SEE-Obs
SEE-Obs Hotspots IFFs in the Western Balkans Kosovo

Kosovo

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TOTAL population (2021)

1.79 million

corruption index 2023

41 / 100

CRIMINALITY SCORE

4.97

total area

10.9 km2

GDP total (2022)

US$9.43 billion

FREEDOM OF THE PRESS (2023)

68.38 / 100

RESILIENCE SCORE

5.08

GDP per capita (2022)

US$5 351.4

Introduction

For Kosovo, illicit financial flows (IFFs) — valued at around 7% of GDP — are a serious concern. The country has a number of high-scoring criminal markets, including financial crime, trade in counterfeit goods, drugs, human trafficking and smuggling, cyber-dependent crimes and arms trafficking.

Corruption is reported to drive and facilitate IFFs. Kosovo was ranked 84th out of 180 countries in Transparency International’s Corruption Perceptions Index 2022, with a score of 41 out of 100 (where 100 equates to the lowest level of corruption). Frequent forms of corruption reported from 2019 to 2022 include abuse of official positions, bribery, conflict of interest and nepotism. Areas identified as being vulnerable to corruption encompass public-sector procurement, healthcare, government subsidies, permits and licences, and public enterprises.

Limited progress appears to have been made to address the threats from IFFs. While several cases linked to offshore transactions used to launder proceeds flowing out of the country were investigated by authorities, significant illicit proceeds — including from widespread tax evasion — are believed to remain within Kosovo. Financial investigations are not systematically conducted in parallel with organized crime and corruption cases, and relevant databases remain incomplete.

Trade mis-invoicing is assumed to be common, as €8 million of customs duties were reportedly avoided between 2020 and 2022. In addition, informality remains a challenge, with Kosovo’s shadow economy estimated to account for 31%of GDP and the grey economy 28% of GDP. Widespread informality in construction and the service sector, especially hotels, restaurants, trade and transportation, also facilitates the laundering of illicit proceeds in these sectors.

Kosovo’s mutual evaluation report in 2018 was conducted by an EU and Council of Europe project, which highlighted that despite progress achieved, many challenges remain. Out of 11 immediate outcomes, six were rated as moderately effective and five as low, while none were rated as substantial or high. A new evaluation is expected to begin in 2023 or 2024. Kosovo is not a member of the Council of Europe and therefore there is no follow-up procedure between evaluations.

Key challenges

  • Kosovo’s response to IFFs largely focuses on the formal financial system, particularly anti-money laundering efforts. Understanding of the role of trade and informality to generate, hold and move illicit value remains limited.
  • The legal and regulatory framework is incomplete and not sufficiently aligned with EU and international standards, especially in the area of combating money laundering, beneficial ownership information, virtual asset service providers and social reuse of confiscated assets.
  • Although tax evasion, corruption, bribery and certain criminal activites were identified as the top three areas that pose high-level IFFs threats, they are not converted into specific operational priorities by the government and its law enforcement agencies.
  • While data is generally easily accessible either through publication of reports or requests for access to public documents, there is a need to increase both the quantity and quality of data to cover all components and channels of IFFs.

Role of civil society

Civil society organizations in Kosovo play an important role in the response to IFFs. They are included in the process of policy development either directly as members of the working groups or indirectly through the process of public consultation.

For example, they are members of working groups for national and sectoral risk assessment, drafting of legislation, joint discussions and meetings in the framework of public–private partnerships, etc. In the Financial Action Task Force (FATF) Terrorist Financing Risk Assessment Guidance, Kosovo was cited as a good example in taking inputs from civil society organizations.

The involvement of civil society in Kosovo is positive but constrained by limited capacities and knowledge of IFFs. This also limits civil society’s capacity to raise awareness on the impact of IFFs, advocate for policy changes and hold government and the private sector accountable for their actions.

Prevention, exposure and combating of IFFS require the active input of civil society and the media. By strengthening their capacities in understanding IFFs they can contribute more effectively to measures to combat them. More specifically, civil society organizations can play a vital role in:

  • Raising awareness about the negative impacts of IFFs on Kosovo’s development, governance, and social welfare;
  • Monitoring implementation of key national policies and legislation;
  • Lobbying for adoption of the law on beneficial ownership and the establishment of a national database;
  • Advocating additional measures to prevent criminals or their associates from entering the financial and non-financial markets as holders (or beneficial owners);
  • Strengthening the public-private partnership through involvement of civil society organizations;
  • Increasing the transparency and accountability of public institutions by advocating publication of data and statistics;
  • Advocating for stronger responses to tax evasion.
Immediate Outcome 1

Understanding the risk

IFFs are not defined in Kosovo's legislative and policy documents, contributing to a lack of broad understanding of the concept among various stakeholders, including the public sector. However, Kosovo's National Risk Assessment (NRA) of 2020 (see the table) produced by Kosovo’s financial intelligence unit (FIU) has red-flagged significant threats posed by tax evasion, corruption and bribery, and several illicit markets. (For more on the FIU, see the section on financial intelligence below).

The NRA has identified that fiscal evasion in Kosovo is tied to widespread informality, allowing profits to go unreported, and that illicit proceeds typically mirror the routes of legal remittances and trade, primarily flowing through the banking sector: money transfer agents and simple cash smuggling are the primary methods used to handle most illicit funds entering Kosovo. Although trade-based money laundering is mentioned in money laundering typologies published in 2013 and 2020, it is not referenced in the National Strategy and Action Plan for the Prevention and Fight against Informal Economy, Money Laundering, Financing of Terrorism and Financial Crimes.

The Ministry of Finance introduced Administrative Instruction MF- No.04/2018 for the National Money Laundering and Terrorist Financing Risk Assessment. Various other risk assessments have covered the judicial and prosecutor’s systems, public procurement, the banking sector and non-profit organizations. The FIU has developed several money laundering typologies, including those involving politically exposed persons and terrorism financing. The table below shows the level of threat of money laundering from predicate criminal offences. 

Level of threat of money laundering from predicate criminal offences, as indicated in the 2020 National Risk Assessment

Predicate criminal offences

Threat level

Fiscal evasion

Corruption and bribery

Extremely
low

Low

Moderate

High

Extremely
high

Drug trafficking

Smuggling

Counterfeiting and piracy of products

Trafficking in human beings

Prostitution

Extremely
low

Low

Moderate

High

Extremely
high

Fraud

Robbery and theft

Extortion and usury

Cybercrime

Extremely
low

Low

Moderate

High

Extremely
high

Illicit firearms trafficking

Environmental crimes

Extremely
low

Low

Moderate

High

Extremely
high

Counterfeiting currency

Illicit trafficking in stolen goods

Forgery

Extremely
low

Low

Moderate

High

Extremely
high

Source: Kosovo Financial Intelligence Unit (FIU) 

Level of vulnerability to money laundering and terrorist financing by reporting entities

Type of reporting entity

Vulnerability to money laundering

Type of reporting entity

Vulnerability to terrorist financing

Banks

Real estate and construction

Extremely
high

Extremely
high

Notaries

Games of chance

Legal entities and arrangements

Money remitters and transfer agents

High

Banks

NGOs

Money remitters and transfer agents

High

NGOs

Forex agents

High value dealers

Moderate

High-value dealers

Microfinance companies

Moderate

Accountants and auditors

Insurance companies, micro-finance

Online casinos

Attorneys

Financial leasing

Low

Auditors

Low

Pension funds

Extremely
low

All other reporting entities

Extremely
low

Source: FIU, National Risk Assessment 2020 
Immediate Outcome 2

International cooperation

Organized crime, money laundering and terrorist financing are increasingly becoming transnational in nature, and cooperation and exchange of information with other countries and organizations is crucial in combating such flows. Kosovo’s framework for mutual legal assistance in criminal matters is overseen by the Ministry of Justice.

The FIU has actively engaged in international cooperation, being a member of the Egmont Group of Financial Intelligence Units since 2017, signing several memoranda of understanding (MoUs) with other FIUs globally, which have enhanced bilateral cooperation (see the table below for a summary). However, mutual legal assistance for money laundering investigations and prosecutions requires greater prioritization.

The International Law Enforcement Coordination Unit (ILECU) is the contact point for international police cooperation and information exchange. Kosovo’s police service is not a member of INTERPOL or the Southeast European Law Enforcement Center, but signed a cooperation agreement with Europol in 2020 and has exchanged information — including financial information — since 2022. Cooperation with the European Union Agency for Criminal Justice Cooperation is limited owing to Kosovo's political status. Kosovo’s customs authority joined the World Customs Organization in 2017, which in 2018 published a report on IFFs via trade mis-invoicing and proposed measures to increase the mandate of customs, strengthen capacities and collaboration, and make better use of techonology in tackling this issue. Its lack of membership to international organizations such as INTERPOL and Kosovo’s political status continue to pose obstacles to international cooperation.

Although information is regularly exchanged by reporting entities to identify the beneficial ownership and control of legal persons, the absence of a beneficial ownership database hinders efficient information sharing. The Law on Legal Cooperation in Criminal Matters was amended in 2022, and a draft Law on the Register of Beneficial Owners emerged in 2023. Both are expected to enhance international cooperation.

A significant weakness of the FIU is that, firstly, it does not have direct access to relevant public databases and, secondly, database interoperability, which hamper international cooperation. Data regarding frozen and confiscated assets abroad is lacking.

Combating IFFs in Kosovo does not appear to be a priority of the international donor community. Kosovo benefits from the German Agency for International Cooperation’s project ‘Combating Illicit Financial Flows’; however, other projects focus mainly on anti-money laundering and anti-corruption, as opposed to IFFs.

FIU international information exchange

International cooperation involving Kosovo’s FIU

Foreign requests received by the FIU

37

Foreign requests refused by the FIU

0

Spontaneous sharing of information received by the FIU

37

Average number of days to respond to requests from foreign FIUs

—

Refusal grounds applied

0

Requests sent by the FIU

63

Spontaneous sharing of information sent by the FIU

10

Total (outgoing requests and information)

73

International cooperation involving Kosovo’s FIU

Foreign requests received by the FIU

43

Foreign requests refused by the FIU

0

Spontaneous sharing of information received by the FIU

43

Average number of days to respond to requests from foreign FIUs

—

Refusal grounds applied

0

Requests sent by the FIU

55

Spontaneous sharing of information sent by the FIU

18

Total (outgoing requests and information)

73

International cooperation involving Kosovo’s FIU

Foreign requests received by the FIU

32

Foreign requests refused by the FIU

0

Spontaneous sharing of information received by the FIU

28

Average number of days to respond to requests from foreign FIUs

58

Refusal grounds applied

0

Requests sent by the FIU

42

Spontaneous sharing of information sent by the FIU

13

Total (outgoing requests and information)

55

International cooperation involving Kosovo’s FIU

Foreign requests received by the FIU

26

Foreign requests refused by the FIU

0

Spontaneous sharing of information received by the FIU

19

Average number of days to respond to requests from foreign FIUs

14

Refusal grounds applied

0

Requests sent by the FIU

74

Spontaneous sharing of information sent by the FIU

15

Total (outgoing requests and information)

89

International cooperation involving Kosovo’s FIU

Foreign requests received by the FIU

32

Foreign requests refused by the FIU

0

Spontaneous sharing of information received by the FIU

12

Average number of days to respond to requests from foreign FIUs

19

Refusal grounds applied

0

Requests sent by the FIU

62

Spontaneous sharing of information sent by the FIU

13

Total (outgoing requests and information)

75

International cooperation involving Kosovo’s FIU

2018

2019

2020

2021

2022

Foreign requests received by the FIU

32

26

32

43

37

Foreign requests refused by the FIU

0

0

0

0

0

Spontaneous sharing of information received by the FIU

12

19

28

43

37

Average number of days to respond to requests from foreign FIUs

19

14

58

—

—

Refusal grounds applied

0

0

0

0

0

Requests sent by the FIU

62

74

42

55

63

Spontaneous sharing of information sent by the FIU

13

15

13

18

10

Total (outgoing requests and information)

75

89

55

73

73

Source: FIU
Immediate Outcome 3

Supervision

Kosovo's supervisory framework involves various entities overseeing compliance and prudential aspects of financial and non-financial sectors, with certain gaps and regulatory efforts yet to be finalized.

According to Kosovo’s law on prevention of money laundering and combating of terrorist financing, the FIU, Central Bank and sector-specific supervisors oversee compliance of financial institutions and designated non-financial businesses or professions. The Central Bank carries out prudential and anti-money laundering/terrorist financing (AML/CFT) supervision, while the FIU supervises non-financial entities unless sectoral supervisors are involved.

The law permits sharing supervisory responsibilities between the FIU and sector-specific supervisors through written arrangements, although no MoUs have been signed. Supervisory authorities and risk-based supervisory frameworks implemented for designated non-financial businesses are as follows:

  • For notaries and lawyers, the supervisory authority is the FIU; the justice ministry is the supervisory authority for prudential oversight
  • For accountants and auditors, the supervisory authority is the FIU; the Kosovo Council for Financial Reporting is the supervisory authority for prudential oversight
  • For dealers in precious metals and stones, the supervisory authority is the FIU
  • For real estate agents, the supervisory authority is the FIU
  • For NGOs, the supervisory authority is the FIU

The Central Bank holds authority to license and register banks and financial institutions. However, Kosovo is partially compliant on measures to prevent criminals or their associates from being professionally accredited, or holding (or being the beneficial owner of) a significant or controlling interest, or holding a management function in a designated non-financial businesse and profession (DNFBP).

Virtual asset service providers are unregulated in Kosovo, though there is an initiative within the Assembly of Kosovo intended to address this regulatory gap.

Number of FIU inspections for compliance control of reporting entities, 2018–2022

On site and remote compliance inspection, 2018–2022

Reporting subject

Banks

6

Microfinance institutions

5

Insurance and life insurance companies

4

Currency exchange offices

9

Exchange bureaux

2

Casinos and games of chance

4

CSOs

0

Auditors and accountants

21

Notaries

67

Real estate agencies

0

Auto salons

10

Total compliance inspections

128

Reporting subject

Banks

—

Microfinance institutions

—

Insurance and life insurance companies

—

Currency exchange offices

7

Exchange bureaux

—

Casinos and games of chance

—

CSOs

—

Auditorsand accountants

—

Notaries

20

Real estate agencies

—

Auto salons

—

Total compliance inspections

27

Reporting subject

Banks

2

Microfinance institutions

—

Insurance and life insurance companies

—

Currency exchange offices

2

Exchange bureaux

—

Casinos and games of chance

—

CSOs

—

Auditorsand accountants

2

Notaries

24

Real estate agencies

—

Auto salons

—

Total compliance inspections

31

Reporting subject

Banks

1

Microfinance institutions

—

Insurance and life insurance companies

—

Currency exchange offices

—

Exchange bureaux

1

Casinos and games of chance

—

CSOs

—

Auditorsand accountants

19

Notaries

—

Real estate agencies

—

Auto salons

10

Total compliance inspections

31

Reporting subject

Banks

3

Microfinance institutions

1

Insurance and life insurance companies

1

Currency exchange offices

—

Exchange bureaux

1

Casinos and games of chance

—

CSOs

—

Auditorsand accountants

—

Notaries

17

Real estate agencies

—

Auto salons

—

Total compliance inspections

25

Reporting subject

Banks

—

Microfinance institutions

3

Insurance and life insurance companies

1

Currency exchange offices

—

Exchange bureaux

—

Casinos and games of chance

4

CSOs

—

Auditorsand accountants

—

Notaries

6

Real estate agencies

—

Auto salons

—

Total compliance inspections

14

Reporting subject

2018

2019

2020

2021

2022

Total

Banks

—

3

1

2

—

6

Microfinance institutions

3

1

—

1

—

5

Insurance and life insurance companies

1

1

—

—

—

4

Currency exchange offices

—

—

—

2

7

9

Exchange bureaux

—

1

1

—

—

2

Casinos and games of chance

4

—

—

—

—

4

CSOs

—

—

—

—

—

0

Auditorsand accountants

—

—

19

2

—

21

Notaries

6

17

—

24

20

67

Real estate agencies

—

—

—

—

—

0

Auto salons

—

—

10

—

—

10

Total compliance inspections

14

25

31

31

27

128

Source: FIU
Immediate Outcome 4

Prevention

The private sector and civil society are integral to the measures aimed at preventing IFFs in Kosovo.
The reporting entities in Kosovo are:

  • Banks
  • Other financial institutions:
    • Microfinance lenders
    • Financial leasing
    • Currency exchange
    • Electronic money
    • Insurance companies, life insurance companies or intermediaries of life insurance companies
  • Casinos, including internet casinos and licensed objects of games of chance
  • Real estate agents and brokers
  • Natural or legal persons trading in goods when receiving payment in cash in an amount of €10 000 or more
  • Lawyers and notaries
  • Accountants, auditors and tax advisers
  • Trust and company service providers
  • NGOs
  • Sellers of precious metals and precious stone traders

The legislation is largely in place. However, the law on AML/CFT should be amended in order to be fully in line with EU acquis and international standards, and a law on beneficial ownership is currently lacking.

The Central Bank has the powers and independence to carry out its supervisory role. Banks and financial institutions understand risks well, but DNFBPs have limited understanding. Banks effectively implement measures for politically exposed persons, correspondent banking, new technologies (such as crypto), wire transfers, terrorism-financing-related sanctions and higher-risk countries, as per FATF. Reporting entities, especially banks, invest in capacity and have access to international databases. DNFBPs, however, lack resources to combat AML and IFFs effectively.

The financial and non-financial sectors capacity-building measures have been scaled up in order to better understand the methods and models with which perpetrators can misuse financial and non-financial systems in Kosovo. Nevertheless, prevention still largely focuses on AML and does not consider trade-based or cash-based risks more widely. There is improved understanding of terrorist financing risk among reporting entities, which were involved in drafting the National Risk Assessment and sectoral risk assessments. There is also a better grasp of typologies of money laundering and terrorist financing indicators that can lead to sending suspicious transaction reports (see the table).

Suspicious transaction reports submitted to FIU

Year

Financial institutions

Banks

661

Microfinance institutions

27

Insurance sector

1

Currency exchange bureaux

—

Money transfer companies

182

Designated non-financial businesses or professions

Notaries

34

Lawyers

1

Other

—

Other reporting subjects

Customs

—

Sectoral supervisors

2

Other

5

Total suspicious transaction reports

920

Year

Financial institutions

Banks

710

Microfinance institutions

13

Insurance sector

1

Currency exchange bureaux

—

Money transfer companies

149

Designated Non-Financial Businesses or Professions

Notaries

17

Lawyers

1

Other

3

Other reporting subjects

Customs

1

Sectoral supervisors

—

Other

2

Total suspicious transaction reports

902

Year

Financial institutions

Banks

785

Microfinance institutions

17

Insurance sector

5

Currency exchange bureaux

—

Money transfer companies

137

Designated Non-Financial Businesses or Professions

Notaries

76

Lawyers

1

Other

1

Other reporting subjects

Customs

—

Sectoral supervisors

1

Other

1

Total suspicious transaction reports

1027

Year

Financial institutions

Banks

559

Microfinance institutions

10

Insurance sector

2

Currency exchange bureaux

—

Money transfer companies

33

Designated Non-Financial Businesses or Professions

Notaries

37

Lawyers

2

Other

—

Other reporting subjects

Customs

1

Sectoral supervisors

—

Other

—

Total suspicious transaction reports

644

Year

Financial institutions

Banks

683

Microfinance institutions

5

Insurance sector

—

Currency exchange bureaux

—

Money transfer companies

34

Designated Non-Financial Businesses or Professions

Notaries

—

Lawyers

—

Other

—

Other reporting subjects

Customs

—

Sectoral supervisors

4

Other

2

Total suspicious transaction reports

728

Year

2017

2018

2019

2020

2021

Financial institutions

Banks

683

559

785

710

661

Microfinance institutions

5

10

17

13

27

Insurance sector

—

2

5

1

1

Currency exchange bureaux

—

—

—

—

—

Money transfer companies

34

33

137

149

182

Designated Non-Financial Businesses or Professions

Notaries

—

37

76

17

34

Lawyers

—

2

1

1

1

Other

—

—

1

3

—

Other reporting subjects

Customs

—

1

—

1

—

Sectoral supervisors

4

—

1

—

2

Other

2

—

1

2

5

Total suspicious transaction reports

728

644

1027

902

920

Source: FIU
Immediate Outcome 5

Private sector

The Business Registration Agency makes available publicly accessible information about legally registered entities, including their unique identification numbers, employee counts, addresses, business types, authorized personnel and owners. The 2020 National Risk Assessment examined legal persons to evaluate their susceptibility to misuse for money laundering (including a reference to trade-based money laundering) and terrorist financing. This concern is reiterated in the Serious and Organized Crime Threat Assessment, recognizing the use of shell and offshore companies for money laundering in Kosovo.

Although the banking sector is considered to be the one with by far the strongest AML controls and a sound understanding of IFFs risks, banks are still considered highly vulnerable to IFFs. There is a significant lack of understanding among authorities regarding the risks associated with legal entities and arrangements. Additionally, they lack awareness of how legal arrangements like trusts and foundations can be established in one country and then operate within the jurisdiction of another. In addition, while the understanding of risks related to cash payments is well understood, there is little awareness about the risk of trade-based money laundering. On the other hand, the financial sector and DNFBPs lack awareness that although most of their customers are domestic, ownership can still be hidden through complex structures and nominee arrangements.

Since there is no beneficial ownership database, banks and other financial institutions in Kosovo hold beneficial ownership information following FIU and Central Bank guidance, particularly when such information differs from basic ownership. The risk is that the lack of information on beneficial ownership enables companies in Kosovo to redirect public funds through corruption-linked procurement processes and thus bypass scrutiny of politically exposed persons by banks. Utilizing front companies without accurate beneficial ownership is a common method allowing companies to channel profits among associates or relatives of politically exposed persons. 

Immediate Outcome 6

Financial intelligence

A range of financial intelligence and other relevant information is collected and used by the following competent authorities to prevent and combat IFFs in Kosovo: 

  • Financial intelligence unit
  • Finance, labour and transfers ministry
  • Tax Administration
  • Internal affairs ministry
  • Kosovo police
  • Kosovo customs
  • Central Bank of Kosovo
  • Special prosecution
  • Kosovo Judicial Council
  • Kosovo Prosecutorial Council
  • Kosovo Intelligence Agency
  • The National Coordinator for Combating Economic Crime

Most data on IFFs is gathered by the FIU, the tax administration and the Kosovo Police. The FIU is an independent central national institution responsible for receiving, analyzing and sharing information related to potential money laundering and terrorist financing. Currently understaffed, the FIU collaborates with five liaison officers from various agencies, each undergoing security clearance by the intelligence agency.

Secure systems like ‘goAML’ and a case management database support the FIU’s operations.  However, there is a need for improved access to systems like the tax administration, the Central Bank’s national bank account register and the border management system, not to mention database interoperability.

Although cooperation between these authorities is generally positive, it is critical to improve coordination and receive feedback from law enforcement agencies. It has been noted that very few reports are provided by customs and most relate to undeclared monetary instruments at the border; meanwhile no suspicion seems to have been reported by customs with regard to trade-based money laundering. Feedback on suspicious transaction reports sent to the police service and other institutions is lacking, leading to uncertainty about case status. The FIU follows a five-level risk system, sharing information with relevant institutions. Improved collaboration with the private sector is critical. 

Statistics are generally accesible through annual reports published in respective websites of institutions. The FIU also provides more comprehensive statistics but publicly available data on IFFs remains limited. This is a particular concern in terms of cash-based payments and the large informal economy, given that these flows cannot be monitored by the existing regulatory and oversight instruments. The FIU provides investigative assistance to law enforcment agencies and other institutions, as shown in the table below.

Number of requests received by the FIU from law enforcement agencies and other institutions in Kosovo, 2018–2022

Request filing institutions

Kosovo Police

145

Kosovo Intelligence Agency

73

EULEX

0

Special Prosecution

9

State Prosecution

4

Tax Administration

2

Customs

13

ILECU/Kosovo Police

14

Central Bank

6

Other

8

Total

274

Request filing institutions

Kosovo Police

82

Kosovo Intelligence Agency

38

EULEX

0

Special Prosecution

12

State Prosecution

7

Tax Administration

1

Customs

33

ILECU/Kosovo Police

12

Central Bank

10

Other

5

Total

200

Request filing institutions

Kosovo Police

92

Kosovo Intelligence Agency

49

EULEX

0

Special Prosecution

6

State Prosecution

3

Tax Administration

1

Customs

13

ILECU/Kosovo Police

5

Central Bank

10

Other

6

Total

185

Request filing institutions

Kosovo Police

92

Kosovo Intelligence Agency

52

EULEX

0

Special Prosecution

1

State Prosecution

1

Tax Administration

1

Customs

6

ILECU/Kosovo Police

6

Central Bank

4

Other

6

Total

173

Request filing institutions

Kosovo Police

68

Kosovo Intelligence Agency

44

EULEX

7

Special Prosecution

1

State Prosecution

1

Tax Administration

10

Customs

14

ILECU/Kosovo Police

2

Central Bank

2

Other

9

Total

156

Request filing institutions

2018

2019

2020

2021

2022

Kosovo Police

68

92

92

82

145

Kosovo Intelligence Agency

44

52

49

38

73

EULEX

7

0

0

0

0

Special Prosecution

1

1

6

12

9

State Prosecution

1

1

3

7

4

Tax Administration

10

1

1

1

2

Customs

14

6

13

33

13

ILECU/Kosovo Police

2

6

5

12

14

Central Bank

2

4

10

10

6

Other

9

6

6

5

8

Total

156

173

185

200

274

Source: FIU

Requests to FIU from Integrated Financial Investigation Sector of Kosovo Police related to organized crime

Year

Requests

48

Year

Requests

28

Year

Requests

21

Year

Requests

20

Year

Requests

18

Year

2018

2019

2020

2021

2022

Requests

18

20

21

28

48

Source: FIU
Immediate Outcome 7

Investigations

Kosovo's institutional framework and legislative structure are established to investigate IFFs in the formal financial system, particularly money laundering connected to predicate offences and standalone cases. The law on extended powers of confiscation allows asset confiscation unrelated to the original criminal offence, supplementing the Criminal Procedure Code’s limitations.

The Special Prosecution service has exclusive jurisdiction over money laundering and terrorist financing investigations, with special departments dedicated to prosecuting corruption, financial crime, terrorism, organized crime and war crimes.

Within the the Directorate for Investigation of Economic Crimes and Corruption, part of the police service, there is a special unit for investigating money laundering. If a predicate offence is identified during a money laundering investigation, this information is shared with the specialized directorate for that offence. The Sector for Integrated Financial Investigations conducts parallel financial investigations in organized crime and corruption cases, but systemic implementation is lacking. The customs authority and the Tax Administration are authorized to investigate smuggling and tax evasion as money laundering predicate offences.

Notably, an FIU case, CUMA, marked a successful stand-alone money laundering prosecution, leading to a €1 million asset confiscation. It was recognized among the best Egmont cases for 2014 to 2020. Numerous financial investigations, however, along with organized crime and corruption probes, remain unresolved. Cases are hampered by lack of interoperability of databases. In 2021, the Special Prosecution received nine new criminal charges against 19 individuals, along with a backlog of 34 cases involving 84 individuals carried over from previous years. 

Investigation of money laundering by the Kosovo police service, 2019–2021

Opened cases

6

Criminal charges of known persons

4

Number of arrested persons

13

Number of involved persons in criminal charges

14

Opened cases

1

Criminal charges of known persons

1

Number of arrested persons

0

Number of involved persons in criminal charges

3

Opened cases

5

Criminal charges of known persons

4

Number of arrested persons

1

Number of involved persons in criminal charges

9

2019

2020

2021

Opened cases

5

1

6

Criminal charges of known persons

4

1

4

Number of arrested persons

1

0

13

Number of involved persons in criminal charges

9

3

14

Source: Kosovo Police
Immediate Outcome 8

Confiscation

The legislative framework for asset confiscation in Kosovo is regulated by the Criminal Code (in the case of standard confiscation) and the Law on Extended Powers of Confiscation (extended confiscation).

Standard confiscation involves seizing assets connected to the criminal offence; extended confiscation allows the seizure of assets unrelated to the offence. Although the legal framework is in place, limited progress has been made in confiscation of assets, particularly extended confiscation. In addition, Kosovo’s legal framework lacks provisions for the social reuse of confiscated assets and confiscation of virtual assets.

From 2014 to 2021, there was a significant disparity (€185.98 million) between the value of seized assets and those ultimately confiscated, with only 3.3% of seized assets being confiscated. In contrast, the EU average is around 50%. Additionally, only 28 confiscations were enforced out of 1 695 cases between 2017 and 2021. The management of seized and confiscated assets falls under the Agency for the Management of Seized and Confiscation Assets (part of the Ministry of Justice).

There was a significant legislative initiative in 2021 to establish the State Bureau for Verification and Confiscation of Unjustified Wealth, enabling non-conviction-based confiscation. The draft law is currently under review by the Constitutional Court.

The current legislation also requires individuals to declare the movement, value and source of monetary instruments into and out of Kosovo to the value of €10 000 or more (or equivalent in foreign currency). The customs authority is authorized to seize suspected proceeds of crime moved across borders. The table shows the value of cash seized at borders between 2019 and 2021.

Discrepancy between the value of seized and frozen
assets with final confiscations

Euros 70 000 000 60 000 000 50 000 000 40 000 000 30 000 000 20 000 000 10 000 000 0
0
10
20
30
40
50
60
70
2021
2020
2019
2018
2017
2016
2015
2014
2021
2020
2019
2018
2017
2016
2015
2014
MLN Euro
Value of seized and frozen assets
Value of confiscated assets
Discrepancy in value
Source: GI-TOC, based on reports received by State Prosecution of Kosovo

Non-declaration of monetary assets at border

Year

Number of non-declarations

Value of non-declaration of assets

The fine imposed (25%)

2019

3

£91 080

€33 200

CHF790

€18 000

(£91 080 confiscated in total)

€7 681

2020

1

€65 450

€16 362.50

2021

6

CHF100 977.12

€70 509.82

€16 510

€26 677.56 

€17 627.46

€4 140

Total

10

£107 590

CHF101 767.12

€16 159.82

91 080.00 GBP confiscated in total

*

€90 488.52

Source: FIU
Immediate Outcome 10

Non-profit organizations
in the prevention of IFFs

Non-profit organizations (NPOs) in Kosovo are defined by Law no.06/L-043 (freedom of association in non-governmental organizations), according to which there are three forms of organization: association, foundation and institute.

NPOs in Kosovo, as reporting entities, have obligations outlined in the law on money laundering and combating terrorist financing. Article 29 of the law stipulates the obligations imposed on NPOs, including conducting due diligence, processing transactions through banks, reporting suspicious transactions within 24 hours, and more.

Kosovo was commended in 2019 for involving NPOs in its risk assessment process, with the FATF recognizing its collaboration with over 150 NPOs. Assessments have shown that the non-profit sector has moderate money laundering vulnerability and high vulnerability to terrorist financing. While there have been no instances of NPOs directly involved in terrorism or terrorism financing, some were suspended in 2014 and 2015 over potential violations of Kosovan legislation and incitement of religious tensions.

Recommendations for
policymakers

  • Encourage broader understanding of IFFs and associated risks. In particular, risks associated with trade and the informal economy need to be better understood and managed. 
  • Strengthen the legal framework in order to align it with EU and international standards. This should include the revision of the law for combating money laundering and terrorism financing; adoption of a law on beneficial ownership and a corresponding database; regulation of virtual asset service providers; and allow confiscation of virtual assets and social reuse of confiscated assets.
  • Identified threats, risks and vulnerabilities from the formal financial system, trade and informality should be translated into strategic, implementable objectives. To achieve this, allocate adequate resources, both financial and human, to effectively combat IFFs; conduct investigations into standalone money laundering cases; improve the process around confiscation of cash at borders; strengthen public–private partnerships; and enforce regulations.
  • Initiate collaborative efforts between government, civil society and media to develop campaigns to raise public awareness of the negative impact of IFFs on the economy, development and social welfare, and emphasize the importance of addressing IFFs and the need for policy reforms.
  • Law enforcement agencies should actively review and respond to suspicious transaction reports sent by the FIU and initiate proactive and systematic financial investigations both as part of broader organized crime and corruption cases and as standalone money laundering cases.
  • The government and donors should provide financial and other support to civil society organizations and the media in their efforts to research and uncover cases of IFFs. 
  • Enhance measures to prevent criminals and their associates from entering the financial and non-financial markets as holders or beneficial owners; implement risk-based supervision by competent authorities; and provide comprehensive training to the private sector, emphasizing a sound understanding of money laundering and terrorist financing risks.

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