Europol Warns of Major EU Recovery Fund Fraud

European police have announced a major operation designed to tackle a wave of anticipated fraud linked to the disbursement of the EU’s COVID-19 recovery fund.

The €807bn ($935bn) in NextGenerationEU loans and grants will be split between 19 member states and is designed to support investment in more sustainable and resilient societies – to correct some of the economic and social damage wrought by the pandemic.

However, the fund will also be a magnet for fraudsters, which is why Europol has announced Operation Sentinel. The initiative will also receive support from four EU entities and authorities from all participating member states.

“Recent experience from the evolution of the criminal landscape during the COVID-19 pandemic suggests these efforts will attract criminal groups active in the EU and beyond. Criminals have shown themselves to be quick in adapting to the pandemic and its impact, and they are using every opportunity to maximize illegal profits,” said Europol.

“For this purpose, Europol will establish a dedicated internal mechanism to process operational data, steer information exchanges and support ongoing cases. The joint activities will target fraud, as well as tax evasion, excise fraud, corruption, embezzlement, misappropriation and money laundering.”

The experience of the US could be instructive in this regard. The country experienced widespread fraud targeting individuals who received COVID-19 stimulus checks and exploiting the fact that businesses were eligible for various hand-outs and loans.

The Federal Trade Commission (FTC) claimed it received double the number of identity theft reports than usual during 2020.

It also estimated back in March that pandemic-related fraud may have cost Americans around $382m, although the true figure is likely to be much higher as it only relates to consumer fraud reported to the agency.

Paycheck Protection Program (PPP) loans were another central area of fraud as business owners, and criminal gangs tried to take advantage of government largesse.

One report estimated that as many as 15% of PP loans may have been fraudulent, at a potential cost to the taxpayer of $76bn.