Bosnia & Herzegovina

Sanctions

EU travel bans and asset freezes against certain individuals

FATF AML Deficient List

No longer on list

Higher Risk

US Dept of State Money Laundering assessment
Not on EU White list equivalent jurisdictions
Offshore Finance Centre

Medium Risk

Compliance with FATF 40 + 9 Recommendations
US Dept of State Money Laundering assessment 
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

Bosnia and Herzegovina is no longer on FATF’s list of AML deficient countries

 

Latest FATF Statement:  23 February 2018

The FATF welcomes Bosnia and Herzegovina’s significant progress in improving its AML/CFT regime and notes that Bosnia and Herzegovina has established the legal and regulatory framework to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in June 2015. Bosnia and Herzegovina is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Bosnia and Herzegovina will work with MONEYVAL to improve its AML/CFT framework.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Bosnia & Herzegovina was undertaken by the Financial Action Task Force (FATF) in 2015. According to that Evaluation, Bosnia & Herzegovina was deemed Compliant for 3 and Largely Compliant for 21 of the FATF 40 + 9 Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

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

OVERVIEW

 

Bosnia and Herzegovina (BiH) has a primarily cash-based economy and is not an international or regional financial center.  BiH is in the middle of the Balkans and has open borders with Croatia, Serbia, and Montenegro.  A Visa Liberalization Agreement with the EU enables easy transit from Eastern Europe and the Balkans region to countries in Western Europe.  BiH is a market and transit point for smuggled commodities, including cigarettes, firearms, counterfeit goods, lumber, and fuel oil. 

 

BiH recently has made substantial progress, not only strengthening its AML regime, but harmonizing its laws across its numerous legal systems, including laws related to money laundering and asset forfeiture.  BiH has a complex legal and regulatory framework with criminal codes and financial sector laws at the state and entity levels (Federation of BiH (FBiH) and Republika Srpska (RS)), and in the Brčko District (BD).

 

BiH completed its National Risk Assessment of Money Laundering and Terrorist Financing in the Period 2018-2022 (NRA) in September 2018, which identifies notaries and real estate agencies as the highest-risk sectors.

 

SANCTIONS

Pursuant to Council Decision 2011/173 the EU has imposed travel bans and asset freezes against certain persons undermine the sovereignty, territorial integrity, constitutional order and international personality of Bosnia and Herzegovina.

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           38

World Governance Indicator – Control of Corruption             37

Corruption is a serious obstacle for business operating in Bosnia and Herzegovina (BiH). Almost all sectors of the economy suffer from rampant corruption and most particularly public procurement. The same applies to the public administration where nepotism and patronage networks are widespread practices. The Criminal Code in BiH criminalizes several forms of corruption; including passive and active bribery and the bribery of foreign officials. Nonetheless, the government did not enforce the relevant laws effectively and prosecutions of corruption offences have been selective and officials engaged in corruption with impunity. The offer and demand of bribes and gifts is criminalized in BiH, however, these practices are widespread. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals, energy, textiles, and furniture as well as on remittances and foreign aid. A highly decentralized government hampers economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment. Foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM) - the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has remained stable.

Interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar, but the economy made progress until 2008, when the global economic crisis caused a downturn. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007.

Bosnia's private sector is growing slowly, but foreign investment has dropped sharply since 2007. Government spending - including transfer payments - remains high, at roughly 40% of GDP, because of redundant government offices at the national, sub-national, and municipal level. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a steady source of revenue for the government and helped rein in gray-market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded.

Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization membership; and securing economic growth by fostering a dynamic, competitive private sector.

Agriculture - products:

wheat, corn, fruits, vegetables; livestock

Industries:

steel, coal, iron ore, lead, zinc, manganese, bauxite, aluminum, motor vehicle assembly, textiles, tobacco products, wooden furniture, ammunition, domestic appliances, oil refining

Exports - commodities:

metals, clothing, wood products

Exports - partners:

Slovenia 16.5%, Italy 15.9%, Germany 12.1%, Croatia 11.5%, Austria 11.1%, Turkey 5.2% (2015)

Imports - commodities:

machinery and equipment, chemicals, fuels, foodstuffs

Imports - partners:

Croatia 19.3%, Germany 13.9%, Slovenia 13.8%, Italy 10.9%, Austria 5.7%, Hungary 5.2%, Turkey 4.5% (2015)

Bosnia and Herzegovina’s (BiH) political environment and complex government structures create significant obstacles to economic development and foreign direct investment. Although open to foreign investment, investors continue to face a number of serious obstacles including corruption, complex legal and regulatory frameworks and government structures, non-transparent business procedures, insufficient protection of property rights, and a weak judicial system. The country’s complicated government structure and political environment has stalled many key economic reforms. BiH’s poor investment climate, lingering effects of the global economic downturn, and the country’s strong connection to still slow growing Europe has resulted in stagnant foreign direct investment inflow over the past five years. According to the World Bank’s Ease of Doing Business Report, BiH is the least competitive economy in Southeast Europe and is currently ranked 79 out of 189 global economies.

Historically, U.S. investment in BiH has been low, primarily due to the challenging business climate and the lack of opportunities for investment. Nonetheless, if fully implemented, the European Union Reform Agenda will gradually open up BiH to foreign investment by improving the labor environment, decreasing regulation, harmonizing economic regulation, and shifting the economy from public to private-led. BiH offers business opportunities to well-prepared and persistent exporters and investors. The country is open to foreign investment and offers a liberal trade regime. It is also richly endowed with natural resources, providing potential opportunities in energy (hydro and thermal power plants), agriculture, timber, and tourism. The best business opportunities for U.S. exporters to BiH include energy generation and transmission equipment, telecommunication and IT equipment and services, transport infrastructure and equipment, engineering and construction services, medical equipment, and raw materials and chemicals for industrial processing. In 2015, the U.S. exported $251 million in goods to BiH (source: BiH Statistics Agency).

 

 

Country Links
Banking Agency of the Federation of Bosnia and Herzegovina
Financial Intelligence Department (FID )
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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