BIRN Analysis: Balkan States Under Pressure to Prosecute Financiers of Terrorism

16.03.2021

Since hundreds of Balkan extremists went abroad to fight for Islamic State and other militant groups, Albania, Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia have come under increased international pressure to clamp down on the financing of terrorism.

Military uniforms, rifle scopes, combat boots, tactical gear, firearms accessories and range finders: these were just some of the items that were bought with money that Ramiz Zijad Hodzic, a man from Bosnia and Herzegovina who was living in the United States, was convicting of raising for terrorist fighters in the Middle East.

A US court sentenced Hodzic to eight years in prison, to be followed by deportation to Bosnia, for “conspiring to provide material support to terrorists”. The indictment also said that he transferred money to other individuals in two Bosnian towns and in Montenegro to support the families of people fighting in Syria, Iraq and elsewhere – but no one in Bosnia or Montenegro was ever prosecuted for these transfers.

Although hundreds of people from the Western Balkans went to join the so-called Islamic State’s brutal armed campaign to create a ‘caliphate’ in the Middle East, and around 100 of them were convicted of terrorism for going to fight abroad, only five people have so far been found guilty of charges of financing terrorism – one in Albania and four in Serbia.

Successful prosecutions of people involved in terrorist financing are vital to counter-terrorism efforts, argues Moneyval, a Council of Europe monitoring body that assesses compliance with international efforts to combat money-laundering. Terrorist organisations rely on a variety of revenue streams, from donations to drug-trafficking, and cutting off their access to funds is seen as vital for limiting their ability to operate.

After the defeat of Islamic State in Syria in 2019, countries in the Balkans have been focusing on implementing Moneyval’s recommendations for preventing funds reaching terrorist organisations.

Countries that fail to implement the recommendations can end up on ‘black’ or ‘grey’ lists of the Financial Action Task Force, an intergovernmental organisation founded by the G7 to help to combat money-laundering and terrorism financing around the world.

The Financial Action Task Force’s grey list contains countries that it believes have “strategic deficiencies” in their regimes to counter money-laundering or terrorist financing, but which are willing to work to improve their legislation and practices.

Countries on the black list – currently only Iran and North Korea – are subjected to sanctions and their international financial transactions are thoroughly scrutinised.

In the Western Balkans, Albania is currently on the grey list, which Serbia is currently undergoing increased monitoring by the Financial Action Task Force after being removed from the grey list. Bosnia was grey-listed for years before being cleared after implementing Moneyval’s recommendations and adopting the required legislation.

In the past few years, all the governments in the Western Balkans have made efforts to address the issue, including the adoption of revised anti-money laundering strategies which include provisions aimed at tackling terrorist financing.

But problems remain with how the strategies are implemented, said Kristina Amerhauser, an analyst at Global Initiative Against Transnational Organized Crime, a Geneva-based organisation that produces reports on money-laundering in the Western Balkans.

“Institutions across the region continue to have a low track record of investigations, prosecutions, and convictions of stand-alone money laundering cases,” Amerhauser explained.

Bosnia struggles to adopt vital legislation

In Bosnia and Herzegovina, no one has yet been prosecuted for financing terrorism, and the Bosnian Prosecutor’s Office did not respond to questions about whether it currently has any cases that involve the financing of terrorism.

The country has had a serious problem with people going to join extremist groups in the Middle East – since 2012, some 200 Bosnian men and 70 women have left for Syria or Iraq.

The Bosnian government’s own risk assessment on the financing of terrorism indicates that from 2012 to 2016, there were 11 police reports to prosecutors about suspected financing of terrorism, but the cases were later classified as other terrorism-related crimes.

Bosnian Deputy Justice Minister Nezir Pivic said that the country only fulfilled the last of the obligations set by the Financial Action Task Force to get off its grey list in 2020.

“In order to ‘delist’, we had to make 14 changes in regulations at different levels of government in order to fulfill the action plan that was set for us,” he said.

Pivic said the ministry’s priority now is a new law on money-laundering and the financing of terrorism, as well as other related legislation.

“In addition to the new law, which is the first and basic obligation, it is necessary to establish a register of real owners of all legal entities registered in Bosnia and Herzegovina,” he explained.

However, the authorities in Bosnia’s Serb-led Republika Srpska entity are against the adoption of new law, as they oppose any new state-level legislation.

Pivic explained that other practical steps also need to be taken to prevent the financing of terrorism.

“We need to work on establishing a register of the accounts of individuals, staff training and the technical equipment of officers for the supervision of cyberspace for the transfer of money, and the implementation of targeted financial sanctions in the fight against terrorist financing,” he said.

Bosnia has also adopted an action plan to prevent money-laundering and terrorist financing and carried out a risk assessment which suggested that the most hazardous sectors for potential wrongdoing are banking, money transfer services and real estate.

The risk-assessment document also suggested that NGO fundraising activities have a “medium high” risk in terms of their potential to be used for financing terrorism in Bosnia.

Legal amendments have been drafted to harmomise the country’s legislation with international standards, but the Republika Srpska entity is obstructing the changes, said Armin Krzalic, a professor at the Faculty of Criminology, Criminology and Security Studies at the University of Sarajevo.

“Such an irresponsible approach can, in essence, lead to Bosnia being put on the [Financial Action Task Force] grey list again very soon in, which could impose even more difficult problems on its citizens when it comes to sending money abroad, exchanging currency and opening accounts,” Krzalic said.

If Bosnia goes back on the grey list, it will take a lot more time than before to meet the conditions and standards to get off it again, he warned.

Serbia warned of ‘significant’ risk

“Due to its geographical location and the non-transparent origin of capital in various investment projects, the risk of terrorist financing in Serbia remains quite significant,” Miroslava Milenovic, a financial forensics expert, told BIRN.

The Financial Action Task Force removed Serbia from its grey list in June 2019, but according to its risk assessment, there is still a ‘medium-level’ terrorism financing risk in the country.

So far, four people have been convicted of financing terrorism in Serbia – so-called Islamic State sympathisers Sead Plojovic, Tefik Mujovic, Rejhan Plojovic and Izudin Crnovrsanin.

The court found that in 2013 and 2014, the men collected money to send recruits to join Islamic State in Syria, and misused religious believers’ donations to help fund their illegal scheme. Money was also sent to help the families of Islamic State fighters, and to help fighters who had been imprisoned.

In general, a lot of money-laundering cases do not reach the courts in Serbia. According to analysis by BIRN Serbia, fewer than a fifth of such cases launched in the country between 2008 and 2018 ended up in the courts.

Those who were found guilty were either sentenced to less than a year in prison or were fined 10,000 dinars (around 85 euros). The most recent data from the Serbian Statistical Office shows that six people were found guilty of money-laundering in 2019.

A Moneyval report in December 2019 said that Serbia was “compliant” with five recommendations made by the Financial Action Task Force, “largely compliant” with 31 of them and “partially compliant” with four.

But Milenovic argued that what is more important that legislative compliance is how effective or enforceable the laws are in practice.

“That is why, in that second part [of the Moneyval report], Serbia is ranked poorly,” she said.

Serbia rates low on ‘efficiency factors’ that include “how many money laundering investigations there are, how many charges and verdicts, and of course how much property was confiscated”, she added.

Assessment ratings in a report by the Financial Action Task Force said that of 11 key goals that should be achieved by an effective system for preventing money-laundering or the financing of terrorism, Serbia has a “moderate level” of effectiveness for eight and a “low level” for three.

Milenovic said that this shows that Serbia has good legislation on paper and institutions set up to combat money-laundering – “but little or nothing is significantly prosecuted”.

The Serbian authorities believe the sectors most exposed to money-laundering are real-estate, sector and banking, followed by currency exchange offices, casinos and accountancy firms. High-tech crime is also a growing threat in terms of money-laundering.

Milenovic argued that like corruption and organised crime, money-laundering has taken root in Serbia.

“While there is no undiscrimnating struggle [against money-laundering], while it is normal for ministers to have forged diplomas and to be representatives of offshore companies with significant assets, not to know the cost of everything we are paying for out of the budget, not to know where the money comes from for the property and lifestyle of many ministers, politicians and public figures, I am afraid that on the ground, the situation will remain unchanged or only cleaned up cosmetically,” she said.

Meanwhile, attempts to tackle terrorism financing have also allegedly been used for political purposes in Serbia. Last year, the Finance Ministry’s Administration for the Prevention of Money Laundering asked for access to the bank data of 20 individuals and 37 NGOs including a number of investigative media outlets and high-profile human rights organisations – BIRN among them.

Amnesty International described the move as “a blatant act of intimidation and the latest in an ongoing campaign by Serbian authorities to silence critic”. The outcome of the Finance Ministry’s investigation has not been made public so far.

Albania urged to be more vigilant

In the 1990s, when practising religion was allowed again in Albania after it was banned for decades under communist rule in the country, many dubious religious organisations became involved in efforts to revive Islam and other faiths. Charities also appeared that spread radical religious philosophies.

Arben Ramkaj, an expert on security and religious issues and the founder of Inter-Religious Institute of Albania, told BIRN that extremists got a foothold in the country through Islamic charity organisations from some Arab states.

They also used the fact the Albanian state was weak and unprepared for the risks posed by extremist ideas, he argued.

“Individuals such as members of al-Qaida who returned from conflicts like those in Afghanistan or Bosnia could use funds dedicated to charity to finance extremism and terrorism,” Ramkaj said.

In the years that followed, Albania gained experience in combating extremism and the financing of terrorism, and Ramkaj said that the fight against terrorism is one of the areas in which the country has made clear and noteworthy progress.

During a five-year period, from 2015 to 2019, there has been 54 cases in which the Albanian General Directorate for the Prevention of Money Laundering, GDPML has raised suspicions that the financing of terrorism might be involved, mainly related to bank transactions.

The majority of these cases didn’t turn out to be related to the financing of terrorism, the director of GDPML, Elvis Koci, told BIRN. However, he added: “Banks and money transfer companies are very sensitive to this risk.”

From 2015 to 2020, only one person was convicted in Albania of financing terrorism, according to the Albanian General Prosecution. Meanwhile a total of 23 people were found guilty of other terrorism charges in the country in the past ten years, the majority of them convicted of recruiting people to fight for Islamic State and of inciting violence.

Albania has adopted legislation to combat the financing of terrorism and amended it several times in order to keep up with new challenges and recommendations from Moneyval.

But in February 2020, the Financial Action Task Force urged Albania to do more work to address its strategic deficiencies, conduct additional in-depth analysis to understand the money-laundering risks that it faces, and enhance institutional coordination.

Koci said that Albania is preparing to address all the issues identified by the Financial Action Task Force’s action plan.

“It is worth mentioning that in this action plan, shortcomings have been not identified when it comes to the prevention, analysis and following-up of cases of suspected financing of terrorism. Also, no further measures in this regard are required from our country,” he added.

North Macedonia ‘should monitor private sector’

A total of 156 people from North Macedonia went to join Islamic State before it was militarily defeated in Syria, but the flow of recruits to extremist armed groups has now dried up.

In April last year, the Finance Ministry’s Financial Intelligence Office published a risk assessment report which estimated the risk of terrorism in the country to be low and the risk of terrorism financing to be on a low to medium level.

According to the report, most of the money transfers that were used to finance terrorist activities in the country over the past few years went through the formal banking system or via services such as Western Union, MoneyGram and RIA Money Transfer.

The transfers were mostly made by people in Western European countries who were sending funds to North Macedonia for the purposes of financing terrorist activities.

The general goal of the country’s national strategy on countering money-laundering and the financing of terrorism is to harmonise its activities with international standards, but experts say that not enough has been done yet  to analyse which specific measures are needed.

“[The national strategy] is solidly structured, but there is a lack of documents and analysis about the implementation and realisation of the specific goals and measures that are envisaged,” Vesna Poposka, a Skopje-based researcher in international relations and security studies, told BIRN.

Some state institutions, like North Macedonia’s National Bank, have published guidelines for assessing the risks of money-laundering and terrorist financing for banks, savings banks, money transfer service providers and authorised exchange offices.

According to the National Bank, several risk factors have to be taken into account – the clients, the countries or geographical areas where the payments are coming from, the types of services and transactions involved, and the distribution channels that are being used.

Poposka said that because terrorism is a security threat that is constantly evolving, North Macedonia’s authorities should take a broader approach in dealing with it, particularly since the country became a NATO member last year.

“With regard to the prevention of terrorism financing in particular, the focus must shift to the non-financial sector and the critical infrastructure sectors, as modern capital flows in this area are much more invisible,” Poposka explained.

“This includes humanitarian and religious organisations, but also the private sector, such as the construction and pharmaceutical industries,” she added.

Montenegro ‘needs law to freeze terrorist assets’

Religious charities are among the organisations under observation in Montenegro, where the National Security Agency monitors extremist activity.

“[Extremists’] funding system is very complex and is managed through special foundations and humanitarian organisations,” explained Nebojsa Medojevic, a member of the parliamentary Security and Defence Council.

“[State] institutions must have the capacity to comprehensively assess the risk of terrorist financing through the non-profit sector, while ensuring that such assessments do not unduly undermine the integrity and legally-protected activities of civil society,” the Montenegrin Interior Ministry told BIRN.

According to Special Prosecution reports from 2017 to 2019, there were 17 investigations into alleged money-laundering during that period in Montenegro, but it is not known if any of them were related to terrorism.

In May 2020, Moneyval called for better cooperation between the country’s institutions, warning that there are no specific laws and procedures for the freezing of terrorist funds or other assets in Montenegro.

Moneyval also urged the Central Bank to directly monitor financial institutions offering microcredits in the country.

Authors: Haris Rovcanin, Fatjona Mejdini, Samir Kajosevic, Bojan Stojkovski and Milica Stojanovic

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