OLAF’s investigation into fake COVID-19 related products
Keeping people safe has long been a priority for OLAF, in particular through its work on tackling counterfeit and potentially dangerous goods. However, the COVID-19 pandemic increased the urgency of OLAF’s work in this field to protect consumers from falling foul of fraudsters offering fake and sub-standard personal protection equipment, testing kits and even potentially fake treatments for the virus.
Tracking down fake hand sanitiser from Turkey
Information provided by OLAF led to the seizure of 140,000 litres of counterfeit hand sanitiser from Turkey that contained dangerously high levels of methanol. Methanol has a direct toxic effect on the optic nerve, and ingestion can lead to blindness. Whilst the use of the confiscated Turkish counterfeit hand sanitiser could cause headaches, blurred vision, nausea, vomiting and loss of coordination.
OLAF first became aware of the risks following an alert by Danish authorities in August 2020, after they seized 6,000 litres of such hand sanitiser from Turkey. A month later, OLAF identified a suspicious shipment heading for Ireland and alerted Irish customs authorities, who intercepted the suspicious cargo when it arrived at the port of Dublin. Tests showed that the cargo of hand sanitisers contained unacceptably high levels of methanol.
A second shipment to Dublin was also seized, and further investigations by the Irish authorities, working in collaboration with the freight forwarding company, led to the discovery of contaminated sanitisers in a number of earlier consignments, which were being kept in storage ahead of distribution to schools, administrations, and other public services across Ireland.
OLAF investigations discovered several companies in different EU Member States that had also ordered hand sanitisers from the same Turkish manufacturer, and warned the authorities in those countries to be on the lookout for the consignments. The manufacturer in question was found to operate under a number of different names, and to manufacture products on behalf of other companies. OLAF’s unique pan-European role enabled it to untangle this complex web and ensure that Member State authorities had all the necessary information to keep their citizens safe.
Illicit production of cigarettes
One feature of OLAF’s work is the continuing battle against cigarette smuggling and counterfeiting.
For three years, OLAF has been coordinating a major cross-border investigation into the illicit production of cigarettes, involving nine EU countries and the United Kingdom. A major operation on 17 December 2020, led by more than 160 officers from the Romanian Border Police and assisted by two officers of the Spanish Guardia Civil, was the final phase of this complex investigation.
On the day, the Romanian Border Police targeted 50 individuals suspected of being part of a criminal organisation involved in a variety of criminal activities linked with smuggling and the illicit production of cigarettes, as well as fiscal fraud. Forty search warrants were served at company offices and private residences in Bucharest and across Romania. On the same day, the Criminal Directorate of the National Tax and Customs Administration in Hungary and the Guardia di Finanza in Italy carried out searches linked to the same international investigation.
During the course of the three-year operation, more than 200 people were arrested or reported to the judicial national authorities in Romania, Hungary, Slovakia, Greece, the Czech Republic, Italy, Spain, Belgium and the United Kingdom.
In addition to the arrests, the operation also prevented the loss of approximately €80 million in duties and taxes in five EU countries following raids on nine illicit factories that led to the seizure of 95 million illegal cigarettes and 300 tonnes of tobacco.
Research projects at risk
An OLAF case closed in 2020 concerned fraud and misuse of EU funds allegedly committed during the implementation of several EU research projects by two companies located in two different EU Member States. The two companies were beneficiaries of 56 projects funded under the EU’s FP7 and/or Horizon 2020 research programmes.
OLAF carried out simultaneous, unannounced on-the-spot checks at the premises of the two companies in the United Kingdom and in France, collecting considerable quantities of data including information on bank accounts and transactions.
Using this data, OLAF was able to establish that the funding from the EU research projects was the main source of income for the companies, which appeared to be linked through their ownership and management. The evidence gathered demonstrated that both companies had maximised their profits by deliberately declaring the maximum working hours allowed under the rules for each of the projects instead of the real hours their employees spent working on the projects. As a result, they almost doubled the amount of money granted to them from the EU research budget.
OLAF also established that both companies had used the EU money obtained in this way for entirely unrelated purposes. For example, OLAF proved that the UK company had invested €800,000 of the illicit funding in a plan to build a block of flats in Colombia.
Judicial recommendations were made to the competent national authorities in France and the UK on the grounds that OLAF considered both companies to have committed fraud and forgery. OLAF also issued financial recommendations for the recovery of €3.8 million.
African water treatment case
EU money is used across the globe to support projects designed to improve the health and safety of citizens, and one case concluded by OLAF in 2020 highlighted how fraud, corruption and mismanagement can have a serious impact on people’s lives.
The case concerned a project in country in Sub-Saharan Africa where EU money was being used to help bring safe water and sanitation facilities to 350,000 people. The procurement was managed by the ministry of water and environment in this country, and OLAF uncovered evidence that various procurement procedures linked to the project had been manipulated, with several of the contracts awarded in extremely dubious circumstances.
Manipulation of tender processes is a common fraud method but this particular case had far wider implications than most. Many of the towns served by the project failed to get the clean water they needed, while the materials used to build latrines and other sanitation infrastructure was substandard and potentially dangerous.
For example, OLAF found that one third of the public toilets built through the project were not functional, because they had been built in inappropriate locations, water bills had not been paid or the facilities were not provided with an effective management system, which meant that continuous and sustainable service could not be guaranteed.
OLAF recommended the recovery of more than €7 million from the project.
EU staff investigations
OLAF has a unique mandate to carry out internal investigations into the EU institutions, bodies, offices and agencies in order to fight fraud and corruption.
Misappropriation of parliamentary allowances
One such investigation concerned a Member of the European Parliament (MEP), who was also under criminal investigation by the Public Prosecutor’s Office in his own Member State for the possible unlawful financing of a political party through false invoicing and corruption.
OLAF’s investigation focused on whether the MEP had illegally inflated the value of contracts for parliamentary assistance and press and communication services in order to claim higher amounts for reimbursement, as well as illegally contracting fictitious parliamentary assistants. Working closely with the local prosecutor’s office and financial police, OLAF helped establish a number of additional facts, including that the MEP had claimed back part of the salary intended for the two real parliamentary assistants, and that the MEP was aware that three parliamentary assistants were engaged in unauthorised external activities. The investigation also revealed a possible case of plagiarism.
OLAF recommended that the European Parliament recover around €800,000 from the MEP and begin disciplinary procedures against the assistants. OLAF also shared its findings and evidence with the national authorities to help support their criminal proceedings. The national authorities also seized around €500,000 in assets as a precautionary measure.