Research pick: Improving EU fraud detection - "An international analysis of fraud detection in European structural and investment funds"

A recent study focusing on European Structural and Investment Funds (ESIF) could help improve fraud detection by identifying key indicators at the national level across the European Union, EU. The findings, published in the European Journal of International Management cover the period 2014 to 2020 and involved analysing data from 454 funds across all of the then extant 28 EU member states.

Thomas Baumgärtler and Philipp Eudelle of Offenburg University in Offenburg, Germany and Jorge Gallud Cano of the Universidad de Valladolid in Valladolid, Spain used an original database and employed regression analyses across EU member states to look for correlations between fraud detection rates and indicators related to fund utilization and monitoring, the frequency of fraudulent irregularities, economic development levels, and transparency within the nation.

The findings highlight the significance of vigilant fund monitoring to help combat fraud. In particular this, the team says, is more viable in those nations with the highest Gross Domestic Product (GDP) and transparency levels. Interestingly, they observed a decrease in irregularities in countries with elevated GDP and those receiving larger funds. However, there are considerable variations in fraud and fraud detection rates among individual states, with federal states like the Federal Republic of Germany demonstrating relative success in detecting fraud within EU funds.

The researchers explain that efforts to combat fraud and protect the financial interests of the EU, must involve collaboration between the EU itself and its member states. Indeed, a “multi-eye” principle in control is essential and the team emphasizes that this coupled with a zero-tolerance policy is the most efficient way forward in combating fraud and corruption.

However, despite the availability of tools such as anti-corruption reports from the European Commission, audit reports from the European Court of Auditors, as well as the existence of the anti-fraud office known as “OLAF” (Office Européen de Lutte Antifraude), during the period investigated, the team found significant differences in understanding of fraud detection between EU member states.

Fundamentally, the research findings underline the importance of closely monitoring funds, especially in economically advanced and transparent countries. The work points to how the European Commission might improve its overseeing of fund management among member states.

Baumgärtler, T., Eudelle, P. and Gallud Cano, J. (2024) ‘An international analysis of fraud detection in European structural and investment funds’, European J. International Management, Vol. 22, No. 2, pp.198–229.