REPORTING SUSPECTED FRAUD AND CORRUPTION OLAF.D.2 – Fraud Prevention, Reporting and Analysis Unit Riga – 25 February

Content Definitions from legal framework on reporting obligations Overview of the situation based on the analysis of reported cases (PIF Report) Fraud detection and reporting obligations – key clarifications 2

Legal basis for reporting irregularities and suspected fraud Cohesion Policy Funds ( ) Council Regulation (EC) No 1083/2006 (Article 70) Commission Regulation (EC) No 1828/2006 as amended by Commission Regulation (EC) No 846/2009 Structural and Investment Funds ( ) Council and EP Regulation (EC) No 1303/2013 (Article 122) Delegated and Implementing Acts under preparation 3

4 Article 122 of Council and EP Regulation (EC) No 1303/2013 Member States must notify to OLAF all irregularities which exceed EUR in EU contribution (Article 122) DA and IA on the reporting of irregularities ongoing NB: obligation to report suspected fraud and/or corruption by qualifying the irregularity in the Irregularity Management System (IMS)

5 Definition of irregularity(Regulation 1303/2013) ARTICLE 2 (36) 'irregularity' means any breach of Union law, or of national law relating to its application, resulting from an act or omission by an economic operator involved in the implementation of the ESI Funds, which has, or would have, the effect of prejudicing the budget of the Union by charging an unjustified item of expenditure to the budget of the Union.

6 Definition of suspected fraud (Regulation 1828/2006) An irregularity which has been subject of a primary administrative or judicial finding giving rise to the initiation of proceedings at national level in order to establish the presence of intentional behaviour, in particular fraud as is referred to in […] the Convention […] on the protection of the European Communities’ financial interests […]

7 The Convention on the protection of the EU's financial interests, fraud definition the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities, non-disclosure of information in violation of a specific obligation, with the same effect, the misapplication of such funds for purposes other than those for which they were originally granted

8 Corruption definition Corruption is defined as the abuse of (public) position for private gain. Bribes and kickbacks refer to the giving (active bribery) or receiving (passive bribery) of a "thing of value" to influence an official act or a business decision. The "thing of value" need not be money, and often is not (the ambiguity remains and the perpetrator can more easily invent excuses if needed). As a consequence, the act of bribery is difficult to detect.

9 Most common types of irregularities reported as suspected fraud in 2013 Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure, p. 60

10 Programming period , 63 % of the irregularities reported as fraudulent were detected by administrative controls Previous programming period, under 20 % Increased effectiveness of administrative controls detecting fraudulent irregularities Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure, p. 61

11 Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure, p. 66 Number of irregularities reported as suspected fraud 2013

Situation in Estonia 12 Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure

Situation in Latvia 13 Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure

Situation in Lithuania 14 Source: Commission Staff Working Document, Statistical evaluation of irregularities reported for 2013 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure

Reporting fraud and corruption Law Enforcement (LE) and Jucial Authorities (JA) competent for investigating fraud Managing Authority (MA) detecting cases of possible fraud or corruption have to report them to competent LE or JA. This implies, suggests and requires:  Structured two-way communication (Memoranda, Agreements, Working arrangements, etc.) establishing Means of transferring of initial information Follow-up and feedback by LE or JA Modalities for nulla osta from JA to enable reporting to EC Regular updates on evolution of cases to fulfill reporting obligation  Exchange of data, expertise and know-how to further foster fraud detection and enhance the protection of the EU financial interests 15

QUESTIONS? Maria Ntziouni – Deputy Head of Unit OLAF.D.2 – Fraud Prevention, Reporting and Analysis Unit OLAF - European Anti-Fraud Office European Commission Rue Joseph II 30 B–1049 Brussels 16