Financial Crime World

Macedonia’s Battle Against Money Laundering and Terrorist Financing: National Risk Assessment Reveals Medium Threat and Vulnerability

In an endeavor to combat money laundering and terrorist financing, the Republic of Macedonia (RM) carried out a comprehensive National Risk Assessment (NRA) following international standards and best practices. The NRA was executed through the collaborative efforts of various competent institutions, aiming to identify and evaluate risks, assess vulnerabilities, and establish a basis for appropriate policy measures and resource allocation.

Acronyms

  • NRAs: National Risk Assessments of Money Laundering and Terrorist Financing
  • FATF: Financial Action Task Force
  • EU: European Union
  • UN: United Nations
  • RM: Republic of Macedonia
  • CC: Criminal Code
  • LPMLTF: Law on Prevention of Money Laundering and Terrorist Financing
  • Moneyval Committee: Committee ofExperts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism
  • FIA: Financial Intelligence Administration
  • NBRM: National Bank of the Republic of Macedonia
  • SECRM: Security and Exchange Commission of the Republic of Macedonia
  • CSD: Central Securities Depository
  • MSE: Macedonian Stock Exchange
  • PRO: Public Revenue Office
  • ISA: Insurance Supervision Agency
  • MAPAS: Agency for Supervision of the Fully Funded Pension Insurance
  • MoF: Ministry of Finance
  • MoI: Ministry of Interior
  • FIU: Financial Intelligence Unit
  • DNFBPs: Designated Non-Financial Businesses and Professions
  • STR: Suspicious Transaction Reports

The NRA Process

The Republic of Macedonia undertook the responsibility to assess money laundering and terrorist financing risks by implementing an NRA process. With over 80 representatives from competent state authorities and entities involved, the assessment was divided into seven working groups: threats of money laundering and terrorist financing, vulnerability of the national system, vulnerability of the banking sector, securities and insurance sector, and other financial institutions and DNFBPs. The FIA coordinated the efforts of these groups.

Results of the NRA

The NRA was based on the World Bank’s comprehensive methodology, and the process was divided into three phases:

  1. Identification of potential risks and risk factors through threats and vulnerability analysis.
  2. Analysis of the nature, extent, and consequences of identified risks.
  3. Preparation of the report and setting priorities for intercepting the risk.

Analysis of Threats, Vulnerability, and Consequences

Macedonia faces various risks of money laundering and terrorist financing due to geographical location, political situation, economic development, and involvement in international organizations. Notable threats include:

  • Misuse of official positions and authority.
  • Tax evasion.
  • Illicit drug trafficking.
  • Trafficking in human beings.

However, the vulnerability of the national system was also assessed, measuring its ability to prevent or mitigate money laundering and terrorist financing. National-level vulnerabilities include the informal economy, international cooperation in criminal matters, transparency of legal entities, and weak enforcement of regulatory frameworks.

The financial sector, particularly the banking sector, was found to be the most vulnerable sector to money laundering and terrorist financing. This sector is attractive due to a diverse range of products and services, large transaction volumes, and largely in line regulatory framework.

The assessment of threats, vulnerability, and consequences resulted in a medium level of risk for money laundering in Macedonia, mainly due to high-risk criminal offenses and their corresponding revenues.

Priority Areas for Enhancement

To effectively combat money laundering and terrorist financing, several priority areas for improvement have been identified in the NRA report:

  1. International cooperation.
  2. Strengthening the penalty system.
  3. Improving the capacity of judges and prosecutors.
  4. Enhancing transparency of legal entities.
  5. Addressing weaknesses in the financial sector and DNFBPs.

Conclusion

The implementation of an NRA and continuous monitoring and evaluation of evolving money laundering and terrorist financing risks are crucial for Macedonia to create an effective anti-money laundering and counter-terrorist financing framework. By establishing and updating a comprehensive understanding of risks, vulnerabilities, and consequences, the authorities can direct their efforts towards targeted measures for intercepting and managing these risks through evidence-based policies and resource allocation.