Evasion of import duties, cigarette smuggling, subsidies for growing olives on farms that don't exist — all are examples of fraudulent activities that cost European taxpayers money.
Protecting the financial interests of the EU is a priority for the European institutions. The protection of the EU financial interests is enshrined in the Treaty on the functioning of the European Union. According to article 310, the EU and its member states shall counter fraud and any other illegal activities affecting the financial interests of the EU. A specialised anti-fraud office (OLAF) is tasked with conducting anti-fraud investigations.
Using advanced statistical methods and information technologies, the JRC develops new concepts and tools that contribute to the protection of the EU budget and the stability of the EU financial system. Research activities in this field include: developing statistical algorithms for the detection of fraud-relevant patterns for customs fraud, VAT fraud, and trade based money-laundering; developing methods to track movements of containers; develop methods based on genetics to enhance traceability in the fisheries sector.
Statistics for antifraud
The JRC develops and applies innovative statistical methods needed by the European Anti-fraud Office (OLAF) and the EU member states for the protection of the financial interests of the European Union. JRC's work addresses several fraud control problems, such as irregularities in payments of export refunds, evasion of payment of import duties, deflection of trade and trade-based money-laundering.
The work scrutinizes international trade to a broader extent; therefore results are generally applicable to the monitoring of commercial practices that are relevant for the trade policy makers. These are practices that, without being necessarily fraudulent, can lead to distorted competition or potentially unfair trading involving one or more member states (state monopolies, dominant positions, deflection of trade, circumvention of EU trade regulations on anti-dumping and countervailing).
The approach taken by the JRC is based on statistical data mining: fraud control problems are formulated as patterns to be detected in appropriate target datasets, then statistical methods for the detection of the patterns are developed and the results are made available to subject matter experts for analysis. Patterns detected include "upward spikes" in trade flows, i.e. sudden, unexpected, unprecedented increases in trade flows at a point in time and "price outliers", i.e. trade flows with price significantly larger or smaller from the prices for comparable trade flows. Through the ARIADNE and WebARIADNE packages, the JRC makes available to end users software developed in-house and used routinely for data exploration and detecting signals in databases. The dissemination of results is done primarily through the restricted area of the THESEUS website which is operationally used by OLAF and several EU member states agencies, including tax and customs services, anti-fraud and control agencies.
Monitoring container traffic and analysing risk
Millions of containers travel every year by sea, transporting the bulk of traded goods. Detecting suspicious fraudulent shipments (e.g. evasion of import or antidumping duties, VAT fraud) is a difficult task for the authorities involved. The JRC's Contraffic research project developed a system that can support authorities in this task by improving their situation awareness and risk analyis capacity. The ConTraffic system can provide not only complete container route information (for current and historical shipments), but also statistics and risk indicators derived from the actual routes followed by the containers. Such risk indicators are used in a pilot project to detect false declarations of origin inside EU import declarations.
Genetics for traceability in the fisheries sector
Fraud in the fisheries sector is unanimously recognised as a serious impediment to sustainable fisheries. The JRC investigates the use of molecular technologies in the fight against illegal fishing focusing in particular on catch identification, fraud throughout the fish product supply chain, and traceability (“From Ocean to Fork”).
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