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# 52001DC0255

**Annual Report 2000 Protection of the Communities' Financial Interests and the Fight Against Fraud /\* COM/2001/0255 final \*/**

  

Annual Report 2000 Protection of the Communities' Financial Interests and the Fight Against Fraud

(presented by the Commission)

TABLE OF CONTENTS

Title I: The activities of the Community

1. The protection of financial interests: the development of the horizontal legal framework

1.1. Legal instruments

1.1.1. Preventing money-laundering

1.1.2. Currency counterfeiting

1.1.3. Counterfeit goods and piracy

1.1.4. Public procurement

1.2. Judicial instruments

1.2.1. Proposal to establish the office of European Public Prosecutor for the protection of the Community's financial interests

1.2.2. Judicial cooperation in penal matters

1.3. Crime prevention

2. Protection of the Community's financial interests: noteworthy developments in the sectoral fields

2.1. Customs duties and indirect taxation

2.1.1. Transit arrangements

2.1.2. Indirect taxation

2.2. Traditional own resources

2.3. Agriculture

2.3.1. The banana import rules

2.3.2. Decisions on clearance of accounts

2.4. Structural measures

2.5. Direct expenditure

2.6. Intersectoral measures: recasting the Financial Regulation

2.7. Implementation of Commission reform

2.7.1. The improvement of financial management and control

2.7.2. The protection of the Community's financial interests in the White Paper

3. The operation of Olaf

3.1. A new structure

3.2. The power of investigation of the European Anti-fraud Office

3.3. An overall anti-fraud strategy

3.4. Reporting

4. Cooperation and partnership

4.1. With the Member States

4.1.1. Cooperation with internal audit services in the field of traditional own resources

4.1.2. Operational cooperation

4.1.2.1. Illicit trafficking in products containing butter

4.1.2.2. Illegal dollar banana imports in the Community under cover of false import licences

4.1.2.3. The fight against cigarette fraud

4.1.2.4. Coordinating investigations in the Structural funds

4.2. Mutual assistance with the countries applying for accession

4.2.1. Administrative cooperation

4.2.2. Operational cooperation

4.3. Mutual assistance with non-member countries

4.3.1. Draft cooperation agreement with Switzerland to fight against fraud and the other illegal activities to the detriment of the financial interests of the Communities, of the Member States and of Switzerland

4.3.2. Mutual administrative assistance in customs matters with Russia

Title II: Measures adopted by the Member States with a view to protecting the Community's financial interests (1 May 1999 - 31 December 2000)

5. Main changes on the legislative and administrative levels

5.1. Own resources

5.2. Agricultural expenditure

5.3. Structural Funds and Cohesion Fund

6. Main changes in the organisation of control services

6.1. Own resources

6.2. Agricultural expenditure

6.3. Structural Funds and Cohesion Fund

7. Cooperation between competent authorities

7.1. Own resources

7.2. Agricultural expenditure

7.3. Structural Funds and Cohesion Fund

8. The recovery issue

8.1. Own resources

8.2. Agricultural expenditure

8.3. Structural Funds and Cohesion Fund

9. Highlights of the fight against fraud

9.1. Own resources

9.2. Agricultural expenditure

9.3. Structural Funds and Cohesion Fund

10. Additional texts on protecting the Community's financial interests

10.1. Key elements and the state of ratification of the 1995 Convention and its Protocols

10.2. Measures adopted implementing the Convention and its Protocols

Title III: Statistics and analyses

11. FRAUDS AND IRREGULARITIES

12. THE SITUATION IN 2000

12.1. The overall level of fraud and other irregularities

12.2. Cases of fraud communicated by the Member States

12.3. Cases under investigation by OLAF

13. TRENDS

13.1. The field of traditional own resources

13.1.1. Introduction

13.1.2. Analysis of data communicated by the Member States

13.1.3. Conclusion

13.2. Agricultural expenditure (EAGGF Guarantee)

13.3. The field of structural measures

13.4. Direct expenditure

14. FINANCIAL FOLLOW-UP

14.1. Determining factors

14.2. Recovery

14.2.1. Traditional own resources

14.2.2. EAGGF Guarantee Expenditure

14.2.3. Structural measures

ANNEXES

ANNEX 1

ANNEX 2

ANNEX 3

ANNEX 4

ANNEX 5

ANNEX 6

ANNEX 7

ANNEX 8

ANNEX 9

ANNEX 10

ANNEX 11

introduction

Henceforth, the new article 280, paragraph 5 of the EC Treaty makes the Community and the Member States jointly responsible for the fight against fraud and other illegal activities detrimental to the Communities' financial interests. This annual report [1] consequently dedicates an important part to the measures taken by the Member States in this area.

[1] The new mechanism was the subject of an overall presentation in the annual report on protecting the Communities' financial interests and the fight against fraud for 1999 (COM(2000) 718 final) adopted on 08.11.2000

Regarding the operational aspects of the fight against fraud [2], these will be presented in a specific report for the period after June 2000 and published in the second half of 2001, so that the Commission will be able to refer to it in its own yearly report.

[2] A first activity report by the European Anti-fraud office (1st June 1999-31st May 2000) was adopted on 23.05.2000. This report is published annually from the date of the establishment of the Office (1st June 1999).

The Commission's 2000 annual report, which is the second on the new treaty base, therefore summarises in its first part the Community initiatives concerning protection of the financial interests (significant legislative developments including instruments coming under Title VI of the Amsterdam treaty and sectoral legislation). It reports in its second part on measures taken by the Member States in 1999-2000 and covers in a third and final part the statistical information communicated by the Member States, under the terms of sectoral regulations, on their activities in the fight against fraud in the main Community policies.

A first part covers the legislative and horizontal regulatory initiatives, and then the sectoral legislation. For the former, the report mentions in particular initiatives in 2000 to strengthen the penal judicial dimension, more particular those linked to the objective of establishing an area of freedom, security and justice. This part also covers the implementation of the White paper on reform in its aspects concerning the protection of financial interests. The operation of the Office, in its reporting activities and in its role amid the institutions, is raised specifically also to illustrate the manner in which it sets up vertical cooperation activities with the competent national authorities (article 280, paragraph 3 of the Treaty) and technical and operational assistance.

This part also covers some of the actions undertaken by the Community in partnership with the main actors in the protection of financial interests and the fight against fraud : concrete examples are given to illustrate what operational cooperation on the ground with the Member States and the accession candidate and third countries may be in aiming for effective and equivalent protection of the Union's finances against fraud and any other illegal activity.

A second part draws the consequences of the ratification of the Amsterdam Treaty and the implementation of the new article 280, paragraph 5 which provides also for the activity of the Member States to be reported. For the first time, the Commission report summarises the resources implemented in 1999 and 2000 by the Member States for the protection of the Communities' financial interests, on the basis of a concerted working methodology. The Member States effectively assume, in practice, the responsibilities conferred on them by the Treaty.

A third part contains an analysis of the data gathered from the Member States resulting from the Community's investigation activity to identify the main trends in fraudulent activity or irregular practices as well as the overall results in terms of recovery and financial follow up. In this context it is important to recall that the detection and follow up of cases of fraud and other irregularities committed against the Communities' financial interests must be carried out by the Member States and the Commission in close cooperation.

The year 2000 marks a new development in the level of irregularities, including fraud established by the Member States or suspected by OLAF. The figures however must be interpreted in a cautious manner given the heterogeneous character of the data given by the Member States. After a period of stabilisation, the amounts involved are on the increase in several areas. Regarding EAGGF-Guarantee expenditure and traditional own resources (respectively, 474.5 million euros and 534,6 million euro, equivalent to 1,17% and 3,5% of the Community budget), the doubling in the sums is explained in part by the impact of some very significant cases. In the area of the structural funds, where the amounts show a slight decrease (114.2 million euros, 0,45% of the budget), the increase in the number of cases indicates the increased effectiveness of checks. The direct expenditure sector, with a total of 170 million euros and 148 cases (1,33% of the budget), shows a strong increase (both in amounts and number), particularly for external policies : this reflects the priority accorded by the Office to this area of activity. Moreover, the observations concerning recovery by the Member States provide the opportunity to raise the mediocre development in the results and to present the initiatives under way and the ways towards a better follow up and greater efficiency in this activity.

Title I: The activities of the Community

1. The protection of financial interests: the development of the horizontal legal framework

1.1. Legal instruments

Following intensive legislative activity to protect financial interests and combat fraud in 1999, there were mainly initiatives in related matters in 2000.

There was indeed little change in the horizontal legislation, pending ratification of the main third-pillar instruments by the Member States. [3] On the other hand, the Commission adopted several new instruments to protect financial interests and combat fraud, corruption and other illegal activities, including economic and financial crime, directly or indirectly jeopardising those interests.

[3] Convention on the protection of the European Communities' financial interests of 26 July 1995 and its protocols.

1.1.1. Preventing money-laundering

Community fraud often appears to be a precursor to money-laundering. Experience has shown that the money-gathering circuits that are detected are in reality shared with fraudulent activities linked to other forms of crime. To protect the Community's financial interests, the importance of mutual administrative cooperation information interchanges with national authorities with power to deal with suspect financial transactions has regularly been stressed. In this context, the Commission proposal for a Parliament and Council Directive [4] amending Directive 91/308/EEC of 10 June 1991 on the prevention of the use of the financial system for the purposes of money-laundering contained a specific provision allowing the Commission (OLAF) to cooperate and exchange information with the authorities of the Member States responsible for combating laundering in cases affecting the Community's financial interests.

[4] COM(1999) 352 final, OJ C 177, 27.6.2000.

A political agreement on the proposal has been reached in the Council, notably as regards the obligations of financial professionals and intermediaries and the definition of the concept of "criminal activity". In its common position of 30 November 2000, the Council had not accepted the original provision on cooperation with the Commission; however in its conclusions of 17 October 2000 [5], it declared that it was aware of the practical value of an information exchange mechanism and asked the Commission to present a new proposal.

[5] Conclusions of the Ecofin/JHA Council of 17.10.2000, notably point 9, part B.

1.1.2. Currency counterfeiting

Following its communication to the Council, the European Parliament and the European Central Bank of 22 July 1998 on the protection of the euro and the fight against counterfeiting, [6] the Commission presented a proposal for a Council Regulation on the protection of the euro against counterfeiting on 26 July 2000. [7]

[6] COM (1998) 474 final.

[7] See Commission annual report for 1999 on the protection of the Communities' financial interests and the fight against fraud: COM (2000) 718 final. Proposal: COM (2000) 492 final of 26.7.2000, OJ C 337E of 28.11.2000.

The proposal covered:

- gathering and accessing technical data and the obligations to transmit false euro notes and coins for identification;

- the obligations of credit establishments and other establishments involved in exchanging different currencies;

- the establishment of an anti-counterfeiting unit in Europol, responsible in particular for managing an operational and strategic information system;

- the national centralisation of information relating to cases of counterfeiting and the reporting obligation via the Europol national unit (and the nature of the information covered);

- questions of cooperation and mutual assistance, including the establishment of an early warning system and cooperation with non-member countries.

The proposal was considered by the Council's Anti-fraud Working Party under the French Presidency, and a political agreement was then reached. [8] Although the Commission's proposed provisions on relations between national police authorities and Europol were not retained, Europol will give them its support on the ground in accordance with its general remit [9] and the Europol Convention. [10]

[8] ECOFIN Council, 12 February 2001. The Commission welcomed the fact the main components of its proposition were included in the draft Regulation on which that agreement was reached.

[9] Council Decision of 29 April 1999 extending Europol's mandate to the fight against currency counterfeiting and falsification of means of payment; OJ C 149, 28.5.1999.

[10] Council Act of 26 July 1995 drawing up the Convention on the basis of Article K.3 of the EU Treaty on the establishment of a European Police Office; OJ C 316, 27.11.1995.

The purpose of the Regulation is to ensure that all activities are situated within a comprehensive and multidisciplinary approach reflecting the dimension of the single currency and the complementary roles of each institution or body and the Member States. Coordination is organised with the establishment of a steering group representing the various institutional partners (Commission, European Central Bank, Europol) and the continuation of work with national experts.

1.1.3. Counterfeit goods and piracy

On 30 November the Commission adopted a communication, [11] together with a plan of action, on the Follow-up to the Green Paper on combating counterfeiting and piracy in the single market, [12] in response to a Resolution passed by the European Parliament on 4 May. This Green Paper recalls that economic crime jeopardises intellectual property (industrial, agricultural and commercial counterfeiting, Community trade mark) and thereby engenders deflections of business in the internal market. It also affects the distribution of the tax effort made by the Member States via the "fourth resource", which is based on national wealth accounts. The economic impact of goods counterfeiting cannot be underestimated. [13]

[11] COM(2000) 789.

[12] COM(1998) 569.

[13] The estimated value of counterfeit goods seized by customs in 2000 exceeds 1,3 billion euro.

The action plan aims to supplement measures to check counterfeit and pirated goods at the Union's external borders to meet the needs of the single market [14], as well as measures taken to combat counterfeiting and piracy in relations with non-member countries and under multilateral agreements. In particular, provision is made for the Commission to consider in the medium term the value of establishing specific administrative cooperation mechanisms with the Member States, possibly based on those that exist in other areas, wherever Community interests are at stake.

[14] Council Regulation (EC) No 3295/94 of 22 December 1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods (OJ L 341, 30.12.1994).

1.1.4. Public procurement

In the particularly sensitive area of public procurement, the Commission wishes above all to reinforce preventive measures. It accordingly adopted a proposal for a Parliament and Council Directive on 30 August 2000 [15] which contains, among other things, a compulsory mechanism for excluding tenderers who have been convicted of conspiracy, corruption or fraud against the Community's financial interests, and an optional mechanism to exclude "untrustworthy" economic operators.

[15] Proposal for a directive on the coordination of procedures for the award of public supply contracts, public service contracts and public works contracts (COM (2000) 275 final, 30.8.2000).

1.2. Judicial instruments

Many initiatives that came to fruition in 2000 for stronger legislative and judicial cooperation between the Member States in criminal matters will support the protection of the Community's financial interests.

1.2.1. Proposal to establish the office of European Public Prosecutor for the protection of the Community's financial interests

On 29 September 2000, as announced in its opinion of 26 January 2000 "Adapting the institutions to make a success of enlargement", the Commission adopted a communication proposing the establishment of the office of European Public Prosecutor for the protection of the Community's financial interests. [16] The proposal is based on detailed preparatory work done by a group of experts in criminal law that had produced the more general proposal known as the Corpus juris. [17] With this proposal the Commission is reaffirming the political priority attached to the fight against fraud and thus meeting the concerns expressed by the European Parliament in its Resolution of 14 April 2000 on the Intergovernmental Conference.

[16] COM (2000) 608.

[17] Corpus juris introducing penal provisions for the protection of the financial interests of the European Union (group chaired by Ms Delmas-Marty). Paris: Economica, 1997.

The Commission proposes a new Article in the EC Treaty providing simply for a legal basis for the establishment of the European Pubic Prosecutor with powers strictly confined to the protection of the Community's financial interests as defined by Article 280. This reflects the philosophy of the Amsterdam Treaty which, for the first time, made the Community and the Member States jointly responsible for the protection of the Community's financial interests.

The Commission considers that establishing the European Public Prosecutor is necessary for the effective criminal-law protection of the Community's financial interests, for which it has a special responsibility under the Treaties. The establishment of the European Anti-fraud Office (OLAF) did indeed facilitate the detection of acts detrimental to the Community's financial interests throughout the Union. But prosecution in the criminal courts on the basis of OLAF's findings still encounters the ongoing limits to judicial cooperation between Member States.

The Prosecutor would be responsible for detecting and prosecuting violations of Community interests in the national courts, but would not supersede the national courts, particularly at the judgment stage. On the contrary, the aim is to help them do their job by presenting them with the facts detected across Union territory and thus removing the barriers raised by the fact that law enforcement is spread over fifteen - soon more - Member States, each with its own rules and procedures.

The Intergovernmental Conference did not adopt this proposal, so on 31 January 2001 the Commission announced [18] that it would prepare a Green Paper to relaunch the debate on its proposal to establish a European Public Prosecutor, in view of its reconsideration at the next IGC. The Commission still considers that, in the absence of a legal base, modification of the Treaty will be necessary. [19] As requested by the European Parliament, the White Paper will especially deepen the Commission's reflections on the tasks and functioning of the public prosecutor with regard to the protection of the Community's financial interests. It is to be adopted before the end of 2001, in view of the Laeken European Council. In the course of 2002, consultations will be launched with interested parties on the largest possible basis.

[18] Commission Work Programme for 2001 (COM (2001) 28).

[19] See Mrs Schreyer's intervention before the European Parliament, in reply to its Resolution of 14.03.2001 on the Commission's annual report for 1999.

1.2.2. Judicial cooperation in penal matters

The European Council that was held on 15 and 16 October 1999 in Tampere, at a special meeting devoted to the area of freedom, security and justice, called inter alia on the Council to adopt a legal instrument allowing for a European judicial cooperation unit (Eurojust) to be established by the end of 2001. The Commission contributed to the negotiations for the draft Council decision on Eurojust with a communication adopted on 22 November 2000 (COM (2000) 746 final). Here the Commission specifies that with regard to criminality affecting the Community's financial interests, it will be necessary to establish close cooperation between OLAF and Eurojust to ensure that each brings its value added, in accordance with its mission and its field of competence.

The Tampere European Council also addressed the question of mutual recognition as regards judicial cooperation, a question which had already been discussed at the Cardiff European Council, in 1998. On 26 July 2000, the Commission adopted a communication [20] calling for the adoption of an arrangement for mutual recognition of final judgments in criminal matters between the Member States of the European Union. The aim was to initiate detailed discussions, in an area where traditional judicial cooperation is characterised by the slow, complex and uncertain principle of the "request" (between non-obliged sovereign States) [21]. The communication proposes to find answers to a number of related questions (mutual recognition of judgments imposing fines in general, measures concerning the criminal record of a person, the forfeiture of rights, substitute sentences and judicial review, confiscation of assets after sequestration, for example).

[20] Commission Communication of 26 July 2000 (COM(2000) 495).

[21] This communication was supplemented by a Commission and Council work programme on mutual recognition, adopted in December 2000 (OJ C12 of 15.01.01).

1.3. Crime prevention

More generally, the Commission believes that the anti-fraud strategy should be supplemented by a general crime prevention approach. To this end, it adopted a communication on 29 November 2000 (COM(2000) 786 final) on crime prevention in the European Union, which proposes a European strategy consisting of developing crime prevention in European Union policies, improving familiarity with the phenomena of crime and networking all those active in prevention (public bodies, enforcement and judicial authorities, members of the business world and civil society).

The implementation of this strategy should, among other things, enjoy European Union financial support, for which the Commission proposes a Council Decision establishing a programme of encouragement, exchanges, training and cooperation in the field of crime prevention (Hippokrates).

2. Protection of the Community's financial interests: noteworthy developments in the sectoral fields

2.1. Customs duties and indirect taxation

2.1.1. Transit arrangements

Customs transit is one of the pillars of integration in Europe and is of vital interest to European companies. It enables goods to move with temporary suspension of the duties and levies normally applicable to goods imported into the European Community or moving between the Community and its partners. [22] For the countries of Central and Eastern Europe, access to the common transit procedure plays a key role in their pre-accession strategy. In recent years the financial impact of frauds in the context of transit operations has meant considerable losses for the national budgets and Community.

[22] The European Free Trade Area and the Visegrad countries (Poland, Czech Republic, Slovakia, Hungary, in the framework of the Common Transit Convention) are currently concerned, as are the 64 countries that are currently parties to the TIR Convention.

To boost the reliability of transit procedures, the Customs Code was first amended to make transit operations secure (control of the end of the operations, procedures for recovery of the debt). [23] The reform as a whole aims to reduce both the risks attached to persons responsible for the transit operations (reliability criteria for giving operators the benefit of the simplified procedure) and the risks attached to goods moving under cover of a transit declaration, with suspension of duties and levies (amount of the guarantee must match the financial risk attached to goods).

[23] Parliament and Council Regulation (EC) No 955/1999 of 13 April 1999 amending Council Regulation (EEC) No 2913/92 with regard to the external transit procedure (OJ L 119, 7.5.1999), supplemented by amendments to the provisions implementing the Customs Code (Commission Regulation (EC) No 2787/2000 of 15 December 2000 - OJ L330 of 27.12.2000) and the Protocols to the Common Transit Convention (Decisions No 1/2000 of the EC-EFTA Joint Committees of 20 December 2000 - OJ L9, 12.1.2001).

The other aspect of this reform is the computerisation of customs transit procedures. The establishment of the European plan for a computerised network for the management and monitoring of movements of goods in transit is based on multinational administrative cooperation. The New Computerised Transit System (NCTS) was launched in May 2000 and will be extended gradually, both geographically and functionally, to all the Member States and to the countries which are contracting parties to the common transit convention of 20 May 1987. [24]

[24] Germany, Spain, Italy, Switzerland, Norway, the Netherlands and the Czech Republic.

On 16 November 2000, an agreement was reached in the Council on a revision of the Customs Code [25] to facilitate computerisation of the customs declaration and the modernisation of procedures (easing of customs operations with an economic impact). This amendment aims to better protect operators acting in good faith who import assets under a preferential scheme on the basis of a declaration of origin provided by the third country's authorities, by introducing safeguard measures against errors by these authorities which engender losses of benefits and corresponding customs debts. Good faith, however, cannot be invoked by an importer when the Commission has issued a warning regarding the sound application of such a preferential treatment to a beneficiary country. Such warning ensures that interested parties are advised against the risks of importing from such a country. [26]

[25] Parliament and Council Regulation (EC) No 2700/2000 amending Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ L 311 of 12.12.2000).

[26] Commission Communication to the Council and the European Parliament, 8.9.2000 (COM(2000) 550 final.

2.1.2. Indirect taxation

Fraud in respect of VAT and excise duties primarily concerns the revenue of the national public treasures, but it also has an impact on the share of VAT which constitutes the Community's own resources, as defined by Article 2 of the own resources Decision. It also has a link with organised crime, which makes use of all available instruments (tax evasion, financial fraud, corruption and trafficking) to thwart fair economic competition. The level of serious VAT fraud in intra-Community trade is already high and rising (increasing number of "carrousel" cross-border frauds.

A report adopted on 28 January 2000 [27] noted that Member States still had not adapted their value added tax (VAT) control systems to take account of the removal of tax controls at borders, more than six years after their removal. Following the recommendations issued by the anti-fraud subcommittee of the Commission and by the Council ad hoc working party on tax fraud, the Economic and Financial Affairs Council of 5 June 2000 invited the Member States to rationalise the information exchange system and adapt their control systems. It also asked the Commission to make proposals on the basis of the recommendations of the ad hoc group.

[27] Report on administrative cooperation in the field of indirect taxation VAT collection and control procedures - COM(2000) 28 final.

The Commission announced in its communication to the Council and to the Parliament that, in order to improve the operation of the VAT system in the internal market27 it will propose a reinforcement of the current legislative provisions with regard to administrative cooperation and mutual assistance.This report also recommends that the Member States should develop risk analysis systems in order to target limited resources on the tax authorities. Within the framework of its powers, the Commission has encouraged initiatives from the Member States in this area, by financing exchanges of officials and seminars on risk analysis through the FISCALIS programme.

In relation to excise duties, following the recommendation of the high level group on tobacco and alcohol fraud, the Commission approved a feasibility study on the possibility of setting up a computerised system for the movement and control of goods subject to excise duties. Furthermore, work has been going on with the aim of improving the functioning of the previous information system put in place in December 1998.

2.2. Traditional own resources

In 2000, a legislative initiative was taken in relation to the Communities' own resources: the publication of Council Decision 2000/597/EC, EURATOM of 29 September 2000 relating to the system of traditional own resources, which will take effect from 1.1.2002 [28]). This decision, which will enter into force after ratification by all the Member States, allows the Member States to retain, as collection expenses, 25% of amounts recorded after 31.12.2000 (against 10 % before).

[28] With the exception of Articles 2(3) and 4, which will take effect from 1.1.2001.

The entry into force of codifying Council Regulation (EC, EURATOM) n° 1150/2000 of 22 May 2000 [29] is only a preliminary step in the framework of the ongoing work aiming to modify the implementing rules of the own resources Decision.

[29] Regulation codifying the successive changes of Council Regulation (EEC, EURATOM) n° 1552/89 of 29 May 1989 (OJ L 130 of 3.05.2000).

2.3. Agriculture

2.3.1. The banana import rules

Following the discovery of fraud in connection with the use of false banana import licences (see chapter on Cooperation and Partnership), the Commission adopted a regulation aiming to strengthen controls in this sector. [30] The new provisions aim to ensure that tariff quota schemes are properly applied, in particular through checks on the authenticity of licences on the basis of periodic cross checks carried out jointly by the customs authorities where the procedures for release for free circulation are carried and the competent authorities of the Member States where licences are issued. To this end, the regulation imposes obligations on customs authorities as regards keeping and passing on licences. The Commission will regularly transmit to customs authorities a list of operators registered under the banana import arrangements.

[30] Regulation (EC) No 1632/2000 of 25 July 2000 amending Regulation (EC) No 2362/98 laying down detailed rules for the application of Council Regulation (EEC) No 404/93 regarding imports of bananas into the Community.

2.3.2. Decisions on clearance of accounts

Within the framework of the common agricultural policy, the clearance of accounts procedure is a vital instrument for controlling expenditure and provides an incentive to reduce the number of irregularities by improving control and audit systems: it makes it possible to recover amounts paid without sufficient guarantee as to the legitimacy of the payments or the reliability of the relevant Member State's control and audit systems. In 2000, the Commission recovered from the Member States EUR 633.6 million unduly spent on 1996-1999 financing. [31] This involves funds recovered on grounds of inadequate control procedures or failure to comply with Community rules on agricultural expenditure (insufficient number of inspections, shortcomings in the risk analysis procedure, failure to comply with periods allowed for payment of aid etc.), including funds recovered as a result of inspections conducted by Commission departments.

[31] Conformity decisions of 1 March and 5 July 2000, in accordance with Article 7(4) of Council Regulation No 1258/1999 of 17 May 1999 relating to the financing of the common agricultural policy (OJ L 160, 26.6.1999), and Decisions of 14.02.2000 and 28.04.2000 (OJ No L 57 of 2.3.2000 and No L 104 of 29.04.2000).

The recovered amounts have been directly taken off the monthly advance payments made to Member States. The financial corrections made by the agricultural expenditure authorising officer concern all the Member States, but there are considerable differences between the amounts to be recovered.

2.4. Structural measures

On 12 July 2000, the Commission presented two proposals for Regulations as well as guidelines concerning, on the one hand, the improvement of the financial management and control of Structural Funds expenditure and, on the other hand, the application of financial corrections in the event of irregularities in the management of funds. These new initiatives were adopted pursuant to the general regulation on the Structural Funds which provides in general terms for decentralisation of the Funds and stronger financial management. [32]

[32] Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds.

The proposed detailed rules encourage the Member States and their regions to define the respective responsibilities of the various actors involved more clearly - at national and regional level - in the management and control of structural measures, and thus to reduce errors in the implementation of the funds. When irregularities occur and Member States do not carry out the necessary recovery measures, the Commission will be able to make financial corrections for the Member States by the procedure laid down by the new provisions [33].

[33] Procedures established by the guidelines defining the principles, the criteria and the indicative ceilings to be applied by Commission services for the determination of the financial corrections intended by article 39, paragraph 3 of Regulation (EC) N° 1260/1999 (adopted at the same time as the two implementing regulations).

2.5. Direct expenditure

In a more specific area of direct expenditure, the Commission adopted a Communication on the reform of the management of external aid on 16 May. The document identifies a number of measures to strengthen financial management, the quality and speed of implementation of external aid projects, where expenditure has tripled in the last ten years and now accounts for 62 % of all programmes managed directly by the Commission. Several measures should contribute to more effective management of what has become one of the most visible fields of action of the Union: the creation of a single body to implement projects, a high degree of decentralisation of management towards the Commission's external delegations and the authorities of recipient countries, the introduction of stricter completion periods (adaptation of the Financial Regulation), the elimination of old and dormant commitments and a clearer definition of responsibilities within the project cycle.

Acting on one of the central recommendations of the Communication, the Commission decided to set up EuropeAid from 1 January 2001 as the sole cooperation office responsible for implementation of all Commission external aid instruments [34].

[34] Decision of 29 November 2000.

2.6. Intersectoral measures: recasting the Financial Regulation

Independently of the White Paper on Reform [35], but with the same objective of improving financial management, notably by simplifying and updating the rules, the Commission submitted on 17 October 2000 a proposal for recasting the Financial Regulation. [36] This proposal aims at unifying the basic principles and rules governing the budget and financial management and the more precise rules applicable to specific budgetary fields: public contracts and subsidies, accounting and financial statements, external action, EAGGF Guarantee Section, Structural Funds, research, administrative appropriations.

[35] White Paper: Commission Reform, COM(2000) 200 final.

[36] Proposal for a Council Regulation (EC, ECSC, Euratom) laying down the Financial Regulation applicable to the general budget; COM (2000) 461 final.

Pending the final adoption of the new Financial Regulation, certain transitional measures have already been implemented in 2000: in particular, audits and ex post controls have been decentralised.

2.7. Implementation of Commission reform

On 1 March 2000, the Commission presented its overall strategy for internal administrative reform, together with an action plan35, taking as a starting point the two reports of the Committee of Independent Experts. One of the priorities of this White Paper concerns financial management and control in the departments, which was the first package of reforms implemented from 2000. In addition, the White Paper incorporates several measures to contribute to boosting the protection of the Community's financial interests.

Other measures appearing in this White Paper refer to the reform of disciplinary procedures and of warning procedures which allow for an improvement in the prevention and the sanctioning of fraud and the protection of the financial interests of the Community. The communications of the Commission on the reform of disciplinary procedures and on awareness-raising in relation to serious malfunctions, and the draft decision of the Commission on the creation of an investigations and disciplinary office are all part of this improvement.

2.7.1. The improvement of financial management and control

Several initiatives appearing in the Reform White Paper refer to the improvement of financial management and control: this involves in particular actions 78 to 83 [37], which represent a deep-seated restructuring of the system of management, audit and control: integration of controls into the management process and definition of minimum control standards, abolition of the "ex ante approval" of commitments and payments by the Financial Controller, increased responsibility to be borne by financial managers in the various Directorates-General under the supervision of a new internal audit service (IAS) and under the general monitoring of an Audit Monitoring Committee made up of three Commissioners as well as an external expert, and presided over by Mrs Schreyer.

[37] Section XXVII - Management and financial control within the Directorates-General, Actions 78 to 83: minimum control standards, Separation of financial tasks and circuits, Evolution of the role of financial units inside the Directorates-General, Reinforcement of the control function of the Directorates-General, Declaration of the Director-General in his annual activity report, Sufficiency of personnel.

The new Commission approach to internal audit was clarified by guidelines and charters on the three main pillars of the new system - internal audit structures, the IAS and the Audit Monitoring Committee. [38] A charter was added in December 2000, defining authorising officers' powers and the new internal control rules.

[38] Documents adopted on 31 October 2000.

In the context of focusing the Community administration on its core functions, which constitutes one of the priorities of this White Paper, the Commission adopted its Communication on the externalisation of Community programme management, as well as a proposal for a outline decision for a new type of implementation agency. [39] These new agencies should enable the Commission to carry out Community programmes with the requisite flexibility and specialisation while preserving responsibility for management and policy-making. They thus form the core component of the consistent and controlled externalisation strategy that the Commission committed itself to developing at the end of 1999 in order to correct malpractice in the form of uncontrolled use of certain technical assistance offices (BATs). [40]

[39] Communication from the Commission: Externalisation of the management of Community programmes including presentation of a framework regulation for a new type of executive agency; Proposal for a Council Regulation laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes (COM (2000) 788 final, 13.12.2000).

[40] See the second report of the Independent Experts on the reform of the Commission, Analysis of current practices and proposals to remedy mismanagement, irregularities and fraud, in particular Chapter 2 on direct management, externalisation and BATs (Doc. 381655, 10.09.1999).

2.7.2. The protection of the Community's financial interests in the White Paper

The White Paper also contains several measures to boost the protection of the Community's financial interests: the point here is to fraud-proof legislation and financial management rules and procedures as far as possible and regulate cooperation between Commission departments and between them and the Member States more effectively. Actions 92 to 98 [41] provide also for guidelines on sound project management to make officials and recipients aware of conduct during the programme and project cycle which can cause unintentional errors, conflicts of interests and irregularities.

[41] Chapter XXX of the White Paper, Actions 92-98: Guidelines for good project management, Improvement of coordination between OLAF and other services, "Fraud-proofing" of legislation and contracts, Optimisation of the early warning system, More efficient recovery of unduly paid funds, Improved management of the Structural Funds, Improvement of the clearance of accounts procedure in the framework of the EAGGF.

The time-frame for implementing these actions is 2001, partly because of the time needed to set up the European Anti-fraud Office, with two exceptions: the optimisation of the early warning system and the improvement of the debt recovery procedure. The Reform White Paper called for the introduction on the long term of a central data base which would facilitate the management and the follow-up of contracts and grants attributed directly by the Commission, and for a mechanism making it compulsory to consult it before entering a commitment in the accounts. Given that the new system will only be set up in 2001, the Commission decided, during its meeting of 31 October 2000, to better define the responsibilities of the services involved and to increase participation by authorising departments.

As regards the improvement of recovery procedures with regard to expenditure directly managed by the Commission, a new initiative was also introduced in 2000. To increase both the recovery rate of funds wrongly paid out (which amounted to approximately 71% of outstanding amounts in 1999) and the speed of recovery, a Commission communication of 13 December 2000 [42] proposes improving the distribution of tasks between authorising officers and accounting officers (greater responsibility of administrative departments for pursuing debtors), developing management tools and redefining the role of the various actors involved in recovery - authorising officers, accounting officers and the departments directly concerned (Directorate-General for Budgets, Internal Audit Service, Central Financial Service, Legal Service and - in cases of suspected fraud or irregularity - OLAF).

[42] Communication on the White Paper's Action 96: More efficient recovery of unduly paid funds.

It is planned to give general responsibility to OLAF when a case calls for a criminal prosecution, so that OLAF can take the requisite action allowing the Commission to participate as a civil party in proceedings in appropriate cases.

3. The operation of Olaf

3.1. A new structure

On 27 September 2000, the European Anti-fraud Office adopted a new transitional organisation chart. The primary objective of the new administrative structure is to ensure continuity in work started by the old UCLAF and prepare for reorganisation of the Office to adapt to the new tasks and policy guidelines set by the legislation of 1999. It substantially meets the challenges identified by the overall strategic approach for the protection of financial interests and fraud prevention, [43] adopted by the Commission on 28 June 2000.

[43] COM(2000) 358 final.

The transitional structure of the Office comprises two directorates: a new directorate for investigations and operations and a second one for "investigations and operations". The already existing "intelligence" unit has been completely modified and is attached directly to the Director general. The accent has been placed on the intelligence function, both as regards the focus of the operational strategy and with regard to assistance to Member States.

The new directorate for investigations and operations, which is based on two pools of investigators, which aims to be a flexible and effective work structure covering all support activities (internal and external coordination of investigations and operations). The horizontal Directorate for Policy, Legislation and Legal Affairs combines magistrates and other experts responsible for assistance with monitoring fraud cases with the national legal authorities and the preparation of cases in the Office itself. In addition to a service responsible for legislation and legal affairs within the Office's sphere of jurisdiction, the directorate is in charge of general matters and inter-institutional relations as well as for fraud-proofing and administrative and financial follow-up.

In accordance with the overall strategic approach of the European Commission concerning the fight against fraud, the Office must adapt its structure, in particular to develop its knowledge of the economic and criminal environment (fraud mechanisms, structure of criminal networks). To this end, it must improve risk analysis and better use of operational information from Commission departments, the other Community institutions and bodies such as the Court of Auditors, the Central Bank, international authorities such as Europol, Interpol, the World Customs Organisation etc. and the national authorities. As thus organised the Office is to perform more effective data gathering and analysis functions to assist the Commission as a whole and operational departments in the Member States and in third countries and work out an operational strategy.

The new structure aims consequently to constitute a genuine platform of services in all the sectors of its competence by putting its know-how and multi-disciplinary experience at the disposal of all Commission departments which contribute to the protection of financial interests and of all the national organisations or authorities. The Director intends to coordinate and ensure consistency between the various tasks assumed by the Office - operational activities, strategic intelligence, improvement of the legislative framework and liaison with the national judicial and police authorities. The intelligence function, at the heart of this Community platform of services, will enable the Office to contribute to the organisation of close and regular cooperation between authorities responsible for protecting the financial interests of the Communities against fraud, money laundering, corruption and any other illegal activity. The new pool of magistrates for its part will work for a better criminal-law treatment at national level of serious, often organised, crime.

3.2. The power of investigation of the European Anti-fraud Office

This is conferred by Regulations (EC) No 1073/1999 and (Euratom) No 1074/1999, adopted on 25 May 1999 by Parliament and the Council, which provide that OLAF is to carry out within the institutions, bodies, offices and agencies set up by or on the basis of the treaties administrative investigations for the purpose of fighting fraud, corruption and any other illegal activity affecting the financial interests of the European Community and to investigate serious matters relating to the discharge of professional duties. In accordance with Article 4 of the two Regulations, each institution, body, office and agency is to adopt the necessary provisions laying down the conditions and procedures for implementing the regulation.

The European Central Bank and the European Investment Bank, however, stated that they do not recognise the explicit power of OLAF to act within their institutions. [44] The need to give full effect to the anti-fraud rules was stressed by the Heads of State or Government. The Commission, while recognising that the implementation of Regulations (EC) No 1073/1999 and N° 1074/1999 must fully respect these two institutions' functional independence, considers that their decisions are not compatible with the Regulations of 25 May 1999 [45]. It consequently decided on 12 January 2000 to bring an action in the European Court of Justice.

[44] Decision of the European Central Bank of 7 October 1999 on fraud prevention (OJ L291, 13.11.1999) and Decision of the EIB Steering Committee, notified to the Commission on 16 November 1999 (regarding its activities in relation to own resources).

[45] Action filed by the Commission on 14.01.2000 against the ECB and Action filed by the Commission on 19.01.2000 against the EIB (Cases C-11/00 and C-15/00, OJ C 122 of 29.04.2000).

3.3. An overall anti-fraud strategy

Following major legislative and organisational changes in 1999 and early 2000, the Commission approved a proposal aiming to consolidate the Union's anti-fraud policy on 29 June 2000. The communication on an overall strategy for the fight against fraud and the protection of financial interests describes the major challenges which must be taken up by the Community and the Member States.

The protection of financial interests is a matter for the entire Commission, as well as the other institutions and the Member States. The strategy stresses the need to combine prevention with the fight against fraud in order to guarantee effective and equivalent protection throughout the Community: this goes from the systematic incorporation of anti-fraud provisions in the Commission's legislative and political initiatives to reinforcing the legal instruments for detecting, controlling and punishing frauds. The development of a culture of cooperation between all the competent authorities requires changes in the structure of the OLAF so that it can give expertise and operational support to the national authorities and become a genuine multidisciplinary platform of services.

The fight against fraud in the institutions aims to make all Commission staff aware of the need for prevention and to make effective OLAF's independent power of internal investigation in all the Community institutions and bodies, as desired by the legislature. The fourth challenge refers to strengthening the criminal-law dimension, via close cooperation between the Commission and the Member States' judicial authorities to remove obstacles raised by the complexity of cases and problems of compatibility between national legal systems. The strategy was presented to the Economic and Financial Affairs Council on 17 July 2000 and to Parliament, which approved it. [46]

[46] European Parliament Resolution of 13 December 2000.

3.4. Reporting

The Commission is required by Article 280(5) of the EC Treaty to report in its annual report on global measures taken to protect financial interests by itself and the Member States. [47] In addition, the European Anti-fraud Office is required to report regularly on its operational activities by Article 12(3) of Regulation No 1073/99. The first report of this kind, covering the period between 1 June 1999, when OLAF was set up, and 31 May 2000, was adopted on 23.5.2000: it analysed the Office's powers and procedures under the legislation and its operational activities in statistical and quantitative terms, and presented a series of questions likely to serve as a base for future guidelines. In order to balance its reporting activity during the year, the Office will adopt its report for 2000 during the second half of 2001.

[47] First Annual Report (1999) adopted on 8.11.2000 (COM(2000) 718 final).

The OLAF Supervisory Committee presented its first activity report, in accordance with Article 11(8) of Regulations Nos 1073 and 1074/99. [48] This report describes the establishment of the Supervisory Committee and the transition from the old Unit for the Coordination of Fraud Prevention to OLAF, and clarifies its relations with the Office. The Supervisory Committee also recommended improvements to procedures and monitoring techniques, in particular the assignment of magistrates to legal advice and support functions in relation to investigations.

[48] Activity report July 1999-July 2000 (OJ C 360, 14.12.2000), approved by the Council on 5.12.2000.

4. Cooperation and partnership

Member States, in particular within the Advisory Committee on Fraud Prevention, wished the Commission Report to comprise some illustrations of cooperation with operational authorities. What follows therefore provides examples of what cooperation and partnership between national authorities for the protection of the Community's financial interests in various Community sectors can consist of, and of the potential value added by the Office's involvement.

4.1. With the Member States

4.1.1. Cooperation with internal audit services in the field of traditional own resources

In the field of the traditional own resources, the Commission, and more particularly the Directorate-General for Budgets, works to establish close links with internal audit services in the Member States in the framework of cooperation based on the principle of the Joint audit initiative. This operation has two clearly-stated objectives: to increase the Member States' responsibility in relation to their obligations to protect the Union's financial interests and to anticipate the necessary changes to control methods as the Union is enlarged.

Following an exchange of experience between the audit services of the Member States, the Commission set up an Audit Sub-group in the Advisory Committee on Traditional Own Resources to provide the necessary impetus for this form of partnership. The Commission is thus developing a new approach to cooperation with the Member States in the control of traditional own resources. It hopes that in the future it will be able to scrutinise their legislation for compatibility with Community legislation on the basis of independent controls carried out by the audit services of the participating Member States.

This new way of voluntary cooperating enables the Commission test another approach to controls: instead of controling the Member States itself, it would leave these Member States' internal audit services to carry out their work on predefined topics and then check the national audit teams' findings.

A pilot action on external Community transit in the Netherlands, in partnership with the Commission, in November 2000 yielded very good results. Two new actions with Denmark and Austria will be tried out in 2001. The Commission is ready to start negotiations with other Member States with an internal audit system or another type of control system with the necessary level of independence, in order to include the greatest possible number of Member States in this initiative.

The Commission is convinced that this approach offers major potential and makes it possible to target controls more accurately while securing the credibility of the Member States' activities.

4.1.2. Operational cooperation

4.1.2.1. Illicit trafficking in products containing butter

Since October 1999 OLAF has been coordinating judicial investigations in Italy, France and Belgium concerning fraudulent trafficking in products declared as Italian serum butter and sold by companies belonging to a group closely linked to a Neapolitan criminal organisation. The Community interest lies in the fact that goods adulterated in Italy then sent on to France and Belgium were then exported as butter oil with payment of refunds or sold on the internal market as pastry butter with production aid. The investigation also provided an opportunity to examine these products in terms of their suitability for human consumption; no health hazards were detected.

At the beginning of 1999, the Naples Prosecution Service launched investigations into a group of companies used by the criminal organisation for its business and tax frauds. Following this investigation, several arrests were made for complicity in homicide and other criminal activities.

The Italian Magistrate then asked OLAF for assistance with the coordination of proceedings between the various Member States concerned. The subsequent investigations determined that an Italian company had sold a product presented as butter to companies in several Member States.

An information was laid in France and international letters rogatory were exchanged between national judicial authorities. In June 2000, these investigations led to simultaneous operations in Italy, France and Belgium with technical and operational support from OLAF. Searches carried out simultaneously in all three countries made it possible to seize significant quantities of adulterated butter and make a large number of arrests in Italy and France. It is established that between 1995 and 2000, approximately 35 200 tonnes of adulterated butter were sold , containing not only butter but non-dairy animal fats and vegetable and synthetic fats. These goods were acquired by several French, Belgian and German companies.

The investigations continues in the Member states concerned. Evidence was also gathered that the main impact of the traffic was the financial loss to the Community budget (which remains to be evaluated precisely). So far, the analyses conducted by the experts on the seized goods have not established any direct hazard for the consumers'health [49].

[49] See the Press notes of the Office, OLAF/07/2000 of 05.07.2000 and OLAF/10/2000 of 19.12.2000.

4.1.2.2. Illegal dollar banana imports in the Community under cover of false import licences

Within the framework of annual tariff quotas, banana imports from Latin and Central America covered by AGRIM import licences are eligible for a reduced customs duty rate (EUR75 instead of EUR680 per tonne). Making this specific arrangement secure consequently helps to enforce the Community's commercial policy and make certain aspects of its development policy work more effectively.

In the middle of 2000, at the Office's initiative, the Italian and Belgian authorities were informed of facts warranting administrative and criminal investigations into organisations responsible for establishing and using false licences for illegal banana imports in the Union.

Joint investigations by OLAF and the national authorities revealed that bananas were released for free movement with false AGRIM licences, mainly in Italian and Belgian ports. Subsequent investigations made it possible to identify similar operations in Spain, Greece, Germany and Portugal. Investigations are continuing to identify all the false licences.

It has been established so far that between the beginning of 1998 and the middle of 2000, at least 220 000 tonnes of bananas were imported with false licences. The amount of duties evaded is currently estimated at EUR164 million, but it could turn out to be considerably higher.

Following this detailed investigation, the Commission immediately adopted precise rules to strengthen controls of banana imports. These make it possible in particular to check the authenticity of licences (see Point 2.3.1).

4.1.2.3. The fight against cigarette fraud

High-level cooperation between OLAF and the Member States is constant in the fight against cigarette fraud. This is one of the most serious problems affecting the Community's financial interests and the national budgets. OLAF gave its assistance to the national authorities responsible for investigations and the judicial consequences, in particular in order to target international cigarette smuggling and the organisers of this illegal activity. OLAF and Member States cooperated in particular on the preparation and implementation of several letters rogatory. OLAF also cooperated closely with the competent authorities of several non-member countries.

As regards specific cooperation projects, OLAF, having received information from Austrian customs, contacted the Greek authorities and found a lorry ready to leave the port of Patras with 4.3. million smuggled cigarettes. The cigarettes were seized and the driver arrested. Alerted by the Dutch authorities to a container of cigarettes seized in Rotterdam and of suspicions regarding another container bound for Portugal, OLAF informed the Portuguese authorities. They seized the container and identified four other containers at various locations in the country. A total of 39.9 million (counterfeited) cigarettes were seized.

On a proposal from OLAF, the judicial authorities at Genoa (Italy) produced a search warrant against a bonded warehouse involved in cigarette smuggling. In the presence of a representative of OLAF, the search conducted at the company made it possible to seize a number of T1 documents relating to consignments of cigarettes for African countries but cleared with false customs stamps. These searches also revealed a link with a US resident involved in international cigarette trafficking and the existence of VAT fraud. This clearly illustrates the fact that criminals are often involved in several types of fraud and that their fraudulent operations are highly professional.

The Italian judicial authorities also informed OLAF of difficulties encountered in cooperation with the Swiss authorities, during their investigations into cigarette smuggling and money-laundering. OLAF has endeavoured to establish cooperation with the Swiss authorities. On the basis of administrative arrangements concluded with the Swiss Office of Integration in 1999, OLAF arranged ad hoc meetings with them and representatives of the Italian Prosecution Service in Rome. The arrest in Switzerland of several persons, including a judge and one of the principal organisers of cigarette smuggling towards the Community, is a direct result of the close liaison established between the relevant authorities.

In addition, in November 2000, the Commission commenced a civil action on behalf of the Community and several Member States against certain American cigarette manufacturers in the New York East District Court. This action, based on the active participation of criminal groups in smuggling, is for compensation for financial losses to the Community's own resources and an injunction to cease smuggling. So far, ten Member States decided to join this action, for they have a twofold interest in recovering excise duties and VAT on the cigarettes smuggled and in defending the interests of the European Community.

4.1.2.4. Coordinating investigations in the Structural funds

In the context of seeking to improve the coordination of different Members State investigative authorities and an improved collaboration with OLAF in the undertaking of investigation of allegations of serious irregularity and fraud in the Member States in the area of Structural Funds, OLAF has assisted in the establishment and development in the United Kingdom of an Intergovernmental Fraud Response Liaison Group.

This group, created principally for the protection of both Member State and EC funds, comprises the senior members of the fraud investigation services of all key UK government departments.

Its principal purpose, and one encouraged by OLAF in the context of joint investigations under Regulation 2185/96, is to facilitate a unified and coordinated approach to investigations.

Following the first major investigation completed in October 1999 with the FRLG with the collaboration of investigators from 4 UK government fraud investigation services, the case was referred to the competent national judicial authorities. Financial recoveries are currently under way or are being enforced in respect of amounts irregularly obtained both from the European Social Funds (c. £ 4 M) and the Research and Technological Development budget of the Commission (c.£ 3 M).

In 2000 a second investigation was undertaken into allegations of serious irregularities in possible breaches of EC Public Procurement Regulations and in the use of both ERDF and ESF monies (up to £ 15 M). The investigation, in the course of being finalised, involved the coordination of investigators from OLAF and 4 different competent investigative authorities in the UK.

4.2. Mutual assistance with the countries applying for accession

4.2.1. Administrative cooperation

With regard to aid for the restructuring of agriculture in the applicant countries of Central and Eastern Europe, the Commission, in June 2000, adopted the regulation on the financial management of the Special Accession Programme for Agriculture and Rural Development (SAPARD), which has an annual budgetary appropriation of EUR529 million until 2006. [50]

[50] Commission Regulation (EC) No 2222/2000 of 7 June 2000 laying down financial rules for the application of Council Regulation (EC) No 1268/1999 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period: OJ L 253, 7.10.2000.

This regulation is based in particular on the principle that management is fully decentralised to the applicant countries' management authorities and that the procedure for EAGGF Guarantee Section accounts applies. It thus aims to ensure the rapid implementation of programmes, the proper use of appropriations and the effectiveness of SAPARD controls throughout the programme period (2000-06). It is also an element which encourages the preparation of the applicant countries for the management of Community aid after accession.

The adoption of this Regulation preceded the signature with the applicant countries of multiannual financing agreements, which comprise rules of financial control equivalent to those which apply within the framework of EAGGF Guarantee Section, [51] in particular the anti-fraud rules in the 'acquis communautaire', including the financial regulation.

[51] Between November 2000 and March 2001, such conventions were signed with Bulgaria, Estonia, Latvia, Poland, the Czech Republic, Slovakia, Romania, Hungary, Slovenia and Lithuania, in accordance with Article (9) of the SAPARD Council Regulation N°1268/1999.

4.2.2. Operational cooperation

To set up an operational and multidisciplinary structure in Poland with the specific task of protecting financial interests, the general inspectorate of the Polish customs was allotted PHARE programme financing of EUR3.5 million in 1999. The conditions for implementing the project were therefore in place in good time: three experts from the Member States and an OLAF official were designated to assist the Polish authorities.

An administrative arrangement between OLAF and the general inspectorate of the Polish customs was negotiated to determine administrative and operational relations between the European experts and the Polish team. The project moved on to the operational phase in Warsaw on 1 January 2000.

4.3. Mutual assistance with non-member countries

Among several agreements on mutual assistance with various third countries [52], the Commission wishes to draw attention to two recent developments which are particularly relevant as regards the fight against fraud and the protection of financial interests.

[52] The agreement with Marocco entered into force in March 2000 (OJ L 70 of 18.03.2000). In 2000, negotiations started on a similar agreement with Cyprus and Macedonia (FYROM) and it is envisaged to launch similar agreements with 14 other third countries or candidate countries.

4.3.1. Draft cooperation agreement with Switzerland to fight against fraud and the other illegal activities to the detriment of the financial interests of the Communities, of the Member States and of Switzerland

The conventions and protocols with Switzerland, including the 1997 protocol on mutual assistance in customs matters, have a limited impact, partly because of their restrictive interpretation in Swiss law. That creates problems of practical application for the purposes of assistance, in particular in cases of fraud involving substantial amounts and organised networks.

In 1997, this situation was criticised in the Report by Parliament's Committee of Inquiry into the Community transit procedure. Parliament recommended giving the Commission a mandate to negotiate an agreement on closer and more effective cooperation in relation to customs fraud and offences.

Exploratory discussions with the Swiss authorities resulted in a number of specific recommendations on measures to be taken to improve cooperation. These discussions were completed in December 1999, the two parties agreeing to prepare the negotiation of an agreement.

On 14 December 2000 the Council authorised the Commission to negotiate such an agreement with Switzerland, which should be concluded before the end of 2001. This agreement aims to strengthen cooperation against organised crime to the detriment of the financial interests of the Communities and Switzerland. Given the intensity of economic relations between the Communities and Switzerland, which will soon be further intensified on the basis of seven bilateral agreements concluded with Switzerland in 1999, cooperation must take into account the requirements as regards anti-fraud cooperation which already exist in the Union. [53]

[53] Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests: OJ L 312, 23.12.1995, p.1; Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities: OJ L 292, 15.11. 1996, p.2; Council Regulation (EC) No 515/97 of 13 March 1997 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs and agricultural matters: OJ L 82, 22.3. 1997, p.1. Parliament and Council Regulation (EC) No 1073/1999 of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF): OJ L 136, 31.5.1999, p.1; Council Regulation (Euratom) No 1074/1999 of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office: OJ L 136, 31.5.1999, p.8.

4.3.2. Mutual administrative assistance in customs matters with Russia

The European Union and the Russian Federation have established regular cooperation relations, in particular to combat fraud. Under the partnership and cooperation Agreement of 28.11.1997 between the Communities and the Member States on the one hand, and the Russian Federation on the other hand, the parties agreed a protocol concerning administrative mutual assistance for the proper application of Community customs legislation.

In 1999, OLAF was informed of problems encountered by Member States in the payment of Community export refunds, owing to the unreliability of the Russian customs import declarations. The mechanism of evidence of arrival at destination for agricultural products exported to Russia must be improved to avert the risk of financial losses both to the Community budget and to the Russian Federation's budget. As an indication, beef and veal exports to Russia during 2000 were 130 000 tonnes [54], which represents an amount of refunds of approximately EUR65 million.

[54] This exclusively concerns exports to Russia eligible for refunds.

Given the major financial consequences, a prior information system between the Commission and the Russian customs authorities was set up to accelerate procedures and provide, after prior notification, electronic confirmation by the Russian authorities of the arrival of products and their release for the market. This is being done on an experimental basis for consignments of beef and pigmeat. It was envisaged that the centralising organisations of the Member States notify the Commission of any information on the movement of goods by road with the Federation of Russia via the prior information system. This mutual information mechanism was established on the basis of the existing partnership and cooperation Agreement. [55] It became functional on 1 February 2001 and will be reviewed at a later date in the light of experience.

[55] Commission Regulation (EC) No 2584/2000 of 24 November 2000 establishing a system for the communication of information between central bodies designated by the Member States and OLAF (OJ L 298, 25.11.2000) and administrative arrangement between OLAF and the State Customs Committee of the Russian Federation of 5.7.2000.

Title II: Measures adopted by the Member States with a view to protecting the Community's financial interests (1 May 1999 - 31 December 2000)

Unlike earlier annual Commission reports on the protection of the Community's financial interests, the implementation of the new Article 280(5) of the EC Treaty means that the Member States' activity in this field must also be reported. In comparison with earlier years, a new Title has therefore been added to the present report since 1999.

The new title - "Measures adopted by the Member States with a view to protecting the Community's financial interests" - describes the activity of the Member States (but without statistics) between 1 May 1999, when the Amsterdam Treaty came into force, and 31 December 2000.

To this end, between April and July 2000 the Commission and Member States, in accordance with Article 280(5), jointly drew up a questionnaire primarily covering national legislation and the organisation of inspections. All the Member States answered, first for 1999 (between 1 September and on 18 December 2000) and then for 2000 (between 15 February and 30 March 2001).

The Commission presented for discussion by the Member States the summary and compilation of the replies, first at the COCOLAF meeting on 11 January 2001 on the basis of the contributions for 1999, and then on 6 April 2001, when all the contributions of the Member States for 2000 had been incorporated.

Accordingly, the information supplied by the Member States in response to the questionnaire for 1999 and 2000 are summed up in this report as required by Article 280. These facts and contributions will be the summarised in a working paper to come.

But it must be stressed that this report does not for the moment constitute a basis for assessing the implementation of Article 280 by the Member States, in particular with respect to the principles of assimilation and equivalence.

Such an appraisal could be performed only after:

- an analysis of all the laws, regulations and instructions in force, whenever adopted;

- a statistical analysis of the reality, i.e. controls of irregularities detected and the penalties imposed.

Looking beyond the questionnaire itself, this statistical analysis would require, on the basis of Article 280 EC, a harmonisation for statistical purposes of the concepts of control and penalty and annual notification of the Commission of the relevant data.

As matters stand, given the questionnaire adopted for 1999-2000, merely taking stock of the means implemented by the Member States over this period does not make it possible to make an assessment of their respective results in relation to the requirements of Article 280.

Several Member States (in particular Greece, Spain, Ireland, Italy, Austria, Portugal, Sweden and the United Kingdom) provided more or less detailed descriptions of the measures which were in place before the reference period. For the sake of a consistent presentation of the contributions, and despite the interest that this abundance of information, these descriptions were not included in this document, the principal objective of which had been agreed to be an assessment of new measures adopted between 1 June 1999-31 December 2000.

In addition, the Member States did not all have new measures to report in all the areas. This explains why they are not all mentioned every time in each part.

5. Main changes on the legislative and administrative levels

The main area in which there were changes to legislation and administrative practice in the Member States in 1999-2000 was checks and inspections. This common factor deserves highlighting and matching with the Commission's desire to harmonise the arrangements governing checks and inspections in accordance with its plan of action 2001-02.

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6. Main changes in the organisation of control services

In 1999 and 2000 the Member States made sometimes far-reaching changes to the organisation of their control services.

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7. Cooperation between competent authorities

Several measures taken during the report periodhelped with the attainment of the objective set by Article 280(3) of the EC Treaty of close and regular cooperation between the competent authorities of the Member States and between them and the Commission. These measures show that there is closer cooperation in relation to own resources than in any other area.

The Commission continues to treat cooperation as a central feature of its antifraud strategy. Its plan of action 2001-02 provides in particular for an upgrading of cooperation structures and for stronger action on intelligence gathering and analysis.

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8. The recovery issue

The Commission's questionnaire to the Member States for the report period dealt more specifically with the question of recovery. In particular the Commission asked the Member States about the priority attached to Community financial interests in the event of the debtor's default in the recovery context. In general terms (there exceptions), the Community's financial interests are on an equal footing with national interests in the event of the tax debtor's default, and Community claims are not treated as priority claims.

The following table shows the measures adopted by the Member States to improve recovery of own resources and wrongful payments, as well as providing some more general observations on the subject.

8.1. Own resources

Three Member States report new measures regarding recovery (DK, I, UK).

Member State // Measures aimed at improving recovery of uncollected resources and wrongful payments

B // The Belgian General Customs and Excise Act provides for a right of precautionary enforcement, a privileged lien on the movable property of persons liable to pay customs or excise duties and a legal mortgage on all these persons' immovable property.

In the event of enforced execution (seizure) against the assets of the judgment debtor or of voluntary payment pursuant to a court order, the order of priority of claims is import duties first, then excise duties second.

Investigations carried out by the Belgian authorities have made it possible to recover substantial amounts.

DK // Generally speaking, in Denmark Community claims enjoy the same status as national claims in the event of recovery following an abuse.

The Customs Credit (Access Conditions) Act (Act No 228) has been amended The national customs and tax authorities may now demand that firms wishing to join the customs credit scheme supply the central customs and tax administration with certain financial information and information on expected imports when registering for the scheme or changing their registration details.

Similar rules have also been established for operators exporting dutiable goods.

It is now also possible to deprive firms of their access to customs credit where there is reason to believe that there is a risk that customs import duties will not be paid.

EL // The legal basis for recovery is the combined provisions of the national Customs Code and Regulation No 2913/92 laying down the Community Customs Code, plus the Code of Public Revenue. National and Community interests are on an equal footing.

F // Section 379 of the French Customs Code establishes the same status for duties that constitute own resources and the national taxes levied on imports of goods. The Customs Administration has a preferential claim over all other creditors.

I // A major legislative reform was made in 1999 to improve the results of recovery and regulate relations with concessionnaires (Act No 337, Legislative Decrees Nos 46, 112 and 326, Joint Decree - Finance and Treasury - No 321, Ministerial Notes Nos 1584/VIII and 2488/VIII).

In 2000, recovery procedures (direct taxes) were updated by various legislation, regulations and administrative provisions.

L // The Audit Department, which is responsible for carrying out external audits of economic operators, combats fraud involving traditional own resources is very effective. Recoveries of own resources by the Department total LUF 15 510 783 for 1999.

The rate of recovery in the ten cases of fraud listed in the 1999 annual own resources report was 100 %.

NL // No measure has been taken to improve the recovery of own resources. But claims by the tax departments have priority status.

A // The current scheme for recovery of traditional own resources is insolvency with no priority ranking of creditors. There is therefore no priority for the recovery of public, including Community, claims.

S // The rate of collection of traditional own resources amounts to 99.92%.

B resources are far less important than in other Member State.

UK // Interest charged on customs debts was introduced in April 2000.

The Central Community Transit Office has reviewed its debt recovery procedures (speedier notification to traders and guarantors regarding undischarged transits).

In early 2000 the recovery of customs debts was fully integrated into Customs arrangements for recovering other duties and taxes.

Although customs duties and agricultural levies are non-preferential debts in the event of debtor default, the majority of debts are paid or otherwise secured either at the time or before they are incurred.

8.2. Agricultural expenditure

Regarding the recovery of agricultural expenditure, ten Member States adopted new measures in the report period (B, DK, EL, F, IRL, I, A, P, FIN, UK).

Three Member States state that there is a priority claims arrangement (EL, IRL, I).

Member State // Measures aimed at improving recovery of uncollected resources and wrongful payments

B // The Belgian intervention and refund agency has adopted two noteworthy measures:

a new computerised system (IRIS) will centralise on computer all the data concerning debtors and the near-automatic creation of a new debtor file where there is a refund problem;

the agency has set up a debtors unit.

DK // Improvements regarding the management of the debtors account have resulted in no losses on recent claims, and most old claims have been recovered.

The implementation of a new system for managing securities and, in parallel, for supporting exports has also helped to cut the risk of loss.

EL // Act No 2520/97, as amended in 1999, gives debts to the State priority; amounts concerned by irregularities in agriculture are returned after offsetting, plus interest at the rate determined by the law.

F // The Interministerial Coordinating Committee for Inspections (CICC-EAGGF Guarantee Section division) has stepped up its recovery activities on the basis of ex post inspections under Regulation No 4045/89. A database has been set up and is updated every quarter by the paying agencies.

// One of the obstacles to rapid recovery lies in the fact that recipients of aids wrongly paid are increasingly inclined to contest the decision in court.

// The principle of transferring the centralisation of reports under Regulation No 595/91 from the Directorate-General for Customs and Indirect Taxation to the CICC was adopted at the end of 1999.

IRL // In general terms, the same priority is given to the recovery of Community claims as to the recovery of national claims.

In 2000 additional resources were set aside for the recovery of claims under the agri-environmental and early retirement schemes.

The Headage/Premia programme makes provision for reducing future payments to a debtor on the basis of the debts incurred in connection with different Community schemes.

I // Italy's agricultural intervention agency (AIMA) enjoys a special legal status as paying agency.

A Bill introduced by the Ministry of Finance would extend its privileges to other fields.

In 1999, various recovery measures were adopted.

A // The Austrian agricultural expenditure payment agency, (AMA), has set up a unit specifically responsible for the recovery of outstanding claims.

AMA is further empowered to offset amounts outstanding from a recipient against other amounts payable to the same recipient.

As a result, 95% of all claims are recovered at low cost by offsetting within a year or two.

P // The National Agricultural Intervention and Guarantee Institute (INGA) has improved the computer system used for recoveries and adapted the recovery rules.

More frequent use of the claims offsetting system has speeded up the recovery process.

FIN // Instructions for the recovery procedure updated, centralised database put into operation (especially for monitoring recoveries)

UK // High priority is given to recovery of agricultural expenditure (on the basis of revised instructions for 1999-2000).

During 2000, the Ministry of Agriculture, Fisheries and Food reviewed all debts that had been outstanding for more than two years.

8.3. Structural Funds and Cohesion Fund

New measures relating to structural measures recovery were less frequent: they concern only four Member States (F, S, FIN, UK).

Member State // Measures aimed at improving recovery of uncollected resources and wrongful payments

DK // Improvement of the management of debtors accounts (EAGGF-Guidance) thanks, in particular to the establishment of the new Directorate of Food, Fisheries and the Agri-food Industry.

The Danish labour market administration has increased the responsibility of regional authorities for European Social Fund grants.

EL // The procedure provided for by Joint Ministerial Order 2007892/461/27.5.98 relating to the recovery of amounts wrongly or illegally paid from national or European Union resources in the implementation of Community policies is commenced for all reported irregularities, irrespective of the amount.

F // Recoveries are regularly monitored by the Employment Ministry on the basis of inspection reports from regional inspectorates. In 1999, circular DGEFP 99/21 spelled out the procedure for recovery.

IRL // Ireland has not felt the need to improve the existing system for the recovery of amounts paid under structural measures.

I // Once the administrative act of self-protection has been taken, enforced recovery by the State-approved body of lawyers becomes possible.

A // As regards the ESF and ERDF, there are provisions whereby the departments empowered to authorise or pay grants may require the recipient to immediately repay the grant or suspend payment in certain clearly defined cases (including delays, obstacles or modifications to the project, failure to notify the documentary evidence asked for where a reminder has been issued, diversion of funds received and where it is impossible to check that the grant application is well-founded).

In additional to these procedures, some departments demand a supplementary guarantee specifically in the case of (ERDF) Community funds, with the result that recovery is guaranteed whatever happens.

P // In the EAGGF-Guidance Section, the IFADAP offsets claims to recover amounts wrongly paid to beneficiaries.

S // The manual of economic administration of the AMS has been updated.

The Swedish agriculture council has launched a project to increase the effectiveness of procedures to recover environmental aids wrongly paid.

Directives for the management of reimbursements and notification of irregularities in connection with FIFG aids are being drafted.

FIN // Recovery measures have been backed up by new legislative measures. Changes have been made to recovery and checks and inspections monitoring systems (2000).

UK // Regarding the ERDF, the recovery of grants obtained wrongly or fraudulently is regarded as an absolute priority.

The Department for Environment, Transport and the Regions (DETR) has made progress with the revision of its fraud/irregularity database and guidance notes issued to the Government Offices in the regions.

Regarding the ESF, the Department for Education and Employment (DfEE) has established a scheme for detecting and recovering wrongful payments (possibility to block payment of new ESF grants until a debt has been settled, possibility to deduce the amount of the debt from payments still to be made), which has brought the recovery rate close to 100 %.

The Department also acts at the request of the Community in accordance with the relevant legislation.

9. Highlights of the fight against fraud

In general terms, the changes made in antifraud practices in the report period concern first and foremost the Member States' control techniques.

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10. Additional texts on protecting the Community's financial interests

10.1. Key elements and the state of ratification of the 1995 Convention and its Protocols

As things stand, the Convention on the protection of the European Communities' financial interests of 26 July 1995 and the additional protocols signed in 1996 and 1997 (the PFI instruments), which were adopted under the Third Pillar of the Treaty on European Union, should in principle be the first important elements of a common base for the criminal protection of the Union's financial interests, as they deal with aspects of substantive criminal law and judicial cooperation in this field. The existence of harmonised definitions and penalties for certain offences under the various national criminal law systems and Member States' obligations to provide judicial assistance, to cooperate in matters of extradition and to transfer and centralise prosecutions - to list just a few of the important elements contained in the instruments - would considerably strengthen the protection of the Community's financial interests that are particularly at risk as a result of the fragmentary nature of the European criminal-law enforcement area.

The following table sets out the principal instruments contained in each of the instruments:

1. Convention on the protection of the European Communities' financial interests of 26 July 1995: [56]

[56] Convention on the protection of the European Communities' financial interests of 26 July 1995 drawn up on the basis of Article K.3 of the Treaty on European Union (OJ C 316, 27.11.1995).

- definition of Community fraud;

- obligation of Member States to make it a punishable offence, to establish their powers on the basis of territoriality, to cooperate, to centralise prosecutions and to extradite;

- obligation of Member States to make heads of companies criminally liable.

2. First Protocol of 27 September 1996: [57]

[57] Protocol of 27 September 1996 drawn up on the basis of Article K.3 of the Treaty on European Union to the Convention on the protection of the European Communities' financial interests (OJ C 313, 23.10.1996).

- definition of corruption affecting the EC's financial interests;

- obligation of Member States to make it a punishable offence [58].

[58] The "Anti-corruption" Convention of 26 May 1997 takes over the substantial provisions of the First Protocol, but without limiting its scope of application to the protection of the Community's financial interests only (OJ C 195 of 25 June 1997).

3. Protocol of 29 November 1996 on the interpretation of the PFI Convention and its Protocols by the Court of Justice. [59]

[59] Protocol of 29 November 1996 drawn on the basis of Article K.3 of the Treaty on European Union on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities' financial interests (OJ C 151, 20.5.1997).

4. Second Protocol of 19 June 1997: [60]

[60] Second Protocol, drawn up on the basis of Article K.3 of the Treaty on European Union to the Convention on the protection of the European Communities' financial interests (OJ C 221, 19.7.1997).

- obligation of the Member States, with regard to the offences listed in the PFI instruments, to make money-laundering [61] an offence and to provide for the responsibility of legal persons;

[61] For a definition of money laundering, the Second Protocol refers to Directive 91/308/EC.

- obligation of Member States to seize and confiscate the instruments and proceeds of these offences;

- rules on cooperation between the Commission and the Member States and on data protection.

Progress with ratifications notified to the Secretariat-General of the Council of the European Union at 22.02.2001

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Source: Council of the European Union, Agreements Office

NB. The date of ratification may differ from the notification, which marks the entry into force in the Member State concerned.

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TITLE III: STATISTICS AND ANALYSES

11. FRAUDS AND IRREGULARITIES

As the Commission emphasised in its last report, the fight against fraud concerns any illegal act which has a negative impact on the budget of the European union; however, as the type of illegal act can vary enormously, it is useful to distinguish clearly between cases of "fraud" in terms of criminal law and cases of simple "irregularity". [62] Whereas OLAF concentrates deliberately on the most serious cases, that is firstly cases of fraud, the Member States are required by the regulations applicable [63] to communicate to the Commission, in addition to cases of fraud, any other irregularity whose budgetary impact exceeds certain limits. This is the reason why the Commission called on the Member States to choose a more homogeneous approach in distinguishing between these two different categories.

[62] "Irregularity shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure' ( Council Regulation (EC, Euratom N°2988/95: OJ L 312, 1995).

[63] Regulation No 1552/89 (traditional own resources); Regulation No 595/91 (EAGGF Guarantee Section); Regulation No 1681/94 (Structural Funds); Regulation No 1831/94 (Cohesion Fund).

At the present time, however, OLAF is not in a position to present two distinct snapshots in this report, in accordance with the wish expressed by the Council [64], for the phenomenon of fraud and other irregularities. The Member States transmit some information on matters which could constitute a fraud [65]. However practices differ in the Member States so that any such distinction would be arbitrary. For example, Germany and Italy are much more prepared to recognise the potentially criminal dimension of certain acts than other Member States.

[64] See conclusions of the Economic and Financial Affairs Council of 17.7.2000, item 7.

[65] The transmission of a case to the prosecutor indicates that a fraud or an irregularity may have been committed. So do certain types of irregularity or ways of committing the irregularity (use of falsified documents, fictive movements or transformation of goods, contraband, etc...)

The Office is conscious of the practical difficulties involved in distinguishing between 'frauds' and 'irregularities'. Whereas a simple "irregularity" in a transaction may be detected by the administrative authorities on the basis of factual information gathered within a relatively short time-scale, the detection of the fraudulent (and therefore criminal) nature of a transaction is only apparent following much longer procedures and taking account of the principle of the presumption of innocence. The true nature of serious cases will only be known therefore years later. This type of information is available from the judicial authorities, whereas information on the follow-up given to confirmed irregularities is collected and transmitted by the administrative authorities of the Member States. Member States will henceforth have to ensure that, in accordance with their obligations, the circulation of such information is not impeded.

In order to assist the Member States with this complex task, the Consultative Committee for the Coordination of the Fight against Fraud (COCOLAF) has created a working group and given it the task of producing guidelines in the near future. These guidelines should ensure a more homogeneous treatment of cases.

12. THE SITUATION IN 2000

12.1. The overall level of fraud and other irregularities

If the number of new cases and their budgetary impact are compared with previous years, the level of frauds and other irregularities detected or suspected in 2000 has increased. While the number of cases detected in the area of own resources declined slightly, this is compensated by an increase in the number of cases detected in the EAGGF Guarantee area and, even more so, in the area of structural actions. The audit and control systems put in place by the Member States in the area of structural measures has brought improved results and controls have been strengthened with the aim of closing a good number of programmes at an early stage. From now on, this area does not differ substantially from the other areas of the budget.

Regarding the amounts involved, a significant increase can be seen in all the areas of the budget.

In total, the Member States and OLAF have dealt in 2000 with 6955 new cases with an overall budgetary impact (confirmed or estimated) of 2029 millions of euros. (For the cases communicated by the Member States, see annexes,2, 4 and 5).

12.2. Cases of fraud communicated by the Member States

In 2000, the Member States communicated 6587 cases on the basis of sectoral regulations [66]. These cases are split as follows in the different areas of the budget (for the details see tables 1, 2 and 3):

[66] See footnote 63.

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12.3. Cases under investigation by OLAF

In addition to the cases communicated by the Member States, OLAF dealt in 2000 with 368 new cases, which fall, according to the provisional assessment of the Office, in their large majority into the category of criminal. In fact, as a general rule, it is the suspicion of fraud, which leads OLAF to open an inquiry: the sole exception is the area of direct expenditure as, in this area, OLAF is responsible for dealing with all irregularities. Of course, it will be for the national judicial bodies carrying out the investigation to determine the nature of the behaviour. Regarding the impact of these cases on the budget, this is a provisional estimate which, with the exception of the area of direct expenditure, must also be confirmed by the competent national bodies who must issue the recovery order to the persons concerned.

The files opened in 2000 are divided as follows:

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There is a growing concern over suspicions of fraud affecting value added tax (VAT) and excise duties. Such frauds affect the contribution of each of the Member States to the Community budget and show that attention must be given to VAT and excise cases.

13. TRENDS

In the last few years there was a tendency for the level of frauds and other detected irregularities to stabilise, but in 2000 there was once again a rather large rise in the number of detected cases and, especially, in the amounts concerned.

This also applies to the cases under investigation by OLAF. However, the real extent of the frauds detected by OLAF in cooperation with the competent services of the Member States is less easily attributable to a calendar year or a specific accounting period. The investigations of OLAF are carried out with the aim of establishing the facts and revealing gradually the real extent of the actions in question. Within the framework of the same investigation, there may be a conservative assessment of the budgetary impact based on the evidence (the "amounts established") and an estimate of the probable budgetary impact based on an extrapolation of the facts. This applies in particular to complex cases, which involve organised economic crime such as cigarette smuggling, the case of the adulterated butter or the fraudulent banana imports.

13.1. The field of traditional own resources

13.1.1. Introduction

Regulation No 1150/00 delegates to the Member States the collection of traditional own resources, in particular import duties. Consequently, Member States are required to take all the measures necessary to fulfil their obligations with respect to the Community budget. Moreover, they have to inform the Commission of their inspection activities and their results.

The Member States transmit statistical information to the Commission in the following way:

- by means of the irregularity and fraud files, in accordance with Article 6(5) of Regulation No 1150/00, for cases where the amount is higher than EUR 10 000 [67];

[67] The notion of fraud is not interpreted in a uniform way by the Member States. This is partly due to the fact that the Convention on the Protection of financial interests which defines the notion has not yet been ratified by all the national Parliaments. In some Member States, an infringement on Community regulations can be qualified as fraud after the final decision of a Court. Whereas in other Member States, operational services qualify this type of infringement themselves during the investigations. The Commission therefore recommends that only overall figures covering both frauds and other irregularities should be used for the sake of analysis.

- and also by means of their annual inspection reports, in accordance with Article 17(3) of Regulation No 1150/00. These reports show the activities and the results of inspections carried out at national level.

The Commission can thus have indicators in order to analyse the trends, which emerge as regards the fight against fraud and recovery in the Member States.

The Commission has adopted a new approach in drawing up its reports on protecting the financial interests for the reporting exercise relating to year 2000. With the aim of presenting to the budgetary Authority an overall assessment based on the factual elements gathered from the Member States, it considered it convenient to amalgamate the OLAF report - established under Article 280 of the Treaty - together with the report established under Article 17(3) of Regulation 1150/00 on own resources. A first step was taken in this direction in 1999, the 17(3) report featuring in the technical annex of the OLAF report. The 2000 report merges the two reports. However, the conditions in which they were prepared are not ideal.

In order to meet deadlines, Member States were invited to transmit their annual reports by the end of February 200l. But the data concerning inspection activity in 2000 by the Member States actually received by the Commission within this timetable is extremely compartmentalised and does not allow for any comparative analysis.

Moreover, information gathering has its price. Thus, the Commission considers that the conclusions which it can draw from the fraud and irregularity files communicated under Article 6(5) of Regulation N°1150/00 (amounts &gt; EUR10 000) are not very different from those likely to be drawn from the information provided under Article 17(3) (all amounts). Accordingly, the results obtained as regards the fight against fraud and the recovery action by the Member States are analysed on the basis of the fraud files.

13.1.2. Analysis of data communicated by the Member States

On the basis of the whole of the data collected in accordance with Article 6(5) of Regulation 1150/00, that is to say on the basis of 2403 cases of fraud and irregularities, the Commission has noted the following trends:

In raw data, the number of cases of fraud and irregularity in 2000 (cases &gt; EUR10 000, see annex 1) shows an average drop of 4.5% in relation to 1999. Compared with the average number of communications over a period of four years, the number of cases communicated in 2000 shows a decrease of 2.95%.

Certain Member States were late updating their communications. Greece did not communicate any cases of frauds or irregularities for the whole of 2000.. [68] This situation is difficult to accept. On the one hand, certain Member States do not fulfil their Community obligations; on the other hand, they deprive the Commission of information necessary for a reliable analysis of fraud developments. The Commission depends very much on the Member States for the information which it can have on frauds and irregularities. It lies therefore with the Member States to find ways of remedying this situation.

[68] Greece notified 24 cases of fraud and irregularities but these cases were linked to previous years whereas they cover 2000. By reason of the late receipt of this notification, these cases have not been taken into account for the present report.

In view of the lack of data on inspection activity in the Member States for 2000 (Annexes 1 and 2), the Commission is not in a position to provide an analysis for the year 2000, in terms of customs staff and the number of entries and the rate of checks.

With regard to the amounts established (Annex 2 column 3) as regards fraud and irregularities, the increase has been constant since 1998; the amount for 2000 is almost double the figure for 1998 and 1999. This increase is based in particular on the irregularities detected in imports of milk products from New Zealand. [69] This case concerns primarily the United Kingdom, and has a considerable financial impact on the amounts established by this Member State.

[69] This case was the subject of a special report by the Court of Auditors, No 4/98: OJ C 127 of 24.04.1998 and OJ C 191 of 18.06.1998.

Leaving aside this case, the aggregated amounts increase from one year to another. This increase does not systematically mean an increase in the number of cases reported by each Member State. A significant rise in the amount established is seen mainly for France, Germany. Italy, the Netherlands and Spain. Finland and Sweden show for their part a considerable fall (for the latter, in parallel to a decrease in the number of cases communicated)..

Situation of recovery (cases &gt; EUR10 000)

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\*Updated on 18.4.2001

The constant rise in the amount established is accompanied by a significant fall in the average recovery rate (column 8, Annex 2) between 1998 and 2000. The New Zealand case is concerned by this situation, the Commission indeed having decided to put off the recovery of 36% of the amounts pertaining to this case.

The national recovery rate fell in most Member States, except for Luxembourg (with a rate of 100% since 1997), Belgium, Ireland, Portugal and Sweden.The recovery rate shows great variations between Member States. However, even if the variation in the level of recovery from year to year were in itself interesting, the Commission would like to stress that this rate in itself is not an indicator of performance. This is because it is linked to a number of factors (national recovery procedures, procedures of appeal, whether administrative or judicial) which must be taken into account.

The Commission usually carries out a breakdown of frauds and irregularities by customs arrangements, product and origin.

As regards frauds and irregularities established by customs arrangements [70], the global information drawn from the fraud forms confirms the trends observed on the impact of fraud in particular in free circulation with 79.8% of the cases and 93% of the amounts detected. Transit remains a sensitive fraud sector (with 11.3% of the cases). However in terms of amounts, the impact is less significant (1.2%) than amounts established for 1997-99. Fraud in other areas remains low. Fraud in free circulation [71] is concentrated on the incorrect description of goods (31.9% of the cases for 10.4% of the amount). In relation to previous years, one observes a clear upward variation in number of cases but a clear downward variation with regard to the amount. The number of non-declarations also shows a general, significant decrease.

[70] The Commission noted, as far as the number of cases is concerned, a discrepancy between overall figures and the data regarding risk analysis by type of irregularity. This does not mean there is a greater number of cases for the established irregularities. The discrepancy originates in the fact that some Member States register more than one anomaly per case, which leads to double counting. The impact on the general trend is not significant. The Commission, however, draws the Member States'attention to the necessity of filling the fraud forms accurately.

[71] A detailed breakdown of fraud and irregularities established in free circulation brings to light the big share of the column Other irregularities: 42% of the cases, 75.4% of the established amount. Some fraud forms do not specify the irregularity concerned, a lack of detail which , as noted above, distorts the analysis.

As regards a breakdown of cases of fraud and irregularities by types of goods, milk products and cigarettes, in particular, as well as cars, clothing, and electrical equipment are particularly sensitive to fraud. This trend can be observed during the years 1998 to 2000. But the high figure for milk products causes a drop in the respective percentage of other goods.

The breakdown of the cases of fraud and irregularities by origin show that dairy products of New Zealand origin are at the top of the list of the 25 most commonly the subject of frauds. This was noted in 1998 and 1999, but amounts established in 2000 are on a steep rise. It is possible to observe a constant rise in the amounts for products originating from the USA and in the amounts and number of cases involving goods of Chinese origin.

However, there is a fundamental difference between these two countries. The irregularities in USA origin goods are mainly errors in tariff classifications; the detection of these errors results in high recovery rates. The observations covering the goods originating in China concern mainly the unjustified application of preferences or false declarations of origin and recovery is often difficult. The cases of Japan and Singapore are similar to the USA cases. The four cases from Ecuador detected in 2000 cover imports of bananas into Belgium in breach of transit regulations.

13.1.3. Conclusion

This 2000 summary shows gaps with regard to the inspection activity of the Member States; moreover, it reveals the impact of the merger of the two reports, whose publication is not currently subject to the same imperatives. Lastly, the data used up to 1999 by the Directorate General for the Budget for the drawing-up of the report has changed. These factors required the Commission to be adaptable. The same adaptability is also awaited from the Member States.

The collection of various items of information from the Member States aims to improve the quality of the follow-up by the Commission of their inspection activity, in particular as regards recovery, and to enable it in addition to identify the difficulties which may be encountered in respecting their Community obligations.

But its objective is as much to assist the Member States to evaluate their own efforts in the field of traditional own resources. The Commission could already draw conclusions, with regard to the efforts which Member States will have quickly to make to improve the quality of the information communicated, implicit in relation to their Community obligations.

The Commission intends to continue its awareness-raising work with the Member States. This will be the subject of discussions within the Advisory Committee on the Communities' Traditional Own Resources at its next meeting or will be covered, depending on the case, in bilateral exchanges.

13.2. Agricultural expenditure (EAGGF Guarantee)

The number of frauds and other irregularities detected by the Member States in 2000 and their budgetary impact are up on the previous year (+10% and +104%, respectively). The considerable increase in the budgetary impact is due initially to two large-scale cases which were detected by Italy and which concern fraudulent activities over a period of several years.

The high budgetary impact of one of these two cases has the consequence that in 2000, export refunds no longer represent the category of expenditure most affected. The relative share of frauds and other irregularities concerning market support measures went up to 44%, while cases communicated in the category of export refunds accounted for 41% of the overall impact (reflecting hardly any percentage change in relation to the previous year). Expenditure for export refunds represented only 14% of the expenditure of EAGGF Guarantee and expenditure for the market support measures only 9% of expenditure. The relative impact of fraud cases and of irregularities was therefore particularly high in relation to market support. On the other hand, fraud and irregularities only to a much smaller degree affect direct aid, which is by far the easiest measure to control.

The relative incidence of cases of fraud and other irregularities in relation to the EAGGF Guarantee budget reached in 2000 a level markedly higher than in the previous years (1.17%, as against 0.74% and 0.73% in 1999 and 1998). The relative incidence is still particularly noteworthy in Italy, Germany and France (the principal recipient of financing from the EAGGF Guarantee Section) having communicated a significantly higher rate of irregular expenditure than in the past.

The new cases opened by OLAF in 2000 concern firstly cereals, olive oil, and fruit and vegetables.

For the trends in numbers and amounts for cases communicated by the Member States, see Annex 9.

13.3. The field of structural measures

In the field of expenditure of structural measures, the appreciable increase in the number of new cases detected by the Member States as well as in terms of the budgetary impact continues. In relation to the previous year, the number of cases communicated increased by 74%, whilst the overall budgetary impact of the cases communicated decreased by 5%. The number of cases recorded shows that the inspection systems of the Member States have become increasingly effective and that the transparency level has increased appreciably.

The cases communicated by the Member States concern primarily the Structural Funds (EAGGF Guidance Section, ESF, ERDF, FIFG). With regard to the expenditure of the Cohesion Fund (which amounts however to approximately EUR3 billion a year), the four Member States which benefit from this financing, only communicated 2 cases. In terms of the number of cases communicated, it is still the Social Fund which was the most affected in 2000, while in terms of amounts it is the Regional Fund which was the most affected.

Behind these overall figures are hidden situations which vary enormously between the Member States. France and the Netherlands, which in the past only communicated a very limited number of cases, communicated in 2000 the largest number of cases (which concern especially the Social Fund). On the other hand, in terms of amounts the cases communicated by Ireland differ greatly from the cases communicated by the other Member States, which is due to a very limited number of significant cases in the field of the Regional Fund. This reflects the phenomenon already known in other budgetary fields that detection - which is random in time - of certain important cases has a major impact on statistics for a calendar year while the financial impact will concern rather a previous period.

After the clear fall of the previous year, the number of new cases opened in 2000 by OLAF and dealt with in cooperation with the Member States again increased considerably. OLAF concentrated on projects financed by the Social Fund and the ERDF.

For the trend in the number and impact of cases communicated by the Member States see Annex 10.

13.4. Direct expenditure

In the field of direct expenditure (which is managed by the Commission), OLAF opened, in 2000, 148 new cases whose overall budgetary impact is estimated at approximately EUR170 million, which represents an important increase in relation to the previous years. This reflects the will of OLAF to give greater priority to this field of the Community budget which, for years, has been the subject of substantial criticism from the Court of Auditors and the European Parliament and where OLAF is the only body with the right to carry out investigations. Almost 60% of the new cases opened in 2000 concern "external policies": [72] on average, the budgetary impact of these files is markedly higher than cases which concern "internal policies". [73]

[72] PHARE and TACIS, development assistance programmes etc.

[73] Financing of activities in the European Union, for example in the fields of research, environment, trans-European networks, training and culture.

14. financial follow-up

Some progress was achieved but the actual rate of recovery of amounts involved in cases of fraud and other irregularities remains unsatisfactory.

14.1. Determining factors

The amounts seen in points 2 and 3 above and in the annexes serve to identify the impact of fraud and irregularities against the European Union in relation to the budget. However this must not be confused with the real and definitive loss to the Community budget. This is because

- The amounts shown include 'attempts discovered in time to prevent misappropriation'. These are cases of frauds and other irregularities where the management and control systems put in place by the Member States and the Commission have made it possible for the Community budget not to suffer any real loss;

- A limited but nevertheless important part of the amounts shown is recovered or will be in the years to come. The possibilities of recovery depend on the concrete situation. The best conditions exist when the beneficiary (or the person responsible) has agreed to a guarantee or when there are ways of obtaining compensation. It goes without saying that recovery procedures must respect due process and procedures can be protracted till evaded entitlements or amounts unduly paid are recovered. It is therefore only after several years that the level of actual recovery is known (for more details, see above);

- Often penalties [74] must be added to amounts to be recovered. Community penalties accrue to the Community budget and offset part of the losses incurred in other cases;

[74] For example, in export refunds paid in advance, the amount to reimburse is automatically increased by 10%.

- In the areas of own resources and indirect expenditure, whenever recovery fails through the negligence of the Member State concerned, the Commission may decide to charge the Member State with the amounts to be recovered. [75]

[75] See procedure in Article 17(2) of Regulation No 1150/2000, account-clearing procedure (Article 8(2) of Regulation No 1258/1999), also procedure of Regulation No 448/2001.

14.2. Recovery

Even though some progress is noticeable, the level of actual recovery of amounts due as a result of cases of fraud and other irregularities remains unsatisfactory and procedures of recovery engaged in the Member States are often too slow. As a result the Commission has put in place a global recovery policy which will enable it to assess actions taken by the Member States and to take correcting measures when necessary.

14.2.1. Traditional own resources

Member States are responsible for the effective collection of traditional own resources. [76] To this end, they are required to set up an appropriate infrastructure. The Union finances this. The Commission (Direction General for the Budget) supervises the way the Member States recover funds in accordance with Community law.

[76] See Decision 94/728 (OJ L 293 of 12.11.1994) on own resources and in particular its Article 8, which requires Member States to collect traditional own resources.

In the Member States, recovery action is dependent on diverse factors, in particular difficulties in identifying the debtor, slowness of administrative and judicial procedures for recovery and insufficient guarantees. In view of all these factors, the Commission put in place an overall follow-up strategy, which enables it to evaluate the actions of the Member States and to take corrective measures when required. The mechanism for monitoring recovery revolves around to three major main principles.

The number of recovery cases managed by the Member States is very high. On the basis of Article 6(5) of Regulation No 1150/2000 and by means of the OWNRES system, the Commission is informed each quarter of the cases of fraud and irregularity as well as of any updates, where the financial impact exceeds EUR10 000. To process such a mass of information, the Commission defined a sample survey strategy.

The first procedure ("Report A"), based on an overall statistical exploitationof fraud forms, gives an indication of the general aspects of the situation of recovery [77]. The second procedure ("Report B") consists of following up to the clearance stage the recovery operations pertaining to a number of particularly significant and complex cases [78]. This monitoring of specific cases also aims to convince the Member States to strengthen their recovery actions. It can lead to the Member States taking on the financial responsibility through error or inaction, for not making available to the Community budget the traditional own resources [79].

[77] A first report of this type was sent to the budgetary Authority in 1995. It is Report A 94, published on 6.09.1995 (COM(95) 398) and a second report amalgamating the A and B reports is planned for 2001.

[78] Two reports of the kind were elaborated. Report B94, published on 9 June 1997 (COM(97) 259 final), deals with 6 cases involving a total of 124 M EUR or so. Report B98, published on 21 April 1999 (COM(1999) 160 final) covers 9 cases for a total amount of approximately 136 MEUR.

[79] Moreover, specific monitoring outside the "sample survey" is ensured for cases which do not fit the conditions for inclusion in the B sample but nevertheless deserve greater attention for reasons of opportunity.

Under certain circumstances, it may not be possible to carry out recovery. The Member State in this case writes off the amount of the debt which could not be recovered. The cases of write-off (amounts &gt; EUR10 000) are communicated to the Commission for examination. If the Member State showed all due diligence to obtain the recovery of the amount due, while respecting national and Community legislation, the exemption can be accepted. Otherwise, it is financially liable on the basis of Article 8 of Decision 94/728 and of Articles 2 and 17 of Regulation No 1150/00. Examining the diligence of the Member States constitutes a very effective action to convince the national administrations to take recovery more seriously.

As regards application of Article 17(2) of Regulation N°1150/2000, writeoff cases communicated in 2000 were particularly numerous, in relation to previous years (57 cases over the period 1997-1999, 327 cases in 2000 - see Annex 3). This results mainly from one Member State which first challenged the Commission's interpretation of Article 17(2) procedure, then ultimately accepted its observations and notified 282 cases for the period 1994-1998. In 2000, 327 cases were thus communicated to the Commission and examined; the results are shown inAnnex 3.

Member States have to ensure the collection of traditional own resources under the best conditions: with this mandate of remunerated delegation (25%) [80] and while meeting international standards of sound and effective management of public funds, any negligence on the part of the Member States which results in a loss of resources gives rise to financial responsibility for their administrative errors.

[80] On the basis of Article 8 of Decision 94/728/EC, Euratom (replaced by the Decision of 29 September 2000 once it is ratified).

According to this approach, the Commission holds the administrations financially responsible for their own errors, for example in the event of limitation (provision) of an amount according to Article 221(3) of the Code, while all the elements allowing for this to be taken into account were well known, or in the event of an administrative error not detectable by the debtor (Article 220(2)(b) of the Code). Thus, administrations will be strongly motivated to act with all due diligence in the process of collection of duties. During the period 1999-2000, the Commission sent 65 Letters of Calls for Funds (LCF) representing an amount of approximately EUR46 million. The LCF were sent following a refusal to write off the amounts concerned.

The improvement in the effectiveness of recovery largely depends of course on the will of the Member States to act with all necessary diligence. For its part, the Commission concentrates on the actions, which it can carry out in order to improve the effectiveness of recovery in each of the main areas mentioned above, and has taken several initiatives for a stricter monitoring policicy.

An active reminder policy with regard to requests for information from the Commission was set up; a greater synergy between the Commission departments, in particular OLAF and the Directorate-General for the Budget, is carried out in the management of the fraud files. Furthermore the 'Recovery 2000' report, to be published for the first time in the middle of 2001, will bring together samples A and B with the aim of describing the situation concerning recovery more comprehensively.

Processing of write-off cases. Firstly, it is advisable to recall that already on 4 July 1997, the Commission submitted a draft amendment of Regulation No 1552/89 (now Regulation No 1150/2000) to make more effective the current write-off procedure for irrecoverable amounts, setting in particular a deadline for the submission to the Commission of the cases withdrawn from the separate accounts. Discussions in the Council are not yet finished.

Regarding the practical treatment of individual cases, the Directorate-General for the Budget created an interdepartmental working group and also obtained the suitable computer equipment to allow it to manage a large number of files effectively.

In relation to financial liability, the Commission set in motion an infringement proceeding (under No A2000/2115) and sent the letter of formal notice on 19/7/2000. The reasoned opinion should come out in the near future. This procedure will serve as a "pilot case" to clarify whether the action of the Commission regarding the financial responsibility of a Member State for its own administrative errors is justified.

14.2.2. EAGGF Guarantee Expenditure

In the field of agricultural expenditure, OLAF continued the exercise of checking the state of recovery in particular in the cases already communicated several years ago and to identifying the amounts which prove to be irrecoverable or to justify, if necessary, the delay in effective recovery.

The problem of recovery in the field of EAGGF Guarantee remains still primarily a problem for one Member State (Italy) which accounts, alone, for three quarters of the overall balance still to be recovered. In large part, this problem is due to the length of the national [81] judicial procedures. Italy has not yet given the assistance necessary to find a solution to this problem.

[81] Also see special report N° 11/2000 of the Court of Auditors which checked the recovery situation (and noted the length of the procedures) in the olive oil sector, which represents approximately a third of the balance to be recovered in the cases communicated by Italy.

For the situation on recovery see Annex 6.

14.2.3. Structural measures

In the field of structural measures, the financial follow-up is determined by the fact that the final decision on the balance to be recovered can be taken only at the time of the closure of the multi-annual operational programme (or of the Community initiative or the Single Programming Document). Member States which discover an irregularity during the period of implementation of the operational programme have the possibility of rectifying the financial situation at the latest at the time of the final payment (recovery of the undue amount already paid or reduction of a later payment) and of reallocating the appropriations released to another project where there has not been an irregularity.

The visibility of amounts yet to be recovered is limited by the fact that the Member states do not always communicate the follow-ups of irregularities in a systematic manner. Member States must now communicate annually to the Commission a breakdown of recoveries to be effected in order to facilitate financial follow-up. [82]

[82] Article 8 of Commission Regulation 438/2001 of 2 March 2001.

OLAF henceforth is systematically involved in the follow-up organised by the authorising departments of the Commission and takes part in the regular coordination meetings with the Member States. The new regulation [83] which introduced a type of "clearance of accounts" will facilitate, in the future, charging to the Member State the amounts lost following as a result of negligence.

[83] Commission Regulation N° 448/2001 of 2 March 2001 laying down the detailed rules for the application of Council Regulation (EC) No 1260/1999 with regard to the procedure for the implementation of financial corrections applicable to aid granted under the Structural Funds (OJ L 64, 6.3.2001).

For the situation on recovery see Annex 7.

ANNEXES

ANNEX 1

Traditional resources

Number of cases of fraud and irregularity communicated by the Member States [84] to the Commission

[84] The communication by the Member States of cases of fraud and irregularity above EUR10000 is a Community obligation set out in article 6, paragraph 5 of regulation 1150/00 of 22.05.2000

Development over the period 1997- 2000

(updated on 18.04.2001)

&gt;TABLE POSITION&gt;

ANNEX 2

Traditional resources Cases of fraud and irregularity communicated by the Member States in 2000 (Amounts in euros)

&gt;TABLE POSITION&gt;

ANNEX 3

Traditional Own Resources

Write-off cases communicated by the Member States [85]

[85] Procedure set out in article 17 paragraph 2 of regulation n° 1150/00

1. Summary of write-off cases sent by the Member States in the period 1992-2000

Observations of the Commission on examining these cases

&gt;TABLE POSITION&gt;

\* The column other cases includes cases withdrawn or which came under old regulations where communication was not appropriate or requiring additional information from the Member States .

2. Détail des cas de mise en non-valeur adressés par les Etats membres en 2000

Observations of the Commission on examining these cases

&gt;TABLE POSITION&gt;

ANNEX 4

EAGGF GUARANTEE Irregularities communicated by the Member States under Regulation N°595/91 2000

&gt;REFERENCE TO A GRAPHIC&gt;

ANNEX 5

STRUCTURAL ACTIONS

Irregularities communicated by the Member States under Regulations N°1681/94 and 1831/94

&gt;REFERENCE TO A GRAPHIC&gt;

2000

ANNEX 6

EAGGF GUARANTEE Situation of recovery in cases communicated under Regulation N°595/91

(Amounts in 10.000 euros)

&gt;TABLE POSITION&gt;

ANNEX 7

STRUCTURAL ACTIONS

Situation of the recovery in the cases communicated under Regulations n°1681/94 abd 1831/94

&gt;TABLE POSITION&gt;

&gt;REFERENCE TO A GRAPHIC&gt;

ANNEX 8

ANNEX 9

&gt;REFERENCE TO A GRAPHIC&gt;

&gt;REFERENCE TO A GRAPHIC&gt;

ANNEX 10

&gt;REFERENCE TO A GRAPHIC&gt;

&gt;REFERENCE TO A GRAPHIC&gt;

ANNEX 11

&gt;TABLE POSITION&gt;

&gt;REFERENCE TO A GRAPHIC&gt;

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