Transcript
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Fraud PreventionThe role of the Managing
Authorities
Johan KHOUW, European Commission, OLAF
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WHAT IS FRAUD?
• Fraud is a “criminal law” notion.
• In 1995, through the Convention on the Protection of the Communities’ Financial Interests (PIF Convention), Member States reached an agreement concerning the definition of EU fraud under criminal law (some elements: intentional act or omission, use of false/incorrect documents, non disclosure of information leading to a loss for the Community budget and misappropriation)
• Only a final decision of a judicial authority can qualify a suspected fraud as a fraud case.
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FRAUD AS A “SUB-SPECIES” OF IRREGULARITY
Definition of irregularity:
“any infringement of a provision of Community law resulting from an act or omission by an economic operator which has, or would have, the effect of prejudicing the general budget of the European Union by charging an unjustified item of expenditure to the general budget.”*
* Article 2(7) of Council Regulation (EC) N. 1083/2006
Irregularities
Fraud
Fraud
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THE COSTS OF FRAUD
• Economic costs
• Social Costs
• Threat to the trust between institutions and civil society (damage to the reputation of the institutions)
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• 12,161 irregularities
• € 1.78 billion involved
• € 0.54 billion recovered
• € 0.8 billion to be recovered
• € 0.44 billion suspended before payment
THE FIGURES ON IRREGULARITIES IN THE STRUCTURAL ACTIONS AREA PROGRAMMING
PERIOD 2000-2006
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THE FIGURES ON FRAUD IN THE STRUCTURAL ACTIONS AREA PROGRAMMING
PERIOD 2000-2006
• 12-15% of irregularities are or can be described as suspected fraud
• 20-25% of related amountsFraud
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WHY IS FRAUD COMMITTED? THE FRAUD TRIANGLE: A
SOCIOLOGICAL/CRIMINOLOGICAL CONCEPT
The existence of "need or greed" factors can trigger individuals to find a way to meet their needs
Even if a person has a motive, he or she cannot perpetrate a fraud without being given an opportunity
Human nature dictates that
people will not commit an act
unless they can justify it to
themselves (“culture”)
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Group of individualscomplying with rules
Group of non-deliberateoffenders
GOALS OF FRAUD PREVENTION
Group of individualscomplying with rules
Group of non-deliberateoffenders
Group of individualscomplying because of
fear of sanctions
Group of deliberateoffenders
Group of individualscomplying because of
fear of sanctions
Group of deliberateoffenders
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WHY IS FRAUD PREVENTION SO IMPORTANT?
- OLAF’s EXPERIENCE -
• Prevention is a cost-effective approach to dealing with fraud
• Investigation and prosecution remain costly and are the
responsibility of agencies which may have different priorities
and objectives
• Investigation and prosecution may take years to achieve
results
• Fraud prevention can be pursued and achieved at different
levels in the management “chain”
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WHO IS RESPONSIBLE FOR FRAUD PREVENTION?
MEMBER STATES
COMMISSION OLAF
FRAUD PREVENTION
FRAUD DETECTION
AND REPRESSION
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RESPONSIBILITIES OF THE MEMBER STATES - SHARED MANAGEMENT/ Art. 53b (2) of Financial
Regulation (1605/2002)
[…] Member States shall take all the legislative, regulatory and administrative or other measures necessary for protecting the Community’s financial interests. To this effect they shall in particular:
(a) satisfy themselves that actions financed from the budget are actually carried out and to ensure that they are implemented correctly;
(b) prevent and deal with irregularities and fraud;(c) recover funds wrongly paid or incorrectly used or funds lost as a
result of irregularities or errors;(d) ensure, by means of relevant sector-specific regulations […],
adequate annual ex post publication of beneficiaries of funds deriving from the budget.
To that effect, the Member States shall conduct checks and shall put in place an effective and efficient internal control system […]
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SECTORAL LEGISLATION STRUCTURAL ACTIONS (Reg. 1083/2006)
• Member States are responsible for the management and control of operational programmes, in particular through the following measures:
– preventing, detecting and correcting irregularities
– recovering amounts unduly paid
– notifying these to the Commission
– keeping the Commission informed of the progress of administrative and judicial proceedings
• When amounts unduly paid to a beneficiary cannot be recovered, the Member State is responsible for reimbursement of amounts lost when it is established that the loss has been incurred as a result of fault or negligence on its part (“deterrent effect”).
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INITIATIVES ADOPTED BY THE COMMISSION IN RELATION TO FRAUD PREVENTION
• SEC(2001)2029 of 7.11.2001, Communication
concerning the fraud proofing of legislation and contract
management
• COM(2007)806 of 17.12.2007, Communication from the
Commission: "Prevention of fraud by building on
operational results: a dynamic approach to fraud-
proofing".
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NOTIFICATION OF IRREGULARITIES TO THE EC
• The notification of irregularities is of great value for the EC
– Provides first/overall impression of what goes or could go wrong
– Provides information for OLAF/EC analyses to identify risks and
threats, in order to improve provisions and controls and strengthen
fraud prevention
– Particular interest for those irregularities classified by MS as
“suspected frauds” giving the Commission services a more exact
idea about the level of fraud
– Allows the competent EC services to follow-up the financial impact
• The role of the managing authorities to contribute to the correct
implementation of the reporting obligation is essential
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HOW CAN MANAGING AUTHORITIES PREVENT FRAUD ?
1. By putting in place an effective control system, e.g.:• Administrative verifications including written standards and
procedures
• On-the-spot verifications of individual operations including sampling
methods for selection
2. Ensuring that the provisions of the regulations are understood
and applied by all (guidance and training)
3. Action plan of the Commission to strengthen its supervisory
role Structural Actions [COM (2008)97 final]
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INTERNAL(within the organisation)
• Integrity / impartiality• Specific attention to
tendering procedures– Composition of
selection committees• Appropriate
remuneration of staff
EXTERNAL(outside the organisation)
• Specific attention to tendering procedures– Economic viability of
recipients– Integrity of recipients
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INTERNAL
• Internal controls• Information exchange and
cooperation/partnerships• Adequate staffing• Training
EXTERNAL
• Transparency / publication of beneficiaries
• Controls• Specific attention to
tendering procedures
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INTERNAL
• Fraud awareness raising
– Promoting internal awareness
– Promoting an anti-fraud/integrity culture
• Training / “Motivation” of staff managing the funds
EXTERNAL
• Fraud awareness raising– Promoting public
awareness (free phone and other tools)
– Promoting an anti-fraud culture
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RECOMMENDATIONS
• MA should develop their own fraud prevention strategy,
Specific:
– Identify risks – analysis of types of operation/beneficiary
and of already reported cases of irregularities and fraud
– Take the appropriate actions to mitigate risks
General:
– Training
– Fraud awareness raising (internally and externally)
– Fraud hot-line
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Fraud awareness
Sound financial managementPartnership
CONCLUSIONS – KEY WORDS
National law enforcement agencies,
the Commission, OLAF, etc.
Effective and efficient internal
control systems, etc
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