Protection of the European Union's financial interests: OLAF's role Budapest, 11 October 2018

1. Protection of the European Union's financial interests: OLAF's role Budapest, 11 October 2018 FEASIBILITY AND ECONOMIC VIABILITY OF PROJECTS FINANCED FROM EU FUNDS Conference organized by Transparency International Hungary Maria Ntziouni-Doumas Anti-Fraud Policy Adviser OLAF

2. TOPICS OF PRESENTATION OLAF's mission and roleFacts and figuresThe need for a holisticresponseThe European response to the fightagainstfraud

3. OLAF MISSION AND MANDATE Mission • Detect, investigate and work towards stopping fraud with EU funds OLAF Mandate is • to conduct independent investigations into fraud, corruption and irregularities involving EU funds so as to ensure that EU taxpayers’ money reaches projects that can stimulate the creation of jobs and growth in Europe; • to investigate serious misconduct by EU staff and members of the EU institutions, thus contributing to strengthening citizens' trust in the EU institutions; • to develop EU policies to counter fraud

4. Présentation Powerpoint

5. OLAF investigations Internal investigations: fraudulent or serious misconduct of EU staff and Members of the EU institutions External investigations: into beneficiaries of EU funds/economic operators (commercial companies, NGOs, contractors and subcontractors etc.) - EU and worldwide Coordination: within the scope of its jurisdiction,OLAF contributes to investigations carried out by national authorities or EU bodies Legal Bases: various, but the most important is Reg. 883/2013 5

6. Outcome of investigations • OLAF investigates under administrative law. OLAF has no judicial powers. • OLAF only seeks evidence for and against the "concerned person" • OLAF may request EU and national authorities to cooperate • OLAF can only make recommendations following its investigations. 6

7. OLAF's recommendations • DISCIPLINARY:the case is referred to the authority having disciplinary powers in the relevant EU institution, body, office or agency • ADMINISTRATIVE:changes to procedures, management or control systems, legal framework recommended to EU Institutions, bodies, offices or agencies + EDES • JUDICIAL:transmission of final report to the relevant national judicial authorities, recommending legal action. • FINANCIAL:recovery of misused funds by the relevant EU institution, body, office, agency or competent authority of the Member State OLAF monitors the implementation of the recommendations 7

8. WHAT ARE THE EU'S FINANCIAL INTERESTS? • They are defined by Article 2 point 1 of Reg 883/2013 as including: • revenues, • expenditures, • assets • covered by: • budget of the European Union; • budgets of the institutions, bodies, offices and agencies; • budgets managed and monitored by the institutions, bodies, offices and agencies. 11-Jan-19 8 8

9. WHAT IS AN IRREGULARITY AFFECTING THE EU'S FINANCIAL INTERESTS? • As defined in Article 1(2) of regulation 2988/95: • ANY infringement of a provision of Community law resulting from an act or omission by an economic operator • 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 • Recoveries are operated by the responsible Directorate-General 11-Jan-19 9 9

10. WHAT IS A FRAUD AFFECTING THE EU'S FINANCIAL INTERESTS? • Fraud, corruption and any other illegal activity as defined in EU criminal law - see for example “PIF” Convention of 1995, which defines fraud thus (see the below note) • This means that each EU Member States has adopted criminal law to protect the financial interests of the EU. • PIF Directive 2017/1371 “PIF” is the French acronym for "Protection of the Financial Interests" 11-Jan-19 10 10

11. The OLAF Report for 2017 - OLAF investigative performance in 2017

12. OLAF AT THE HELM OF LARGE, COMPLEX, CROSS-BORDER INVESTIGATIONS • Public procurement is still an attractive marketplace for fraudsters, who use corruption and off-shore accounts as fraud facilitators. Many procurement fraud cases are transnational, as the new fraud scenarios often involve a contracting authority from one Member State and bidders from several other Member States who subcontract their works to companies again located in different countries. • Research and Employment Grants constitute a lucrative fraud business, with double-funding and employment subsidy fraud becoming increasingly popular.

13. OLAF's ADDED VALUE: CENTRAL ROLE IN COMPLEX INVESTIGATIONS • Trends revealed by OLAF investigations in 2017: • Corruption, conflict of interest and the manipulation of tender procedures continue to be encountered in fraud cases affecting EU structural funds, with instances of organised crime trying to gain profit • Fraudsters have increasingly attempted to defraud funds for research or refugees • The evasion of customs duties is orchestrated through transnational criminal schemes

14. IRREGULARITIES REPORTED AS FRAUDULENT IN 2017

15. Irregularities not reported as fraudulent in 2017RREGULARITIES REPORTED AS FRAUDULENT IN 2017

16. Detection Rates

17. COHESION & FISHERIES – PP 2007-13Most reported irregularities related to Public Procurement HU

18. COHESION & FISHERIES – PP 2007-13*Irregularities related to Public Procurement - HU • Lowerfrequency and lower incidence of relatedamounts(comparedwith EU) • No fraud • Link with 'ethics and integrity' infringements(conflict of interest) * Irregularities reported since 2008 (excluding 2018) ** fraudulent and non-fraudulent irregularities

19. Cohesion policy – Improving access to employment and sustainability Types of violations

20. OLAF INVESTIGATIONS ENSURE EU MONEY CAN SERVE ITS GOALS Member State/OLAF detection of irregularities and their financial impact in the area of Traditional Own Resources in the period 2013 - 2017 Member State/OLAF detection of irregularities and their financial impact in the area of Structural Funds and Agriculture in the period 2013 - 2017

21. OLAF RECOMMENDATIONS LEAD TO INDICTMENT RATE OF 42% ACROSS THE EU Actions taken by national judicial authorities following OLAF’s judicial recommendations (issued between 1/1/2010 and 31/12/2017)

22. FEASIBILITY AND ECONOMIC VIABILITY OF PROJECTS FINANCED FROM EU FUNDS September 4, 2018 12:00 • https://translate.google.com/translate?sl=hu&tl=en&js=y&prev=_t&hl=hu&ie=UTF-8&u=https%3A%2F%2Fmfor.hu%2Fcikkek%2Fmakro%2Fcsak-penzszorasra-jo-az-oko-filmpark-kisvardan-5-ev-mulva-elbontjak.html&edit-text= The Eco-Movie Park in Kisvárda is good enough to blow up: 5 years later it is demolished Hundreds of millions of EU subsidies come from a movie market at Kisvárda, which, according to the latest information, does not sound like anything else about the collapse of EU funds. But in all respects, the fate of the eco-filmpark has already fallen. On 29 August, the Environmental Protection and Nature Conservation Department held a public hearing in the environmental impact assessment procedure. Here, it was already said that the facility would be dismantled after a mandatory 5-year maintenance period. "At the request of the client, LászlóRózsa expert presented the planned investment and the impact of the establishment and operation on the environment and nature protection." He explained that the facility was planned to be maintained for 5 years and will be demolished, "says the brief, only 1 page report of public hearings. That is, in the light of that, nothing else is said about spending the EU resources as quickly as possible for the purpose of sparing, or even short-term, gains.

23. SELECTION OF CASES - CRITERIA • OLAF’s specific competence, as defined in Reg883/2013 • Whether information is sufficient to trigger an OLAF investigation(reliability of the source, credibility of the allegation) • Whether information falls within OLAF’s Investigative Policy Priorities, which include considerations of: • Subsidiarity/added value (OLAF’s sole competence…) • Proportionality (expected results vs resources; likelihood of recovery/prosecution…) • Financial impact • Efficient use of investigative resources (workload, priorities, expertise…) • Special Policy Objectives (reviewed at regular intervals) 11-Jan-19 23

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25. …CONSEQUES FOR THE EUROPEAN CITIZEN • Waste of public money • Reduction of EU purchasing power • EU businesses are harmed by illegal imports • European projects fall into disrepute • Less EU support for genuinely deserving projects 11-Jan-19 25

26. RECENT DEVELOPMENTS IN THE PIF AREA The current anti-fraud framework is not sufficient to achieve the objectives of Art. 325 TFEU. Significant recent developments in PIF area at the EU level: • The establishment of the EPPO (Regulation 2017/1939): it will conduct criminal investigations and prosecutions of PIF offences; • The adoption of the PIF Directive (2017/1371): it defines in a harmonised way the offences for which the EPPO will be competent. Once the EPPO becomes operational, the EU's financial interests will be protected in a comprehensive way: criminal investigations and prosecutions by the EPPO and administrative investigations by OLAF. Homologues Group

27. OLAF'S FUTURE ROLE Revision of Regulation 883  rules on EPPO/OLAF cooperation • OLAF continues to be competent for fraud and irregularities; • Report to the EPPO any information about criminal conduct  verification? • No parallel investigations  complementary investigations? • Act where the EPPO cannot or does not want to act: • Referral of cases to national authorities • Administrative follow up • Assist the EPPO on request: • Information, analysis, expertise • Coordination of specific actions • Other?

28. OLAF's STRATEGY FOR FIGHTING FRAUD • 360°responsibility for anti-fraud: policy, deterrence, prevention, investigation • Operating under the Commission Anti-Fraud Strategy, bringing together anti-fraud activities in the Commission • Analysing risks and increasing security in areas that are vulnerable to fraud and corruption • Fraud-proofing of legislation and management • Strengthening legal instruments for detecting, investigating and punishing fraud • Developing a culture of cooperation between all relevant authorities with the full participation and commitment of national and European authorities on the ground • Working on the basis of integrity, impartiality and transparency, in full compliance with the principle of legality, individual rights and freedom 11-Jan-19 28

29. FIGHT AGAINST FRAUD PROGRAMME & TOOLS OLAF manages Herculeprogramme and tools to promote its policy objectives • Herculeprogramme is dedicated to fighting fraud, corruption and any other illegal activities affecting the financial interests of the EU - Budget: 14 million • Anti-Fraud Information System (AFIS) offers tools to improve cooperation with partners, including other institutions, Member States, international organisationsand non-EU countries. It encompasses two major areas: mutual assistance in customs matters and irregularities management on the expenditure side of the budget. Budget: 6.9 million

30. TRENDS AND OUTLOOK • Increased awareness of EU citizens about fraud and corruption • Higher flow of allegations submitted to law enforcement bodies in the EU and increased expectations that authorities will act swiftly • Increase in the transnational dimension of fraud and corruption cases • Corresponding needfor more transnational responses and for strong - European - enforcement

31. FRAUD REPORTING • WHAT TO REPORT? https://myintracomm.ec.europa.eu/serv/en/ • WHO CAN REPORT? fraud-prevention/ReportFraud/Pages/index.aspx • HOW TO REPORT? • Templateforreportingfraud • Whistleblowingguidelines • OLAF procedureonwhistleblowing Anti-fraud website: https://myintracomm.ec.europa.eu/ serv/en/fraud-prevention/Pages/ FraudPrevention.aspx 31

32. Thank you Maria NTZIOUNI-DOUMAS Adviser Anti-Fraud Policy EUROPEAN COMMISSION EUROPEAN ANTI-FRAUD OFFICE (OLAF) E-mail: maria.ntziouni-doumas@ec.europa.eu OLAF website: http://olaf.europa.eu