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Trade-based financial crime and misinvoicing in Albania, Kosovo and North Macedonia

By Mark Ford on October 21, 2020

A new report from the Global Initiative against Transnational Organised Crime has found significant evidence of trade-based financial crime in Albania facilitated by misinvoicing. Illicit Financial Flows in Albania, Kosovo And North Macedonia looks at illicit financial flows (IFFs) all three of the Balkan states.

The report by the international NGO composed of a network of law enforcement, governance and development practitioners says misinvoicing in international trade was detected by comparing income from trade (reflected in the current account deficit) with foreign exchange reserves.

Balance of trade discrepancies

In Albania, between 2017 and 2019, foreign exchange reserves increased by €3.2 billion (US$3.8 million), from €6.7 billion to €9.9 billion. The trade statistics cannot account for this, showing an increase of only €52 million in 2018, with a similar figure anticipated for 2019.

Experts the authors consulted for the report argue that approximately €3 billion came into the country in ways that are not captured by trade or fiscal data.

More inflows

The Bank of Albania confirms that more foreign exchange inflows have been observed over the period 2016-20 than previously according to the report.

It emphasises that these balance-of-trade discrepancies cannot and should not be attributed exclusively to IFFs, as some may be due to exchange rate fluctuations or other technical volatility.

However, the experts believe that up to 80 per cent could be IFFs attributable to drug revenues and misinvoicing in the trade of goods and services.

Revenue capture

In July 2019, the Albanian minister of finance announced a new online invoicing system to reduce tax evasion.

The initiative was launched after controls in the hospitality industry discovered 1,600 hotels that were not registered with the tax authorities.

It remains to be seen whether this new system will successfully overcome the multiple weaknesses in the monitoring and oversight of trade.

The report by Geneva-based Global Initiative against Transnational Organised Crime, Illicit Financial Flows in Albania, Kosovo And North Macedonia, can be found here.