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Bosnia and Herzegovina Adopts Sweeping Reforms with New Anti-Money Laundering and Counter Terrorism Financing Law
In a decisive move, the Parliament of Bosnia and Herzegovina (BiH) has passed a new Law on Anti-Money Laundering and Counter-Terrorism Financing (ALM/CTF Law), which is set to significantly strengthen the country’s regulatory framework in this area.
Meeting EU Integration Requirements
The law was adopted in an emergency session of the House of Peoples on February 16, just ahead of the fifth round of evaluation by MONEYVAL, scheduled to take place from February 13 to 28. This assessment aims to determine whether BiH meets international standards in combating money laundering and terrorist financing, with a view to avoiding a potential greylisting.
Key EU Directives
The new law brings Bosnia and Herzegovina’s regulations into line with key EU directives, including:
- Regulation (EU) 2018/1672
- Directives (EU) 2015/849 and (EU) 2018/843
This harmonization underlines BiH’s commitment to international cooperation and adherence to established norms in anti-money laundering and counter-terrorism financing.
Significant Changes for Emerging Businesses
The ALM/CTF Law introduces significant changes that will have a positive impact on emerging businesses. It establishes a comprehensive legal framework for previously unregulated financial services and products, such as:
- Crypto assets
- E-money
This positions Bosnia and Herzegovina at the forefront of regulatory readiness for further digitalization.
Broadened Scope of Entities Covered
The law significantly broadens the scope of entities covered, subjecting a wider array of financial institutions and businesses to anti-money laundering regulations. This inclusivity aims to eliminate potential loopholes that may be exploited, reinforcing the financial system against illicit activities.
Detailed Provisions for Suspicious Transactions and Businesses
A notable feature of the legislation is its detailed provisions regarding procedures and measures obligated entities must implement when dealing with suspicious transactions and businesses. The law clarifies situations requiring enhanced due diligence and those where simplified checks are permissible, outlining specific criteria for different types of obligated entities.
Innovative Measures for Fintech and Digitalization
The ALM/CTF Law also introduces innovative measures, enabling Know Your Customer (KYC) checks through:
- Video identification
- Electronic signatures
- Electronic stamps
This groundbreaking step facilitates client onboarding for financial institutions and establishes a regulatory foundation for the broader use of fintech and increased digitalization within the financial sector.
Empowering Obligors to Conduct KYC Checks Indirectly
The law empowers certain obligors to conduct KYC checks indirectly through third parties, provided these entities adhere to anti-money laundering and counter-terrorism financing standards equal or superior to those stipulated in the law.
Mechanisms for Cash Transactions and Transport of Physical Currencies
The new law also incorporates mechanisms to guarantee the implementation of statutory limitations for cash transactions and transport of physical currencies. This ensures that no one is exempt from these regulations, which are designed to prevent money laundering and terrorist financing.
Permanent Coordination Body
A significant addition to the ALM/CTF Law is the establishment of a permanent coordination body, comprising representatives appointed by the BiH Council of Ministers from competent bodies of the entities – the Federation of Bosnia and Herzegovina and Republika Srpska – and the Brčko District. This body aims to promote, coordinate, and cooperate in areas related to the law’s scope and the fulfillment of BiH’s international obligations in preventing money laundering and terrorist financing.
Conclusion
The ALM/CTF Law represents a multifaceted and forward-thinking legislative initiative that positions Bosnia and Herzegovina as a proactive player in the global fight against financial crimes, fosters EU integration, and embraces the opportunities presented by technological advancements in the financial sector.