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Last Updated: Saturday, 27 November, 2004, 00:46 GMT
EU reveals increase in aid fraud
Euro notes
In some cases, EU funds end up illegally in private accounts
The EU has revealed an increase in cases of serious abuse of its international aid project, losing it 1.5bn euros over the past year.

In its annual report, EU anti-fraud squad Olaf said incidents increased by 9% to 637 over a period of 12 months.

In some cases, European donors were being overcharged or funds were siphoned off for private or corporate benefit, the Olaf report said.

The 25-nation EU bloc is one of the world's largest aid donors.

But international aid was being dogged by "complex and well-organized" financial fraud, the report concluded.

In particular, it said, EU humanitarian and development aid to third world countries was being targeted.

"Such fraud takes an advantage of the lack of coordination in the monitoring and auditing activities between the various international donors," the report reads.

Detection improved

It cited several examples, including a water project in Lesotho where a local official responsible for awarding contracts stashed away over 3m euros in bribes in Swiss accounts.

In another project in Paraguay, it said 90% of the EU's money for a water supply project ended up illegally diverted to a bank account belonging to a foundation that had nothing to do with the development.

"Of the problems we detect, more and more are in the aid sector, where things have to be looked into more closely," Olaf director-general Franz-Hermann Bruener told reporters.

"All donors have systems of control, but we have to improve them."

The document - Olaf's fifth annual report - found that registered cases increased from 585 to 637 over the period of 1 July 2003 to 30 June 2004.

Mr Bruener said the rise was down to an improved detection rate.

"The increase in cases is partially because there is an increase in people telling us... It is a very promising sign," he said.

Additionally, dossiers on a series of financial scandals within the European Commission's statistical office Eurostat have been handed to judicial authorities in France and Luxembourg, he said.

Mr Bruener added that he expects the investigations to be completed within the next few months.

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