In a few weeks, the one-year monitoring period by the Financial Action Task Force (FATF) will expire. If the authorities in Bosnia and Herzegovina fail to act, the country could be placed on the Moneyval’s grey list.
This warning was issued by the EU Delegation to Bosnia and Herzegovina, which stated that being on the list formally known as “FATF Jurisdictions under Increased Monitoring” would have serious consequences for the country.
Considering that Bosnia and Herzegovina has a large number of citizens living abroad, one of the most significant consequences would be slower and more complex international transactions, both incoming and outgoing.
If Bosnia and Herzegovina makes the Moneyval grey list, every inbound and outbound payment would be subject to increased monitoring, significantly extending the time required for transactions to be completed.
This is particularly important given that Bosnia and Herzegovina has been on track to join Single Euro Payments Area (SEPA), which would have accelerated cross-border transactions.
At the same time, local financial institutions would be overwhelmed with requests for additional documentation, asevery transaction would automatically be treated as more “suspicious” than in countries not on the Moneyval grey list.
Such a move by FATF would also have a significant impact on the economy in Bosnia and Herzegovina, primarily through its effect on investment.
Investors deciding where to allocate their capital take numerous factors into account, including whether a country is on the Moneyval grey list.
In this context, for a country that is constantly seeking additionalforeign investment, returning to the grey list would represent a major setback.
In addition, institutions seeking to borrow on international financial markets would likely face higher interest rates, which would have a direct impact on the country’s overall financial stability.
Further negative effects could also be felt through increased controls on goods exported from and imported into Bosnia and Herzegovina, as well as through greater difficulty in obtaining foreign loans and international financial assistance.
What Must Bosnia and Herzegovina Do?
Placement on the grey list would also damage Bosnia and Herzegovina’s international reputation, which has already been weakened by persistent internal political challenges.
To avoid this scenario, the authorities of Bosnia and Herzegovina must, within the few next weeks, adopt two key pieces of legislation: the Law on Asset Seizure and Management, and the Law on Targeted Financial Sanctions related to terrorism, terrorist financing, and the proliferation of weapons of mass destruction.
In addition, one of the key requirements is the establishment of a register of ultimate beneficial owners (UBO) of legal entities in Bosnia and Herzegovina.
The responsibility for avoiding this is “grey scenario” now in thehands of the authorities of Bosnia and Herzegovina, who must urgently prepare and submit these two crucial laws to parliamentary procedure in order to prevent potentially catastrophic consequences for the country’s economy.
