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

Serbia

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TOTAL population (2021)

6.83 million

corruption index 2023

36 / 100

CRIMINALITY SCORE

6.22

total area

85 km2

GDP total (2022)

US$63.5 billion

FREEDOM OF THE PRESS (2023)

59.16 / 100

RESILIENCE SCORE

4.96

GDP per capita (2022)

US$9 393.6

More about the Organized Crime Index

Introduction

According to the 2023 Global Organized Crime Index, Serbia is heavily affected by organized crime, with the highest criminality score among the Western Balkan countries (6.22 out of 10). With a score of 7.0 for financial crimes, 1.02 points above the global average, Serbia is particularly affected by financial crimes, especially illicit financial flows (IFFs). One difficulty the country faces is that there is no official definition of IFFs in Serbia, which poses a challenge in combating the illicit transfer of money across national borders. The Western Balkan region, of which Serbia is a part, faces heightened vulnerability to IFFs as a result of its geographic location, socio-demographic profile, substantial informal economies, pervasive corruption, inadequate oversight of political financing, and restricted space for independent media and civil society.

Serbia's financial intelligence unit (FIU), the Administration for the Prevention of Money Laundering (APML), has identified a new type of financial crime involving cash withdrawals by entrepreneurs dealing in secondary raw materials. This has an impact on taxation and therefore may involve tax crimes as predicate offenses. Notably, during the period of Serbia’s inclusion on the Financial Action Task Force (FATF)’s grey list (2018–2019), non-residents from high-risk countries (e.g. the United Arab Emirates and post-Soviet countries) established companies in Serbia with minimal capital and engaged in suspicious transactions. Emerging criminal methods include substantial real estate investments in Belgrade made by individuals from high-risk countries.

Serbia faces considerable risks of illicit financial activity stemming from organized crime, corruption and tax evasion. Organized crime groups actively engage in drug-related crimes, with Serbia serving as a transit country for heroin, cannabis and cocaine. Common predicate crimes include corruption, tax offences, unauthorized drug production and trafficking, and human trafficking and smuggling. Serbia’s 2023 Index scores for the drug trade were also remarkably high, with the heroin trade scoring 7.0, putting it on the same level of concern as financial crimes. This is noteworthy, as drug trafficking is the main predicate crime associated with IFFs. The significance of the link between drug trafficking and IFFs has been underlined by recent arrests and a joint operation between the Serbian police and Europol, which resulted in the seizure of over €2.7 million. An example from October 2023 illustrates trade-based money laundering, where a criminal group orchestrated under-invoicing in the car import sector, resulting in significant tax evasion of €18 million.

As a member of the Council of Europe, Serbia is subject to monitoring by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), an associate member of the global coordinating body, the FATF. Since the MONEYVAL evaluation in April 2016 and a series of follow-up reports, Serbia has made progress in achieving compliance with the FATF’s recommendations. The latest report, published in November 2021, indicates the country’s full compliance with five of the 40 recommendations and a move towards broad compliance with four others. However, challenges remain, particularly in the area of new technologies, including virtual assets.

According to the National Risk Assessment (NRA) for 2021, the overall threat assessment of money laundering in Serbia is medium. The country’s anti-money laundering and combating the financing of terrorism (AML/CFT) system plays a crucial role in preventing IFFs by enabling the early detection of predicate crimes such as corruption, tax offences, narcotics smuggling and people smuggling.

Recognizing the shortcomings identified in the 2021 NRA, Serbia initiated a new action plan for 2022–2024, building on its 2020–2022 plan. As the country enters the two-year reporting period, only 13 of the 108 tasks planned for 2020–2022 have been completed, while 21 are still in progress. This indicates a less than satisfactory implementation record, although it is important to take into account the obstacles to implementation posed by the COVID-19 pandemic.

Key challenges

  • Inadequate record keeping on money laundering by government agencies results in data that is not comparable, highlighting the need for greater consistency in reporting and tracking financial crime.
  • Although national authorities show a good understanding of the risks associated with money laundering, there appears to be a lack of willingness to address the most serious shortcomings. Examples include the real estate sector, which is recognized as being at high risk of money laundering.
  • Most money laundering convictions in Serbia involve plea agreements, indicating shortcomings in criminal policy. There are also weaknesses in the capacity of state bodies, insufficient parallel and proactive financial investigations, and only a modest track record in confiscating criminal proceeds.
  • With its role as a transit country for drug trafficking contributing to an illicit market channelling IFFs, the case of Serbia underscores the urgency of prioritizing high-profile cases involving established transnational criminal networks.

Role of civil society

Civil society plays a crucial role in exposing illicit financial activities and can provide valuable support in initiating legal proceedings against corrupt elements of the system. Serbia has notable investigative media centres such as the Crime and Corruption Reporting Network, the Centre for Investigative Journalism of Serbia, the Balkan Investigative Reporting Network and Insider. However, despite the media’s efforts, only a few cases have been opened by the prosecutor's office on the basis of information provided by journalists.

In Serbia, civil society organizations have been actively participating in the policy development process, particularly in identifying and understanding risks in the NRA since 2018. Investigative journalists, who are an integral part of civil society, serve as a crucial counterbalance to the executive, upholding the rule of law and democratic values. Civil society can contribute to effectively preventing, exposing and combating IFFs in the following ways:

  • Promoting transparency, ensuring financial responsibility, and collaborating with state bodies to address weaknesses that make Serbia susceptible to money laundering and terrorism financing.
  • Raising public awareness of the impact of IFF’s on Serbia’s development, in particular the misuse of resources intended for civil society initiatives as a tool for money laundering and terrorist financing.
  • Monitoring policy implementation, advocating for transparency and anti-corruption measures, fostering public–private partnerships, and enhancing the transparency and accountability of public institutions by advocating for the publication of relevant data and statistics.
Immediate Outcome 1

Understanding the risk

Serbia does not define IFFs in its legal framework and policies. At the same time, the clear identification of risks in the 2018 and 2021 NRAs has enabled supervisory bodies to improve subsequently standards for supervision based on risk in accordance with FATF recommendations. Previously, Serbian authorities have published several reports and policy documents addressing money laundering and terrorist financing, including NRAs and Action Plans in 2018 and 2021, as well as the National AML/CFT Strategy (2020–2024) and the National AML/CTF Action Plan (2022–2024).

The 2021 NRA identifies Serbia’s real estate sector as particularly high-risk, with criminals exploiting high-value assets for money laundering. Although the risks of money laundering and terrorist financing are well known, some issues remain unaddressed, such as the fact that a significant percentage of real estate transactions are conducted in cash. In the first six months of 2023, for example, cash payments accounted for 80% of real estate transactions without a bank loan, while only 7% of the total value of €3.3 billion in immovable assets was financed through loans. While authorities demonstrate an understanding of these risks, there are challenges in translating this awareness into effective risk mitigation strategies. In addition, political and financial interests often conflict with AML/CFT obligations.

There is also a lack of timely reporting of suspicious transactions at the clerical level (e.g., bank tellers in branches), which highlights the need for further targeted training. The NRA notes a high level of risk tolerance in some sectors, such as law firms, which sometimes act as facilitators of criminal activity. Although these law firms have reporting obligations, the number of suspicious transactions they identify remains relatively low in certain areas. Effective sanctions and supervision of reporting entities are also essential. The facilitation of under-invoicing by private companies – which in one case led to over €18 million in tax evasion – can be mitigated through public–private sector coordination and partnership between the National Alliance for Local Economic Development and the Serbian government.

The highest risk sectors identified in the NRA are banking, real estate, online gambling and gaming and accounting. Following the release of the 2021 report, supervisory bodies have improved their standards and Serbia's FIU updated its anti-money laundering guidelines in 2022. A 2019 organized crime threat assessment, based on Europol methodology and involving extensive coordination between government agencies and the private sector, also identified risks in the real estate sector. Addressing the identified risks requires combining high-level awareness with effective measures and targeted interventions in the sectors most vulnerable to money laundering and IFFs.

Money laundering threat level by sector

Sector

Risk rating

Real estate sector

Online casinos

Banking sector

Accountants

Low

Medium
low

Medium

Medium
high

High

Accountants

Organizers of game of chance

Casinos

Low

Medium
low

Medium

Medium
high

High

Real estate agents

Lawyers

Virtual asset service providers

Car dealers

Postal service operators

Factoring companies

Insurance companies

Low

Medium
low

Medium

Medium
high

High

Insurance companies

Securities market

Payment and electronic money institutions

Auditors

Notaries

Low

Medium
low

Medium

Medium
high

High

Leasing companies

Voluntary pension fund management companies

Low

Medium
low

Medium

Medium
high

High

Source: Administration for the Prevention of Money Laundering, 2021 National Risk Assessment on Money Laundering and Terrorism Financing in Serbia
Immediate Outcome 2

International cooperation

Serbia has given attention to strengthening cooperation with international counterparts, particularly in the context of mutual legal assistance. This reflects collaboration between Serbia's FIU and the financial intelligence units of other countries and extends to broader inter-agency cooperation at the international level. The Law on Mutual Legal Assistance in Criminal Matters clearly defines international mutual legal assistance in criminal matters and is complemented by the Law on Seizure and Confiscation of the Proceeds of Crime and its framework for cooperation in the recovery of the proceeds of crime, which covers both temporary and permanent confiscation. Overall, the prosecutor’s office has improved the handling of international mutual legal assistance through participation in judicial networks, bilateral cooperation, promotion of informal collaboration and capacity strengthening, including specialization in international mutual legal assistance.

Collaborative efforts in law enforcement include a memorandum of understanding (MoU) signed in 2016 between the tax administration and the police on the exchange of information. The FIU actively engages with counterparts in the Western Balkans and internationally, participating in annual meetings to discuss money laundering and terrorism financing. As a member of the Egmont Group of Financial Intelligence Units since 2003, Serbia’s FIU facilitates bilateral links. In 2022, it received 88 requests and sent 106 to counterparts globally, having signed over 40 bilateral MoUs. The FIU uses international channels such as Europol, the Secure Information Exchange Network Application and the Camden Asset Recovery Inter-agency Network for information exchange.

Serbia's customs administration cooperates extensively through memberships in international organizations, including the World Customs Organization, Regional Intelligence Liaison Offices and the Southeast European Law Enforcement Center. These collaborations underscore Serbia's commitment to international cooperation in combating financial crime and enhancing the effectiveness of its law enforcement agencies.

Immediate Outcome 3

Supervision

In Serbia, several supervisory bodies are mandated to address IFFs, including the national bank, the Securities Commission, the FIU, the trade ministry, the Games of Chance Administration, the Chamber of Public Notaries and the Bar Association.

In addition, risk-based supervision within the legal profession has improved since 2016. The Bar Association, for example, conducted 1 137 off-site and 67 on-site inspections between 2018 and 2020. Public notaries reported an increasing trend of suspicious activities related to real estate purchases, with 239 reports issued in 2022, 238 in 2021 and 172 in 2020.

The Law on Inspection Supervision, introduced in 2015, established control lists applicable to non-financial entities, allowing for self-assessment. Based on the 2016 Mutual Evaluation Report, all financial and non-financial entities, except accountants, are required to obtain a licence to operate. The 2018 amendment to the Law on Accountants introduced fit and proper standards for licensing requirements.

Banks dominate the financial sector, accounting for 90% of the balance sheet, while insurance, financial leasing and voluntary pension funds constitute an additional 9%. There are 20 banks, 20 insurance companies, 16 leasing companies and 75 broker-dealerships in Serbia. The non-financial sector is dominated by real estate, followed by the gambling sector, attorneys, accountants, postal service operators, notaries and auditors.

According to the Games of Chance Administration, in October 2023, there were 1 105 real estate agents, 5 434 accountants, 22 online casinos and two lending casinos in Serbia. A total of 542 natural persons in the real estate construction sector pose a heightened money laundering risk, because payment can be made in cash. Ongoing risk assessments aim to improve compliance with the Law on Planning and Construction, focusing on investors in real estate, with a deadline set for 2024 in the Action Plan for the implementation of the national AML/CFT strategy.

Unlike some countries in the Western Balkans, Serbia regulates virtual assets through a law adopted in 2020, managed by the national bank and the Securities Commission, which have issued two licences for virtual asset service providers so far.

Immediate Outcome 4

Prevention

Serbia lacks legislation directly addressing IFFs, as most laws and policies relating to financial crime focus on money laundering and terrorist financing. Civil society, the media, and the private sector play an important role in curbing IFFs by raising awareness of the damage they cause to society. In Serbia, the Law on the Prevention of Money Laundering and the Financing of Terrorism outlines the responsibilities of obligated entities in the implementation of measures against money laundering and terrorist financing.

Obligated entities, primarily financial and legal firms handling significant transactions, play a pivotal role in monitoring, reporting and preventing IFFs. In Serbia, 1 655 real estate agencies fall under this category and are mandated to report suspicious transactions to the FIU. The FIU uses this information to trace and strengthen evidence of predicate offences, enabling law enforcement action based on detailed reports.

Serbia adheres to wire transfer regulations, requiring financial institutions to document sender and recipient information. The 2015 Law on the Freezing of Assets aligns with UN Security Council resolutions, and the FIU's online tool provides real-time updates on Security Council sanctions in the national database.

The Serbian Business Registers Agency provides information on legal persons, and the 2018 Law on the Central Register of Ultimate Beneficial Owners aims to establish a beneficial ownership database to address existing shortcomings, which will be subject to ongoing review.

Small, limited liability companies have been identified as critical players in the concealment of money laundering activities, as a result of their simplicity and lax regulatory requirements. Many obligated entities outside the banking sector lack dedicated anti-money laundering officers and rely instead on general compliance officers. Efforts to improve personnel knowledge include FIU-issued licences based on mandatory examinations for entities with more than seven employees, valid for five years. The 2018 AML/CFT law mandates high-level executive responsibility for anti-money laundering efforts in obligated entities.

Number of obligated entities in Serbia, reviewed in October 2023

Obligated entities

Number

Banks

20

Insurance companies

20

Payment institutions

10

Leasing companies

16

Voluntary pension funds

4

E-money institutions

5

Factoring companies

22

Broker–dealer companies

15

Accountants

5 434

Auditors

77

Real-estate agents

1 655

Lawyers

Around 2 000

Online gambling companies

22

Casinos

2

Virtual asset service providers

2

Source: National Bank of Serbia
Immediate Outcome 5

Private sector

The private sector plays an essential role in curbing illicit financial flows, as private companies make up the majority of obligated entities worldwide. In 2022, reporting entities, mainly banks, money service providers and public notaries, reported a total of 1 563 suspicious transactions. The Law on the Prevention of Money Laundering and the Financing of Terrorism 2018 covers specific enhanced due diligence aspects related to politically exposed persons, correspondent banking, new technologies and higher risk countries, in line with international standards for clear reporting.

Financial institutions and designated non-financial businesses maintain independent databases of suspicious transactions and individuals, and conduct preventative checks on new customers. Many obligated entities, in particular banks, conduct AML/CFT reviews not only at the outset of a business relationship but also on a regular basis throughout the life of the customer relationship. The legislative framework facilitates effective reporting by obligated entities and ensures commitment to international standards in their efforts to combat IFFs.

Immediate Outcome 6

Financial intelligence

The APML is the key authority responsible for tackling IFFs in the country. The APML plays an important role in early detection of IFFs, sharing intelligence with law enforcement agencies such as the prosecutor's office, organized crime division, customs and tax police. The APML has the authority to collect financial intelligence from obligated entities, request data from relevant authorities and disseminate information to law enforcement. However, the APML is an administrative type of financial intelligence unit and therefore does not have authority to conduct investigations.

While the APML staff is well trained and technologically proficient, there is a shortage of suspicious transactions reports from obligated entities, particularly from designated non-financial businesses and professions, such as lawyers, accountants and auditors. Prosecutors lack expertise in financial intelligence and rely heavily on the APML to build cases. Delays in the exchange of information between the APML and law enforcement or tax authorities pose a challenge.

To improve efficiency, an MoU was signed by 10 national anti-money laundering authorities in 2021 to standardized and make accessible records of money laundering and terrorism financing cases. A ban on whistleblowing ensures the secure use of financial intelligence, with new software for reporting suspicious transactions launched in 2023. Serbia is aligning itself with the EU's cash protocols, limiting individuals to carrying a maximum of €10 000 without declaration. Cash seizures at the Serbian border, predominantly involving foreign nationals, amounted to €13 313 303 between 2020 and 2023. In 2022, €2.2 million was temporarily confiscated in criminal procedures and €1.6 million permanently confiscated.

Immediate Outcome 7

Investigations

Serbia's system for investigating IFFs is intricate, involving entities such as the Office of the Higher Prosecutor, police units for economic and organized crime, the tax police, the Military Security Agency, and the Security Information Agency. The Prosecutor’s Office for Organized Crime is also responsible for investigating money laundering by organized criminal groups, which adds to the complexity of the jurisdiction.

Although the 2021 MoU provides for the establishment of a centralized reporting database, its effectiveness remains limited, which hinders a comprehensive approach to combating money laundering. The involvement of the Financial Investigation Unit (part of the interior ministry, distinct from the FIU) in pre-investigation procedures needs to be strengthened. This unit focuses solely on identifying assets for confiscation, neglecting the gathering of evidence to prove that a crime has been committed. Furthermore, there is often a lack of coordination between the separate financial and criminal investigation units, hampering effective teamwork.

Task forces, led by prosecutors and comprising personnel from different agencies, are frequently deployed. To address specific issues such as public procurement, corruption and money laundering, strategic task forces are recommended for risk assessment and operational coordination. In 2022, criminal charges were filed against 234 individuals, with 258 ongoing or unresolved cases from previous years. Indictments were also issued against 120 individuals, resulting in 74 verdicts, most of which were convictions. Assets were only confiscated in 17 cases. Enhanced cooperation, primarily through joint investigation teams focusing on high-risk predicate offences, is essential for making meaningful progress in combating IFFs.

The Serbian authorities have demonstrated a proactive approach to money laundering investigations, prioritizing them regardless of the underlying crime. Special investigative techniques, including wiretaps, are used against suspects of serious crimes, including money laundering.

Immediate Outcome 8

Confiscation

According to the 2021 NRA, Serbia has a comprehensive legal framework governing the temporary and permanent confiscation of assets originating from criminal activities. The confiscation framework is defined by Articles 91 and 92 of the Criminal Code, while security measures are outlined in Article 87 and the Law on Seizure and Confiscation of Proceeds from Crime.

An independent administrative body, the Directorate for the Administration of Seized Assets under the justice ministry, is responsible for the management of assets. Although seized assets are prioritized for sale, they can be reused for humanitarian purposes if they are not sold within a year. For example, the Centre for Human Trafficking Victims Protection was allocated a seized facility for social reuse, demonstrating social reinvestment. Confiscated vehicles are intended for use by public authorities. The highest recorded value of confiscated property relates to predicate offences of drug trafficking (€611 778.12), while the highest value of assets seized from criminal proceeds (€7 208 249.40) relates to abuse of office.

In 2023, a major operation was conducted to uncover crypto-related fraud, resulting in 15 arrests and the seizure of over US$1 million. Previously, media outputs reported that an organized crime group converted cash into cryptocurrencies, which highlighted the need for law enforcement to adapt to new criminal trends.

Immediate Outcome 10

Non-profit organizations
in the prevention of IFFS

Civil society and the media play an important role in broader efforts to counter IFFs in Serbia. According to the Law on Associations of the Republic of Serbia, associations are voluntary, and several natural and/or legal persons are needed to establish non-governmental non-profit organizations, which then become legal entities upon entry in the register of associations. The 2021 NRA records 36 219 active non-profit organizations registered in Serbia, including 35 627 associations and 952 foundations and endowments.

Like any other legal entity, non-profit organizations are exposed to the risk of money laundering and terrorism financing, but this risk is low to medium, according to the 2021 NRA. The NRA also details how one non-profit organization was discovered to have been misused for terrorism financing activities.

Although some efforts have been made by the APML to publish informative materials on IFFs, to advocate for transparent financing and promote self-regulation, there is a need to raise awareness among civil society of the potential misuse of civil society (including non-profit organizations) for money laundering. Serbia has a clearly defined framework for the registration and management of the civil society sector, but there is also a need to strengthen civil society through capacity-building, rather than using existing legislation to pressure it. In 2020, the Serbian authorities requested financial statements from non-profit organizations and individuals, including investigative journalists, which was widely seen as an attempt to intimidate government critics.

A strong civil society enables the democratic development of the country, acting critically and demanding accountability through investigative journalism. However, when the credibility of civil society is undermined, the space for civic action is reduced. One such example is the recent exposure of a network of phantom associations that won €5 million in tenders from the Ministry of Family Welfare and Demography designed to assist young people.

Recommendations
for policymakers

To enhance the overall approach to countering IFFs in Serbia, several measures are recommended:

  • Improve the legal framework to enable integrated financial and criminal investigations, emphasizing the role of the Financial Criminal Investigation Unit within the Serbian interior ministry.
  • Strengthen law enforcement capacities for parallel financial investigations, including through additional training and exchange of information and best practices.
  • Thoroughly implement the AML/CFT National Strategy Action Plan for 2022–2024.
  • Raise awareness of the impact of organized crime among public and private stakeholders, including by publishing data on asset recovery and information on the social reuse of criminal assets.
  • Enhance coordination and cooperation mechanisms between competent authorities responsible for financial intelligence, money laundering and terrorism financing investigations, prosecution and asset recovery.
  • Regularly update the NRA, apply comprehensive mitigation measures to evolving risks, and raise awareness of the harmful effects of IFFs.
  • Strengthen public–private partnerships in the fight against IFFs through joint projects and ad hoc teams, providing feedback in particular to designated non-financial businesses and professions.
  • Promote self-regulation in the non-profit sector in cooperation with Serbia’s national bank and umbrella organizations, including ethical reporting practices.
  • Increase awareness among critical professionals and organizations (e.g., investigative journalists, unions and professional chambers) of the importance of reporting and monitoring IFFs, and provide training on identifying and exposing irregular financial activities.
  • Establish strategic task forces on targeted issues, including experts and practitioners from different backgrounds, such as public institutions, the private sector, civil society, the media and academia. For example, a targeted strategic group could be set up to address the risk of money laundering related to public procurement, and the main users of the results would be law enforcement agencies, particularly prosecutors’ offices. The standing coordination body could be used to set up a strategic expert working group for these purposes.

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