Serbia's lack of official data and expertise helps money launderers

23/10/2006

Legislation may be in place, but without consistent and reliable data, the fight against economic crimes in Serbia is severely hampered, says an OSCE report.

By Georgi Mitev-Santek for Southeast European Times in Belgrade -- 23/10/06

The Serbian Interior Ministry is one of several institutions involved in efforts to fight economic crime. [Getty Images]

Although Serbia has boosted efforts to combat money laundering and related crimes, those efforts are hampered by inadequate information management and problems in gathering data, the OSCE Mission to the country said in a report presented this month.

Every government service that should be a link in the fight against such crimes, from the customs agency to prosecutor's offices, has a separate method of recording data. These databases are incompatible, making it impossible to pursue the money trail, said the report, entitled "Money-laundering and Predicate Crime in Serbia 2000-2005".

The study was prepared together with the UN Inter-regional Crime and Justice Research Institute and supported by the US Departments of State and Justice. The authors were Petrus van Duyne, professor of penal law at the University of Tilburg, and Stefano Donati, adviser for industrial crime with the OSCE mission in Belgrade.

Discrepancies in book-keeping interfere with tracking economic and financial wrongdoing," said the report. Thus, it is difficult to assess the volume and impact of economic crime, or to pinpoint those areas where such crimes are concentrated.

The problems with data are compounded by a lack of expertise, it said. Officials are few in number, technologically under equipped and without the level of knowledge needed to deal with skilled criminals and very sophisticated fraud schemes.

According to van Duyne and Donati, a plausible hypothesis is that the underground economy is sizeable and largely foreign cash-based. According to official statistics, Serbian households spend some 600m euros annually in excess of their total household income, and authorities cannot account for the discrepancy.

The main players in economic crime may find their financial outlets in tax havens such as Cyprus, they said, stressing however that the lack of data makes it impossible to verify this.

Cyprus was the favoured destination for taking money out of Serbia during the Milosevic era. Although a relatively small service based economy, transaction records show it is a great exporter of goods to Serbia -- greater than Russia, a country from which Serbia imports all of its crude oil and natural gas. In 2004 alone, according to information from the National Bank of Serbia, Cyprus exported 585m euros worth of goods to Serbia. According to the Statistics Bureau that figure is 33m euros, while Cypriot statistics indicate only 1.4m euros.

Even with different classification methods factored in, researchers point out that the discrepancies are still too great. Cyprus also was the greatest investor by a long shot, pumping in 66m euros during 2005. Although they cannot prove it, the OSCE researchers suspect laundered money could be a driving force.

Improving expertise and databases topped the list of recommendations made in the report. Others include using a better method of analysis and making sure the number of personnel is adequate to cover the workload.

The government has sent mixed signals about its commitment to tackling such issues. Interior ministry representatives declined to send representatives to an experts' focus group on the issue, and the prosecutor's office was also a no-show. Privatisation Agency representatives cancelled their participation on the day of the roundtable sessions.