Financial Crime World

Illicit Financial Flows (IFFs) in the Western Balkans: A Complex Issue

Conceptual Confusion

The issue of illicit financial flows (IFFs) in Albania, Kosovo, and North Macedonia is surrounded by conceptual confusion. This confusion can lead to challenges in research, analysis, and policy creation.

  • The term “IFFs” often requires explanation, and different stakeholders may have varying understandings of the problem.
  • Contradictory estimates are a result of this confusion, making it difficult to develop effective solutions.

Definition of IFFs

The report adopts the UN definition of IFFs:

Money that is illegally earned, transferred or used and that crosses borders

IFFs are primarily generated from three sources:

  • Criminal activity: Crimes such as money laundering, bribery, and extortion.
  • Corruption: Abuse of power for personal gain.
  • Tax fraud: Evading taxes or underreporting income.

Methodology

The report’s methodology involves primary field research through semi-structured interviews with experts in various fields, including:

  • Law enforcement
  • Financial intelligence units
  • Prosecutors
  • Journalists

The field research is supplemented by a review of secondary literature, government reports, and administrative statistics.

The report aims to provide a political-economy analysis of key drivers and trends that enable IFFs in the region. It identifies several factors that contribute to the vulnerability of the Western Balkans to IFFs:

  • Informal economy: The high level of informality in the regional economy facilitates illicit flows.
  • Interconnectedness: The three countries’ interconnectedness makes it challenging to identify and implement national solutions.
  • Strategic geographic location: The region’s strategic position on the Silk Road trade route intensifies flows, both legal and illegal.
  • Organized crime: Globalization has helped organized crime to flourish in the Western Balkans.

Conclusion

The report aims to provide a richer understanding of IFFs in Albania, Kosovo, and North Macedonia, highlighting the complex interplay between economic, criminal, and governance factors that contribute to this phenomenon.