Strengthening Anti-Money Laundering Framework in Bosnia and Herzegovina

Bosnia and Herzegovina, a country with a rich history and culture, has been making efforts to strengthen its anti-money laundering (AML) framework. However, despite these efforts, the current AML regulations fall short of meeting international standards set by the Financial Action Task Force (FATF). This article highlights the key areas that need improvement to align with FATF recommendations.

Customer Identification and Due Diligence

Weaknesses in Identifying Beneficial Owners: The country’s AML framework has weaknesses in identifying beneficial owners, particularly when it comes to legal persons.
New AML Law Improvements: However, the new AML Law has improved this area by increasing transparency. Nevertheless, more effective implementation is required.

Third Parties and Introduced Business

Lack of Clarity on Third-Party Reliance: The old law did not specifically address or prohibit third-party reliance.
New AML Law Clarifications: However, the new AML Law has clarified this area by prohibiting third-party reliance. Despite this, it still doesn’t fully cover FATF recommendations.

Financial Institution Secrecy and Confidentiality

Confidentiality Overridden by AML Provisions: Confidentiality clauses in laws are overridden by provisions in the AML Law for disclosing information related to AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism).

Record Keeping and Wire Transfer Rules

Insufficient Documentation Retention: The retention of documentation falls short of meeting all essential elements of Recommendation 10, particularly regarding identification and transaction information.
Lack of Clarity on Retention Period: There’s also a lack of clarity on initiating the 10-year retention period.

Monitoring of Transactions and Relationships

Objective Not Fully Understood or Recognized: The objective of Recommendation 11 is not fully understood or recognized, leading to ineffective examination of transactions for purposes of the old LPML (Law on Prevention of Money Laundering) and similarly under the new AML Law.

Suspicious Transaction Reports (STRs)

Low Level of Reported Transactions: While financial institutions are required by law to file STRs regardless of amount, there’s a low level of reported transactions, particularly from insurance and securities sectors.

Recommendation 21

Lack of Obligation to Terminate or Decline Business: There is no specific obligation to terminate or decline business with legal/natural persons from countries not sufficiently applying AML/CFT measures.
Monitoring of Such Transactions: Nor is there an obligation to monitor such transactions in the banking and insurance sectors.

Conclusion

Bosnia and Herzegovina needs to strengthen its AML framework to meet international standards effectively. The findings outlined above highlight key areas that require improvement, including customer identification, third-party reliance, financial institution secrecy, record keeping, monitoring of transactions, suspicious transaction reports, and Recommendation 21. By addressing these weaknesses, the country can enhance its anti-money laundering capabilities and reduce the risk of illicit financial activities.