Bosnia and Herzegovina (BiH) has been urged to significantly enhance its efforts in combating money laundering (ML) and terrorist financing (TF) following a critical evaluation by MONEYVAL, the anti-money laundering body of the Council of Europe. The latest assessment highlights serious shortcomings in the country’s regulatory and enforcement frameworks, raising concerns over its ability to effectively prevent and mitigate financial crimes.
Key Findings from MONEYVAL’s Assessment
MONEYVAL’s report evaluates Bosnia and Herzegovina’s effectiveness in 11 key areas related to AML and CFT compliance. While the country demonstrated moderate effectiveness in nine of these areas, the report emphasized that major improvements are urgently needed in:
- Understanding and addressing financial crime risks: While BiH has some level of risk awareness, there are gaps in its ability to assess and mitigate the evolving threats posed by money laundering and terrorist financing.
- International cooperation: While BiH engages in cross-border AML/CFT efforts, law enforcement agencies are not proactive enough in seeking police cooperation for countering TF risks.
- Use of financial intelligence: The financial intelligence unit (FIU) of BiH has made progress in processing and analyzing suspicious transactions, but the application of intelligence to actual law enforcement cases remains weak.
- Money laundering investigations and convictions: Although ML investigations have led to convictions, they do not fully align with the country’s risk profile. Many large-scale illicit financial operations remain undetected or unpunished.
- Confiscation and asset recovery: The effectiveness of seizing and confiscating criminal proceeds remains far below international standards, allowing illicit financial activities to persist without substantial deterrence.
Critical Areas of Concern: Terrorist Financing and Sanctions Compliance
One of MONEYVAL’s most pressing concerns is BiH’s inadequate application of United Nations financial sanctions related to terrorist financing. The report highlights the urgent need for reforms in:
- Implementation of UN Sanctions: BiH lacks an efficient mechanism to quickly and effectively apply UN financial sanctions against terrorist organizations and individuals involved in financing terrorism.
- Risk Management in the Non-Profit Sector: The report flags weak oversight and regulatory enforcement in the non-profit sector, which remains vulnerable to potential terrorist financing abuse. Authorities lack a structured approach to identifying high-risk entities and monitoring their financial activities.
- TF Prosecutions and Convictions: Despite existing counter-terrorism laws, BiH’s prosecutions and convictions related to TF cases are not proportionate to the country’s risk exposure. Limited expertise among investigators and prosecutors has contributed to low conviction rates for terrorist financing crimes.
Bosnia and Herzegovina Placed Under Enhanced Monitoring
Due to these significant deficiencies, MONEYVAL has placed Bosnia and Herzegovina under its enhanced follow-up procedure. The country has been given a deadline until December 2026 to demonstrate substantial progress in improving its AML and CFT measures. If BiH fails to meet international compliance standards, it could face stricter financial monitoring, reputational damage, and potential restrictions on international financial transactions.
Implications and the Road Ahead
The findings of MONEYVAL’s assessment are a clear warning to Bosnia and Herzegovina that urgent action is needed to align with global AML/CFT standards. Failure to act could result in:
- Stronger regulatory scrutiny from international financial institutions
- Increased risk of BiH being placed on the Financial Action Task Force (FATF) “grey list”, which would deter foreign investments and limit its global financial access
- Damage to the credibility of BiH’s financial system, making it less attractive for international banking partnerships
To improve its AML/CFT framework, Bosnia and Herzegovina must:
- Strengthen its risk assessment and intelligence-sharing mechanisms
- Increase the efficiency of financial investigations and convictions
- Enhance international cooperation, particularly in counter-terrorism policing
- Implement a more rigorous system for applying financial sanctions and monitoring high-risk non-profit organizations
Conclusion
MONEYVAL’s report highlights serious weaknesses in Bosnia and Herzegovina’s ability to combat money laundering and terrorist financing effectively. With increased international pressure, the country must take decisive steps toward strengthening financial regulations, improving law enforcement efforts, and ensuring compliance with international AML/CFT standards. The next two years will be critical in determining whether BiH can successfully reform its financial crime prevention system or risk facing stricter global regulatory oversight.
