Standard Summary Project Fiche
1. Basic Information
1.1 Twinning n° AL 04 IB JH 04
1.2 Title Tackling Money Laundering and Financial Crime[1]
1.3 Location Albania
2. Objectives
2.1 Overall Objective(s): To strengthen the capacities of institutions responsible for tackling money laundering and financial crime and to improve inter-agency collaboration in these areas.
2.2 Project Purpose: To improve the functional capabilities of the Financial Intelligence Unit (FIU) and provide training and practical assistance to those responsible for the investigation of financial crime.
Specific Purpose
Working primarily, but not exclusively with the FIU and the Economic Crime and Corruption Joint Investigation Unit, the project will:
a) Improve inter agency cooperation and information flow between the FIU and other law enforcement agencies and the financial sector by establishing and implementing common guidelines and working procedures;
b) Assist the Government of Albania (GoA) in meeting the MONEYVAL’s recommended action plan to improve the Anti Money Laundering and Counter Terrorist Financing (AML/CFT) system by overseeing and mentoring the development of the FIU and its staff;
c) Provide those responsible for the investigation of financial crimes with the necessary skills to carry out their tasks and undertake complex financial investigations;
d) Develop a costed medium and long-term strategy and work plan for the expansion and development of financial crime investigation for the GoA.
2.3 Accession Partnership and NPAA Priority
The Stabilisation and Association Agreement (SAA) was signed between Albania and the EU on 12th June 2006. Article 78 of the agreement places importance on the consolidation of the rule of law and the reinforcement of institutions at all levels and law enforcement and the administration of justice in particular. It stresses that co-operation should aim at improving the functioning of the police and other law enforcement bodies, providing adequate training and fighting corruption and organised crime. Article 85 specifically refers to the need to cooperate to prevent the use of financial systems for laundering the proceeds of crime and encourages administrative and technical assistance in this regard.
The European Commission’s European (Accession) Partnership document of 30th January 2006 sets out the following relevant priorities:
a) Achieve improved concrete results in the fight against organised crime, in particular by making full use of the provisions of the new organised-crime laws and accelerating the implementation of the action-oriented measures against organised crime;
b) Implement and update the 2004 to 2005 anti-corruption action plan and the recommendations of the Council of Europe's Group of States against corruption (GRECO) evaluation reports;
c) Improve coordination between prosecutors and police;
d) Adopt the necessary legislation to harmonise the Albanian legal framework with European Conventions on Corruption (in criminal and civil matters) ratified by Albania as well as the relevant UN Conventions;
e) Improve the existing legislation on bribery and implement it with due regard for inter-ministerial coordination;
f) Ensure enforcement of the Law on Declaration of Assets;
g) Strengthen the institutional capacity to investigate and prosecute corruption;
h) Ensure that the Specialised Unit attached to the Tirana Prosecution Office (dealing with financial crimes) also covers corruption cases;
i) Reduce the grey economy by effective and non-discriminatory enforcement of tax legislation and intensifying the fight against fiscal fraud;
j) Strengthen the legal and supervisory framework for the banking and insurance sectors, including the establishment of independent and properly-staffed supervisory authorities;
k) Improve the prudential monitoring of the financial sector;
l) Take further measures to reduce the use of cash in the economy;
m) Take urgent measures for better enforcement of anti-money laundering legislation in terms of convictions, confiscations, seizures and the freezing of assets;
n) Enhance the capacity of the Financial Intelligence Unit, the prosecutor's offices and the police Economic Crimes Unit by ensuring the provision of appropriate financial and IT resources and improving working-level cooperation;
o) Ensure the EU compliance of the current Law on the Prevention of Money Laundering;
p) Further improve cooperation with the authorities of other countries, in particular by using the Regional Financial Intelligence Network more actively;
q) Ensure proper enforcement of reporting obligations and examine transaction reporting thresholds;
r) Define more precisely the respective responsibilities of the various state bodies involved in the fight against organised crime and terrorism, and take measures to enhance cooperation, in particular between the judicial authorities and the police;
s) Take further measures to establish coherent and coordinated intelligence gathering and processing systems.
The Government of Albania’s National Action Plan for the Implementation of the European Partnership Priorities makes the following commitments regarding Money Laundering and Financial Crime:
The Albanian Government is fully involved in strengthening the fight against money laundering originating from illegal trafficking and terrorism and in decriminalising the country’s economic activity. Therefore, it aims to increase in-country economic and legal credibility levels. Strengthening this field’s capacities will be a huge focus for the Government, in order to achieve significant and concrete results.
Therefore, the Albanian Government will increase regional cooperation, particularly on money laundering matters. In addition, it will cooperate with other countries so as to prevent the use of their financial systems for criminal proceeds in general and, in particular, their use to finance terrorism.
This field’s cooperation will be based upon the implementation of the appropriate standards and mechanisms in the fight against money laundering and terrorism financing, focusing in particular on the European Union and other international institution standards.
2.4 Contribution to National Development Plan
The national development plan makes reference to stepping up the fight against money laundering and financial crime and improving infrastructure and capacity in this regard. This project will contribute to this plan, specifically by:
a) Increasing the skill levels of those involved in prosecuting financial crime;
b) Developing the FIU to allow it to begin to fulfil its function;
c) Assisting in the development of a national strategy and action plan;
d) Provide for clearer distinction of responsibilities between agencies and improved information flow;
e) Improve regional cooperation in the tackling of financial crime and money laundering.
2.5 Cross Border Impact
A significant proportion of Albania’s national wealth is derived from money remitted from abroad. Some estimates put it as high as 40% of the economy. It is clear that while much of this money will be lawfully earned by migrant workers (although may not be properly taxed either in the originating country or Albania) a significant proportion will be of the proceeds of crime committed elsewhere. At present, foreign investigations that seek to ‘follow the money’ with a view to sequestering the proceeds of crime find that too frequently their investigation cannot progress when it is discovered that proceeds have been transferred to Albania, either due to institutional reluctance or lack of capacity to assist such investigations. This project will develop the capacity to trace money and conduct financial investigations. This will have a knock on benefit for foreign jurisdictions who should receive a higher quality response to their requests for assistance.
Similarly the FIU has formalised responsibility to share and transmit information with other FIUs worldwide. Presently the FIU is in practice, non-functioning (see below), meaning they are unable to provide an even basic service to other FIU’s. This project will develop the FIU so that it can begin to fulfil its purpose, this will allow the Unit to begin to provide adequate responses to requests for information from abroad.
3. Description
3.1 Background/Justification
Albania was a communist dictatorship until 1991 when the collapse of the regime heralded the transition towards modern democracy. The 1990s were troubled by political instability, financial insecurity, poverty and mass migration. In 1997 the country descended into civil unrest after the collapse of pyramid schemes, it has taken several years for Albania to emerge from these difficult times but Albania is now at a point where a SAA agreement has been signed with the EU and membership of the Union is the clear goal for the country.
An outcome of the mass migration that has been part of Albania’s recent history is that large sums of money are wired or otherwise transported back to the country in many different forms by the diaspora. A significant proportion of this money is the proceeds of criminal acts committed elsewhere. In addition, criminal activity originating from Albania itself also feeds the illegal economy.
There has been progress in recent years in developing the financial sector, commercial banking has grown, greatly assisted by the expansion of the presence of foreign banks in the country, despite this a large number - probably the majority - of transactions are made outside the formal banking system. Albania also has created and developed a number of institutions to help regulate the financial systems. Amongst them there is a State Audit Office, an Institute for the Declaration of Assets, a Securities Commission and a number of other oversight authorities such as for insurance and casinos. It is fair to say that the quality of these institutions varies greatly and none have yet achieved a fully satisfactory standard and - together with the rest of the public administration - they suffer from a high level of politicisation. Positions within them are awarded in many cases as a result of patronage rather than on the basis of expertise in the required field.
The primary institution responsible for tackling money laundering is the Ministry of Finance’s General Directorate of Money Laundering, Financial Intelligence Unit. This was set up in 2000 when the new law on Money Laundering was established. This law was further amended in 2004. The FIU has never functioned properly and the number of cases it has referred to the Prosecution office since its creation is extremely low, precise figures are hard to pin down but official statistics refer to 24 case referrals. The transfer of cases from the FIU to the prosecutor is beset by difficulties. Prosecutors tend to expect a ‘prosecution ready’ case from the FIU as they don’t fully comprehend its role. Staff in the FIU have two primary functions, inspection (ensuring adequate reporting by reporting bodies) and analysis (analyse CTR & STRs to detect suspicious patterns and referrals for investigation. Staffs are not sufficiently trained to properly carry out these important functions. There has never been a sanction against a reporting subject for failing to report.
In addition, the FIU has very limited IT infrastructure, so limited that it is in reality totally reliant on paper based systems. It currently receives more than six thousand reports a month from the banks, who in effect are the only subjects who report, despite the legal requirements for many others, such casinos, attorneys and notaries to do so. It simply is unable to carry out any meaningful analysis of that number of hard copy reports. If, as seem possible a review of the law currently underway, which has been assisted by the IMF, recommends a lowering of the mandatory reporting threshold from its current, very high level of $200,000 USD the FIU’s system will break down even further as the number of hard copy reports will become totally unmanageable. The current head of the FIU is keen to address the problems that beset his unit at present though he lacks the specialist knowledge not having worked in an FIU prior to taking up his post in October 2006.
In terms of investigation and prosecution, the key institutions are the Albanian State Police and General Prosecutors Office. The Albanian State Police’s Organised Crime Directorate has about 80 investigators to deal with financial crime across the country. Since 2005 a unit has existed within the Tirana District Prosecution Office (which is the largest of the 26 prosecution offices nationwide) to tackle Economic Crime and Corruption. However, due to a lack of resources and above all, training this unit has not performed as well as hoped.
The primary problems preventing the Albanian State in properly tackling money laundering and financial crimes are:
a) A lack of specific expertise in the financial issues related to money laundering and the financial source of crimes, coupled with a lack of understanding of the principles, scope and depth of money laundering and financial crime;
b) Inadequate cooperation among the institutions involved in tackling money laundering and financial crime;
c) Inadequate technological support;
d) Lack of experience in carrying out complex financial investigations;
e) The weakness of current proceeds of crime seizure and confiscation measures and a lack of implementation procedures on asset forfeiture and confiscation.
However, the Government of Albania has emphasized its commitment to tackle money laundering and financial crime. A symbol of this commitment was made on 23rd September 2005 when the Minister of Interior, together with relevant ministers from BiH, Croatia, FYROM, Serbia and UNMIK signed a joint declaration on the Island of Brijuni, Croatia (the Brijuni Declaration) committing themselves to building upon the London Statement of 2002 by defining certain joint actions with regard to tackling Organised Crime. The Ministers committed themselves to implementing the Regional Strategy developed by the working groups and experts of the Joint Council of Europe and European Commission CARPO Project. This document defined a detailed action plan based upon actions to be undertaken by all countries as well as country specific actions. Specific recommendations were made with regard to the development of financial investigations.
A number of activities are underway to assist the GoA in its efforts. International partners are currently assisting in reshaping the unit within the Tirana Prosecutors Office into a structure that should allow for better investigation. It is anticipated that in the first quarter of 2007, a joint order between Ministry of Finance, The General Prosecutors Office and the Ministry of Interior (Albanian State Police) will be signed establishing a new structure for the Unit and giving it more clearly defined responsibilities. Despite this, when formed, staff of the unit will not have the skills necessary to carry out financial investigations
Funds are available under CARDS 2004 to purchase IT hardware and software for the FIU, this should allow for the creation of a large database to which reports submitted via hard and e-copy can be entered and then analysed.