TAIEX-REGIO Expert Mission in Latvia 31 May —

TAIEX-REGIO Expert Mission in Latvia 31 May - 3 June 2016 Operational Cooperation OLAF - AFCOS Bulgaria - Member States' competent authorities as to fight against fraud to the EU budget Boyko KOSTOV Head of Unit Operational Cooperation AFCOS Bulgaria

Presentation content Ø AFCOS Bulgaria Structure Ø EU and National legal framework Ø Cooperation OLAF – AFCOS BG – Member States’ competent authorities Ø Case study

AFCOS STRUCTURE DIRECTOR UNIT OPERATIONAL COOPERATION Responsible for cooperation and OTSC with OLAF and MS’ competent authorities UNIT REPORTING IRREGULARITIES UNIT ADMINISTRATIVE INVESTIGATIONS Responsible for OTSC on own investigations UNIT INFORMATIONAL and ANALITICAL ACTIVITY, LEGAL and ADMINISTRATIVE SERVICE

Legal framework cooperation and on-the-spot checks European union law Ø Art. 325 TFEU and Commission decision establishing OLAF Ø Regulation 2988/95 on the protection of the EC financial interests Ø Regulation 2185/96 concerning on the spot checks and inspections Ø Regulation 883/2013 concerning investigations conducted by OLAF Ø Regulation 515/97 on mutual administrative assistance on customs and agricultural matters Ø Regulation 1798/2003 concerning VAT fraud Ø Regulation on ESIF cooperation-? ? ? National law Ø Law of the Ministry of Interior, art. 43 a, par. 10 Ø Rules of the implementation of the Law on the Ministry of Interior, art. 85 b Ø AFCOS’ Internal rules on investigation procedures, operational cooperation and on -the-spot checks

AFCOS Directorate – Ministry of Interior AFCOS MAIN Functions 1. National contact point to OLAF and to the relevant Member States’ competent authorities in the anti-fraud area. 2. Realizes the operational cooperation with OLAF and Member States’ competent authorities, exchanges of information. 3. Performs operative cooperation with OLAF in conducting on-thespot checks on the territory of Bulgaria. Rules of implementation Art. 85 b

AFCOS Directorate – Ministry of Interior MAIN functions 4. Receives signals for irregularities affecting the financial interests of the EU and performs an analysis, evaluation and checks on them. 5. Conducts administrative investigations on its own initiative or upon request by OLAF. 6. Provides, controls and coordinates reporting of irregularities by the national institutions to the European Commission. Rules of implementation Art. 85 b

General provisions of on-the-spot checks Ø Aimed to protect the financial interests of the EU OTSC shall be prepared and conducted by the Commission in close cooperation with the competent authorities of the MS Ø The competent national authorities shall be promptly informed of the object, purpose and legal basis of controls in place Ø Ø OTSC are carried out on economic operators to whom can be applied administrative measures and sanctions under Regulation 2988/95 and on other concerned economic operators Ø Provide evidence for the investigation through making reports according to the national law

BULGARIAN MODEL ON-THE-SPOT CHECKS 1. Gathering and expanding information - AFCOS and Ministry of Interior databases - Commercial Register - Irregularity Register - Addresses’ visits 2. Provision of participants - Economic operator - Prosecution’s office - Local police authorities - Public Financial Agency Inspection - MA, Audit authorities, other competent authorities 3. Update of the information of the on-going pre-trial proceedings and prosecution checks 4. Interview preparation - by AFCOS - by Managing authority 5. Final On-the-spot Check Plan

BULGARIAN MODEL ON-THE-SPOT CHECKS 6. Workig meeting at AFCOS Directorate’s premises OLAF Investigators, Head of Unit Operational cooperation and AFCOS Experts 7. Starting the on-the-spot check - written authorization - identity of team - purpose and scope of OTSC - Operational center at AFCOS Directorate during the OTSC 8. On-the-spot check core activities - all kind of documentation in relation to the public procurement - computer data - physical checks as to nature of quantity of goods - budgetary and accountant documents - documentation of the project etc. 9. Finalizing the On-the-spot Check - report of the OTSC - objection and comments - workig meeting in AFCOS, conclusions and recommendations 10. Analysis on the results

Operational Cooperation OLAF – AFCOS - statistics YEAR REQUESTS FOR ASSISTANCE FROM OLAF TO AFCOS REQUESTS FOR ASSISTANCE FROM AFCOS TO OLAF MISSIONS AND ON-THE-SPOT CHECKS CONDUCTED IN BULGARIA SIGNALS RECEIVED IN AFCOS (from OLAF and other sources) 2007 6 10 2 24 2008 28 12 1 82 2009 46 4 7 54 2010 58 5 12 87 2011 98 4 2 116 2012 75 5 1 80 2013 82 8 9 104 2014 88 10 20 147 2015 77 8 35 214

Cooperation between OLAF, AFCOS and other national authorities Who do we cooperate with in case: 1. The economic operator resists an on-the-spot check? 2. Coercive powers guaranteeing immediate and prompt intervention by national authorities are needed? 3. The competent authority needs to obtain a warrant from judicial authority before using coercive powers? 4. There are reasonable grounds to believe that a crime has been committed? 5. Digital forensic operations are performed during OTSC? 6. Assistance is needed from another Member State?

Audit of EU Funds Executive Agency Prosecution and Judicial Authorities OLAF AFCOS Directorate Police authorities Managing authorities, Intermediate bodies Public Financial Inspection Agency Member States’ competent authorities Customs and Tax authorities

Case Study 1 1. Romanian APIA signs 2 contracts for ~30 million euro to aid the Most Deprived, financed by the EU. 2. A Bulgarian Company “X” is the winner of the public procurement, who receives 18 million euro from APIA as payment for delivery of flour and oil and disappears. 3. OTSC in Bulgaria and Romania. F CRIME A U D

Is the owner of the Bulgarian company that received 18 million euro payment residing here? F CRIME A U D

- Status opened case for fraud and corruption multiple OTSC by AFCOS Bulgaria and DLAF Romanian anti-corruption prosecutors conducted house and office searches arrests and interrogations Other - Difficulties many persons involved offshore companies company without property not paying bank - Relationships between the persons involved

What happened and who participated? OLAF AFCOS Bulgarian Police and Judicial authorities Romanian Police Authorities Carabinieri Italy Adm. Authorities Sweden DLAF Romania DNA Romania Adm. Authorities Germany Judicial authorities Cyprus "This operation is a good example of effective action by OLAF and national authorities working together to defend EU taxpayers' money against fraud. ” Mr. Giovanni Kessler

Case Study 2 1. BG company “A” submitted project application under ERDF worth 2, 2 mln. leva (~1, 1 mln. €), supported by EU companies’ offers from Italy, Spain and Austria. 2. Bulgarian Companies “B” and “C” are winners of the public procurement procedure and receive 2, 2 mln. leva from the MA as payment for delivery of machines and equipment to company “A”. 3. Cooperation and OTSC in Bulgaria and in the Member States during AFCOS/OLAF ongoing administrative investigations. F CRIME A U D

Modus operandi - Presented false offers, invoices and supporting documents to the MA with the application form - Manipulation of the Public procurement procedure - Many contracts signed for transfer of the companies’ capital and ownership - Contracts signed by persons concerned in conflict of interests Difficulties - Many persons involved (Interviews conducted, documents and statements taken) - Huge number of companies involved (multiple OTSC by AFCOS BG and MS’ competent authorities, by OLAF’s request) - Company without property

Project under ERDF BG Company “A” Project 2, 2 mln lv Contract for EU grant 1 mln lv Application submitted to MA Application EU companies’ offers supporting the application: Italy Spain Austria EU support

What happened in real? BG company “A” BG company “B” companies in EU: Italy-1 Spain-1 Austria-4 companies in China BG company “C” BG companies “D”, “F” companies in China

Who participated during the investigation? OLAF AFCOS Bulgarian Managing authorities Bulgarian Judicial authorities Italian authorities Spanish authorities Austrian authorities di Finanza Civil of Finance – Guardia – Ministry

Conclusions and Recommendations 1. BG company “A” has been transferred to Mr. X and his Son 1 by Ms. Y and her Daughter before signing the contract. BG company “B” has been transferred to Ms. Y’s Daughter by Mr. X’ Son 2. At the same time BG company “B” has contracts (signed by Mr. X’ Son 2) with two AT companies for producing the same machines. BG company “C” is owned by the Ms. Y’s Daughter but contracts for delivery are signed by Mr. X. 2. BG company “C” has signed several contracts with the BG companies “D”, “F” and CN companies for delivery of machines and equipment. According to the customs declarations the prices of delivered goods are 3 -5 times less then the prices in the invoices issued by BG company “C” to the beneficiary BG company “A”. 3. Guardia di Finanza by OLAF’s request conducted examination and it has established that the Italian company in question is in bankruptcy. The Italian citizen owner of the company has not found any documents or offer in relation to BG companies “A” “B” “C”. 4. Guardia Civil in Spain (OLAF request) has taken statement by the owner of the Spanish company and seized the original offer presented with the application. It was found fake. 5. Austrian MF has checked by OLAF’s request four companies and seized the original offer of one of them presented with the application. It was found fake as well. 6. OLAF has provided 7 invoices issued by the AT companies which are manipulated. 7. AFCOS’s FCR reveals serious violation of the sound financial management of the ERDF and recommends recovery of unduly paid subsidy. The process is ongoing.

REPUBLIC OF BULGARIA MINISTRY OF INTERIOR “Protection of the European Union’s financial interests” Directorate - AFCOS Bulgaria Sofia, sq. “Sveta Nedelya” № 6 e-mail: afcosbg@mvr. bg website: http: //afcos. mvr. bg/ tel. +359 2 9401445