Financial Crime World

Combating Money Laundering in Bosnia and Herzegovina: A Legislative Framework

Introduction

Money laundering is a significant threat to the political and economic stability of transition countries like Bosnia and Herzegovina (BiH). It refers to the process of disguising the origins of illegally obtained funds, making them appear legitimate for further use. This article discusses the legislative framework in BiH aimed at preventing money laundering.

Definition of Money Laundering

Money laundering is defined as the process of disguising the origins of illegally obtained funds, making them appear legitimate for further use.

BiH’s efforts to combat money laundering are guided by international legal frameworks such as:

  • United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988): This convention sets standards for countries to prevent the trafficking of illicit drugs and psychotropic substances.
  • Council of Europe’s Convention on Laundering, Search, Seizure and Confiscation of Proceeds from Crime (1990): This convention provides a framework for countries to combat money laundering and confiscate proceeds from crime.

National Legislation

BiH has enacted the Law on Prevention of Money Laundering and Financing of Terrorist Activities (2014), which outlines provisions and responsibilities for legal entities and individuals. The law categorizes offenses into three types, with varying penalties for each category:

Offenses and Penalties

  • First Category: Failure to fulfill obligations (e.g., not identifying a foreign legal entity or submitting information to the FIU) - fined between 10,000 KM to 100,000 KM.
  • Second Category:
    • Legal entities: fined between 10,000 KM to 100,000 KM
    • Responsible persons in legal entities: fined between 1,000 KM to 5,000 KM
    • Natural persons who perform self-employment: fined between 2,000 KM to 20,000 KM
  • Third Category: Not being guilty of an offense mentioned in categories one or two - no fine is imposed.

Conclusion

Money laundering poses a significant threat to BiH’s political and economic stability. Encouraging legal investment necessary for development requires effective prevention measures.

References

  • Cindori, S. (2007) Money laundering prevention system, Financial theory and practice 31.
  • Directive 2005/60/EC, 2007/64/EC, 2008/20/EC, 2009/110/ EC, 2010/78/EC, 2013/36/EC.
  • EU Council guidelines on the prevention of the use of the financial system for the purpose of money laundering, 1991/308/EEC, 2001/97/EC i 2005/60/EZ.
  • FATF Recommendations, Financial Action Task Force, Paris, 2012, http://www.fatf-fafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf [accessed 23 December 2020].
  • Law on Prevention of Money Laundering and Financing of Terrorist Activities, Official Gazette of BiH, no 47/14,46/16.
  • United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Vienna, 1988.