European Watchdog Faults EU Fraud Investigations

(Bloomberg) -- The European Commission’s anti-fraud office doesn’t effectively protect the EU’s financial interests, and the executive arm needs to take a leadership position in future inquiries, the European Court of Auditors said.

The commission lacks comprehensive information on the scale, nature and causes of fraud in European Union spending, while seven out of 10 citizens perceive that fraud against the bloc’s budget happens “rather frequently,” the watchdog said in a report published Thursday.

“This is disturbing because if people think that, it’s decreasing trust in the EU and gives courage to fraudulent people to be more active,” Juhan Parts, member of the European Court of Auditors responsible for the report, said by phone. “If we really want to achieve clear results and EU citizens to trust more that EU money doesn’t mean corruption then we should put strategic management on the new quality level.”

The report comes as the bloc is engaged in fraught negotiations over its next trillion-euro budget, and amid allegations of widespread misuse of EU funds. In one of the most high-profile cases, the Czech Republic’s billionaire Prime Minister Andrej Babis was implicated in the misuse of EU grants at a company that once belonged to his chemical, agriculture and media empire.

The auditors found that out of 17 cases a year recommended by the European anti-fraud office, OLAF, less than half led to prosecutions of suspected fraudsters. Of 1.9 billion euros ($2.2 billion) of paid EU money that was recommended for recovery between 2012 and 2016, only 13 percent was recovered.

While the commission detected fraud in EU spending in 2017 at 390.7 million euros, or 0.29 percent of total payments from the EU budget, figures do not provide a complete picture, auditors said. The Commission also lacks insight into the level of undetected fraud.

The auditors called for fraud risk management and prevention efforts to be concentrated in one commissioner’s portfolio to put in place a “robust fraud reporting and measurement system.” The anti-fraud strategy adopted in 2011 should also be renewed, they said.

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