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48 I Southeast Europe bne June 2021
that in several countries across the region, companies that apply for a construction permit are not obliged by law to show proof of their capital or its origin. They just need to pay the infrastructure tax, which depends on the value of the construction.
It lists numerous practices that create scope to hide illicit money such as prepayments by clients, high liabilities to suppliers, declarations of large loans from other parties (rather than banks or financial institutions) and direct transactions between buyers and investors or builders. “These methods enable companies to pretend that the whole investment is carried out based
the Western Balkans is a major transit region for the trafficking of cannabis, heroin, cocaine and synthetic drugs. The last are also produced in the region, mainly in Serbia.
“Despite the significant operating costs, organised crime and illicit trade in
both licit and illicit goods undoubtedly generate billions of euros every year
in illicit global financial flows that are channelled abroad, laundered into local economies or reinvested in other criminal activities,” says the report.
According to an estimate from the United Nations Office on Drugs and Crime (UNODC), money laundering
financial system”. This takes place from small amounts of illicit money simply taken to the bank, to banks’ roles as
an important intermediary in larger transactions and to offshore accounts.
Another way of money laundering is through purchases of luxury assets, such as works of art, jewellery, cars and yachts, says Global Initiative, as is trade-based money laundering,
or investment into the emerging cryptocurrency markets.
Patchy prevention efforts
Governments from the region have made a number of efforts to tackle money laundering, including through the adoption of a revised anti-money laundering framework. However, says the report, there remain gaps, especially when it comes to the implementation of these frameworks. “Institutions across the region continue to have a poor track record of investigations, prosecutions and convictions of stand-alone money laundering cases,” it says.
An earlier report points to the international nature of illegal activity, and shows that not only do drug traffickers from the Western Balkans make most of their money outside the region, but that much of the assets from crime are laundered outside the region, for example in Spain, the UK and Dubai.
The latest report warns that even when relatively small amounts of money are laundered they can have a “significant impact” on local economies. “Money laundering can drive up real estate prices to make housing unaffordable;
it strengthens patronage networks and reduces fairness in the marketplace; it has an impact on access to various types of services, and – if left unpunished – it creates incentives for others to follow suit,” says the report. “Furthermore, the dirty money being made and laundered in the region is perpetuating an ecosystem of crime and corruption that weakens the rule of law and hampers the ability of institutions to deal with the problem.”
“There is also a sizeable drugs trade in the region, which is both a source and a transit route for narcotics"
on the payments from customers and suppliers and loans from third parties, thus allowing for the completion of the cycle of laundering of criminal proceeds,” says the report.
More illicit funds to launder
Finding ways to launder larger amounts of money has become more pressing as the flows of fund from illegal activities, such as the drugs trade and people smuggling, increases.
Global Initiative’s conservative estimate of the total value of the migrant- smuggling market in the region (with
a ± 20% margin of error) is between €33.7mn and €50.6mn for the three main transit zones, with the total for the Western Balkans somewhat higher.
There is also a sizeable drugs trade in the region, which is both a source and a transit route for narcotics. Albania has long been an important location for cannabis production, despite government efforts to stamp it out, and growing amounts of the drug
are now produced in Bosnia, North Macedonia and Serbia. On top of this,
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accounts for around 2.7% of global GDP, or $$1.6 trillion. The International Monetary Fund (IMF) puts the total
at between 2% and 5% of global GDP. Applying these percentages to the Western Balkans, between €1.8bn and €4.6bn would be laundered every year.
“These numbers are remarkable, especially when put in perspective: for example, in 2021, the budgets of the interior ministries of North Macedonia and Albania each amount to €168mn; the Kosovo police force has only €87mn at its disposal.” says the report.
As well as the real estate sector, several other ways of laundering money are also charted in the report. Smaller amounts of illicit proceeds are typically laundered through cash-intensive businesses, such as restaurants, bars, filling stations and taxi companies. Gambling is another way to launder money, in the countries where this
is permitted.
Banks, according to the report, “play a key role in money laundering, as they often act as gatekeepers to the