Hungary tops charts for EU funding frauds

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Hungary has ranked second in both the number of cases closed (10) and the number of new reports made (27) in the European Anti-Fraud Office's (OLAF) 2017 report published on Wednesday. The one list in the report Hungary is topping is the number of irregularities in the European Structural and Investment Funds and Agriculture for the period 2013-2017, with OLAF's financial recommendations amounting to nearly 4% of payments.
OLAF opened 215 new investigations last year and concluded 197 cases, issuing 309 recommendations to the EU and national authorities involved and recommending nearly EUR 3.1 billion for financial recovery. It must be noted that OLAF typically recommends a financial penalty (correction) amounting to 100% of the amount in question, which the member state in question then negotiates with the Commission.

As the chart below shows, there was incoming information in 27 new cases in Hungary in 2017, with 26 of these sources private and only a single one public. Other top countries on this list include Spain (31), Bulgaria (tied at 27) and Romania (24), but the ratio of public sources was much higher in these countries.

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Of the 197 cases concluded by OLAF last year, 11 were in Romania, followed by Hungary and Poland with 10 apiece. Seven of these cases have concluded with judicial recommendations to Hungarian authorities.

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The report mentions in specific last year's investigation into 35 public lighting projects in Hungary, where OLAF sent its final report with financial recommendations to the European Commission Directorate-General for Regional and Urban Policy to recover EUR 43.7 million, and judicial recommendations to the General Prosecutor of Hungary.

Another case involving Hungary was a cross-border misuse of EU funds in 31 research and development projects. The investigation, which took place in Hungary, Latvia and Serbia, uncovered a subcontracting scheme used to artificially increase project costs and hide the fact that the final suppliers were linked companies.

As for following up on OLAF's recommendations, Hungarian judicial authorities took no decision in 20 of the 37 cases referred to them, dismissing nine and indicting only eight cases between 2010 and 2017. The 47% indictment rate is slightly above the EU average, while the number of cases with no decision was the third highest.

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The 49 OLAF investigations regarding the European Structural and Investment Funds and Agriculture for the period 2013-2017 is the second highest figure, while the 3.92% of payments recommended for recovery was by far the highest in the EU, followed by Slovakia with 2.09% and Bulgaria with just 0.54%.

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In general, corruption, conflict of interest and the manipulation of tender procedures continue to be encountered in fraud cases affecting EU structural funds, the OLAF report said, with some instances where organised crime groups try to gain profit. Fraudsters have increasingly attempted to defraud funds destined for research or the refugee crisis, OLAF adds, while the evasion of customs duties is orchestrated through transnational criminal schemes.

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