Annual report 2016 on the protection of the EU’s financial interests - Fight against fraud

The European Parliament adopted by 558 votes to 45, with 40 abstentions, a resolution on the annual report 2016 on the protection of the EU’s financial interests – Fight against fraud.

Better fraud detection: Member States and the Commission have shared responsibility for implementing approximately 74 % of the Union’s budget for 2016. Members welcomed that the total number of fraudulent and non-fraudulent irregularities reported in 2016 (19 080 cases) was 15 % lower than in 2015 (22 349 cases) and their value had decreased by 8 % (from EUR 3.21 billion in 2015 to EUR 2.97 billion in 2016).

Parliament deplored the fact that not all Member States have adopted national anti-fraud strategies and that there is still a gap between the Member States in the reporting process. It called for a set of measures to be taken to ensure closer, more effective and more efficient cooperation in the area of fraud detection. The Commission is urged to: (i) establish a uniform system for the collection of comparable data on irregularities and cases of fraud from the Member States; (ii) continue its efforts to help Member States to step up the level and quality of inspections.

PIF Directive and European Public Prosecutors ‘s Office Regulation: Parliament welcomed the adoption of the Directive on the fight against fraud to the Union’s financial interests by means of criminal law (the PIF Directive),  which includes cross-border VAT fraud involving total damages of at least EUR 10 million.

It also welcomed the decision of 20 Member States to proceed with the establishment of the European Public Prosecutor's Office through enhanced cooperation. In this context, it called for effective cooperation among Member States, the EPPO, OLAF and Eurojust.

Revenue - Own resources: VAT yielded almost EUR 1 035.3 billion in 2015, and contributed EUR 18.3 billion to EU own resources, or 13.9 % of the EU’s total revenue in the same year. The Missing Trader Intra-Community (MTIC) fraud, commonly called carousel fraud, alone was responsible for VAT revenue losses of approximately EUR 50 billion in 2015.

Members expressed concern about losses due to the VAT gap and fraud relating to EU VAT, which amounted to EUR 159.5 billion in 2015. They emphasised that the problems related to cross-border VAT fraud demand strong, coordinated and speedy measures. The Commission is urged to speed up its procedures to present its proposals for a definitive VAT system as provided for in the action plan.

Parliament called on Member States to improve their cooperation to combat tobacco smuggling into the European Union, which represents an estimated annual loss of EUR 10 billion on public revenue to the EU and Member States' budgets.

It also invited the Commission to:

• strengthen the common policy on customs checks by providing for genuine harmonisation, focusing in particular on efforts to combat trade in illicit and counterfeit products;
• recover from the United Kingdom Government a shortfall of EUR 1.987 billion, an amount that should normally have returned to the Union budget;
• set up a system to calculate the total sums recovered following OLAF's recommendations.

Expenditure: Members regretted that this is the fourth year in which the irregularities reported as fraudulent in direct management increased in number and value (EUR 0.78 million in 2015 and EUR 6.25 million in 2016). They called on the Commission to present by the end of 2018 a specific plan to reduce fraud in this area. The resolution noted the following:

• that the number of reported fraudulent and non-fraudulent irregularities concerning the European Agricultural Fund for Rural Development (EAFRD), while decreasing from 3 250 cases in 2015 to 2 676 cases in 2016, is still twice as high as in 2012, but wished to highlight that the amounts concerned in 2016 are only 8 % higher than in 2012;
• the 8 497 fraudulent and non-fraudulent irregularities linked to cohesion policy and fisheries in 2016 represented a 22 % decrease compared to 2015, but are still 25 % higher than the average for the last five years; of almost one third of the irregularities reported as fraudulent in 2016 in cohesion policy, no information was provided on the priority area concerned;
• the level of irregularities due to non-compliance with public procurement rules remains high. The Commission is invited to develop a database of irregularities, capable of providing a basis for meaningful analysis in a comprehensive way of the frequency, seriousness and causes of public procurement errors.

In view of the problems highlighted, Parliament suggested taking the following measures:

1) Improving controls: Members called for firmer measures against fraudulent irregularities and that non-fraudulent irregularities should be eliminated using administrative measures, in particular by introducing more transparent and simpler requirements.

In particular, a system enabling the authorities to exchange information would facilitate the cross-checking of accounting records for transactions between two or more Member States in order to prevent cross-border fraud in respect of the structural and investment funds.

2) Preventative actions: Parliament called for the strengthening of the implementation of the Early Detection and Exclusion System (EDES) and Anti-Fraud Information System (AFIS) and for the completion of the national antifraud strategies.

The Commission is invited to:

• submit as a matter of urgency a horizontal legislative proposal on the protection of whistleblowers in order to effectively prevent and combat fraud affecting the financial interests of the European Union; investigative journalism should be encouraged by legal means both in the Member States and within the Union;
• commit to a much more credible and comprehensive anti-corruption strategy. Members recalled that in its resolution of 25 October 2016, Parliament called for the establishment of an annual report on democracy, the rule of law and fundamental rights, including country-specific recommendations, with special focus on corruption;
• put in place, at EU level, all necessary measures to track and trace Philip Morris International tobacco products and to bring legal action in the event of any illegal seizures of this manufacturer’s products until all provisions of the Tobacco Products Directive are fully enforceable.

OLAF investigations: Parliament called on the Commission to ensure full implementation of OLAF’s recommendations in the Member States. It deplored the fact that despite numerous OLAF recommendations and investigations, the prosecution rate is only 30 % in the Member States and the judicial authorities of some Member States do not regard OLAF’s recommendations on the misspending of EU money as a priority.