Albania’s Efforts to Combat Money Laundering and Counter-Terrorist Financing

A recent on-site visit by international experts has assessed Albania’s measures against money laundering (ML) and counter-terrorist financing (CFT). While significant progress has been made, the country still faces challenges in implementing effective anti-money laundering and combating the financing of terrorism.

High Risk of Money Laundering

Albania’s informal economy, which accounts for a significant portion of its cash-based transactions, remains a major concern. The country’s history of organized crime, including clan-based and hierarchically organized networks involved in drug trafficking, increases the risk of ML. Additionally:

• Vulnerabilities in cross-border currency transportation
• Illegal practices in sectors such as exchange bureaus and gambling establishments

contribute to Albania’s high ML risk.

Cash-Based Economy

Despite efforts by authorities to reduce cash reliance, the informal economy continues to pose challenges for preventive measures. Transactions facilitated through these channels circumvent established safeguards, undermining overall effectiveness.

Financing of Terrorism

Albania remains at risk regarding possible financing of terrorism activities. Although the government has frozen assets of terrorist financiers and expelled individuals suspected of having links to terrorism, more needs to be done to address this threat.

Criminalization of Money Laundering and Financing of Terrorism

Albania has fully criminalized ML in line with international standards, but few convictions have been made due to demanding evidentiary requirements. Provisions criminalizing the financing of terrorism also fall short of meeting FATF standards, including:

• Lack of clarity on prohibited activities
• Demanding evidentiary requirements for conviction

Financial Intelligence Unit (FIU)

The Albanian FIU has improved its analytical processes, resulting in higher-quality financial intelligence. However, the legal framework needs strengthening regarding operational independence and clarifying the FIU’s responsibility for disseminating information on suspicious transactions.

Preventive Measures

Albania has updated its legal framework for preventive measures, but requirements fall short of international standards in some areas, including:

• Identifying beneficial owners
• Lacking customer due diligence (CDD) measures for foreign politically exposed persons (PEPs)

Implementation of preventive measures remains a concern, with uneven understanding amongst financial institutions and limited suspicious transaction reports.

Supervision

The supervisory role of the Financial Supervisory Authority (FSA) should be clarified, and inspections of the securities and insurance sectors are needed. Cooperation between supervisory agencies, both domestically and internationally, is underutilized.

Recommendations

To strengthen Albania’s anti-money laundering and combating the financing of terrorism regime, experts recommend:

1. Improving the legal framework to address cash-based transactions and illegal practices.
2. Enhancing the FIU’s operational independence and clarifying its responsibilities.
3. Strengthening preventive measures, including identifying beneficial owners and implementing CDD for PEPs.
4. Increasing inspections and supervision of financial institutions and designated non-financial businesses and professions (DNFBPs).
5. Improving cooperation between supervisory agencies and enhancing international cooperation.

By addressing these challenges, Albania can further strengthen its efforts to combat money laundering and counter-terrorist financing, ultimately reducing the risk of these threats to its economy and national security.