Vanya Petrova
Illicit cross-border financial flows – estimated at between $1 and $1.6 trillion per year globally – harm economic development at national and global levels. This is particularly true when these flows come from strongly statist economies, without division or effective independence of the private sector in relation to the public or state sector.
Autocracies have long used obfuscated corporate ownership structures and illicit financial flows (IFFs) for nefarious purposes such as corruption and inappropriate lobbying to obtain everything from technologies and know-how to economic and political influence on countries of interest. Russia has established a pattern of harmful economic impact in Europe by cultivating “an opaque network of cronyism across the region that it uses to influence and direct decision-making” in key markets and institutions.
IFFs in the Balkan region, in particular, are multiple, multidirectional and proportionately large as a percentage of GDP. While global illicit flows represent 3-5% of global GDP, IFFs in the Balkans are estimated at around 6% of the region’s GDP. The common denominator of Western Balkan countries is their vulnerability fueled by institutional weakness and state capture.
IFFs encourage rent-seeking and criminal behavior, reduce the capacity of governments to support development and inclusive growth, undermine the rule of law and jeopardize the business environment. Illicit flows drain public resources, reduce the reach and quality of public services and thus undermine trust in state institutions.
The main objective of this report is to assess the main enabling factors and vulnerabilities of illicit financing in the eight Balkan countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, North Macedonia and Serbia) after the Russian invasion of Ukraine. More concretely, the study aims to analyze the main sources and channels of FFI in the region, and identify any emerging trends regarding modus operandi, routes, business models, use of information and communications technologies . Furthermore, the study aims to examine the pressing challenges faced by border control, law enforcement and anti-money laundering authorities in effectively preventing, investigating and combating organized crime involved in the smuggling of money and money laundering. Finally, the report aims to suggest actionable recommendations for improvement.