Illicit Financial Flows: Bosnia and Herzegovina, Montenegro, and Serbia Face Huge Economic Losses
A Looming Crisis in the Western Balkans
VIENNA, AUSTRIA – January 19, 2022 - Millions of euros in illicit financial flows (IFFs) are moving through Bosnia and Herzegovina, Montenegro, and Serbia every year, according to a new report from The Global Initiative Against Transnational Organized Crime.
Estimated Economic Losses
The report, “Illicit Financial Flows in Bosnia and Herzegovina, Montenegro, and Serbia: Key Drivers and Current Trends,” estimates that IFFs are equivalent to 2-5% of each country’s annual GDP, totaling €1.5 billion to €3.75 billion.
What Are Illicit Financial Flows?
IFFs are the proceeds earned from corruption, tax evasion, and organized crime that are then laundered into the local economies. The report finds that construction, real estate, tourism, and gambling are among the sectors most vulnerable to IFFs.
Key Drivers of IFFs
- Lack of available data on all components and channels of IFFs makes it difficult to uncover the full scope of the problem.
- Construction, real estate, tourism, and gambling are among the sectors most vulnerable to IFFs.
Case Studies: Bosnia and Herzegovina, Montenegro, and Serbia
The report highlights three key case studies:
- Financing of Non-Governmental Organizations in Bosnia and Herzegovina: The lack of transparency and accountability in the financing of NGOs in Bosnia and Herzegovina creates an environment conducive to IFFs.
- Defense Industry in Montenegro: Corruption in the defense industry in Montenegro has led to inflated prices, with some estimates suggesting a 20-30% increase due to corruption.
- Infrastructure Investment in Serbia: Corruption in infrastructure investment in Serbia has also been identified as a major issue, with some reports suggesting that corruption has inflated prices by 20-30%.
Tax Evasion and the Illicit Trade of Tobacco
The report reveals that the Western Balkans are deprived of €200 million every year from the illicit trade of tobacco. Additionally, income tax is evaded by paying workers in cash.
- In Bosnia and Herzegovina, almost 30% of the workforce are informally employed.
- Billions of euros of imports are vulnerable to misinvoicing across the Western Balkans.
Conclusion
The report concludes that despite significant government efforts to prevent this type of crime, implementation of new laws and regulations is limited. “This discourages the public and private sectors from investing in essential infrastructure,” said Kristina Amerhauser, one of the report’s authors. “And it deprives the licit economy of resources that are needed for sustainable development.”
Contact Information
For further questions or to interview the report’s authors, please contact Claudio Landi (Claudio.landi@globalinitiative.net).