Bosnia and Herzegovina’s Progress in Implementing Anti-Money Laundering (AML)/Counter-Terrorism Financing (CFT) Regulations

Technical Compliance Deficiencies Addressed

Bosnia and Herzegovina (BiH) has made progress in addressing some technical compliance deficiencies related to AML/CFT regulations. However, several effectiveness deficiencies remain.

Effectiveness Deficiencies

Lack of guidance and trainings: BiH has failed to provide adequate guidance and training on the application of risk-based approach (simplified and enhanced CDD).
Inconsistent implementation: The country’s measures for enhanced due diligence are not consistently implemented.
Measuring effectiveness: BiH is unable to fully measure the effectiveness of its AML/CFT Law.

The report identifies several specific deficiencies related to SR.IV, including:

By-Laws and Transaction Reporting

Inadequate by-laws: BiH’s by-laws do not cover funds but rather transactions.
Lack of transparency: Large amounts of STRs are only reported in the aftermath of supervisory action.

Quality and Quantity of STRs

Defensive reporting: Defensive reporting undermines the quality of STRs and reduces their actual number even further.
Overreliance on CTR reporting: Overreliance on CTR reporting leads to disregard of STR reporting.
Subjective test of suspicion: The subjective test of suspicion is rarely applied in practice, leading to overreliance on a list of indicators provided by authorities.

Terrorist Financing (TF) Issues

Lack of STR reporting: There is a lack of STR reporting in relation to TF despite high risk of terrorism in BiH.
Lack of specific indicators: The lack of specific indicators in by-laws contributes to a lack of awareness among private sector regarding TF issues.

Measures Taken and Future Work

While some measures have been taken to address these deficiencies, more work is needed to improve the effectiveness of BiH’s AML/CFT system.