Select Committee on European Scrutiny Fifteenth Report




Annual Activity Report of the European Anti-Fraud Office (1 June 2000 - 31 May 2001).

Legal base:
Forwarded to the Council:18 October 2001
Deposited in Parliament:18 January 2002
Department:HM Treasury
Basis of consideration:EM of 24 January 2002
Previous Committee Report:None
To be discussed in Council:March 2002
Committee's assessment:Politically important
Committee's decision:Cleared; but relevant to the debate already recommended on the Commission's Fight against Fraud annual report and action plan and the Court of Auditors' annual report for 2000; further information requested

The document

  13.1  The document summarises the activities of the European Anti-Fraud Office (OLAF) during the year ending 31 May 2001, which was OLAF's second year of existence. The document has the following sections: investigation activity; OLAF's procedures; evolution of the instruments for the support of operational activity; and conclusion.

  13.2  The document notes that two pools of investigators from the new operational Directorate dealt with the following areas:

  • internal investigations;

  • direct expenditure;

  • Structural actions;

  • customs/trade,[36]

  • agriculture[37] ; and

  • Customs and excise duties[38].

  13.3  Overall, during the reporting period, 511 new files were created for evaluation, 441 cases moved on to the investigation stage and 659 files were closed. The main comparisons between the position at the end of the reporting period and that at the start are set out below:

  • a 28% increase in the number of cases, from 1,832 to 2,343, which was due to the more rigorous system of registration of cases introduced by the Case Management System, an increased awareness of the activities of OLAF among the EU institutions and the general public and improved co-operation with the Member States;

  • a fall in the number of cases in evaluation from 612 to 436, or from 33% to 19% when expressed as a proportion of all cases, which was largely related to the work carried out in OLAF to conclude customs and trade cases;

  • a small increase in the total number of cases in investigation, which rose from 636 to 664, although this represented a decline from 35% to 28% as a proportion of all cases over the period;

  • a large increase in the number of cases closed, from 584 to 1,243, or from 32% to 52% as a proportion of all cases over the period, largely reflecting the extensive work carried out in OLAF on old cases;

  • an increase in the number of cases involving internal fraud from 51 to 88 — a slight increase from 3% to 4% of all cases;

  • an increase in the number of direct expenditure cases, from 304 to 470 — an increase from 17% to 20% of all cases;

  • an increase in the number of customs and trade cases from 903 to 1,065 (a fall from 49% to 45% as a proportion of all cases) and a rise in the number of cases relating to cigarettes from 85 to 102 (a slight fall from 5% to 4% as a proportion of all cases).[39]

  13.4  As regards internal investigations, the document notes:

"Thirty-six investigations were opened during the period, including eight concerning Community institutions, bodies and agencies other than the Commission. Reports have been produced in nine investigations. These reports concern the Commission, the Economic and Social Committee as well as the Translation Centre for the bodies of the European Union and the European Parliament; eight investigation reports were followed by decisions to refer the case to the national judicial authorities. They are usually complex cases of fraud committed either by well­organised people or by isolated individuals or individual actions which may constitute a breach of the obligations of officials. These cases show the diversity of behaviour (misappropriation of funds, forgery, manipulation of tenders, transmission of information on tenders liable to lead to criminal prosecution, concealed activities) of officials or servants of the various institutions."

  13.5  In terms of the future, the document states that OLAF's clear focus is on dealing with suspected internal fraud cases. As regard administration, the main priority is the completion of the organisational changes and the re­defining of the tasks of the Office.

The Government's view

  13.6  In her Explanatory Memorandum of 24 January 2002, the Economic Secretary to the Treasury (Ruth Kelly) says that:

"The publication of this second comprehensive activity report by the Director of OLAF indicates the seriousness with which fraud detection and investigation is taken. OLAF has been involved in some important cases and is beginning to fulfill its role as an important force in the protection of the Community's financial interests. The Government regrets that OLAF's increase in staffing resources proceeded rather more slowly than expected (this was also criticised by the European Court of Auditors in its report on the year 2000), but recognises that OLAF's staff numbers now exceed those of its predecessor, UCLAF.

"The Government is pleased with the administrative, procedural and technical improvements OLAF has introduced — the OLAF manual, the Case Management System, and the AFIS [the anti-fraud information] system. In future reports the Government would like to see more information on the follow­up of cases — an important function for which OLAF possesses greater powers than its predecessor — and also on preventive action put in place to block loopholes or reduce the possibility of recurrence of fraud.

"However, the Government does not share OLAF's concern that the proposal for a European Public Prosecutor was not adopted by the Nice European Council. The Government does not believe that creating a European Public Prosecutor is either necessary or practicable. OLAF should be able to refer appropriate fraud cases to Eurojust, as that is likely to be more effective in tackling EC budget fraud."


  13.7  The establishment of OLAF, as a successor to UCLAF, has required some major changes to the structure and organisation of the Commission's anti-fraud operations. These changes have caused some difficulties. For example, the document notes that, although staffing levels have increased by some 70%, OLAF has suffered from recruitment problems and staff shortages.

  13.8  OLAF's clear priority is to deal with suspected internal corruption cases. We note OLAF's comments that disciplinary proceedings following internal investigations need reform. The document mentions "administrative proceedings (recovery) or even penal proceedings" and the establishment of "a European prosecutor in the field of internal investigations". We also note OLAF's belief that the mistrust which exists between its officials and those of other EU institutions can be overcome, especially as the importance of OLAF's investigations becomes better understood.

  13.9  OLAF also notes that one of its units will provide support to the applicant countries so that in the run­up to accession the level of protection of the Communities' financial interests in candidate countries' is equivalent to the level achieved in the rest of the Community. We welcome this.

  13.10  We clear the document, but consider it relevant to the forthcoming debate on the Fight against Fraud annual report, the Commission's Action Plan and the Court of Auditors annual report for 2000. We also ask the Minister to update us on the staffing levels at OLAF in order that we can be reassured that the efforts by OLAF to tackle fraud are not hampered by having inadequate numbers of well trained staff.

36  In this sector, activity was mainly concerned with protecting preferential customs regimes; cases involving sugar and banana imports, due to high rates of duties; export refunds, in particular on exports to the Russian Federation. Back

37   Processing and production aid notably for olive oil, tomatoes, flax and dairy products, based on risk identification. Back

38   Combating cigarette and alcohol smuggling and other illegal activities. Back

39   As the Commission's "Fight Against Fraud" report for 2000 also showed, there were a large number of cases opened in this area during the period, including some cases of very high value (e.g. the banana fraud of around 160 million euro). Back

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