Report: Impact of Organised Crime on the EU’s Financial Interests

This analytical study, requested by the European Parliament’s Committee on Budgetary Control, examines the impact of organised crime on EU’s finances. Taking together the expenditure and revenue sides, the research suggests that between 1% and 2% of the EU budget is defrauded each year. The study also assesses measures at the EU and Member State levels to combat the problem, and recommends actions to help reinforce these measures.

Scale

All the available evidence suggests that the scale of fraud against the EU finances is vast. This at first sight does not appear to be the case on the expenditure side but here there is a particular problem of identifying ‘missing’ funds. On the revenue side, estimates from the Commission suggest that the VAT gap amounted to EUR 150 billion in 2016, EUR 50 billion of which were defrauded by criminal groups. Other estimates highlighted below indicate potentially higher levels of fraud. Our estimates indicate around EUR 2.0 billion to EUR 2.7 billion of EU financesis lost to organised crime. Considering the EU’s 2020 budget of EUR 165 billion, this is calculated to represent between 1% and 1.6% of the EU’s budget.

EU and Member State approaches to the problem

The PIF Directive and the EU’s Strategy on Organised Crime (2021-25) represent significant steps towards forging a common approach to tackling the problem of organised crime fraud in relation to EU finances. That said, while all Member States have transposed the PIF Directive, there are varying degrees of implementation. Furthermore, while the Commission has encouraged Member States to develop National Anti-Fraud Strategy (NAFS), so far progress is limited.

The capacity of national authorities to address the challenge of organised crime in relation to the EU finances varies considerably across the EU Member States and while some have welldeveloped strategies, resources and mandates, others do not. This also creates challenges and obstacles for efficient cooperation. Differences between Member States in terms of reporting on fraud and irregularities arise because of differences in national systems to counter fraud as well as nonharmonised reporting systems. Similarly, the EU level tools to detect and prevent fraud are not used by all Member States or are not used extensively by some others. An additional complication is that there is no distinction in some Member States between national financial crimes and EU financial crimes. This study suggests that a key priority is to develop a common approach to estimating the level of fraud affecting the EU finances and in relation to the measures taken by Member States to tackle the problem.

Recommendations

EU level

• Harmonise national definitions of organised crime to ensure EPPO has competencies over all cross-border cases

• The Commission should support and encourage Member States to use both EDES and Arachne to tackle fraud and organised crime

• The Commission should engage in communication activities with Member States on how to use data tools such as Arachne and EDES

• The EU data collection and risk analysis tools should be better integrated

• Member States are encouraged to establish regional cooperation networks for groups of Member States to share information on cases and strategies to combat fraud against the EU finances if it is of interest to them

• In line with Article 11 of the PIF Directive, the Commission and Member States should ensure that their jurisdiction is established over criminal offences against the EU’s financial interests occurring in third countries

• The intra-community VAT system should be updated to close loopholes that can be exploited by organised crime through MTIC schemes

• The EU should set common quality standards for national anti-fraud systems and reporting procedures and require a declaration of compliance. This would help ensure that managing authorities develop robust control systems to manage EU funds

Member States

• Member States need to develop effective fraud risk assessment and management systems to help ensure the early detection and reporting of fraud risks

• Supported by the EU, Member States should be encouraged to provide training to staff of the relevant authorities to equip them with the knowledge to identify potential fraud, make use of the relevant tools effectively and report suspicious cases in line with EU standards. This should also be done with a view to enhancing the capacity of authorities managing EU funds to detect, investigate and report fraud.

• The European Commission should define minimum standards for AFCOSs and Member States should adopt these standards to help harmonise their effectiveness across the EU

• Member States should take up more of the cases highlighted by OLAF of possible fraud against the EU’s finances

• Member States should seek to involve civil society as well as the private sector in the effort to combat fraud. This would include developing confidential channels to report suspected fraud and to guarantee protection to those doing so.

• Member States supported by OLAF and the EPPO where appropriate, should undertake research to improve the estimates of the financial impact of organised crime fraud involving the EU’s finances, particularly when it comes to EU expenditure.

• Member States should with EU guidance as appropriate, regularly evaluate their anti-fraud frameworks to establish their effectiveness, identify best practices and review their anti-fraud strategies to address any emerging risks.

Lees verder:

• Impact of Organised Crime on the EU’s Financial Interests, European Parliament