AML and CTF law and regulation in Serbia

  • The Anti-Money Laundering and Financing of Terrorism Act, adopted in 2017, and amended in 2018 and 2019 (the “AML Act”) and supporting bylaws;
  • Limitation of Disposal of Property to prevent Terrorism and trade in Weapons of Mass Destruction Act adopted in 2015 and amended in 2017 and 2018 (the “Limitations Act”) and supporting bylaws;
  • The Central Registry of Ultimate Beneficial Owners Act adopted in 2018 and amended (“UBO Act”) and supporting bylaws.

2. Are the 4th AML Directive and the 5th AML implemented in your jurisdiction?

Yes, with the adoption of the AML Act the basic provisions of the 4th AML Directive were implemented. Additional amendments to the AML Act were adopted in December 2019 implementing the provisions of the 5th AML Directive.

3. Which is the AML/CTF supervisory authority in your jurisdiction?

The Administration for the Prevention of Money Laundering (the “Administration”) is the main AML/CTF supervisory authority. This body is part of the Ministry of Finance and has the authority to collect, store, investigate, analyse and disclose to the competent authorities documents and data as well as to conduct other procedures aimed at counteracting money laundering and financing terrorism, in accordance with the AML Act.

Other authorities authorised to monitor compliance with the key obligations under the AML Act in certain sectors include the National Bank of the Republic of Serbia, the Securities Commission, the National Customs Agency, and the Republic of Serbia Gambling Authority. 

4. Who are the obliged/reporting entities in your jurisdiction? Are there any local derogations from the scope of the obliged entities as provided for in the 4th and 5th AML Directives? 

Under the AML Act, a large number of entities have this duty and they include banks, financial institutions, payment services providers, insurance companies and intermediaries. In this regard, the entirety of the full scope of the obliged entities is covered, but in Serbia, the scope of the obliged entities under the AML Directives is extended to also include attorneys when they assist in certain types of transactions. 

The KYC requirements in the AML Act follow the requirements of the 4th and 5th AML Directives.

The AML Act obliges reporting entities to acquire information regarding the UBO’s of their clients (customers). The UBO Act governs the establishment, content, bases of recording and manner of keeping the Central Register of beneficial owners of legal entities and other entities registered in the Republic of Serbia. The UBO Act provides a general obligation on all entities to disclose their UBOs to the Central Registry. 

6. Is there any legislation in your country allowing for online/digital onboarding of customers? What are the restrictions, if any?

Yes, the legislation in various sectors, such as the banking sector, allows for the digital onboarding of customers, provided that the requirements for customer identification and customer verification under the AML Act are observed. Still, this method of onboarding of customers is not widely used in practice, and so far only a handful of obliged entities have adopted full online onboarding of customers, while many more are frequently using digital tools to make the onboarding of customers user friendly and save time.

7. What are the other main obligations of the reporting entities? Do the obligations of some of them go beyond those required by the 4th and 5th AML Directives in terms of internal safeguards, KYC duties, reporting obligations, etc.?

The reporting entities’ obligations under the AML and CTF Act follow the 4th and 5th AML Directives. These include customer due diligence (CDD), the collection and storage of information and documents; an assessment of the risk of money laundering and terrorist financing, and the disclosure of information on suspicious operations, transactions and customers. There are no obligations that go beyond the scope of the AML Directives.

8. Is a National Risk Assessment adopted in your jurisdiction? If yes, what are the main identified risks?

Yes, a National Risk Assessment for Money Laundering and Terrorist Financing (the “NRA”) was adopted on 31 May 2018 in Serbia. Based on this risk assessment, Serbia has adopted the Strategy and the Action plan for implementing the Strategy for the Fight against Money Laundering and Financing of Terrorism, 2020–2022. These documents provide a strategy and useful measures for monitoring and limiting the risks of money laundering and financing terrorism.

The NRA provides a strategy and useful measures for monitoring and limiting the risks of money laundering and terrorist financing. The sectors that are most exposed to money laundering threats are the real estate sector, the organisation of games and the banking sector, followed by the exchange office, casinos and accountants.

9. What are the main CTF measures in your country?

The only measures provided under the AML and CTF Act relate to KYC, and include a prohibition on providing financial services, funds and other financial assets and economic resources if these cannot be carried out properly. 

Following suspicious activity, the Administration must be notified and will carry out an investigation or monitor the subject.

10. What are the criminal and/or regulatory and/or other risks for corporate bodies/directors/employees under your national law if failing to comply with AML/CTF legislation? Is there regular enforcement of the AML/CTF legislation in your country?

The Serbian Criminal Code recognises both money laundering and financing terrorism as standalone criminal offences. Predicate crimes that are committed either in or outside Serbia can support a money laundering charge brought in Serbia. 

The penalties prescribed in the Criminal Code for money laundering are:

  • imprisonment for a period of six months up to 12 years depending on the sum of the laundered money and circumstances, as well as a fine;
  • the funds which were laundered will be confiscated.

The penalties prescribed in the Criminal Code for financing terrorism are:

  • imprisonment from one to ten years and the funds used to fund terrorism will be confiscated.

Legal entities can, in principle, bear criminal liability under Serbian law. Namely, the Responsibility of Legal Entities Act states that if a legal entity has enriched itself through the proceeds of a crime committed by an employee or a director, the legal entity can be sanctioned with a fine. This fine ranges from RSD 100,000 (EUR 850) up to RSD 500,000,000 (EUR 4,250,000) and will depend on the jail time prescribed for the criminal offence committed by the employee or director.

The AML Act provides a range of sanctions for non-compliance with the key requirements, such as customer checks, record-keeping, and suspicious transaction reporting. The sanctions take the form of fines and penalties which vary depending on the type of the infringement and range from RSD 50,000 (EUR 425) to RSD 3,000,000 (EUR 25,500), for the legal entity and RSD 10,000 (EUR 85) to RSD 200,000 (EUR 1700) for the responsible person.

Banks and other special categories of obliged entities are fined in accordance with the Banks Act.

Further, the Registry Agency as administrator of the Central UBO Register may also impose fines for non-compliance.

The number of prosecutions, convictions and administrative sanctions has increased in recent years.  

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Radivoje Petrikić
Partner
Vienna
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Milica Popović
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Belgrade