£800m defrauded from EU budget last year

SOME £800 million is known to have been defrauded from the EU's £64 billion budget last year, the Justice Commissioner, Ms Anita Gradin, said yesterday.

Fraud consumes at least 1.4 per cent of the annual budget, totalling 4,700 reported cases last year, an increase of 15 per cent on 1994. However, the likelihood is that this reflects better detection rather than increased criminality.

Ms Gradin, presenting the annual report on the fight against fraud, said there was clear evidence that most of the embezzlement was not the product of farmers overstating acreages for grants but the systematic work of organised criminal gangs.

That was reflected in the fact that some 4 per cent of cases involved 75 per cent of the lost cash and that less than half of the reported fraud could be directly attributed to individual member states, the result of conspiracies that often crossed several frontiers.

The Commission figures show that of the £320 million in irregularities reported by individual states, some £650,000 in losses, or 35 cases, were attributable to Ireland. Germany reported some £96 million and Italy £81 million in fraud losses.

The report shows, however, that Ireland tops the league of EU states in recovering embezzled funds, with a marked improvement in recovery rates for agricultural fraud since 1992. This is a measure, the Commission will acknowledge, of the improved procedures put in place since then.

While 52 per cent of the notified farm losses of £5.5 million in 1992 still have to be recovered, only 38 per cent of losses of £1.4 million between then and 1994 are outstanding. In the EU as a whole, some 75 per cent of losses in agriculture up to 1994 are not recovered, and 95 per cent of excise duty evasions.

Notably, given the media interest in agribusiness fraud, the bulk of detected fraud in Ireland is not on the expenditure side of the EU accounts but the revenue side, with some £500,000 lost in excise duty frauds due to smuggling.

This reflects the EU picture where reported agricultural and structural fund fraud amounted to £300 million last year, and fraud related to evaded duties and taxes cost £500 million. The result is substantial additional costs to states which have to make up any losses on the revenue side.

The biggest black hole is in the smuggling of cigarettes, losing an estimated £300 million in Union revenues last year, £90 million in Italy alone.

Ms Gradin, who said the figures reflected the fact that the Union was "better and more effective" at combating fraud, appealed to states to speed up the process of ratifying the convention agreed last year which provides for common definitions of fraud and commits states to prosecute those involved through their criminal justice systems. She also called for speedy agreement on the long delayed Europol Treaty.

She said primary responsibility, for the fight against fraud lies with the states, which are responsible for administering some 80 per cent of EU expenditure and 100 per cent of revenue collection.

Co operation between the Commission's fraud unit and member governments was improving she added, but some were still reluctant to report expenditure fraud, partly because of fears that the Union would recover losses' through fines.

The Commission acknowledges this is a powerful disincentive to reporting fraud, but insists fines will only be levied against states when the fraud authorities are not convinced that enough has been done either to safeguard Community funds or to recover them when defrauded.