A new report by the Global Initiative Against Transnational Organized Crime (GI-TOC) has identified millions of euros in illicit cash moving through Bosnia and Herzegovina, Montenegro and Serbia annually.
According to the NGO, the three main sources of the illicit cash are corruption, tax evasion and avoidance, and organized crime. The report, “Illicit financial flows in Bosnia and Herzegovina, Montenegro and Serbia: Key drivers and current trends,” focuses on three case studies in each country.
In Serbia, the infrastructure and construction industries are major sources of illicit cash.
“A number of project construction contracts have allegedly been awarded to Chinese and Russian contractors in exchange for loans,” the report reads, “Additionally, major assets sold to European investors may have been subject to political influence and sub-optimal pricing.”
In Bosnia and Herzegovina, researchers found that public money is “channeled to nongovernmental organizations (NGOs) and civil society organizations (CSOs) based on political favoritism”. In the Canton of Sarajevo, for example, GI-TOC found that more than four hundred thousand euros is “routinely” given to CSOs, without public consultation processes or competition.
Meanwhile, in Montenegro, the defense industry is at the center of governance issues thanks to a high number of scandals. In 2013, Montenegro abolished a law that barred foreign investment of more than 49 percent in national defense companies, allowing foreign firms to enter a market “already affected by corruption scandals related to a widespread lack of transparency.”
According to the report, tax evasion remains a widespread issue in Bosnia and Herzegovina and Serbia, with employees often officially paid a minimum wage which is then supplemented with cash payments or other unreported benefits.
The trafficking of drugs, arms and migrants is rife in all three countries. Illicit goods, like tobacco, and even the smuggling of legal goods are also major pillars of organized crime. In Bosnia and Herzegovina alone, the market for smuggling migrants was valued at 10.5 million euros in 2020.
In order to combat organized crime activities and the associated flow of illicit cash, banks in all three countries currently require proof of origin for amounts above 15,000 euros. Larger transitions automatically trigger red flags and a suspicious transaction report.
GI-TOC’s report, however, has found that the system is “commonly circumvented,” with criminals typically splitting illicit cash transactions into smaller amounts and transferring the money between different accounts, both local and international, in order to evade detection.