RESEARCH AND FEASIBILITY STUDY OF THE FORMAL MONEY TRANSFER SECTOR AND ALTERNATIVE REMITTANCE SYSTEMS IN SERBIA Project against Money Laundering and Terrorist Financing in Serbia MOLI Serbia Publisher Council of Europe Office in Belgrade Španskih boraca 3, 11070 Belgrade www.coe.org.rs © Council of Europe, 2013. This publication has been produced with the financial contribution of the European Union under the Project against money Laundering and Terrorist Financing in Serbia (MOLI Serbia). The views expressed herein can in no way be taken to reflect the official position of the European Union and/or the Council of Europe. Original title Research and feasibility study of the formal money transfer sector and alternative remittance systems in Serbia Author Terence Donovan Translation Alpha Team One Proofreading Bojan Cimbaljević Design, preparation and printing MAŠINA1973, Belgrade Circulation 50 copies ISBN 978-86-84437-64-0 All Rights Reserved. No part of this publication may be translated, reproduced or transmitted in any form or by any means, electronic (CD-Rom, Internet etc.) or mechanical, including photocopying, recording, or by any information storage and retrieval system without prior permission in writing from the Directorate of Communication (F-67075 Strasbourg Cedex or [email protected]) For more information on the subject of the publication, please contact: Economic Crime Cooperation Unit Action Against Crime Department DGI – Directorate General Human Rights and Rule of Law Council of Europe Email: [email protected] Internet: www.coe.int/corruption RESEARCH AND FEASIBILITY STUDY OF THE FORMAL MONEY TRANSFER SECTOR AND ALTERNATIVE REMITTANCE SYSTEMS IN SERBIA PREPARED BY COUNCIL OF EUROPE EXPERT Mr TERENCE DONOVAN BELGRADE AUGUST 2013 Foreword Economic and organised crime is a rising threat for flows and transfer corridors through Serbia, assessing the national and global economies, with transnational their money laundering and terrorism financing risks. criminal groups becoming increasingly involved in It advises Serbian authorities on various legislative cross-border activities generating billions of Euros of and policy changes to close the gaps in the system to illicit profit. Such groups use modern, sophisticated preclude criminal abuse ofthe money transfers systems. schemes to hide the proceeds from illegal trafficking in drugs and human beings, corruption, cybercrime The research for this study started back in June 2012 or other criminal acts and convert them into “clean”, with an extensive scoping exercise undertaken jointly legitimate business, real estate or other assets. with authorities and representatives of the money and value transfers sector in Serbia to gather data on The present research study into the formal money key vulnerabilities and risks. The Council of Europe transfer sector and alternative remittance systems also held two workshops with authorities to present in Serbia was developed within the framework of the findings, international standards, FATF and the “Project against money laundering and terrorist MONEYVAL recommendations addressing this area. financing in Serbia” (MOLI Serbia), a 2,2 million Euro joint project of the Council of Europe and the European I am grateful to the Council of Europe expert Mr Union implemented throughout 2010-2014. Terence Donovan, the author of this study. I thank also our partners from the Administration for the The MOLI Serbia project aimed to strengthen the Prevention of Money Laundering, the National Bank legislative and institutional frameworks of combating of Serbia, the Ministry of Interior, the Customs and money laundering and financing of terrorism in the Tax Administrations, the Office for Cooperation country using a risk-based approach to identifying with the Diaspora and Serbs in the Region, the threats and developing counter-measures at the Office for Cooperation with Churches and Religious national and sectorial levels. Communities and the Security Information Agency. This study provides an overview on the risks of money This study is intended for a broad spectrum of laundering and financing of terrorism in the formal and anti-money laundering professionals, including informal money transfers sectors in Serbia. It contains a regulators and the financial sector in Serbia as well as thorough analysis of international and regional money neighbouring countries. Jan Kleijssen Director Information Society and Action against Crime Directorate Council of Europe / 7 / GLOSSARY OF TERMS AML/CFT Anti-money laundering and combating the financ- LEA Law enforcement authorities ing of terrorism AML/CFT Law Serbia: Law on the prevention of money laundering ML Money laundering and the financing of terrorism APML Administration for the Prevention of MONEYVAL Council of Europe’s Committee of Experts Money Laundering (Serbian FIU) on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism ASB Association of Serbian Banks MoU Memorandum of Understanding BIA Security Information Agency (Serbian national intelligence agency) BiH Bosnia and Herzegovina MTO Money transfer operator BIS Bank for International Settlements MVTS Money and value transfer service BoP Balance of payments NBS National Bank of Serbia BPM IMF Balance of Payments Manual NRA National risk assessment BVI British Virgin Islands Post Serbia Pošta Srbije, Serbian postal service CDD Customer due diligence PSD EU Payment Services Directive CPI Consumer price index R. FATF Recommendation CSRDCH Central Securities Registry, Depository RSD Serbian dinar and Clearing House DVP Delivery versus payment RTGS Real-Time Gross Settlement System EEA European Economic Area Serbia Republic of Serbia (EU plus Iceland, Liechtenstein and Norway EU European Union SR. FATF Special Recommendation EULEX EU Rule of Law Mission in Kosovo* STR Suspicious transaction report EUR Euro SWIFT Society for Worldwide Interbank Financial Telecommunication FATF Financial Action Task Force TF Terrorism financing FIU Financial Intelligence Unit TI Transparency International FREN Foundation for the Advancement UK FCA United Kingdom Financial of Economics, Serbia Conduct Agency FX Foreign currency/foreign exchange USD United States dollar GDP Gross domestic product VAT Value Added Tax Hawala Arabic for ‘Transfer’1 WTO World Trade Organization IMF International Monetary Fund WUPSIL Western Union Payment Services Ireland Limited IMF FAS IMF Financial Access Survey * This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence 1 Term used for trust-based informal funds transfer scheme, with prompt cash payment but without immediate cross-border cash settlement. / 8 / TABLE OF CONTENTS EXECUTIVE SUMMARY .......................................................................................................................................................................................11 PART I – INTRODUCTION, SCOPE AND BACKGROUND ........................................................................................................ 23 INTRODUCTION......................................................................................................................................................................................................... 23 SCOPE AND OBJECTIVES OF THE STUDY........................................................................................................................................................... 23 BACKGROUND............................................................................................................................................................................................................. 25 LAW ENFORCEMENT PERSPECTIVE – TYPOLOGIES OF FINANCIAL CRIME......................................................................................... 28 PART II – FORMAL FUNDS TRANSFER SYSTEMS........................................................................................................................... 32 OBJECTIVES OF PART II............................................................................................................................................................................................ 32 STRUCTURE OF ANALYSIS....................................................................................................................................................................................... 32 DOMESTIC FUNDS TRANSFERS............................................................................................................................................................................. 32 INVENTORY AND DISCUSSION OF AVAILABLE DOMESTIC FUNDS TRANSFER CHANNELS........................................................... 34 CROSS-BORDER FUNDS TRANSFERS................................................................................................................................................................... 37 INVENTORY OF AVAILABLE FORMAL MEANS OF TRANSFERRING FUNDS INTO SERBIA................................................................ 38 INVENTORY OF AVAILABLE MEANS OF TRANSFERRING FUNDS OUT OF SERBIA............................................................................. 39 ASSESSMENT OF MONEY LAUNDERING AND TERRORISM FINANCING RISKS RELATED TO THE FORMAL MONEY TRANSFER MARKET.................................................................................................................... 39 WIRE TRANSFERS – ASSESSMENT