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Illicit Financial Flows in Albania, Kosovo, and North Macedonia

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Illicit Financial Flows in Albania, Kosovo, and North Macedonia POLITICAL ECONOMY REPORT ILLICIT FINANCIAL FLOWS IN ALBANIA, KOSOVO AND NORTH MACEDONIA Key drivers and current trends TUESDAY REITANO | KRISTINA AMERHAUSER AUGUST 2020 ILLICIT FINANCIAL FLOWS IN ALBANIA, KOSOVO AND NORTH MACEDONIA Key drivers and current trends W Tuesday Reitano Kristina Amerhauser August 2020 ACKNOWLEDGEMENTS This assessment of illicit financial flows is part of the Global Initiative’s wider engagement in the Western Balkans and the Civil Society Observatory to Counter Organized Crime in South Eastern Europe (SEE-Obs). SEE-Obs is a platform that connects and empowers civil-society actors in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. It aims to enable civil-society actors to identify, analyze and map criminal trends and the impact of these on illicit flows, governance, development, inter-ethnic relations, security and the rule of law, and supports them in their monitoring of national dynamics and wider regional and international organized-crime trends. The report is based on data, information and analyses collected by civil-society actors. In par- ticular, it draws on interviews with and input reports from nine experts in Albania, Kosovo and North Macedonia. We thank them for their valuable contributions and frank and constructive engagement throughout the process. Special thanks also to Walter Kemp, Fatjona Mejdini, Ugi Zvekic and Fabian Zhilla of the SEE-Obs team. This publication was produced with the financial support of GIZ. We would like to thank our partners in GIZ who steered us substantively through the report. The contents, however, are the sole responsibility of the Global Initiative Against Transnational Organized Crime (GI-TOC) and do not necessarily reflect the views of GIZ. ABOUT THE AUTHORS Tuesday Reitano is Deputy Director at GI-TOC. Tuesday spent 12 years as a policy specialist in the United Nations system, including with the UN Development Programme (UNDP), the UN Development Group (UNDG) and the UN Office on Drugs and Crime (UNODC). She has authored several policy-orientated and academic reports with leading institutions, such as the UN, World Bank and OECD, on topics ranging from organized crime’s evolution and impact in Africa to human smuggling, illicit financial flows, and the nexus between crime, terrorism, security and development. Tuesday is the lead author of an OECD flagship publication: Illicit Financial Flows: Criminal Economies in West Africa. Tuesday is based in Geneva, Switzerland, with her family. Kristina Amerhauser joined GI-TOC in October 2018. She is currently an analyst conducting research on the Western Balkans and working with SEE-Obs. Kristina holds a master’s degree in advanced international studies from the Vienna School of International Studies, a BSc in international business from the Vienna University of Business and Economics and a BA in development studies from the University of Vienna. She is based in Vienna. © 2020 Global Initiative Against Transnational Organized Crime. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Global Initiative. Cover: © Robert Atanasovski, Armend Nimani/AFP via Getty Images; Dan Dennis, Amin Hamad, Marjanblan, Vladimir Solomyani, Christian Wiediger/Unsplash Cover design: Elné Potgieter Cartography: Paulina Rosol-Barrass Please direct inquiries to: The Global Initiative Against Transnational Organized Crime Avenue de France 23 Geneva, CH-1202 Switzerland www.globalinitiative.net CONTENTS Acronyms and abbreviations..........................................................................................................................................iv Executive summary ................................................................................................................................................. 1 Introduction ................................................................................................................................................................. 4 What are IFFs? .......................................................................................................................................................... 6 Methodology ............................................................................................................................................................. 7 Contextualizing IFFs in the Western Balkans ........................................................................................ 9 Governance features .............................................................................................................................................12 Components of IFFs ..............................................................................................................................................15 Corruption-related crime ......................................................................................................................................15 Organized crime ...................................................................................................................................................... 18 Tax-related crime ....................................................................................................................................................23 Channels of IFFs ......................................................................................................................................................26 Money laundering ..................................................................................................................................................26 Trade mis-invoicing ................................................................................................................................................ 31 Cash transfers .........................................................................................................................................................34 Capital account channels ......................................................................................................................................36 Assessing responses to IFFs in the Western Balkans ....................................................................39 Anti-money laundering ......................................................................................................................................... 41 Financial regulation ................................................................................................................................................44 Anti-corruption efforts .........................................................................................................................................45 Policy implications ................................................................................................................................................. 47 Considering IFFs post-COVID-19 ......................................................................................................................48 Conclusion ...................................................................................................................................................................50 National conclusions .............................................................................................................................................. 52 Recommendations .................................................................................................................................................54 Notes..... ............................................................................................................................................................................ 58 ACRONYMS AND ABBREVIATIONS ALL Albanian lek AML Anti-money laundering AML/CFT Anti-money laundering / countering the financing of terrorism EU European Union EULEX EU Rule of Law Mission in Kosovo FATF Financial Action Task Force FIU Financial Intelligence Unit GDP Gross domestic product GFI Global Financial Integrity GI-TOC Global Initiative Against Transnational Organized Crime IFFs Illicit Financial Flows IMF International Monetary Fund KFOR NATO Mission for Kosovo ML/TF Money laundering / terrorism financing MONEYVAL Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures NBRNM National Bank of the Republic of North Macedonia PPE Personal protective equipment SDG Sustainable Development Goal SEE-Obs Civil Society Observatory to Counter Organized Crime in South Eastern Europe STR Suspicious transaction report TJN Tax Justice Network UNMIK United Nations Interim Administration Mission in Kosovo UNODC United Nations Office on Drugs and Crime VAT Value-added tax iv © Peter Endig/Picture Alliance via Getty Images EXECUTIVE SUMMARY llicit financial flows (IFFs) – defined by the UN as ‘money that is illegally earned, transferred or used and that crosses borders’ and that is generated from three Isources: criminal activity, corruption and tax fraud1 – are a significant challenge for the countries of the Western Balkans. This report considers the dynamics of IFFs in the region, with a focus on Albania, Kosovo and North Macedonia. It is intended to complement the numerous assessments done at the behest of multilateral orga- nizations, and as part of the EU accession process, by drawing on a civil-society perspective of the phenomenon. Following the model provided by UN Task
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