Fraud prevention and detection - PowerPoint Presentation

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Fraud prevention and detection

Coordinators’ Day on Amendments and Reporting27 November 2020

Manuela Serrano SerenoPolicy Officer – Anti-FraudDG RTD.B2 - Common Audit Service

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Fraud: what and why

Why the fight against fraudCommission Anti-Fraud Strategy Most

common types of fraud and serious irregularities detected in R&I grants Who is responsible for fraud prevention, detection and correction, and the role of project coordinators and consortiaRed flags, controls and corrective measures

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Table of contents

Fraud is a deliberate act of deception intended for personal gain or to cause a loss to another party.

The reasons behind

fraud :Pressure is the financial or emotional cause prompting a fraudulent act; Legal definitions:

Opportunity

is

the perceived or actual possibility to commit fraud;

- Fraud: Article

3 PIF Directive Rationalisation is the personal justification of fraudsters. - Irregularity: Article 1(2)Council Regulation 2988/95

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Fraud: what and why?

Elements of fraud

Intention

Damage of EU’s financial interests

Illegal action

FRAUD

IRREGULARITY

Fraud is a risk with a low occurrence rate in

R&I (when detected) but a high reputational impactEU citizens deserve that the EU budget

is spent in a sound and efficient way and for the intended purposes and societal challengesEveryone is concerned if fraud occurs – even consortia The EC has a zero tolerance to fraud

R&I: trust-based Programme, but this does not mean we do not control...

Why

fight against fraud?

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The 2019 CAFS

: two priority objectives: data collection /

analysis and coordination / cooperation. Ethics, enhanced transparency and fraud prevention remain as guiding principles.The AF Strategy for the R&I family (2019 RAFS)

based

on the

principle

of ‘

better control rather than more control’. This strategy deals with external fraud risks related to the implementation of R&I Programmes concerning grant expenditure by the entire R&I family. Sectorial anti-fraud

strategies

These strategies address specific sectorial irregularities/fraud

risks and patterns. They

include

external and internal

fraud and

cover grants, procurement

, financial instruments, etc.

Commission Anti-Fraud Strategy and

sectorial strategies

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Prevention and detection:

Each EC/EA/JU staff member in his/her field of responsibilityAnti-fraud experts in services

(also working closely with OLAF)OLAFProject coordinators and beneficiaries !!Correction: For R&I, each RAO of the EC/EA/JU

Investigation:

OLAF

, the

European

Anti-Fraud Office, is mandated to -and responsible for- investigating fraud against the EU budget (Regulations No 883/2013 and No 2185/96).(EPPO)Who?

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Misuse of EU funds in

general;Inflation of (personnel) costs or fictitious costs (of staff not working on action

);Falsification of invoices or documents;Misrepresentation, identity theft;Double funding;

Plagiarism;

Undisclosed conflict

of

interest;

Fraudulent bankruptcy.The most common types of fraud and serious irregularities in R&I grants

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Part of the internal control framework - Articles 36 & 74(5) FR & H2020 Ex ante Control Strategy:

standard or automated controls (embedded in IT tools) on payment requests and on (technical and financial) reports and deliverables. Minimum level of ex ante controls & mandatory.

Trust-based: focus on comparing the estimated budget/DoA with the work actually carried out and the costs claimed.targeted or risk-based controls. Risk management module and reinforced monitoring

measures;

particular attention is paid to double funding and plagiarism checks.

Ex ante Controls

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Checking legal entities is a responsibility of the EC but

also

of coordinators

-

Legal

existence (

legal

registration)-Legal data (address, registration number,

VAT, etc.)

-Legal status (SME, Public, HE, etc.)

-Business scope ?

-

Coherence

of contact details

(email, internet domain,

phone/fax) with respect to:

Legal entity

name

Country-Why

gmail

or

other

generic

emails?

-

Why

non-

existing

web

address

?

-

Who

is

the

scientist involved ?-Why mobile / fixed phone number ≠ Country?-Third parties involved ?(These quick checks can be performed on any beneficiary at proposal stage and/or added via a request for amendment)

PIC

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Part of

the internal control framework - Articles 36 & 74(6) FRA

udits. They are carried out at any moment and up to 2 years after the payment of the balance. Audits normally concern mainly the financial implementation of the action by a beneficiary. (H2020

Ex post Audit

Strategy)

Reviews. They

are carried out at any moment and up

to 2 years after the payment of the balance. Reviews normally concern mainly the technical implementation of the action (i.e. its scientific and technological implementation). When suspicion of fraud, corruption or serious irregularity  OLAFEx post Controls

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Carefully

assess participants & their

capacity when building consortia or modifying these;Attention to

bank

accounts

and contact

details of participants: address (PO Box, private addresses, non-professional emails, etc.), website (non

existing/ under

construction/amateur), conflicting phone numbers vs. countries

Attention to other

red flags

(e.g.

fabricated CVs

, delays in response

, poor or non participation in meetings, poor

quality deliverables

, defaulting beneficiary, bankruptcy right after having received the

pre-financing, Amendments: an early request for change, a new partner, substantial

changes of action

tasks

, changes

concerning

subcontractors

,

unclear distribution of subcontractor roles

, links between the subcontractors and the beneficiary, unplanned

subcontracting, etc.)

Keep

all

evidence

Report

early

your

suspicions and observations: to

your

PO, to CAS auditors, to OLAFOLAF Fraud Notification System (FNS – Anonymous – 24 EU languages): https://ec.europa.eu/anti-fraud/olaf-and-you/report-fraud_enWhat can project coordinators and consortia do?

Exclusion

from participating in award procedures or from being selected for implementing Union funds, for 5 years or the duration set by the final judgment (Articles 136 and 139 FR);

Financial penalties (Article 138 FR and Article 45 MGA): the amount shall not exceed 10 % of the total value of the legal commitment;With the possibility of publishing the established facts/findings (the exclusion situation) and the financial penalties on the Commission's website (Article 140 FR);

(Possible

criminal prosecution under national law

, in case of findings arising from an OLAF investigation and in the future from

the EPPO.)

Corrective measures in the event of a confirmed case of fraud (1)12

R

ejection from an award procedure (Article 141 FR);Reduction of the grant (Articles 131 FR & 43

MGA); Recovery of undue amounts (Articles 101-103 FR & 44 MGA);Suspension of

payments

(Articles

131 FR & 48

MGA);

Suspension of the implementation of the grant agreement (Article 131 FR);Termination of the grant agreement or of the participation of one or more beneficiaries (

Articles 131 FR & 50 MGA).

Corrective measures in the event of a confirmed case of fraud (2)

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This system

allows: (3 decisions made by RAO)the early detection of

persons or entities which pose a risk to the financial interests of the Union. Registration of restricted information for 1 year (detection and circulation of this information);the exclusion of persons or

entities

which are

in one of the exclusion situations referred to in Article 136(1

) FR,

such as fraud, corruption or other illegal activities. In case of fraud, this decision is based on a final judgment or a recommendation issued by the panel referred to in Article 143 FR;the imposition of financial

penalties (final judgment or panel recommendation).

The Early Detection and Exclusion System (EDES)14

Example 1.

Fake company and misrepresentation

False declarations and falsified documents confirming scientific experience and achievements;Establishment of a

fake

research/scientific center

using a fancy name without real staff or any kind of

activity

;unconfirmed working experience, non-verifiable author rights;inexistent publications; reference to publications in the specialised press cannot be found online;

research center not found on public registers;i

nexistent employees, no turnover, etc.

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Example 2.

Undisclosed conflict of interest and falsification of timesheets

A project leader added an extra researcher with only marginal input to the project and charged corresponding costs.The additional researcher:

was

his

spouse;

did not have the qualifications

described;was not part of the team notified to the EC;received a salary three times higher than any other researcher;

concordant

family names; change of staff;

asymmetric payment.

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

Zero tolerance to fraud

to protect the EU R&I budgetPay attention to

red

flags



Rapidly report any suspicion or red flag to the EC/EA/JU, and/or auditors and/or OLAF

Conclusion: BE AWARE, BE ALERT !

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THANK YOU FOR YOUR KIND ATTENTION

ANY QUESTIONS ?

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