ARACHNE risk scoring tool
What is ARACHNE?
ARACHNE is an integrated IT tool for data mining and data enrichment developed by the European Commission. Its objective is to support managing authorities in their administrative controls and management checks in the area of Structural Funds (European Social Fund and European Regional Development Fund).
ARACHNE
- establishes a comprehensive database of projects, implemented under the Structural Funds in the EU and provided by the ESF and ERDF managing authorities,
- enriches the data with publicly available information in order to identify, based on a set of risk indicators, the projects, beneficiaries, contracts and contractors which might be susceptible to risks of fraud, conflict of interest and irregularities.
- but does not aim at assessing the particular individual conduct of fund recipients and does not as such serve to exclude automatically any beneficiaries from the Funds. The tool provides highly valuable risks alerts to enrich management verifications, but it does not supply with any proof of error, irregularity or fraud.
ARACHNE can increase the efficiency of projects selection, management verifications and further strengthen fraud identification, prevention and detection.
Which procedure is followed to calculate risks?
- The operational data of the projects from Member States' ESF and ERDF managing authorities are transmitted to the European Commission.
- The operational data is further complemented with information from external data sources, Orbis and World Compliance, containing officially published and publicly available data on companies and related persons.
- ARACHNE calculates individual risk indicators
What kind of information is processed?
Arachne gathers data from ESF and ERDF managing authorities and from external data sources. Data subjects concerned are legal entities and natural persons. The categories of personal data processed are the following:
1. From the ESF and ERDF managing authorities:
- Beneficiaries: name, address, VAT number, number of employees, turnover;
- Project partners: name, address, VAT number, turnover;
- (Sub-)Contractors: name, address, VAT number, turnover;
- Service providers: name;
- Consortium members: name, address, VAT number, turnover;
- Key experts for service contracts: name, date of birth;
- Involved persons: name, date of birth, functions.
2. From external data sources provided by Vadis Technologies:
a) ORBIS from commercial provider Bureau Van Dijk:
- Information on companies : financial information, address, historical data;
- Shareholders/management/key staff: name, date of birth, functions.
b) WORLD COMPLIANCE from commercial provider LexisNexis Risk Solutions, Inc.:
- Profiles of Politically Exposed Persons (PEP), as well as those of their family members and close associates;
- Sanction List, which includes individuals and companies with the highest risk rating;
- Enforcement List, including information received from regulatory and governmental authorities and the content of warnings and actions against individuals and companies;
- Monitoring of newspapers and magazines for risk relevant info (including information from major on-line newspapers in the Member States of the European Union and in third countries).
Where an ARACHNE user, i.e. the European Commission or a Member State, identifies an invalid matching between the internal and external data sources, he/she must report this the Arachne team in the IT department of DG EMPL through a procedure referred to as "feedback loop". The rectifications introduced via the "feedback loop" will impact on the ARACHNE system (calculated risks), not on the initial source of information itself.
What is the legal basis?
Article 325 of the Treaty on the functioning of the European Union (TFEU) requires the Commission and the Member States to counter fraud and any illegal activities affecting the financial interests of the Union. Preventing and detecting fraud is therefore a general obligation for all Commission Services in the framework of their daily activities involving the use of resources.
The legal basis of the ARACHNE system encompasses:
- Articles 60, 61, 62, 69 and Chapter IV, Sections 1 and 2, of Council Regulation 1083/2006;
- Articles 13, 14, 16, 19, 37 as well as Section 7 of Commission Regulation 1828/2006;
- Chapter 2.2.3 of the Commission's Communication on Anti-Fraud Strategy;
- Regulation 966/2012 in the light of Articles 325 and 317 of the TFEU.
What are the benefits for the managing authorities?
Meeting the requirements of the Regulation (EU) 1303/2013
Integrating Arachne in the management and control system and effectively applying Arachne in the day-to-day management and verification of expenditure claims and projects would be considered as one important part in meeting the requirement of Article 125§4(c) of Regulation (EU) 1303/2013. The Commission has provided non-binding technical guidance to Member States (ref. guidance note EGESIF 14-0021-00 of 16 June 2014) to assist them in the implementation of this article.
Install and run the risk scoring tool free of charge
The Commission offers the development and implementation of the Arachne Risk Scoring Tool without any charges for the Member States. A framework contract signed by the Commission covers the Arachne licenses for the whole duration of the programming period 2014-2020 (until the closure of the period). Towards the end of the contract, it is planned to evaluate the use and impact of the tool. Subject to the results of this evaluation the Commission proposes a renewal of the contract after the completion of this framework contract and will strongly support free licences for national authorities.
Get training and technical support from the Commission
Upon the request of the authorities the Commission provides training for those colleagues who are designated to use Arachne. Additionally the managing authorities will be advised on how to integrate the programme into their daily work and into their management and control system. The Commission shares the same aim as the national and local authorities to prevent and fight against fraud and irregularities and to increase effectiveness and efficiency of management verifications.
Increase efficiency and effectiveness of management verifications
The Arachne Risk Scoring Tool represents the state of the art in terms of data mining and data enrichment. Applying this advanced technology will contribute significantly in helping to improve the efficiency and effectiveness of management verifications during the selection of operations and the financial management and control of the operational programmes. On-the-spot verifications of operations and administrative verifications in respect of each application for reimbursement by beneficiaries are costly and absorb administrative capacity. The tool helps you to allocate, in an efficient way, your human resource capacity for the desk review and on-the-spot verifications by focusing on the more risky beneficiaries, projects, contractors and contracts.
Show and document the result of increased efficiency and effectiveness of management verification
The Arachne Risk Scoring Tool will provide the managing authorities the possibility to assess the effectiveness and efficiency of management verification and to record and present the results of increased effectiveness and efficiency of management verifications over time.
Strengthen measures to prevent and fight against irregularities
The Arachne Risk Scoring Tool identifies more than 100 risk indicators, which are grouped into 7 risk categories such as procurement, contract management, eligibility, performance, concentration, other and reputational and fraud alerts. All risk indicators together help the managing authorities in identifying the most risky projects, beneficiaries, contractors and contracts. Once in place and once part of the management and control system the Arachne Risk Scoring Tool can substantially increase the level of prevention and detection and the fight against irregularities and fraud.
Profit from automatic dataflow and decreased administrative burden
For the new programming period 2014-2020, all managing authorities have adopted their computerised system according to Article 72 (d) of the Regulation (EU) 1303/2013. Many of the data fields used by Arachne are included in this system and can be extracted in an easy manner in order to benefit from a full range risk scoring.