The director of the European Union’s anti-fraud agency has warned that the surge in defence spending across Europe is attracting increased criminal activity, particularly in the areas of procurement and research. Petr Klement, who assumed leadership of the EU’s Office for the Protection of the European Union’s Financial Interests (Olaf) in February, described the growing defence budgets as a “magnet” for fraudsters drawn by the significant financial resources being allocated.

Since Russia’s invasion of Ukraine in February 2022, EU member states have intensified their investments in military capabilities, utilizing substantial sums from the EU’s common budget. Notably, these include a €500 million ammunition funding programme, €150 billion in EU-backed defence loans, and a €1.5 billion initiative aimed at bolstering the defence industry. Klement highlighted that as the volume of funding directed toward defence increases, so too does the risk of fraud and irregularities.

Olaf’s annual report, released recently, shows a rise in reports of wrongdoing related to defence projects, especially involving public tenders, inflated pricing, clientelism, and corruption. Klement emphasized that such issues are often more prevalent in countries with weaker systems of oversight, though he refrained from identifying specific nations or cases. He noted that these problems have persisted for decades and are primarily driven by the opportunity presented by large amounts of public money.

The agency is tasked with safeguarding the EU’s financial interests and recommends recovery actions when fraud is detected. Last year, Olaf urged member states and EU institutions to reclaim €597 million lost to fraud and irregularities, while also preventing €18.1 million in suspicious expenditures. Over the past decade, the agency’s efforts have contributed to the recovery of approximately €6.8 billion.

Klement, who previously served as deputy chief prosecutor at the European Public Prosecutor’s Office (EPPO), outlined the priority of fostering stronger cooperation between Olaf and the EPPO through joint investigations and enhanced information sharing. While Olaf conducts investigations into financial wrongdoing, it is the national authorities or the EPPO that must pursue legal action. This division has created challenges, with some countries failing to adequately act on Olaf’s findings.

Notably, Hungary has been cited for its low rate of fund recovery, having returned less than 20% of amounts identified by Olaf for potential fraud between 2015 and 2024. However, recent political changes in Hungary, including the election of Péter Magyar who has pledged to align Hungary with the EPPO, may signal shifts in how the country addresses fraud investigations moving forward.

Klement also pointed to the EU’s forthcoming €2 trillion budget negotiations as a critical area where vigilance will be essential to prevent misuse of funds, underscoring the continuing need for robust oversight amid escalating defence expenditure.