Almost anyone can commit subsidy fraud – from an individual to a company to the state itself. And these scams affect us all. Often it is public money that ends up in someone’s pocket. And we should not let that happen. In this article, we’ll tell you where to look for information on subsidies and what to do if you suspect subsidy fraud.
The crime of fraud falls under the category of property crimes. According to the Criminal Code, it is a situation where someone obtains a pecuniary benefit for himself or for someone else by misleading another person, taking advantage of his mistake or concealing important information, thereby causing not insignificant damage to someone else’s property. This means damage of at least CZK 10 000.
Tip: Read more about the crime of fraud and how to defend yourself in our article.
In addition to classic fraud, there are three special types of fraud, which are defined separately in the Criminal Code. These are insurance fraud, which is a situation where someone provides false or grossly misrepresented information or withholds important information in connection with the conclusion or amendment of an insurance contract, the settlement of an insurance claim or the claim for insurance benefits.
The second type of specific fraud is credit fraud. This consists in providing false or grossly misleading information or concealing important information when concluding a credit agreement or taking out a loan.
Finally, the third type is subsidy fraud, which we will look at in more detail.
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Grant fraud is a situation where someone provides false or grossly misleading information or omits material information in an application for a grant, subsidy or repayable financial assistance or contribution. Alternatively, the funds obtained by means of a grant, subsidy or repayable financial assistance or contribution are used for a purpose other than that for which they were intended.
Subsidy fraud is punishable by imprisonment for up to two years or prohibition of activity. If the perpetrator has been convicted or punished for this offence within the last three years, then the offence can be punishable by imprisonment for six months to three years. He/she will be imprisoned for one to five years if he/she has caused greater damage by his/her act, i.e. a minimum value of 100,000 crowns.
Tip: Imprisonment is one of the most feared punishments. For what crimes can it be imposed, what exactly influences its amount and how is it carried out? Find out in the next article.
The offender will be imprisoned for two to eight years if he or she acted as a member of an organised group, if he or she caused significant damage (corresponding to at least CZK 1 million) or if he or she committed fraud in the role of a person who has a special duty to protect the interests of the victim.
The most severe penalty of 5 to 10 years’ imprisonment is imposed if the perpetrator has caused damage of a large scale (i.e. a minimum value of CZK 10 million) or if the perpetrator has committed subsidy fraud with the intention of enabling or facilitating the commission of a terrorist offence, a terrorist financing offence or the threat of a terrorist offence.
Subsidy fraud is very often committed by legal persons. However, it is logically impossible to put a company or foundation behind bars. For this reason, there is criminal liability for legal persons, which provides for special penalties.
Tip: You can find out how legal persons are punished and which penalties can be imposed on them in our next article.
As we have already stated, both natural and legal persons can commit subsidy fraud. For example, a farmer applying for a subsidy to buy new agricultural machinery. In his application, he states that he will use the machine on 100 hectares of land when he only owns 50 hectares. After receiving the subsidy, he submits false documents proving that the machine will be used on a larger area.
Another example is a non-profit organisation applying for a subsidy to run a shelter. In its application, it states that it has a capacity of 50 beds and provides services for 100 people per month. In reality, it has only 20 beds and serves 30 people per month. The organization falsifies documentation to substantiate higher client counts.
Subsidy fraud by cities is also not uncommon. For example, when a municipality applies for a subsidy to build a new park. The application states that the project will cost CZK 10 million. However, the actual cost is only 7 million, with the remaining 3 million being included in false invoices and redistributed to those involved through fraudulent contracts.
However, it could also be an ordinary family applying for a subsidy to insulate their house. The application states that the house will be insulated with modern and expensive insulation material. However, after receiving the subsidy, they will use a cheap and low-quality material that does not meet the requirements of the subsidy programme. In addition, they falsify invoices and receipts from the contractor to prove the use of quality material.
In general, there are frequent cases of misuse of subsidies provided by the European Union. One example of this is the ongoing case of the Boar’s Nest. However, subsidies from a number of other international institutions, such as the World Bank and the United Nations, are also being abused. Subsidies are also provided by the Czech Republic itself and by local authorities or various non-profits and private companies. And subsidy fraud does not avoid them either.
Subsidy fraud and its consequences affect us all. In many cases, it is public money and therefore your money that you give to the state. Its abuse is therefore a fraud against us all and should be prevented. However, the first question that arises is where do we actually find out about the subsidies that have been granted?
If you suspect that someone is misusing subsidies, don’t let it go and report your suspicions. You have several options:
Tip: Up to two-thirds of criminal reports are dropped. So if you are going to file a criminal complaint, don’t do it alone and get a professional to help you. We have an attorney with more than 10 years of experience in criminal law who will evaluate your situation and then prepare your criminal complaint.
Grant fraud consists of the misrepresentation or misrepresentation of information in grant applications or the misuse of funds. Perpetrators of such fraud can face serious penalties, including imprisonment for up to ten years, especially if they have caused significant damage or acted as members of an organised group.
Information on subsidies can be found on official government websites, the DotaceEU.cz portal, the European Union website and local authorities. If you suspect subsidy fraud, you must report it to the relevant authorities, such as the subsidy providers, the European Anti-Fraud Office (OLAF) or the police. By working together, we can help protect public funds and ensure that subsidies are used correctly and efficiently.
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