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European Anti-Fraud Office (OLAF)

Fraud against the environment: OLAF and Spanish authorities bust traffic in illicit F-gases

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The European Anti-Fraud Office (OLAF) and the Spanish authorities dismantled a criminal organization trafficking in illicit refrigerant gases, which are notoriously harmful for the climate. Operation Verbena led to the seizure of 27 tonnes of illicit refrigerant gases – also called F-gases or hydrofluorocarbons (HFCs) – and to the arrest of five people.

Operation Verbena was the biggest operation yet at EU-level against the trafficking of refrigerant gases. In addition to the 27 tonnes seized, investigations discovered 180 tonnes of illicit HFCs that were smuggled before the intervention of the Spanish authorities and OLAF. According to estimates, the criminal group is responsible for the emission of over 234,000 tonnes of carbon dioxide into the environment – that is roughly equivalent to a car driving all the way around the globe almost 9,000 times. Operation Verbena – which put a halt to these activities – was carried out by the Spanish Police and the Spanish Tax Agency, with support from OLAF.

HFCs are commonly used in refrigerated units and while importing them into the EU is allowed, given their significant carbon footprint imports are subject to strict quotas and regulations. According to investigations, the criminal group smuggled the gases into Spain from China by providing false information in the relevant customs documentation. The HFCs were then sold on to companies in Spain, Germany, France, Portugal and Senegal.

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OLAF Director-General Ville Itälä said: "As we have been witnessing with increasing frequency, fraud and smuggling can have collateral victims such as the environment or people’s health and safety. OLAF has been working against illicit refrigerant gases for a few years now. A key element of our work is the cooperation with national authorities, with whom we continuously share our intelligence. I am pleased that we could support this successful operation by the Spanish authorities. Our cooperation with them has been, as ever, excellent and I would like to congratulate them on their results."

More information is available (in Spanish) in the press release of the Spanish Police.

Video footage of the seizure for media use is also available for download.

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OLAF mission, mandate and competences

OLAF’s mission is to detect, investigate and stop fraud with EU funds.

OLAF fulfils its mission by:

·                carrying out independent investigations into fraud and corruption involving EU funds, so as to ensure that all EU taxpayers’ money reaches projects that can create jobs and growth in Europe;

·                contributing to strengthening citizens’ trust in the EU Institutions by investigating serious misconduct by EU staff and members of the EU Institutions;

·                 developing a sound EU anti-fraud policy.

In its independent investigative function, OLAF can investigate matters relating to fraud, corruption and other offences affecting the EU financial interests concerning:

·                all EU expenditure: the main spending categories are Structural Funds, agricultural policy and rural

development funds, direct expenditure and external aid;

·                 some areas of EU revenue, mainly customs duties;

·                 suspicions of serious misconduct by EU staff and members of the EU institutions.

Once OLAF has completed its investigation, it is for the competent EU and national authorities to examine and decide on the follow-up of OLAF’s recommendations. All persons concerned are presumed to be innocent until proven guilty in a competent national or EU court of law.

European Anti-Fraud Office (OLAF)

EPPO and OLAF working arrangement: Ensuring no case goes undetected

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A working arrangement as basis for co-ordination and co-operation between their two offices was signed today in Luxembourg by Ville Itälä, Director-General of the European Anti-Fraud Office and the European Chief Prosecutor, Laura Kӧvesi.

The European Anti-Fraud Office (OLAF) conducts administrative investigations, while the European Public Prosecutor’s Office (EPPO) conducts criminal investigations and prosecutes cases falling under its competence in front of national courts.  The common aim is to increase fraud detection at EU level, to avoid duplication, to protect the integrity and efficiency of criminal investigations and maximize the recovery of damages. Both offices will combine their investigative and other capacities to improve the protection of the financial interests of the European Union.

Laura Kӧvesi said: “This working arrangement allows us to clearly delineate our respective tasks and responsibilities, so as to work together in the most efficient manner with only one goal in mind: to better protect EU taxpayers’ money and to bring all crimes against the EU budget to justice as quickly as possible.”

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Ville Itälä added: “The working arrangement between OLAF and the EPPO is an important milestone in our future relationship. It sets out in concrete terms how we will work together, based on trust and transparency. Focusing on rapid, effective and reciprocal exchanges of information, it should ensure that no case goes undetected. It is a major part of ensuring that together we can step up the fight against fraud and corruption affecting the financial interests of the EU.”

Among other things, the working arrangement sets out how the two offices will exchange information, report and transfer potential cases and support each other in their respective investigations. It also covers how OLAF will carry out complementary investigations when needed, as well as ensuring the two offices share regular information on trends, and conduct joint training exercises and staff exchange programs.

The full text of the agreement can be found here.

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OLAF mission, mandate and competences

OLAF’s mission is to detect, investigate and stop fraud with EU funds.

OLAF fulfils its mission by:

·                carrying out independent investigations into fraud and corruption involving EU funds, so as to ensure that all EU taxpayers’ money reaches projects that can create jobs and growth in Europe;

·                contributing to strengthening citizens’ trust in the EU Institutions by investigating serious misconduct by EU staff and members of the EU Institutions;

·                 developing a sound EU anti-fraud policy.

In its independent investigative function, OLAF can investigate matters relating to fraud, corruption and other offences affecting the EU financial interests concerning:

·                all EU expenditure: the main spending categories are Structural Funds, agricultural policy and rural

development funds, direct expenditure and external aid;

·                 some areas of EU revenue, mainly customs duties;

·                 suspicions of serious misconduct by EU staff and members of the EU institutions.

Once OLAF has completed its investigation, it is for the competent EU and national authorities to examine and decide on the follow-up of OLAF’s recommendations. All persons concerned are presumed to be innocent until proven guilty in a competent national or EU court of law.

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Crime

#OLAF plays major role in seizure of over a thousand tonnes of dangerous #CounterfeitPesticides

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The European Anti-Fraud Office (OLAF) shared operational intelligence with the customs authorities of the member states, of China, Ukraine, Russia and Colombia. This happened in the context of Operation Silver Axe V, which has led to the seizure of 1,346 tons of illicit and counterfeit pesticides. These products pose a major risk to public health and the environment if they ever reach the open market. The Operation Silver Axe V was coordinated by Europol, involving police, customs and plant protection authorities from 32 countries.

OLAF’s role in the operation was to alert EU member states’ customs authorities about suspicious shipments of pesticides, with a specific emphasis on active ingredients that have recently been de-authorised for use in the EU, such as carbendazim, chlorpyrifos, thiacloprid or thiametoxam. These last two substances are acutely toxic for bees. OLAF also exchanged information with the Chinese Anti Smuggling Bureau and the Security Service of Ukraine via its liaison officers in Beijing and in Kyiv, as well as with the Colombian Policía Fiscal y Aduanera, and the Federal Customs Service of Russia. The suspicious shipments of pesticides came mainly from China and India. Although the shipments were declared as being in transit through the EU and destined for re-export from the EU to another country, the chemicals were in fact intended for illegal sale in the EU.

OLAF Director-General Ville Itälä said: "The traffic of illicit and/or counterfeit pesticides is one of the most profitable businesses for international fraudsters, and is estimated to represent up to 13.8% of all pesticides sold in the EU. It harms the European economy, damaging legitimate businesses and stifling innovation, putting many jobs at risk in Europe.

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"But it also comes with serious risks: pesticides must undergo rigorous testing before being placed on the EU market, and the illegal pesticides, which are mostly untested and composed of active substances banned in the EU but still in use in other parts of the world, can pose significant health risks for farmers and consumers.

"They are also considered harmful to the environment by causing damage to flora, fauna and soils. Europol and OLAF provided vital support and expertise to the member states involved in the operation. With our help, police, customs and plant protection authorities succeeded in foiling the organized crime groups trafficking illicit and counterfeit pesticides.”

Operation Silver Axe is now in its fifth year, and has so far led to seizures of 2,568 tons of illegal pesticides. OLAF’s role in these operations focuses on the smuggling of potentially dangerous products in complex cross-border fraud schemes that are impossible to detect and decrypt for the national authorities of a single state.

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OLAF is very active in supporting the customs authorities of the Member States in the prevention and detection of dangerous goods, including pesticides. In this respect, OLAF has put in place a rapid alert system allowing to share intelligence in real time with non-EU countries, like Hong-Kong, Singapore, Malaysia, Thailand, Vietnam and Indonesia, for the monitoring of such goods during the transhipment of the containers in the ports of transit.

The trade of counterfeit products results in vast illicit profits and huge losses of tax revenues for the EU and its member states. The smuggling of counterfeit products harms the European economy, damages legitimate business and stifles innovation, putting many jobs at risk in Europe. Counterfeiting also poses serious risks to the environment and health and safety.

For more information, please see OLAF's previous press releases on this subject .

OLAF mission, mandate and competences

OLAF’s mission is to detect, investigate and stop fraud with EU funds.

OLAF fulfils its mission by:

  • Carrying out independent investigations into fraud and corruption involving EU funds, so as to ensure that all EU taxpayers’ money reaches projects that can create jobs and growth in Europe;
  • contributing to strengthening citizens’ trust in the EU Institutions by investigating serious misconduct by EU staff and members of the EU Institutions, and;
  • developing a sound EU anti-fraud policy.

In its independent investigative function, OLAF can investigate matters relating to fraud, corruption and other offences affecting the EU financial interests concerning:

  • All EU expenditure: the main spending categories are Structural Funds, agricultural policy and rural;
  • development funds, direct expenditure and external aid;
  • some areas of EU revenue, mainly customs duties, and;
  • suspicions of serious misconduct by EU staff and members of the EU institutions.

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Banking

We can’t afford tax havens in the age of #Coronavirus

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UK Chancellor Rishi Sunak, appointed to the job just over a month ago, announced the most significant set of British policy measures since the Second World War on Friday, 20 March.  The sweeping package—which includes a £30 billion tax holiday for corporations and a government commitment to pay part of citizens’ wages for the first time in British history—would have been unthinkable for a Conservative administration only weeks ago. The unprecedented nature of the measures, as well as the gravitas with which Sunak announced them, drove home the reality of the economic tsunami which the coronavirus pandemic has unleashed.

The global economy, as one commentator noted, is going into cardiac arrest. Central banks from Tokyo to Zurich have slashed interest rates—but this can only do so much to alleviate the pain from millions of workers staying home, assembly lines grinding to a halt, and stock markets going into freefall.

It’s almost impossible to predict the full scale of economic damage while most of the world is still fighting to contain the virus’s exponential spread, and while so much remains uncertain. Will the virus, for example, fade thanks to a combination of strict quarantine measures and warmer weather—only to return with a vengeance in the fall, causing a devastating double dip in economic activity?

What’s almost certain is that Europe is tipping into a fresh financial crisis. “Extraordinary times require extraordinary measures,” admitted ECB chief Christine Lagarde, underscoring that “there are no limits to our commitment to the euro.” The bloc’s major economies, some of which were flirting with recession even before the pandemic, are sure to blow past 3% deficit limits. They are likely to play fast and loose with EU state aid rules, too, as hard-hit firms—particularly major airlines, including Air France and Lufthansa—may need to be nationalised to keep them from folding.

As policymakers try and keep their economies afloat during—and after—this acute phase of the pandemic, they will need every scrap of revenue. It’s outrageous, then, that some $7 trillion in private wealth is hidden away in secrecy jurisdictions, while corporate tax avoidance via offshore tax havens drains as much as $600 billion a year from government coffers. New research indicated that 40% of multinational firms’ profits are squirreled away offshore.

The Tax Justice Network has identified an “axis of avoidance”—the UK, the Netherlands, Switzerland and Luxembourg—which together account for fully half of the world’s tax evasion. The UK bears a particular responsibility for failing to crack down on the widespread financial malfeasance occurring in its overseas territories.  While NHS staff on the frontlines of the coronavirus epidemic have expressed concerns that they are being treated as “cannon fodder” amidst a gross shortage of protective equipment, the world’s three most notorious offshore hideaways are British overseas territories.

The most famous is probably the Cayman Islands, which the EU placed on its tax haven blacklist earlier this year. For decades, ill-fated firms from Enron to Lehman Brothers stashed their problematic assets in the idyllic islands, while firms like mining giant Glencore allegedly funnelled bribe funds through the British Overseas Territory.

The Caymans have made a recent attempt to shed this reputation as a fiscal Wild West, pledging to reveal corporate owners by 2023—a move which would bring the island nation in line with EU directives. In the meantime, however, stories continue to emerge illustrating how unscrupulous companies are taking advantage of the Caymans’ lax regulation.

Just a few months ago, the Gulf Investment Corporation (GIC)—a fund owned jointly by the six Gulf countries—asked courts in both the Caymans and the United States to look into the “hundreds of millions of dollars” which have apparently disappeared from the Port Fund, a Caymans-based financial vehicle.

According to court filings, the Port Fund’s sponsor, KGL Investment Company, may have been involved in siphoning off proceeds from the sale of Port Fund assets in the Philippines. The GIC maintains that the Port Fund sold a Filipino infrastructure project for roughly $1 billion—but only disclosed $496 million in proceeds and disbursed a mere $305 million to the fund’s investors.

The “missing” $700 million didn’t just evaporate into the ether, of course. It seems highly plausible that the discrepancy has gone at least partly towards the costly lobbying effort which the Port Fund has mounted to spring its former executives, Marsha Lazareva and Saeed Dashti, from prison in Kuwait, where they’ve been locked up after being convicted of misappropriating public funds. The high-powered lobbying campaign has run up a tab of millions of dollars and roped in everyone from Louis Freeh, the head of the FBI from 1993 to 2001, to Cherie Blair, the wife of former British PM Tony Blair.

The sordid saga is the perfect illustration of how cunning companies can exploit the lack of regulatory oversight in fiscal paradises like the Caymans to keep cash out of public coffers. There are countless such examples. Netflix reportedly shifts money through three different Dutch companies to keep its global tax bill low. Until mere months ago, tech titan Google took advantage of a tax loophole dubbed the “Double Irish, Dutch sandwich”, channelling huge sums through Ireland to “ghost companies” in tax havens including Bermuda and Jersey, both British dependencies.

European leaders can no longer afford inaction on stamping out these financial black holes. Ibrahim Mayaki, the co-chair of a recently-created UN panel on illicit financial flows, remarked that “the money that is being hidden in offshore tax havens, laundered through shell companies and outright stolen from public coffers should be put towards ending poverty, educating every child, and building infrastructure that will create jobs and end our dependence on fossil fuels.”

Right now, it should be put towards retrofitting critical care beds, ensuring that Italian doctors treating coronavirus patients have the gloves that could save their own lives, and providing support to Europe’s small businesses so that they don’t go belly up.

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