUR) 
 
strategies  at  Commission  service  and  agency  level,  the  Commission  is  now  increasingly 
focusing on how to support Member States in developing their own anti-fraud strategies. 

Regulation  (EU)  No  883/2013  provides,  inter  alia,  for  enhanced  cooperation  with  Member 
States through the appointment of an AFCOS. 

At the end of 2014, all Member States had designated their AFCOS. The responsibilities of 
each national AFCOS vary, depending on the Member State. All Member States have given 
their  AFCOS  coordinative  responsibilities,  albeit  to  varying  extents.  Only  a  few  Member 
States empower their AFCOS to act in an investigative capacity. 

Structured coordination between anti-fraud bodies and other national authorities has proved to 
be a best practice and should be implemented in all Member States. 

Recommendation 1: 

Member States are encouraged to use their AFCOS to its full potential. 

The  Commission  suggests  that  cooperation  between  relevant  national  parties  be 
developed in the framework of national anti-fraud strategies. 

6.1.2.  Measures to fight fraud and corruption in public procurement 
In February 2014, the first EU anti-corruption report was adopted93 and the revised package of 
public procurement Directives and a new concessions Directive entered into force. 

The  transposition  of  these  Directives  gives  the  Member  States  an  opportunity  to  enhance 
transparency and strengthen their anti-fraud efforts, by defining conflict of interest, making e-
procurement  mandatory  and  introducing  monitoring  and  reporting  obligations  to  curb 
procurement fraud and other serious irregularities. 

In  addition,  Member  States  took  a  significant  number  of  legislative  and  administrative 
measures aimed at strengthening anti-fraud work in the area of public procurement. 

Recommendation 2: 

During the public procurement process, conflict of interest can cause serious harm to 
the public budget and to the reputation of the EU and the Member States concerned. 

Member States are invited not only to transpose the definition of ‘conflict of interest’ 
contained in the Public Procurement Directive, into national legislation but also to put 
effective measures in place to tackle conflicts of interest. 

6.1.3. 

Sectoral measures: expenditure 

In  2014,  the  main  regulatory  provisions  for  the  2014-2020  spending  programmes  were 
finalised. For the first time, they contain a specific requirement for national authorities to put 
in  place  effective  and  proportionate  anti-fraud  measures,  taking  into  account  the  risks 
identified.  These  anti-fraud  measures  should  ideally  be  embedded  in  national  anti-fraud 
strategies. 

Guidelines on fraud risk assessment and effective and proportionate anti-fraud measures were 
prepared  by  the  Commission  together  with  the  national  authorities  in  201494.  One  of  the 
guidance  documents  aims  to  assist  Member  States  in  establishing  national  anti-fraud 
strategies. 

93 

94 

See section 4.1.4. 
In 2013 and 2014. 

30 

 
                                                 
6.1.4. 

Sectoral measures: revenue 

The revised Regulation 515/97 on mutual administrative assistance in the customs area paves 
the way for the creation of an EU database on goods entering, transiting and leaving the EU. 
In addition, the introduction of a container monitoring system will allow container movements 
to be analysed, in order to identify potentially fraudulent activities. 

6.1.5.  What lies ahead 

Two  major  legislative  proposals  submitted  to  the  co-legislators  in  previous  years  are  still 
awaiting approval: 

(1) 

a directive on the fight against fraud by means of criminal law; 

(2) 

a regulation setting up the European Public Prosecutor’s Office. 

The adoption of these proposals would complement and strengthen the legal framework and 
would considerably reinforce the fight against fraud, in particular through the establishment of 
a European body equipped with full investigative powers. 

6.2. 

Increasing detection: results and open issues 

6.2.1.  Expenditure 

On  the  expenditure  side,  the  fluctuation  in  the  number  of  fraudulent  irregularities  reported 
over the last five years is difficult to interpret. However, apart from the years 2011 and 2012, 
the amounts concerned have remained relatively stable. This might reflect the fact that most 
spending programmes are multi-annual and the level of detection follows their cyclical nature. 

The  role  of  Managing  and  Paying  Authorities  in  detecting  fraud  has  grown  since  2012  and 
should be further enhanced in the coming years, pursuant to the new regulatory framework for 
the period 2014-2020. 

Fraud  detection  practices  still  differ  between  Member  States  and  the  Commission  is 
concerned  about  the  low  number  of  potentially  fraudulent  irregularities  reported  by  some 
countries. However,  the number of Member States  which report  no, or very few, fraudulent 
cases  has  fallen  in  recent  years.  The  Commission  will  continue  to  provide  guidelines  to 
improve  the  convergence  of  national  systems  and  to  raise  awareness  of  fraud,  in  order  to 
protect the EU’s financial interests more efficiently. 

In 2014, Italy and Romania were the most effective countries in detecting potential fraud in 
the agriculture sector95. Germany, Poland and the Czech Republic were the most effective in 
the cohesion policy area. 

Overall, Germany was the most effective Member State regarding the detection of fraud.  

Recommendation 3 

As  some  Member  States  continue  to  report  a  very  low  number  of  fraudulent 
irregularities,  the  Commission  recommends  strengthening  their  work  in  relation  to 
detecting and/or reporting fraud, in particular, as they have not reported any over the 
last five years: 

- 

- 

95  

in the area of agriculture: Slovakia and Finland. 

in the area of cohesion policy: Denmark and Luxembourg.  

Hungary  reported  the  highest  number  of  fraudulent  irregularities  uncovered  during  the  course  of  an  OLAF 
investigation. 

31 

 
                                                 
The  Commission  takes  note  of  progress  made  in  reporting  by  some  Member  States, 
such  as  France  and  Spain  in  the  cohesion  policy  area,  but  believes  that  there  is  still 
considerable room for improvement. 

Although satisfactory, the quality of the reported irregularities could be further improved, in 
particular  in  relation  to  the  classification  of  fraudulent  irregularities  and  the  timing  of 
reporting, as highlighted by the analysis of the Member States’ replies to the questionnaire. 

Given  the  new  rules  on  the  reporting  of  irregularities  currently  being  adopted,  and  the 
remaining  areas  for  improvement  identified  by  the  Commission  following  analysis  of  the 
information  provided  by  the  Member  States,  the  Commission  will  prepare  a  working 
document on the practicalities of the reporting of irregularities, in close cooperation with the 
Member States. 

6.2.2.  Revenue: Updating control strategies 

In 2014, on the revenue side, the number of detected irregularities and, in particular, the level 
of  the  established  amounts  increased  significantly  in  comparison  with  previous  years. 
Considering the risks of cross-border fraud, the Commission believes that close cooperation 
between the Member States and exchange of information beyond the borders for purposes of 
customs  controls  is  to  be  welcomed.  Exchange  of  information  on  customs  transactions, 
economic  operators  or  debts  should  ensure  that  all  customs  transactions  and  economic 
operators are included in the populations for post-clearance controls, regardless of the place of 
physical  importation  of  goods,  or  the  place  where  the  economic  operator  is  located. 
Information  received  from  other  Member  States  should  be  integral  to  risk  management  and 
supplement  the  national  populations  used  for  risk  management  purposes.  Absence  of  such 
cooperation might result in financial liability in the area of TOR. 

Based on the figures for 2014, it can  be concluded that  cases of fraud  and  irregularities  are 
detected  much  more  often  after  the  clearance  of  goods.  It  should  be  kept  in  mind  that  a 
combination  of  different  control  strategies  is  required.  However,  post-clearance  controls  are 
the most effective method of detection, both in terms of the number of cases detected and in 
terms  of  established  amounts.  Controls  at  the  time  of  clearance  of  goods  and  inspections 
carried out by anti-fraud services are crucial to the detection of certain types of existing fraud 
and new types of fraud. 

Furthermore,  mutual  assistance  notices  issued  following  JCOs  conducted  by  OLAF  are  an 
important source of information for detection of irregularities in transactions involving certain 
types of goods. 

Recommendation 4 

To  fight  customs  fraud,  Member  States  are  invited  to  inform  the  Commission  of  the 
measures taken to strengthen cooperation in order to ensure that all transactions, and 
all  economic  operators,  are  included  in  the  population  for  post-clearance  controls, 
irrespective  of  whether  or  not  the  importer  is  located  in  the  Member  State  of  the 
physical importation.  

Considering  the  decreasing  number  of  customs  controls  at  the  time  of  clearance, 
Member  States  are  invited  to  exchange  experiences  where  customs  authorities  were 
particularly successful in detecting fraud or irregularities at the time of clearance.  

32 

 
 
 
ANNEX 1 — Irregularities reported as fraudulent 

(The number of irregularities reported as fraudulent measures the results of Member States’ work to counter fraud and other illegal activities affecting 
the EU’s financial interests; it should not be interpreted as the level of fraud in the Member States’ territories). Totals differ from Table 1 as Annex 1 
does not include Third Countries (pre-accession) and Direct expenditure. 

33 

N€N€N€N€N€N€Belgique/België1390 00033 230 34843 620 3482613 328 963Bulgaria11506 4675772 5843883 19363 836 555255 998 7992510 549 202Ceská republika4273 5893836 394 5014236 668 09100Danmark350 349350 3492695 560Deutschland6146 831657 067 858717 214 6901256 197 315Eesti41 053 24341 613 78482 667 0262108 304Éire/Ireland33388 42033388 42042 249 080Ellada12741 437137 831 942258 573 379308 247 512España19575 7434394 45223970 19512031 610 207France173 251 655132 648 689215 900 34413133 788 803Hrvatska1108666 342Italia545 812 8883370 6548721 271656 904 8135154 423 351Kypros240 4621126 3163166 778222 192Latvija11715 218277 044 371387 759 59020987 566Lietuva61 603 8462283 77381 887 62014712 907Luxembourg0000Magyarország1786 675 246302 111 9892088 787 2357171 088Malta161 814161 8142326 396Nederland32 105 33932 105 3397414 169Österreich00223 455 606Polska7831 838 80745178 186 064123210 024 871373 618 513Portugal62 633 580128 97912 629 33385 291 8911150 068Romania538 560 8821968 7332512 173 753163 177 2339524 880 60014381 856Slovenija3679 52576 779 604107 459 129111 009 264Slovensko111 102 103111 102 1033256 714Suomi/Finland114 181114 181376 017Sverige17 54327 755315 297195 624United Kingdom5457 58510864 894151 322 478422 676 250TOTAL50866 465 130112 140 949306274 215 514237 013 788848349 835 381710176 218 869REVENUEMember StatesAgricultureFisheriesCohesion PolicyPre-AccessionTOTAL EXPENDITURE 
 
 
 
ANNEX 2 — Irregularities not reported as fraudulent  

Totals differ from Table 2 as Annex 2 does not include Third Countries (pre-accession) and Direct expenditure. 

34 

N€N€N€N€N€N€Belgique/België10158 0988511 621 1499511 779 2471216 205 170Bulgaria171 657 7567328 65017728 709 867451 123 64924631 819 9224185 274Ceská republika482 606 617211 744982290 890 4611 032293 508 8228311 557 085Danmark24561 9847377 06831939 051684 647 124Deutschland623 066 016114 12028219 573 29734522 653 4331 33872 120 974Eesti481 498 0659191 886538 288 4711109 978 4226140 863Éire/Ireland1003 101 07813153 685 65023156 786 728242 067 028Ellada731 582 488226107 242 238299108 824 726121 292 094España41724 936 67612842 444167381 229 728596407 008 84828816 277 914France15827 504 8709991 63417039 310 73533767 807 23928328 031 020Hrvatska27171 16027171 1602130 002Italia42433 068 574216 58327271 197 937698104 283 0941048 707 647Kypros19427 5534186 87723614 4299140 537Latvija291 010 9039212 741 67012113 752 5737850 644Lietuva1115 852 003350 53612136 804 05623542 706 595352 212 533Luxembourg0000Magyarország34519 489 8552324 55919015 924 46053735 738 874782 268 155Malta257 08514981 879161 038 96400Nederland14026 051 920124 892405 181 19918131 258 01038943 748 347Österreich28504 607562 038 206842 542 812582 761 902Polska1534 780 3026847 041681121 528 992840127 156 3351767 725 213Portugal24011 996 19113970 3929821 202 51635134 169 099543 249 925Romania69155 909 86031 156 31933040 601 669315 495 0191 055103 162 866618 059 449Slovenija21631 982110 620378 952 008599 594 6108182 398Slovensko371 216 977141 065267239 883 9781718306241 142 738321 497 052Suomi/Finland26479 858591 67412336 60743908 139321 371 455Sverige30831 683482 988291 114 918632 029 589684 063 419United Kingdom741 935 79210594 41145441 714 07253844 244 2751 135572 885 031TOTAL3 327230 918 791916 591 5574 9771 561 319 7071046 790 5468 4991 805 620 6024 475802 378 256REVENUEMember StatesAgricultureFisheriesCohesion PolicyPre-AccessionTOTAL