FATF Status

Albania is no longer on the FATF AML Deficiency list.

Latest FATF Statement  -  27 October 2023

The FATF welcomes Albania’s significant progress in improving its AML/CFT regime. Albania strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2020 related to (1) conducting additional in-depth analysis to understand its ML and other risks sufficiently, and enhancing institutional coordination and cooperation; formalising the economy and reducing the ML/TF risks posed by the widespread use of cash; and registering property ownership information across nearly the entire country (2) improving the timely handling of mutual legal assistance requests; (3) establishing effective mechanisms to detect and prevent criminal infiltration of the economy, including by strengthening competent authorities’ powers to take necessary action; (4) ensuring that accurate and up to date basic and beneficial ownership information is available on a timely basis; (5) increasing the number and improving the sophistication of prosecutions and confiscations for ML, especially in cases involving foreign predicate offenses or third-party ML; (6) improving the implementation of targeted financial sanctions, in particular through enhanced supervisory action and targeted, proactive outreach. Albania is therefore no longer subject to the FATF’s increased monitoring process.

The FATF welcomes Albania’s commitment to respect the FATF principles in case Albania introduces a VTC programme in the future.

Albania should continue to work with MONEYVAL to sustain its improvements in its AML/CFT system.

Compliance with FATF Recommendations

The latest Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Albania was undertaken in 2023. According to that Evaluation, Albania was deemed Compliant for 6 and Largely Compliant for 31 of the FATF 40 Recommendations. It remains rated Highly Effective for 0 and Substantially Effective for 2 of the Effectiveness & Technical Compliance ratings.

US Department of State Money Laundering assessment (INCSR)

Albania is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

The Government of Albania made little progress toward thwarting money laundering and financial crimes in 2019.  Albania remains vulnerable to money laundering due to corruption, organized crime networks, and weak legal and government institutions.  The country has a large cash economy and informal sector, with significant remittances from abroad.  Major proceedsgenerating crimes include drug trafficking, tax evasion, and smuggling.  Albanian organized crime organizations are known to have links with networks operating in Europe and South America.  Ongoing judicial reforms, to include the vetting of judges and prosecutors and the creation of multiple specialized police units targeting financial and economic crimes, have improved Albania’s prospects for addressing money laundering.  These efforts, however, are still hamstrung by the capacity challenges of recently established justice institutions and the pervasive corruption that undermines existing rule of law.

Overview 

While the Government of Albania made progress toward thwarting money laundering (ML) in 2021, much more remains to be done.  On July 1, 2021, a new law requiring companies to register both beneficial owners and bank accounts entered into force.  The law allows real-time access for law enforcement authorities and data analysis that will better facilitate ML and financial crime investigations and tracing of illicit assets.  Albania further adopted new  requirements mandating all transactions be recorded electronically and reported to tax authorities on a real-time basis.  While the requirement entered into force on September 1, 2021, businesses have been given a compliance grace period until year end 2021.    

Albania remains vulnerable to ML due to corruption, the presence of organized crime networks, and gaps in legislation and supervision.  Albania has a large cash economy and informal sector, with significant remittance and investment money inflows from abroad.  Narcotics trafficking and other organized crime activity are the major sources of laundered funds.  Albanian criminal organizations have links with networks operating broadly across Europe and in South America.  Albania continues to use its anti-Mafia confiscation law to seize companies associated with drug trafficking and corruption.  

Ongoing judicial reforms have improved Albania’s prospects for addressing ML.  These efforts, however, are still hampered by capacity challenges, insufficient supervisory oversight of certain sectors, and the need to improve cooperation among law enforcement and supervisory bodies.  

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           37

World Governance Indicator – Control of Corruption               39

Corruption is a serious problem in Albania. It is one of the country’s greatest stumbling blocks, impeding its bid for EU candidacy and hindering its investment climate. The procurement and construction sectors are particularly affected by patronage networks and other forms of corruption. The judiciary is also hampered by corruption and political influence. The necessary anti-corruption legal framework is in place, but enforcement is poor and conviction rates are very low. Active and passive bribery, as well as the bribery of foreign officials, are illegal under the country's Criminal Code. The same applies for offering gifts or facilitation payments, yet these practices are widespread.  For further information - GAN Integrity Business Anti-Corruption Portal

Albania is an upper middle-income country with a gross domestic product (GDP) of USD 18.2 billion (2022 International Monetary Fund estimate) and a population of approximately 2.85 million people.

Albania joined the North Atlantic Treaty Organization (NATO) in 2009 and has been a member of the World Trade organization (WTO) since 2000. The country signed the Stabilization and Association Agreement with the European Union in 2006, received the status of EU candidate country in 2014, and began accession negotiations with the EU in July 2022.

Albania’s economy weathered three consecutive shocks, including the 2019 earthquake, the COVID-19 pandemic, and the economic shocks of Russia’s unprovoked war against Ukraine. Following a contraction of 3.5 percent in 2020, Albania’s economy bounced back growing by 8.5 percent in 2021 due to construction activity, the easing of pandemic-related restrictions, the recovery of the tourism sector, the increase in the real estate sector, record domestic electricity production, and continued budgetary, monetary, and fiscal policy support, including IMF and EU pandemic and earthquake related support. Estimates put the growth for 2022 at 3.7 percent, down from the initial forecast of 4.1percent, mostly because of spillover effects from the Russia’s invasion of Ukraine. The progress during 2022 continued to be fueled by growing tourism, services, and the real estate sector. The IMF estimates growth during 2023 will decelerate to around 2percent due to shocks to the global economy from Russia’s invasion, including inflationary pressures and a slowdown in Europe. Average inflation during 2022 stood at 6.73 percent, peaking in October at 8.4 percent . Unemployment dropped from its peak of 11.9 percent during 2021 to 10.8 percent in December 2022 but skilled labor shortages due to an increase in emigration in the last few years is a growing concern.

To maintain macroeconomic stability, the IMF called on the Albanian government to continue fiscal consolidation, increase fiscal transparency, improve public financial management, strengthen fiscal risk monitoring, and integrate all public private partnership contracts into the budget cycle. The IMF and other stakeholders have also cautioned against the proposed fiscal amnesty due to governance and money laundering risks.

Albania’s legal framework is in line with international standards in protecting and encouraging foreign investments and does not discriminate against foreign investors. The Law on Foreign Investments of 1993 outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. A new umbrella law on investments has been considered for several years. The Law on Strategic Investments approved in 2015, with the objective to promote both domestic and foreign investments in strategic sectors, did not attract significant foreign investments even though its December 2018 deadline was extended several times. The law will be in force until December 2023. The majority of approximately 50 approved projects focus on the tourism sector and projects are dominated by domestic investors.

The U.S.-Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive national treatment and most-favored-nation treatment. Albania and the United States signed a Memorandum of Economic Cooperation in October 2020 with an aim of increasing trade and investment between the two countries.

As a developing country, Albania offers large untapped potential for foreign investments across many sectors including energy, tourism, healthcare, agriculture, oil and mining, and information and communications technology (ICT). In the last decade, Albania has attracted greater levels of foreign direct investment (FDI). According to United Nations Conference on Trade and Development (UNCTAD) data, during 2016-2021, the flow of FDI has averaged USD 1.19 billion and stock FDI at the end of 2021 reached USD 10 billion, double the amount from 2016. According to preliminary data of the Bank of Albania, the FDI flow in 2022 exceeded USD 1.44 billion. Investments are concentrated in extractive industries and processing, real estate, the energy sector, banking and insurance, and ICT. Switzerland, the Netherlands, Canada, Italy, Turkey, Austria, Bulgaria, and France are the largest sources of FDI. Stock FDI from the United States accounts for a small but growing share. At the end of 2022, the United States stock FDI in Albania according to Bank of Albania reached USD 232 million, up from USD 100 million at the end of 2020.

Albania has a large economic potential, a sound legal framework, and has made progress in limiting petty corruption by digitalizing public services for both citizens and businesses. However, foreign investors perceive Albania as a difficult place to do business. They cite ongoing corruption, including in the public sector, the judiciary, public procurements, unfair and distorted competition, large informal economy, money laundering, frequent changes to fiscal legislation, and weak enforcement of contracts as continuing challenges for investment and business in Albania. Emigration of young, skilled labor has created labor shortages that affects investment prospects in many sectors. Albania continues to score poorly on the Transparency International’s Corruption Perception Index. In 2022, Albania ranked 101 out of 180 countries, a slight improvement from 2021 but still far from its best ranking of 2016, when it ranked 83rd out of 176 economies. Albania also continues to rank low in the Global Innovation Index (GII), ranking 84 out of 132 countries in 2022 GII.

Albania has a large informal sector and money laundering activities. The Financial Action Task Force on Money Laundering (FATF) included Albania in its grey list in 2020 and the country continues to be in the list for 2023 due to strategic deficiencies in addressing money laundering concerns. The business community reports that the large influx of illicit proceeds from drug trafficking, smuggling, fiscal evasion, and corruption distorts the competition in the market. Allegations of corruption are common, and investors often report that they become the target of extortion by both public administration, media, and criminal groups.

Reports of corruption in government procurement are commonplace. Investors frequently report cases of government corruption delaying and preventing investments in Albania. The continued use of public private partnership (PPP) contracts has reduced opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring PPP contracts are ongoing concerns. U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have faced contentious commercial disputes with both public and private entities, including some that went to international arbitration. In 2019 and 2020, a U.S. company’s attempted investment was allegedly thwarted by several judicial decisions and questionable actions of stakeholders involved in a dispute over the investment. The case ended in international arbitration.

Property rights continue to be a challenge in Albania because clear title is difficult to obtain. There have been instances of individuals allegedly manipulating the court system to obtain illegal land titles. Overlapping property titles is a serious and common issue. The compensation process for land confiscated by the former communist regime continues to be cumbersome, inefficient, and inadequate. Parliament passed a law on registering property claims on April 16, 2020, which might provide some relief for title holders.

To address systemic corruption, Albania passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law in 2016. The implementation of judicial reform is underway, heavily supported by the United States and the EU, including the vetting of judges and prosecutors for unexplained wealth. More than half the judges and prosecutors who have undergone vetting have been dismissed for unexplained wealth or ties to organized crime. The EU expects Albania to show progress on prosecuting judges and prosecutors whose vetting revealed possible criminal conduct. Albania has functional, independent anti-corruption bodies, including the Special Prosecution Office (SPO) and National Bureau of Investigation (NBI) part of the Special Structure Against Corruption and Organized Crime (SPAK.) The implementation of judicial reform is ongoing, and its successful implementation is expected to improve the investment climate in the country. The Albanian parliament voted overwhelmingly and unopposed to extend this vetting mandate in February 2022.

Country Links

General Directorate for the Prevention of Money Laundering (GDPML )

Bank of Albania