Financial Crime World

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Effectiveness Assessment for Recommendation 13/Special Recommendation IV

Deficiencies

Inadequate Reporting and Implementation

There are several deficiencies that need to be addressed regarding Recommendation 13/Special Recommendation IV:

  • Lack of clear guidance on funds reporting: The by-laws do not cover funds but rather transactions (R.13/SR.IV)
  • Insufficient Suspicious Transaction Reports (STRs): A large amount of STRs are only reported in the aftermath of supervisory action (R.13)
  • Defensive reporting reduces quality and quantity of STRs: Defensive reporting undermines the quality of STRs and reduces their actual number even further (R.13)
  • Overreliance on Currency Transaction Reports (CTRs): Overreliance on CTR reporting in practice leads to disregard of STR reporting (R.13)
  • Inadequate test of suspicion: Subjective test of suspicion is rarely applied in practice, leading to overreliance on list of indicators provided by the authorities (R.13)
  • Lack of reporting on Terrorist Financing (TF): Lack of STR reporting in relation to TF although high risk of terrorism in the context of BiH (SR.IV)
  • Limited awareness among private sector: Lack of specific indicators in by-laws contributes to lack of awareness in terms of TF issues among private sector, despite high vulnerability to terrorism (SR.IV)

Measures Adopted and Implemented

Despite these deficiencies, the following measures have been taken:

  • Addressing deficiency 1: The BiH authorities informed that this deficiency will be clearly addressed following the adoption of the new AML/CFT Law.
  • Improving STR quality and quantity: The FID provided feedback on the results of its analysis to 41 reporting entities, discussing the issue with reporting entities and responsible supervisors.
  • Training and workshops: Trainings and workshops were organized in the framework of the IPA 2013 Twinning project to improve the quality of STRs.

Overall Conclusion

The BiH has achieved a level of compliance equivalent to LC with R.5, but still has four effectiveness deficiencies related to Recommendation 13/Special Recommendation IV. The BiH authorities have taken steps to remedy some of these deficiencies, but more needs to be done to address the remaining issues.