Fraud chief warns of ‘big risk’ in policing €800bn EU recovery funds – About Your Online Magazine


The EU faces a “great risk” of abuse of its €800 billion post-pandemic recovery fund because some countries refuse to sign up to a common transaction database, warned the bloc’s anti-fraud chief.

The gap in central oversight could make it difficult to monitor record financial flows, even as Brussels builds other parts of its anti-corruption arsenal, Ville Itala, director general of European Commission agency Olaf, told the Financial Times.

His comments highlight the anxiety at EU headquarters about trying to prevent the misuse of benchmark financing bonanza agreed by member states to help the 27-member bloc repair the economic damage caused by the pandemic.

“It’s a lot of money – prevention is important,” Itala said in an interview. He said he regretted the decision by some member states to block attempts to demand the use of a long-standing EU-wide risk assessment and oversight mechanism known as Arachne.

“We see that it is a big risk, for sure. Because we don’t have the same possibilities to follow the flows of money and information – and find the ultimate beneficiaries. ”

the commission this week started its loan program aims to raise next-generation EU money by issuing €20bn of debt, a step towards its target of spending €800bn to help kick-start Covid-19’s shaky economies.

Brussels has also begun to sign off on member states’ recovery and resilience plans. On Wednesday it gave the green light to bids from Spain and Portugal. The Next Generation EU program goes beyond the seven-year budget of 1.2 trillion euros.

Itala said tight supervision at the national and EU level is essential to ensure that money is not lost to waste and fraud given past scandals about the misuse of EU funds. He said the lack of a complete pan-union dataset would make it more difficult to analyze the ultimate recipients of the money behind what can be complex layers of businesses and transactions in more than one jurisdiction.

“We can do this, but it’s much, much more complicated,” said Itala, a former Finnish police officer. “And it’s a lot more work to do that if you don’t have those IT tools to get to the end beneficiary.”

More than 20 member states use Arachne to track existing EU cohesion funding, and many are expected to use it voluntarily for next-generation EU spending, but under current rules they will not be required to do so. The tool is not used in Germany, Poland, Sweden, Denmark or Cyprus, as some capitals prefer to use their own internal systems.

However, Brussels believes it has acquired other new and stronger weapons that can be used to monitor recovery fund money and combat misuse, including the kinds of conflicts of interest that have been at the heart of past notorious cases. Member States should set up national systems to register and report the final beneficiaries of EU funds disbursed under the recovery funds program, as Brussels imposes stricter requirements on them.

Valdis Dombrovskis, executive vice president of the commission, told the FT this year that Brussels put in place a “robust system”, noting that the commission was policing the national “control systems” to spend the money and applying its own checks. He added that Brussels is ready to suspend payments if there are signs that a national government is not complying with reforms or is not putting money into pre-agreed investments.

Spending scandals in recent years linked to European funds include the EU’s anti-fraud office asking Hungary to return the money for a subway line due to concerns about fraud and corruption.

Itala acknowledged that the EU’s monitoring of recovery fund spending faced an extra challenge because it is happening at the same time as the launch of the European Public Prosecutor’s Office (EPPO). The new body has powers to prosecute criminal cases and is an attempt to fill a gap created because Olaf has the authority only to recommend rather than require member states to initiate prosecutions.

Itala said Olaf has established good relations with the prosecution and is approving more than 150 open investigations, or about a quarter of existing cases. “It’s very important to have the EPPO,” he said. “And if we combine our strengths, we can get much better results.”

Paula Fonseca