Bosnia and Herzegovina remains on the MONEYVAL gray list for the third month in a row, among the countries that have strategic deficiencies in combating money laundering and terrorist financing. A country is not placed on this list because of one decision or oversight, but due to a series of weaknesses in its laws, institutions, and their adaptation. Bosnia and Herzegovina received the warning but failed to complete the reforms, and now the economy is paying the price. Transactions are slower and under greater scrutiny, foreign investors are more cautious, and banks are tightening controls.
The Economy is Already Feeling the Consequences
The economy of Bosnia and Herzegovina is recording the first negative effects – slower and more expensive financial transactions, with heightened scrutiny. This is also affecting foreign direct investments, because now Bosnia and Herzegovina, labeled a high-risk country, is not as attractive for capital investment as it was last year when foreign investments amounted to 1.41 billion BAM.
“I cannot give you the name and last name of a foreign investor who has pulled out or something similar, but I can say that there is a significant reputational risk and that this represents direct damage to investments. They expressed a concern because, of course, they counted on new capacities, though about their investments and potential new capacity for their business, especially in the automotive sector, and they announced a possible departure. Yes, that is true,” said Nedim Makarević, Executive Director of the Foreign Investors Council of Bosnia and Herzegovina.
Edis Ražanica, Director of the Association of Banks of Bosnia and Herzegovina, also pointed out the impact on business operations.
“If we take an example of a domestic exporter who exports goods and then waits for payment, the transaction previously would have been processed within, say, 48 hours. Today, the execution of such payment could last seven to ten days. The exporter then has to seek additional sources of funding to bridge that ten-day gap in order to pay their suppliers,” explained Ražanica.
Banks Are Stepping Up Monitoring
This can lead to a drop in the country’s credit rating and higher interest rates, although it is still early for that, stated the banking sector.
“So far, there are no major reasons, I would say, for panic. Payment transactions are proceeding normally, including international payment transactions. It is true that certain correspondent banks from specific countries stepped up transaction monitoring, especially the requests for documenting certain transactions,” said Faris Bogunić, Director of the Specialist Supervision Department at the Banking Agency of the Federation of Bosnia and Herzegovina.
What Bosnia and Herzegovina Must Fulfill
Through an action plan, MONEYVAL gave concrete tasks to the institutions of Bosnia and Herzegovina: establishing a register of beneficial owners of companies, as well as adopting the state Law on International Legal Assistance in Criminal Matters and the Law on Seizure and Management of Assets Derived from Crime.
Bosnia and Herzegovina must have more investigations and convictions for money laundering and terrorist financing in order to be removed from the list.
“In the coming period, the focus will not only be on the further improvement of regulations, but primarily on proving their effective implementation. This means that it will be necessary to demonstrate concrete results in the areas of money laundering investigations and prosecutions, supervision of obliged entities, the quality of suspicious transaction reports, the availability and accuracy of beneficial ownership data, international cooperation, and the implementation of measures regarding terrorist financing and targeted financial sanctions,” stated the Ministry of Security of Bosnia and Herzegovina.
Bosnia and Herzegovina alongside Congo, Bolivia, and Nepal
“Deadlines extend to 2029 for certain areas. What we inevitably have to do is to first adopt an action plan within the state of Bosnia and Herzegovina, and based on that action plan, all institutions and government authorities are obligated to act,” emphasized Bogunić.
A captured judiciary, lack of transparency, misuse of public funds, and the absence of the rule of law – this is the image of Bosnia and Herzegovina’s reputation, which is not a topic for the authorities during the election campaign, even though the country is in a lower economic tier alongside nations such as Congo, Bolivia, and Nepal.
