Serbia – Know Your Customer (KYC) Rules

 

 

Serbia is not considered a regional financial center. However, Serbia is situated on a major trade corridor known as the “Balkan route,” and commonly confronts narcotics trafficking; smuggling of persons, weapons and pirated goods; money laundering; and other criminal activities. Corruption and organized crime also continue to be significant problems in Serbia.

Serbia has long been and continues to be a black market for smuggled goods. Illegal proceeds are generated from drug trafficking, corruption, tax evasion and organized crime, as well as other types of crimes. Proceeds from illegal activities are invested in all forms of real estate and into sports, particularly football (soccer) club operations. Some gray money flows to Cyprus, reportedly as payment for goods and services; although GOS officials believe these monetary flows have become less significant over the past few years. Banks in Macedonia, Hungary, Switzerland, Austria and China continue to be destinations for laundered funds. Trade-based transactions, in the form of over- and under-invoicing, are a commonly used method for laundering money. There are reports that purchases of some private and state-owned companies have been linked to money laundering activities.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Serbia – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Serbian Law:

    • Banks
    • Licensed bureaux de change and money transfer services
    • Investment fund management companies
    • Voluntary pension fund management companies
    • Guarantors and financial leasing and factoring providers
    • Insurance companies, brokers, and agencies, and insurance agents with a license to perform life insurance business
    • Persons dealing with postal communications
    • Broker-dealer companies
    • Casinos
    • Organizers of games of chance operated on the Internet, by telephone, or using telecommunication networks
    • Auditing companies
    • Licensed auditors, accountants and tax advisors
    • Real estate and credit intermediaries
    • Lawyers

Serbia – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 2,257 from January 1 to October 27, 2011

Number of CTRs received and time frame: 179,516 from January 1 to October 27, 2011

The following is a list of STR covered entities covered by Serbian Law:

    • Banks
    • Licensed bureaux de change and money transfer services
    • Investment fund management companies
    • Voluntary pension fund management companies
    • Guarantors and financial leasing and factoring providers
    • Insurance companies, brokers, and agencies, and insurance agents with a license to perform life insurance business
    • Persons dealing with postal communications
    • Broker-dealer companies
    • Casinos
    • Organizers of games of chance operated on the Internet, by telephone, or using telecommunication networks
    • Auditing companies
    • Licensed auditors, accountants and tax advisors
    • Real estate and credit intermediaries
    • Lawyers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: As of May 2011, prosecutions were pending against 255 individuals
Convictions: 19 as of May 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The GOS has taken a number of steps to improve its anti-money laundering/counter-terrorist financing (AML/CFT) regime over the past year. In May 2011, the Law on Capital Markets came into effect. The law adds market manipulation and insider trading as money laundering predicate offenses.

Serbia has yet to adopt legislation governing administrative freezing of assets in accordance with international standards. The Serbian government continues to insist the major problem in freezing terrorist assets without delay is jurisdictional (i.e., who would legally seize the assets). In practice, however, there is good cooperation among the Serbian Administration for the Prevention of Money Laundering (APML), the prosecutor‘s office, and police. This informal cooperation is effective, and APML officials anticipate that procedures formalizing the cooperative relationships will be codified in a draft law slated to be proposed in late 2011. This draft law has been in process for approximately 18 months, and it is unclear when, or if, this law will be adopted and implemented.

In late 2010, the AML/CFT law was amended to add wire transfer provisions to mandate that payer information accompany transfers of funds. Additionally, the amendment sets forth provisions for the licensing of compliance officers. The APML now holds organized exams for compliance officer certification and conducts training for compliance officers working in banks, insurance companies, brokers and dealers. In early 2012, the law is expected to be revised to expand coverage of the law to notaries. Although tipping off is prohibited, the AML/CFT law does not provide for any sanctions when the rule is breached by management or employees of obligors.

In cooperation with international partners the APML is working to improve its efficiency and operations, help reporting entities improve STRs, and improve the quality and quantity of ML indictments and convictions. In 2011, the APML began to utilize electronic exchanges of documents with obligors to enhance both security and efficiency. The APML is also studying the non-profit sector to analyze the legal framework. Additionally, with partner assistance, the APML, the National Bank of Serbia (NBS), the Securities Commission and other stakeholders are working to develop a national risk assessment for Serbia, as well as enhance the stakeholders‘ capabilities in terms of legislation, operations and capacities.

The numbers of prosecutions and convictions are for unknown time frames because Serbian authorities are unable to provide clear and precise statistics due to bureaucratic issues and divisions of responsibility among the Ministries of Interior and Justice, and APML, which all cover various aspects of ML issues.

The GOS and U.S. Government are currently negotiating an extradition treaty. The GOS maintains bilateral agreements on mutual legal assistance with 31 countries. The FIU has signed information sharing agreements with 15 countries.

Serbia should continue to pursue measures to improve supervision of Serbian securities firms and designated non-financial businesses and professions, and to provide these institutions with sufficient guidance to ensure they understand and are able to comply with their responsibilities under the AML/CFT law. The NBS and other supervisory bodies, as well as investigative agencies, the FIU, prosecutors, and judges require additional resources to build their professional capabilities. Law enforcement and prosecutors also need to make increased use of criminal money laundering charges.