Trade is one of the three mechanisms or ‘channels’ – alongside cash movement and the financial system – identified for transferring millions of illegally obtained euros generated from corruption, tax evasion and organised crime through Bosnia and Herzegovina, Montenegro and Serbia every year according to a new report by the Global Initiative against Transnational Organised Crime (GI-TOC).

The not-for-profit’s report, Illicit financial flows in Bosnia and Herzegovina, Montenegro and Serbia: Key drivers and current trends, looks in detail at the abuse of trade systems and examines the characteristics of trade-based money laundering (TBML) in the region.

Researchers at GI-TOC used interviews to gather largely anecdotal cases of TBML, rather than estimates of value.

Underinvoicing

In Serbia, interviewees cited cases of significant underinvoicing of goods – in one case, in a trade with Turkey, goods worth €8.5 (US$9.6) each were invoiced at €4.2177 (US$4.8) each. Serbian goods exploited in this way include agricultural produce such as tomatoes and lemons.

In Bosnia and Herzegovina, examples cited were of cars from China and Turkey that are under-invoiced while one interviewee cited Croatia recording tens of thousands more transactions with the Republic of Srpska region of Bosnia and Herzegovina than the republic had declared.

Widespread trade misinvoicing

In Montenegro, an interview with the head of a trading company revealed that trade mis-invoicing is widespread and that most irregularities happen in the national territories, as inspectors are not sufficiently trained to conduct efficient controls.

“Trade mis-invoicing is widespread and most of it happens where companies are based, for example, in the Podgorica area. Generally, the goal is quite obvious: increasing profits and extracting cash from transactions,”  said the trading company head who reckoned that in the Port of Bar where there is a free trade zone with a significant reputation for illegal trade, “at least 20 per cent of transactions are in some way incorrect”.

Banks’ key role

The financial sector is a key channel by which illicit flows move across borders and are laundered into local economies according to the report.

It found that banks, exchange offices, insurance brokers, investment companies, microcredit institutions and real estate firms are key elements of most forms of money laundering, as they not only facilitate the movement of money across countries but also hide the illegal origin of the profits, distance the criminal from the original transgression and inject the funds into the local economy.

The GI-TOC report, Illicit financial flows in Bosnia and Herzegovina, Montenegro and Serbia: Key drivers and current trends, can be found here.

Categories: Trade Based Financial crimes News

Tags: bank, Bosnia, GI-TOC, Global Initiative against Transnational Organised Crime, Herzegovina, Illicit financial flows, Montenegro, report, Serbia, TBML