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The new director of the EU’s anti-fraud agency has warned that European capitals’ rearmament drive is a “magnet” for criminals who are attracted by the historic sums being poured into the defence sector.
The anti-fraud watchdog Olaf has received a rising number of tip-offs regarding “wrongdoing in the defence area, especially in research projects or procurement”, it stated in its yearly report published today.
“If we invest more into defence, you will see more fraud or more cases in defence,” Petr Klement, who took over as Olaf’s director in February, told the FT.
“The magnet for the fraudsters, the magnet for the criminals . . . is the money itself,” he added.
Olaf investigates fraud and irregularities related to the EU’s common budget, which member states have been using to finance a growing number of defence projects, particularly since Russia’s full-scale invasion of Ukraine. These include a €500mn programme to fund ammunition, €150bn in EU-backed defence loans and a €1.5bn defence industry programme.
“Since this is money of the European citizens, and since Olaf is tasked to . . . protect the financial interests, we are strongly dedicated and we are on guard,” Klement said, adding that this also concerned the EU’s upcoming €2tn budget, which is currently being negotiated.
Based on its findings, the agency makes recommendations to member states and EU agencies to recover funds linked to fraud.
Last year, Olaf told member states and EU institutions to recoup €597mn lost as a result of fraud or other wrongdoings, and to prevent €18.1mn from being spent in the first place. Over the past decade, Olaf’s probes have led to the recovery of €6.8bn, according to its report.
Klement declined to comment on specific defence-related cases, but said that issues in the sector included “manipulation with public tenders, blown-up prices, clientelism [and] corruption”.
He said cases were likely to crop up in countries “with a weaker system of controls . . . this is not shaming certain countries or segments. This is simply how it’s been working for decades”.
“The opportunity to steal money attracts those who want to steal,” Klement added.
Klement, who is Czech and previously acted as deputy chief prosecutor at the European Public Prosecutor’s Office (EPPO), said it was one of his “top priorities” to seek closer co-operation between Olaf and EPPO, staging more joint investigations and sharing information.
While Olaf conducts investigations, it is up to authorities in the member states or EPPO to initiate judicial proceedings based on Olaf’s findings, a loophole that has led to some countries such as Hungary not properly following up on the agency’s probes.
Hungary recovered and handed over less than a fifth of the funds flagged by Olaf for potential fraud between 2015 and 2024, according to data from the agency.
But the election of Péter Magyar, who unseated longtime premier Viktor Orbán a week ago, could herald changes as Magyar has announced that Hungary would join EPPO.
“I find it very positive, Hungary’s joining EPPO,” Klement said, adding that this would “definitely” aid in the fight against fraud, for instance through better exchanges of information or following up on Olaf’s recommendations.
“It’s a very rational and very good step forward.”