Antifraud and Anticorruption Measures in the European Structural

Anti-fraud and Anti-corruption Measures in the European Structural and Investment Funds Financial Crime Investigation Service under the Ministry of the Interior of the Republic of Lithuania 25 February, 201 5 25 February, 2015 Ryga

Fields of Cooperation üThe creation/ creation implementation of national strategies to protect EU’s financial interests (and promoting the related administrative/legislative changes); üIdentification of possible weaknesses in national systems for managing EU funds, including pre-accession funds; üDissemination of information and communication; üSufficient human resources capacity, including training fraud-prevention staff; üHelping cooperation between national administrations, prosecution authorities and OLAF; üSharing information on irregularities and suspected fraud cases with national administrations and OLAF.

Directions of Cooperation within AFCOS system OLAF ES TI I R LA U G RE IR Irregularity Reporting System bodies CR IM ES COOPERATION Law Enforcement Institutions

Reporting Criminal Investigation Experts Reporting Experts FCIS IRD FCIS PAA, IMS 1681, 1831 >10. 000 € Verification Experts Mo. F, Agencies 498, 1828, 1848

Financial Crime Investigation Service (FNTT) The goal of the Service is to elaborate methods of combating criminal activities against the State and EU financial system. Presently the priority attention of the Service is paid to the disclosing, investigation and prevention of the criminal acts, related to the money laundering, VAT embezzlement, illegal receipt and use of the funds of the financial support from the European Union and foreign countries. For the anti-fraud efficiency great importance has the fact that the Service officers participate in the development of the risk management system of administration and control of the European Union support, it closely cooperates with the administrating institutions of the European Union financial support.

The Levels of Cooperation The Anti-Fraud cooperation process in Lithuania takes place at: ü Governmental level ü Inter-institutional level ü Institutional level

Inter-Institutional Level Managing Authority (Mo. F) formed Irregularities officers working group. This Group comprised of Irregularities officers and headed by the Managing Authority. In the Group as observers invited Coordinating, Certifying Authorities, Audit Authorities, Ministries, and (or) other state institutions, the Public Procurement Office and the Financial Crime Investigation Service Representatives. (Nr. 1225, 2008 -11 -12)

The Institutional Level of Cooperation Each institution has its own arrangements. Ex. FCIS for the purpose of protection of the EU financial interests has cooperation agreements with MA and IB 2 level bodies. These agreements legitimize the exchange and usage of SFMIS information for the criminal intelligence and criminal investigations. With State Tax Inspectorate existed modern form of cooperation – Risk Assessment Center (RAC).

Criminal Code of the Republic of Lithuania üApplicants want to obtain by fraud EU’ funds resources (Art. 182 CC. Swindling Fraud) üFalsification of documents, which to be used to get the EU's support (Article 300 CC. Forgery of a Document or Possession of a Forged Document ) üBeneficiaries of EU aid fraudulently or negligently managed accounts (Art. 222 CC. Fraudulent Management of Accounts , Art. 223 CC. Negligent Management of Accounts ) üState civil servants abusing the service or negligent performance of their duties (Art. 228 CC. Abuse of Office , Art. 229 CC. Failure to Perform Official Duties) üLegalisation of illegally obtained EU funds money (Art. 216 CC. Money or Property Laundering ) üIllegal financial transactions, the use of not oneself electronic means of payment (Art. 215 CC. Unlawful Use of an Electronic Means of Payment or Data Thereof)

Crime characteristics (1) üThe project result is not achieved (not intend to implement the project). üOne type of equipment is contracted, but other equipment is installed (purchase of used equipment). üAdditional works are purchased not using public procurement procedures. üDiscriminatory technical specifications (when conditions make for a single supplier or model of techniques). üA simplified procurement procedure is used instead of an international one. üSimplified purchase procedure is used without the proper legal basis to do so. üThe Law on Construction is violated (works are started without a construction permit of state institutions).

Crime characteristics (2) üThe price gap between public and private sector (in the private sector same works price 40 -60% lower); üThe tender analysis missing special knowledge (documents submitted by the persons who do not have specific knowledge of construction, land reclamation, computer technology and so on. ); üPublic and private interests conflict (municipal council members are often managed companies which take part in the contest); üSuppliers agreed in advance (after the tender unsuccessful participants shall sign the sub-contract – “cartel”); üPart of the costs are not justified (used for the acquisition of material without documents, illegal work, and so on. ); üFalsified documents are provided to the State authorities (applications and payment requests, bill, VAT invoice, and so on. ).

Crime characteristics (3) üUnreasonably increase the construction cost estimate (no reason to include all firms costs, business trips and so on. ) üProvides not detailed estimates (and later the same form drawn up to carry out the works acts); üAfter the competition work carried out not by the estimated costs; üUsed to justify the expenditure actually a “ghost” companies (without carrying out any work, without the value added) documents; üTax evasion – companies conceals the real corporate profits, income tax; üMade financial transactions through offshore companies (spends money for luxury goods, real estate, cars, etc. )

Problems of Investigation Complicated administrative procedures. Different areas of EU support and different funding periods have different rules, legislation, administration system ( it makes PTI cases multiplex and crowded with documents). Administrative prevention gap. The risk assessment and reporting of possible fraud does not guarantee the timely detection of criminal acts (for PTI are important evidence, not assumptions). Special qualification requirements for officers. Necessary not only legal knowledge, usually required skills for different areas (agriculture, agronomy, engineering, industry, IT products and so on) PTI proceedings are necessary experts in different areas Professionals with special training, education, skills and knowledge that can provide detailed findings of research in specific areas (preparation of expert report takes time, service of experts are very expensive, it’s influence court costs)

Thank you for your attention Paldies Tänan Ačiū

Financial Crime Investigation Service inder Mo. I Šermukšnių g. 3, Vilnius E-mail. dokumentas@fntt. lt