Financial Crime World

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Bosnia and Herzegovina’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) System

Recommendation 5 (R.5)

Key Findings

  • Only one technical compliance deficiency was noted, which was successfully addressed.
  • Four effectiveness deficiencies were identified:
    • Lack of guidance and trainings on the application of risk-based approach (simplified and enhanced CDD).
    • Inconsistent implementation of measures to be taken in case of enhanced due diligence.
    • Unable to fully measure the effectiveness of implementation of the newly introduced AML/CFT Law.
    • BiH was unable to properly assess deficiencies 4 and 5 as this is a desk-based exercise.

Measures Adopted and Implemented

  • For deficiency 1, no concrete measures were taken by BiH to remedy this issue.
  • For deficiencies 2 and 3, some steps were taken by BiH to address these issues, but no further information was provided for the purpose of this paper.
  • For deficiency 4, BiH noted that CTR reporting is a technical requirement of the AML/CFT Law and is related to a specific threshold, not suspicion. However, the authorities acknowledged that different activities have been carried out with reporting entities to improve the quality of STRs.

Special Recommendation IV (SR.IV)

Key Findings

  • Seven deficiencies were identified:
    • By-laws do not cover funds but rather transactions.
    • Large amount of Suspicious Transaction Reports (STRs) are only reported in the aftermath of supervisory action.
    • Defensive reporting undermines the quality of STRs and reduces their actual number even further.
    • Overreliance on Currency Transaction Report (CTR) reporting in practice leads to disregard of STR reporting.
    • Subjective test of suspicion is rarely applied in practice, leading to overreliance on list of indicators provided by the authorities.
    • Lack of STR reporting in relation to Terrorist Financing (TF) although high risk of terrorism in the context of BiH.
    • 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.

Conclusion

Bosnia and Herzegovina has made progress in addressing some of the deficiencies identified in Recommendation 5 and Special Recommendation IV. However, further efforts are needed to fully implement the AML/CFT Law and improve the effectiveness of its implementation.