Bosnia and Herzegovina currently faces significant challenges in addressing money laundering and terrorist financing, potentially endangering its financial relations with the European Union and other nations. Financial experts are expressing concern over the possibility of Bosnia returning to the European ‘grey list,’ which includes countries that have not made essential legal reforms in this area.
A delegation from MONEYVAL, an anti-money laundering body associated with the Council of Europe, is set to evaluate Bosnia’s progress in implementing legislative changes. This evaluation comes eight years after Bosnia was removed from the grey list. However, Bosnia still lacks a new law targeting money laundering and terrorist financing and has yet to implement various recommendations from the Financial Action Task Force (FATF), a global watchdog.
An anonymous government official believes that MONEYVAL may grant Bosnia a grace period for implementing its recommendations. However, the source expresses concerns about Bosnia potentially returning to the grey list in 2025, which could have more prolonged and severe consequences compared to previous listings.
The impact of such a downgrade would affect businesses and the general public, particularly regarding the use of foreign credit cards within Bosnia and the usage of Bosnian cards abroad. There is a possibility of payment disruptions due to restrictions imposed by other countries. Additionally, conducting financial transactions within the European Union using Bosnian cards may encounter obstacles.
Samir Lacevic, an adviser to the Bank Association of Bosnia and Herzegovina, underscores the serious economic ramifications. He points out that it could disrupt economic activities and business collaborations. Partnering countries may be hesitant to engage in financial dealings with Bosnia due to concerns about the stringent penalties associated with money laundering.
Bosnia is not the only country facing these challenges. Albania has been on the MONEYVAL grey list for three years, and Serbia and North Macedonia are anticipating expert reviews in the near future.
Bosnia’s previous efforts to exit these lists involved revising numerous laws and by-laws at various government levels. Nezir Pivic, who led Bosnia’s delegation to MONEYVAL in the past, highlights the current government’s lack of focus on this issue, potentially leading to a return to the grey list.
To mitigate this risk, Pivic emphasises the importance of Bosnia adopting a new law addressing the prevention of money laundering and terrorism financing. The Security Ministry reports that the draft of this law is in its final stages, aiming to align Bosnia’s framework with FATF standards and MONEYVAL recommendations.
However, there remain gaps in compliance, including better monitoring of notaries, attorneys, accountants, and microcredit organizations for money laundering and terrorist financing regulations. Bosnia also lacks a registry of beneficial owners and legislation on virtual currencies, among other shortcomings identified in previous assessments by FATF.
Ivana Veselcic, Bosnia’s current head of delegation to MONEYVAL, suggests that it is too early to discuss the results of the MONEYVAL assessment. She emphasizes that the evaluation process aims to enhance national authorities’ capacities to combat money laundering and terrorist financing effectively.
The EU delegation to Bosnia, on the other hand, warns that without taking required actions by year-end, Bosnia could find itself back on the ‘grey lists’ of international control bodies FATF and MONEYVAL. This could have significant political, economic, and financial consequences, affecting international financial markets, transactions, investments, loans, and the flow of capital into the country.
