Most of SEE countries are not in risk of money laundering and terrorist financing

Published by the Basel Institute on Governance since 2012, the Basel AML Index is an independent annual ranking that assesses the risk of money laundering and terrorist financing around the world. It measures the risk using data from publicly available sources such as the Financial Action Task Force (FATF), Transparency International, the World Bank and the World Economic Forum.

A total of 15 indicators of countries’ adherence to anti-money laundering and countering the financing of terrorism regulations, levels of corruption, financial standards, political disclosure and the rule of law are aggregated into one overall risk score. By combining these data sources, the overall risk score represents a holistic assessment addressing structural as well as functional elements of the country’s resilience.

The scores are aggregated as a composite index using a qualitative and expert-based assessment in order to form the final country ranking. They should be read in conjunction with the analysis and descriptions of the methodology and indicators in the rest of the report. Without this background, the results may easily be misunderstood or misrepresented, and this may have unwanted consequences for any policy or compliance decision that is taken as a result.

The Basel AML Index does not measure the actual amount of money laundering or terrorist financing activity, but rather is designed to assess the risk of such activity. The risk is understood as a broad risk area in relation to a country’s vulnerability to money laundering and terrorist financing and its capacities to counter it.

The Basel AML Index ranks countries based on their overall scores, capturing the complex global nature of risks and providing useful data for comparative purposes. However, the primary objective is not to rank countries superficially in comparison with each other, but to provide an overall picture of different countries’ risk levels and serve as a solid basis for examining progress over time.

More countries showed slight improvements in their risk scores in 2019 than last year, but there have been no substantial changes indicating significant progress in tackling money laundering and terrorist financing. This confirms the general trend visible over the eight years since the Basel AML Index was first calculated: most countries are slow to improve their resilience against these risks. Improvements are minor – between 2018 and 2019, 27% of countries listed in the Public Edition (34/125) improved their scores by more than 0.1 point.

60% of countries in the 2019 Public Edition ranking (74/125) have a risk score of 5.0 or above and can be loosely classified as having a significant risk. This compares with 64% in 2018. The mean average level of risk, though marginally better than 2018, remains above this (5.39 in 2019 compared to 5.63 in 2018).

Most countries of South East Europe fall into the category of countries with low risk. North Macedonia holds high 3rd place with risk of only 3,22, followed by 5th Bulgaria with 3,51, 6th Slovenia, 7th Croatia and 10th Montenegro with 3,7, 3,82 and 3,94. Greece with 4,56 and Romania with 4,76 experience moderate risk, while the countries with significant risk of money laundering and terrorist financing include Bosnia Herzegovina with 4,76, Albania with 6, Turkey with 6,19 and Serbia with 6,33 which is the highest risk of all countries of Europe and Central Asia!

A moderate improvement in on the international drug trade in South East Europe

The 2019 International Narcotics Control Strategy Report (INCSR) is an annual report by the Department of State to Congress prepared in accordance with the Foreign Assistance Act. It describes the efforts of key countries to attack all aspects of the international drug trade in Calendar Year 2018.

Volume I covers drug and chemical control activities. Volume II covers money laundering and financial crimes.

For the third year in row, the report classifies four countries of South East Europe as “major money laundering countries” – those whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.

The report notes improvement, but these countries remained on this non-popular list. Here are the resumes of the situation.

The Government of Albania made no significant progress toward thwarting money laundering and financial crimes in 2018. Albania remains vulnerable to money laundering due to corruption, growing organized crime networks, and weak legal and government institutions. The country has a large cash economy and informal sector, with significant money inflows from abroad in the form of remittances. Major proceeds-generating crimes in Albania include drug trafficking, tax evasion, and smuggling. Other significant predicates include counterfeiting, arms smuggling, and human trafficking. Smuggling is facilitated by weak border controls and customs enforcement. Albania serves as a base of operations for organized crime organizations operating in the United States, Europe, the Middle East, and South America. Recent justice reforms, vetting of judges and prosecutors for corruption and ties to organized crime, and the creation of a police task force targeting organized crime activities have created a positive trajectory for Albania to address money laundering and financial crimes. These efforts, however, are still challenged by pervasive corruption.

Bosnia and Herzegovina (BiH) has a primarily cash-based economy and is not an international or regional financial center. BiH is in the middle of the Balkans and has open borders with Croatia, Serbia, and Montenegro. A Visa Liberalization Agreement with the EU enables easy transit from Eastern Europe and the Balkans region to countries in Western Europe. BiH is a market and transit point for smuggled commodities, including cigarettes, firearms, counterfeit goods, lumber, and fuel oil.

BiH recently has made substantial progress, not only strengthening its AML regime, but harmonizing its laws across its numerous legal systems, including laws related to money laundering and asset forfeiture. BiH has a complex legal and regulatory framework with criminal codes and financial sector laws at the state and entity levels (Federation of BiH (FBiH) and Republika Srpska (RS)), and in the Brčko District (BD).

BiH completed its National Risk Assessment of Money Laundering and Terrorist Financing in the Period 2018-2022 (NRA) in September 2018, which identifies notaries and real estate agencies as the highest-risk sectors.

In 2018, Serbia made a high-level political commitment to address noted deficiencies and has subsequently made significant progress in bringing its AML regime in line with international standards, resulting in an increased number of related investigations and convictions. With assistance from donors, Serbia updated its national risk assessment (NRA) to better identify current threats or crimes associated with money laundering and methods used to launder money and finance terrorism.

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, the Middle East, and Eastern Europe. Turkey’s rapid economic growth over the past 15 years combined with its commercial relationships and geographical proximity to areas experiencing political turbulence, such as Iraq, Syria, and Crimea, make Turkey vulnerable to money laundering risks. It continues to be a major transit route for Southwest Asian opiates moving to Europe. In addition to narcotics trafficking, other significant sources of laundered funds include smuggling, invoice fraud, tax evasion, and to a lesser extent, counterfeit goods, forgery, highway robbery, and kidnapping. Recent conflicts on the southern border of Turkey have, to a small extent, increased the risks for additional sources of money laundering. In 2018, Turkey implemented new regulations on the registration and supervision of foreign exchange houses, passed a tax amnesty law, and the government underwent a restructuring, resulting in new ministries.

To read the 2019 International Narcotics Control Strategy Report follow this link>>>>