The European Anti-Fraud Office (OLAF) detected 12,076 cases of fraud or irregularity on the use of the EU's funds amounting to €1.42bn in 2005. The statistics, presented in the agency's annual report, represents an increase of 28 per cent in the number of cases and of six per cent in the amounts involved.
Of that amount OLAF reported €102m worth of "irregularities" in 2005 related to agricultural subsidies, a rise of 24 per cent compared to the €82m detected in 2004.
Frauds detected in the private sector included those involving garlic from China, coffee, avoidance of VAT, illegal meat imports, and milk. In all fraud in the agriculture and food sector amounted to 108 cases in assessment and under active investigation at the end of 2005. Most of the cases involved meat (20 cases), sugar (21 cases) and garlic (17 cases).
In one case study, OLAF alerted member states that some companies was possibly illegally importing of coffee capsules for machines from a third country into the EU. The suspicion was that the importing companies were not accounting for customs duty due on certain royalty fees which they had to pay on a quarterly basis to the manufacturer in the non EU country.
Following an investigation, customs authorities in seven member states informed OLAF that irregularities had indeed been detected. The projected
overall financial impact for the case currently stands at €570,000 of which virtually all had been recovered.
In another case study OLAF reported problems with imports of a mixture of milk powder and rice from one of the member states' overseas territories. An investigation established that the specific mixing operations for the product carried out in the overseas territory were not sufficient to confer qualifying origin status upon the final product, both in terms of preferential and non-preferential origin.
The product subsequently faced a duty liability of 11 per cent, and not the preferential zero rate actually claimed. Of a total financial impact of €6.5m, about €700,000 in duty has been recovered so far.
Another case involving canned peaches involved a company receiving €1.5m in subsidies that should not have been paid, OLAF said.
OLAF found a processing company had cheated on the minimum price to be paid to peach producers. At judicial level, the case was examined by two national prosecutors. After the completion of the ordinary investigation, national judicial authorities decided not to proceed due to the lack of evidence in regard to criminal activity.
The OLAF also uncovered a significant fraud involving garlic imported from China. Garlic is subject to a significant import duty when imported from China outside the existing quota.
This has led to a series of fraud cases in the past, where operators used Chinese garlic for transhipments via certain third countries or importation to third countries with subsequent re-exportation and misdeclared origin. OLAF identified 14 possible cases of illegal transhipments from third countries, of which five cases were already active investigations.
The investigation led to nine cases being assessed further. Five more investigations were opened.
In the meat market OLAF uncovered cases of illegal imports due to EU bans. The EU has banned imports of certain animal products from countries where foot and mouth disease (FMD) is endemic.
The price differences resulting from such a prohibition create a considerable incentive to introduce these products illegally into the territory and the markets of the EU, OLAF stated.
The European Food Safety Authority (EFSA) asked OLAF to produce a study on the risks of possible illegal introductions of animal products from FMD risk areas on EU territory. Global trade flows for 11 products originating from seven FMD risk areas were analysed. The analysis suggested that although the risk of illegal imports into the EU appears to be lower than in other areas, exports of meat from FMD risk areas to EU countries which are neighbours to the EU in Central and Eastern Europe have risen strongly.
The imports create a potential risk for further spreading of the disease, OLAF stated.