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Albania

Author(s):
International Monetary Fund
Published Date:
July 2011
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1. GENERAL

1.1. General Information on Albania

33. Albania is a parliamentary democracy. The Council of Ministers is proposed by the prime minister, nominated by the president and approved by parliament. Its legislative branch consists of a unicameral Assembly (the Kuvendi). Its Constitution was promulgated on November 28, 1998. Albania has a civil law system and has accepted the jurisdiction of the International Criminal Court of its citizens.

34. Albania borders the Adriatic Sea to the West across which is Italy. It shares land borders with Montenegro, Kosovo, Macedonia and Greece. The capital and seat of government is Tirana. Albania is a smaller European country with 3 million citizens living on 28,748 sq km. Albania joined NATO in 2009. European integration continues to be a priority of the Albanian Government with the harmonization of legislation, institutional developments as well as economic reforms being implemented to this end. The official currency of Albania is the Lek.

35. Although Albania’s economy continues to grow, the country is still one of the poorest in Europe, hampered by a large informal economy. According to Albanian estimates, the informal economy represents over 30% of the economy of the country. Only 25-30% of transactions pass through the formal banking system.

36. Albania had a Gross National Product of US$23.12 billion in 2009. Macroeconomic growth in Albania averaged around 6% between 2004-08, but declined to about 4% in 2009. Inflation is low and stable and the government has recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment.

37. Private sector activity benefited from strong, albeit slowing, credit growth, and from improved stability of the energy supply. The international financial and economic crisis has resulted in lower demand for Albanian exports, a fall in net inflows of monetary transfers in the form of remittances, and a marked slowdown in credit growth. Per capita GDP in purchasing power parities was estimated at 25% of the EU-27 average in 2008, up from 24% in 2007. Overall, the Albanian economy continued to grow, albeit at a slower pace.

38. The current account deficit widened in 2008 to 14.5% of GDP, up from 10.5% of GDP in 2007, reflecting a further deterioration of the trade deficit and a decline of remittances. The trade deficit in 2008 increased to 27.2% of GDP from 26.5% of GDP in 2007. Partly due to the massive public road works, imports of capital goods increased by 29% as compared to 2007. Consumption goods imports decreased by 6% in 2008. Albanian exports continued to show strong dependency on apparel industries, which accounted for 43% of total exports.

39. Remittances were down by 16% in 2008 compared to 2007, amounting to 9.2% of GDP, partly reflecting the impact of the global financial crisis as well as the declining trend observed over the past years. Latest data for the second quarter 2009 point to a further decrease of remittances of 4% compared to the same period in 2008.

1.2. General Situation of Money Laundering and Financing of Terrorism

1.2.1. Predicate offences

40. Albanian authorities indicate that drugs trafficking, human being and arms trafficking, and corruption are the main predicate offences that generate proceeds in Albania. Albania has also a history of organized crime, with clan-based and hierarchically organized networks which make them difficult to infiltrate3. Organized criminal groups use Albania as a base of operations to conduct criminal activities in other countries4 (predominantly in the United States and also, according to Albanian criminal investigators, in European countries, such as Greece, Italy, Spain and the United Kingdom). Anecdotal evidence suggests that trafficking in stolen cars is another common proceeds-generating offence.

41. Due to its geographic position, Albania continues to be used by drug traffickers as a transit country. Albania is also a producer of cannabis. Despite eradication programs that have resulted in a reduction of cannabis cultivation, such cultivation persists in various regions of the country. According to the authorities, no laboratories for the production of synthetic drugs have ever been discovered in Albania, and the trade in synthetic drugs remains virtually non-existent. In 2005, the Albanian Government outlawed the circulation of speedboats and several other varieties of water vessels on all Albanian territorial coastal waters for a period of three years. This has has slowed the movement of drugs by smaller waterborne vessels.

42. Albanian organized crime networks are involved in several European heroin markets especially those based in Greece, Italy and Switzerland. According to World Customs Organization seizure statistics, between 2000 and 2008, Albanians made up the single largest group (32%) of all arrestees for heroin trafficking in Italy which according to the UNODC is one of the most important heroin markets in Europe. Albania ranks 87th in Transparency International’s 2010 Corruption Perception Index. Corruption is a major problem that Albanian authorities confront. Anecdotal evidence and an assessment by the European Commission5 suggest that corruption of the judiciary hinders the ability to successfully prosecute criminal activity.

43. The table below contains statistics provided by the authorities on the offences that are major sources of illegal proceeds in Albania:

Offences that are Major Sources of Illegal Proceeds
Type of CrimeYearRegistered crimeConcluded

investigation
Persons charged
Drug related crimes2006453341559
2007524314501
2008701454688
2009647397568
Jan-Aug477373595
2010
Robbery200616499169
200712390144
200814490140
200916989156
Jan- Jun1055587
2010
Customs & tax crimes2006187167230
2007393379457
2008229219264
2009192186238
Jan- Jun219218284
2010
Theft through abuse of office2006262659
2007232032
2008363468
2009272239
Jan- Jun232330
2010
Fraud2006171153170
2007254191220
2008429409467
2009288281335
Jan-Aug261254297
2010
Circulating falsified currency2006504762
2007393336
2008352949
20098270105
Jan- Jun7770102
2010

1.2.2. Money Laundering

44. The major vulnerabilities to ML in Albania are the large, cash-based informal economy (which facilitates the laundering and integration of proceeds of crime, especially in the real estate sector and in commercial undertakings) and the cross border transportation of cash and its further assimilation into the economy and Albania’s financial system). Despite authorities’ efforts and the existence of licensing/registration requirements, there remain a number of sectors that are identified with illegal businesses or practices, such as the “cambiste” (illegal exchange bureaus). The national casino is seen as being particularly vulnerable to money laundering. It has historically low compliance levels with AML/CFT requirements and the FIU recommended that its license be revoked. The high risk assessment for this sector is also due to a concern expressed by the authorities that underground casinos and games of chance operate within Albania. Criminal organization involvement in the operating gaming halls has also been documented.

45. Albania’s ports on the Adriatic and its rugged borders make it an attractive stop on the smuggling route for traffickers that are moving shipments into Western Europe. The digitization of border crossing points through installation of a Total Information Management System (TIMS) has led to improved surveillance and information management and has enhanced considerably the work of the Border and Migration Police. However, despite improvements in the implementation of the SR IX-related requirements, crossborder transportation of cash remains high and poses asignificant risk of ML.

46. Albanian authorities reported that methods actually used by criminal organizations for ML, as revealed by investigations are:

  • Transactions within the financial sector;
  • Opening of bank accounts in the name of social and family ties;
  • Purchasing or entering into partnerships in legal businesses (commercial companies, construction, services, transportation etc);
  • Opening of offshore companies;
  • Purchasing immovable properties (land, apartments, hotels, restaurants, gas stations etc);
  • Commission of criminal activity outside of the territory of Albania, and laundering some of the proceeds obtained from this activity in Albania.

47. Authorities also report that, based upon their analysis of ML trends and techniques, the most common ML schemes are:

  • Injection of illicit income into business activities;
  • Purchase of real estate;
  • Acquisition of luxurious goods; and
  • Structured transactions, where the purpose is to conceal the source of funds and the actual beneficiaries.

48. As for the types of financial institutions, DNFBP or other businesses that are used in ML activities, authorities indicated that the ML schemes are realized mainly through the banking system. There are also attempts to use gatekeepers such as notaries, lawyers and accountants to conceal the illegal origin of funds.

49. Real estate agents and the use of business undertakings are also identified as potentially vulnerable to attempts to launder illegal proceeds. Anecdotal evidence draws a link between new construction activity and proceeds of crime. Industry representatives have expressed concerns that some jewelers operate in the black market. It is believed that the use of cash in these black market operations is prevalent and that these operations are more vulnerable to ML.

50. The following are statistics provided by the Prosecutor’s Office on ML penal proceedings at the investigative and trial stages:

Year

CC 287

Number ML

Investigations/

Prosecutions
20062007200820092010

(to Oct.1)
Cases Registered/

No. of suspects or

defendants
2

(0 suspects)
2

(2 dfndts)
13

(5 dfndts)
41

(5 dfndts)
42

(3 suspects)
Matters sent for

trial
013 (4 dfndts)1 (1 dfndt)0
Matters with

investigation

terminated
3111617
Matters suspended2
Proceedings in

which conviction

obtained and

sentence issued
01

(1 dfndt)
1

(1 dfndt)
1

(1 dfndt)
1

(1 dfndt)
Cases Registered/

No. of suspects or

defendants
03

(2 dfndts)
10

(10 dfndts)
9

(12 dfndts)
2

(5 dfndts)
Matters sent for

trial
014104
Matters with

investigation

terminated
0111
Matters suspended1
Proceedings in which conviction obtained and sentence issued01

(3 dfndts)
1

(3 dfndts)
10

(12 dfndts)
1

(2 dfndts)

51. Although the number of investigations for ML is increasing (for instance, in 2009, 50 such investigations were opened), actual results thus far are quite limited. The Prosecutor’s Office has reported that for matters under the basic ML criminal provision (Article 287), since 2006 only four cases have been sent to court. A conviction was obtained in each case – one in each year 2007 through 2010. There have been 20 defendants convicted in 13 cases that were initiated under Article 287/b which relates to acquisition, possession or use of stolen goods. This is a very low number, particularly considering the stolen cars black market.

52. The statistics above are low also considering the fact that organized criminal groups are active in Albania and that Albanian nationals that are part of such groups but operate elsewhere return proceeds to Albania. In addition, the risk for the laundering of proceeds is enhanced because of the relatively high levels of drug transit and considerable level of production, corruption and trafficking in human beings that occur in Albania.

1.2.3. Terrorism and Terrorist Financing

53. There have been no cases of FT since the last mutual evaluation. There has been one case relating to the concealment of funds. In January 2008, a criminal trial commenced in Albania against Hamzeh Abu Rayyan on charges of concealing funds used to finance terrorism. In 2009 he was convicted of violating Article 230/b of the Criminal Code for his activities in administering funds for a person on the UNSCR list, Yassin al-Kadi. Authorities await a decision of the High Court in order to execute the decision of the Court of Appeals in this case. The sentence imposed was four years imprisonment and a fine of lek 600,000.

54. Statistics provided by the prosecutor’s office indicate there have been only a few investigations in the period 2007 – 2009 as set forth in the chart below, and one conviction.

Prosecutorial-Led FT Investigations and Court Proceedings under Criminal Code 230 and 230/a -2007 - 2009
Year200720082009
Number Registered in Year111
Total under Investigation4*3**3***
Of those Dismissed113
Of those Pending End Year220
To Court100
Convicted001

2007 – Three investigations transferred from 2006. One of those was dismissed.

2008 – Includes two investigations transferred from 2007. All three investigations closed without charging (dismissed).

2009 – Includes one proceeding transferred from 2008.

2007 – Three investigations transferred from 2006. One of those was dismissed.

2008 – Includes two investigations transferred from 2007. All three investigations closed without charging (dismissed).

2009 – Includes one proceeding transferred from 2008.

55. However, with a history in the first half of the 2000s of the government freezing assets of terrorist financiers, curtailing activities of suspect Islamic NPOs, and expelling individuals suspected of having links to terrorism and the historical backdrop after the 1991 fall of the Communist regime of in-country activities by some Al Qaeda operatives and the presence of Islamic non-governmental organizations (some of them fronts for Al Qaeda-linked activities), Albania remains at risk regarding possible financing of terrorism activities.

56. The authorities appear vigilant regarding the presence of these risks, but they have thus far not been able to develop actionable criminal cases relating to terrorism other than the one indicated above.

57. In this context, the lack of progress in the area of NPO and the shortcomings identified with regard to NPOs, constitute a potential vulnerability for terrorism and terrorist financing.

1.3. Overview of the Financial Sector

58. The Albanian financial system comprises of 16 banks (with 530 branches), 17 non-bank financial instititions including leasing companies and money remitters (two of which operate money transfer services affiliated to Western Union and Money Gram) and 283 bureaux de change. There are also two Savings and Credit Associations and 135 Savings and Credit Unions. All of these insititutions are licensed by Bank of Albania (BoA).

59. Although Tirana has a stock exhange, it is not currently operational as there are no companies listed on it. There is an over-the-counter market in govenment bonds, where prices in both the primary and secondary markets are set by the Government Securities Retail market platform. The main market participants are the larger banks.

60. The insurance sector in Albania is dominated by general insurance, with estimates of less than 10% of business by premium being in the life/investment sector. There are ten insurance companies operating, of which seven are non-life insurance companies, two are life insurance companies, and one is a combined life and non-life insurance company. Companies in both the insurance and securities industries are regulated by the Financial Supervisory Authority.

61. The following table sets out the types of financial institutions that can engage in the financial activities that are within the definition of “financial institutions” in the FATF 40+9:

Type of financial activity

(See glossary of the 40

Recommendations)
Type of financial institution that

performs this activity
AML/CFT regulator &

supervisor

In addition to the FIU
1. Acceptance of deposits and other repayable funds from the public (including private banking)1. Banks6

2. Saving and credit companies and their unions
1. BoA
2. Lending (including consumer credit; mortgage credit; factoring, with or without recourse; and finance of commercial transactions (including forfeiting)1. Banks

2. Non-bank financial institutions7
1. BoA

2. BoA
3. Financial leasing (other than financial leasing arrangements in relation to consumer products)1. Banks

2. Non-bank financial institutions (Leasing companies)
1. BoA

2. BoA
4. The transfer of money or value, including financial activity in both the formal or informal sector (e.g. alternative remittance activity), but not including any natural or legal person that provides financial institutions solely with message or other support systems for transmitting funds)1. Banks

2. Non-bank financial institutions (Money remitters)

3. Postal services that perform payment services
1. BoA

2. BoA

3. BoA
5. Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller’s cheques, money orders, and bankers’ drafts, electronic money)1. Banks

[2. Any other physical/legal entity that issues/manages payments]8
1. BoA

[2. Financial Supervisory Authority (FSA)]
6. Financial guarantees and commitments1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
7. Trading in:

(a) money market instruments (cheques, bills, CDs, derivatives etc.;
1. Banks

2. (b) Foreign Exchange Offices

3. Stock exchange/broker/agents
1. BoA

2. BoA

3. FSA
(b) foreign exchange;

(c) exchange, interest rate and index instruments;

(d) transferable securities;

(e) commodity futures trading
8. Participation in securities issues and the provision of financial services related to such issues1. Banks

2. Stock exchange/brokers/dealers
1. BoA

2. FSA
9. Individual and collective portfolio management1. Banks

2. Stock exchange/brokers/dealers
1. BoA

2. FSA
10. Safekeeping and administration of cash or liquid securities on behalf of other persons1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
11. Otherwise investing, administering or managing funds or money on behalf of other persons1. Banks1. BoA
12. Underwriting and placement of life insurance and other investment related insurance (including insurance undertakings and to insurance intermediaries (agents and brokers))1. Life insurance companies/agents/intermediaries/pension funds1. FSA
13. Money and currency changing1. Banks

2. Foreign exchange offices
1. BoA

2. BoA

62. The following table contains the list of subjects licensed by Bank of Albania since 2005:

Subjects200520062007200820092010
1Banks and foreign branches171716161616
2Non-bank financial institutions76671313
3Foreign exchange bureaus5860112189221283
4Savings and Credit Associations131125130133135135
5Savings and Credit Associations Unions222222

63. The banking sector dominates financial activity in Albania. At the end of 2009, the total number of branches and agencies (within and outside the territory of the Republic of Albania) reached 530, as represented individually for each bank in the table below:

Banks operating in

Albania
No. of branches

within Albania
No. of agenciesNo. of branches

outside Albania
No. of

branches in

total
Bank 1102102
Bank 22729258
Bank 3426
Bank 488
Bank 543447
Bank 652530
Bank 788
Bank 84848
Bank 91914437
Bank 10301545
Bank 11131023
Bank 12213
Bank 1327633
Bank 144242
Bank 15151631
Bank 16549
Total3981266530

64. The size of banks in terms of balance sheets, shareholder’s equity, loans, investments in state obligations and securities as well as total deposits is shown in the following table:

Banks

operating in

Albania
Total of

balance sheet

(In %)
Shareholders

equity

(In %)
Total loan

(In %)
Treasury

bills

(In %)
Securities

(In %)
Total

deposits

(In %)
Bank 128.2825.920.027.954.829.6
Bank 214.49.610.822.212.916.1
Bank 30.51.20.50.00.00.5
Bank 40.72.00.80.10.00.6
Bank 59.512.912.913.41.58.0
Bank 64.84.78.72.40.23.3
Bank 70.81.60.50.90.70.6
Bank 87.38.810.34.81.37.4
Bank 913.013.011.112.220.814.0
Bank 104.73.64.75.01.14.9
Bank 113.33.76.10.70.01.6
Bank 120.21.40.10.00.00.1
Bank 135.74.37.01.41.06.2
Bank 144.33.94.16.94.04.6
Bank 151.92.22.21.70.11.8
Bank 160.71.40.40.41.50.7
Total100.0100.0100.0100.0100.0100.0

65. None of the banks in Albania are wholly funded by Albanian capital, with Austria, Italy, France, and Greece being the countries where the largest shareholders are based.

66. Albania continues to be a largely cash-based economy, with the financial sector growing slowly.

1.4. Overview of the DNFBP Sector

67. All DNFBP categories outlined by the standard have AML/CFT obligations in Albania. The categories of DNFBPs, as defined in the AML/CFT Law are real estate agents and evaluators of immovable property; public notaries, attorneys, and other legal representatives; independent public accountants, independent certified accountants and financial consulting offices; dealers in precious metals and stones; entities engaged in the administration of third parties’ assets, and gaming, casinos and hippodromes, of any kind.

68. The following table outlines the number of entities identified by authorities in each DNFBP sector.

DNFBPNumber of licensed entitiesSupervisory Body
Notaries308Ministry of Justice
Attorneys (Advocates)Approximately 4000 Lawyers



57 Legal firms
The National Chamber of Advocates of the Republic of Albania
Independent auditors and auditing firms157GDPML*
Independent accountants and accounting firmsMore than 2,000GDPML*
Persons and casinos organizing prize games including persons organizing internet prize games1 casino



12 games of chance
Gaming Commission
Real estate agents/agencies42GDPML*
Trusts; legal person registration service providersNo trust in existence in Albania; the number of company formation agents unknownNo designated supervisor
Dealers in precious metals; dealers in precious stonesUnknownGDPML*

Although the GDPML has not been specifically designated as the supervisory authority for these sectors it has undertaken examinations in these sectors. Refer to Recommendation 24 for a detailed analysis of DNFBP supervision.

Although the GDPML has not been specifically designated as the supervisory authority for these sectors it has undertaken examinations in these sectors. Refer to Recommendation 24 for a detailed analysis of DNFBP supervision.

69. Trust and Company Services Providers – Trusts do not currently exist in Albania however some company formation services such as acting as the formation agent of legal persons, providing a registered office, business address or accommodation for companies are offered by lawyers, notaries and accountants. The AML/CFT Law does extend obligations to individuals or legal entities that engage in the administration of third parties’ assets/managing the activities related to them in the event that TCSP activities are undertaken in Albania. Based on meetings with industry and the authorities the provision of company formation services is not prevalent in Albania. The limited use of these services and the requirement to register with the National Registration Centre limits the ML risk of these activities.

70. Casinos, games of chance – Currently there is one casino operating in the territory of the Republic of Albania and 12 operators of games of chance that provide access to slot machines. All of the entities are licensed and supervised by the SUGC. The money laundering risk of the gambling industry is considered high by the FIU. The national casino is seen as being particularly vulnerable to money laundering with historically low compliance levels with AML/CFT requirements resulting in the FIU recommending that the casino’s license be revoked. This high risk assessment is also due to concerns by the authorities that underground casinos and games of chance are operating in Albania. Criminal organization involvement in the running of gaming halls has also been documented.

71. Real Estate Agents – The AML Law covers the residential and commercial real estate sectors as well a construction companies. Less than 8% of real estate transactions are conducted through real estate agents as the majority are private transactions. All real estate transactions must be notarized and subsequently registered with the Central Office for the Registration of Immovable Property that performs the registration of property rights in the Republic of Albania. The GDPML is responsible for AML/CFT supervision of the real estate sector. Many industry representatives consider the real estate sector as high risk for ML. Use of cash is very common in real estate transactions. Anecdotal evidence draws a link between new construction activity and proceeds of crime.

72. Compared to what appears to be higher risks in the overall real estate industry, transactions facilitated by real estate agents may be of slightly lower risk. Real estate representatives met during the assessment indicated that the value of most real estate transactions was below the non-cash reporting threshold of lek 6,000,000 and that most real estate transactions are not facilitated by real estate agents. It should be noted that given the recent economic downturn, growth in the number of real estate agents could be stagnating given difficulties in facilitating sales in the current market and the relatively modest commissions (1-3% of sale price). The GDPML considers both the real estate agents and construction companies at medium risk of being used for ML.

73. Accountants, accounting, and auditing firms – There are currently 131 certified accountants, six foreign auditors and 20 accounting firms. There are also more than 2000 independent accountants that provide various accounting services to domestic and foreign companies operating in Albania. The AML/CFT Law specifically applies to public accountants, independent certified accountants as well as financial consulting offices. The GDPML supervises the accounting sector for AML/CFT purposes. Accountants and auditors are covered for all their activities including activities that are not outlined in Recommendation 12. The entities met during the assessment provided a wide range of services including auditing, accounting and book keeping services, tax consultation as well as involvement in facilitating mergers and acquisitions. More limited activities were conducted related to company formation and management of assets. The GDPML considers their activity as low to medium risk.

74. Lawyers – Advocates are organized in Chambers which are established by the National Chamber of Advocates. The detailed rules on the legal profession practice in accordance with the law are determined in the Charter and “Ethics Code of Advocates” approved by the General Council of the National Chamber of Advocates. The National Chamber of Advocates and the Ministry of Justice keep the register of all advocates and administer the relevant documentation concerning the right to practice the legal profession. The Ministry of Justice is responsible for ensuring that the legal profession is exercised normally and in compliance with the law. The National Chamber of Advocates is a legal entity that carries out its activity independently from the state and is responsible for the regulation and control of the exercise of legal professions in the Republic of Albania. The total number of lawyers is approximately 4000. The Chamber of Advocates supervises advocates for AML/CFT purposes.

75. Attorneys, public notaries, and other legal representatives trigger AML/CFT obligations when they prepare for or carry out transactions for a client in relation to the following activities (for values equal or above to lek 1.5 million or ~ US$15,000):

  • - transfer of immovable properties, administration of money, securities and other assets;
  • - administration of bank accounts;
  • - administration of capital shares to be used for the foundation, operation or administration of commercial companies;
  • - foundation, functioning or administration of legal entities;
  • - legal agreements, securities or capital shares transactions and the transfer of commercial activities.

76. Lawyers are involved in the creation and operation of companies and legal persons, the buying and selling of business entities, and providing a registered office and business address for newly established companies. They are also at times involved in real estate transactions and management of client’s assets. The GDPML considers the sector medium risk of being used for ML.

77. Notaries – Notaries are professionally organized at the local level through the notary chambers functioning in one or more judicial districts and at the national level through the National Chamber of Notary. The local notary chamber comprises all the notaries appointed to exercise their activity under its jurisdiction. The general number of notaries exercising their activity in the Republic of Albania is proportionate to the general number of population. The Minister of Justice determines every two years the general number of notaries for each judicial district and the relative coverage for each municipality and nearby commune. The Ministry of Justice and the National Chamber of Notary, separately, keep registers for notaries and assistants and administer the documentation related to the granting and revoking of the license of exercising the notary activity, their transfer, the compliance with the legal obligations and the disciplinary continuity of notaries and assistants. The total number of notaries is 308. The Minister of Justice supervises notaries for AML/CFT purposes.

78. Notaries are involved in notarizing all transactions related to the sale of moveable and immoveable property including real estate, securities and goods such as cars. This provides notaries with a unique vantage point to observe a large amount of transactions conducted within the Albanian economy. Information reported by notaries also provides an important source of intelligence for the GDPML. Given the wide range of transactions notarized by the profession the sector is considered by the GDPML as highly vulnerable to money laundering.

79. Dealers in precious metals and stones (DPMS) – Individuals or legal entities engaged in the business of precious metals and precious stones have obligations under the AML/CFT Law. The GDMPL has been designated as the supervisory agency for AML/CFT purposes. The exact number of entities in this sector has not been determined. Retail outlets covered by the legislation do not appear to undertake transactions over the US$15, 000 threshold (both cash and non-cash transactions) established by the standard. ML risk in the formal precious metals and stones sector would appear to be low. Industry representatives have expressed concerns that some jewelers operate in the black market. It is believed that the use of cash in these black market operations is prevalent and that these operations would more vulnerable to money laundering. The GDPML considers that the money laundering vulnerability of the sector as being low but additional information on black market activities is required to fully ascertain the level of risk in the sector. Overview of commercial laws and mechanisms governing legal persons and arrangements.

80. This section should contain a description of the types of legal persons and legal arrangements (referred to here as “entities”) that can be established or created, or can own property, in the country. Use tables as appropriate. It should provide information on the basic characteristics of such entities e.g. who has ownership (for example shareholders, which could be legal or natural persons) and control (e.g. directors) and whether and where they are registered and/or require a registered office or agent. Please provide information on the extent to which such entities are prevalent, statistics on numbers and information on their significance, if available, within the financial sector.

1.5. Overview of Strategy to Prevent Money Laundering and Terrorist Financing

AML/CFT Strategies and Priorities

81. The Council of Ministers approved on October 27th the National Strategic Document “On the investigation of financial crime”. The formulation of this strategic document was based on a thoughtful analysis of the following factors:

  • Organized crime activities, the risks that they represent for the Albanian economy, modus operandi, their specific knowledge and forms of organization;
  • Capacities and means that are available to state institutions (human resources as well as mechanisms of internal control);
  • The actual environment in which those two groups of factors interact.

82. The strategic document seeks to create a long term strategic platform and establish a sustainable equilibrium among effective prevention of crime and investigations in the economic and financial domain and is based on the following principles:

  • Effectiveness – by maintaining and strengthening the control systems;
  • Proportionality – by means of concentrating the efforts in areas of priority;
  • Commitment/broad based inclusion – continuous and effective communication with state institutions, law enforcement agencies and civil society.

83. The State institutions involved in the implementation of this strategy will establish standards based on reverence for values such as: Integrity, Commitment and Professionalism.

84. This strategic document sets out medium and long term objectives which serve as the basis for a detailed action plan that outlines activities from 2009-2015. The objectives are as follows:

  • Formulation and harmonization of the legislation with the international standards and recommendations of the international organizations;
  • Further enhancement of the effectiveness of the control and oversight in the money laundering and financing of terrorism area;
  • Increase the professional level and human capabilities of the state institutions involved in the investigation of financial crime;
  • Effective evidencing and documentation of the financial crime investigation;
  • Enhance inter-institutional and international cooperation;
  • Enhancement of the public’s awareness regarding the importance of the fight against financial crime as well as the role of the institutions;
  • Strengthening of the preventive capabilities of the law enforcement agencies and the establishment of the appropriate mechanisms to this end.

85. To ensure the implementation of the objectives of this strategy and the enhancement of the effectiveness of the fight against economic and financial crime, the strengthening and increase of cooperation among law enforcement agencies and state institutions such as: the Interior Ministry, GPO, GDT, GDC, GDPML, SIS, HIDAA and AAASC is of paramount importance. The cooperation with financial supervisory authorities such as the Bank of Albania, Financial Supervisory Authority and private sector groups such as the Albanian Banker’s Association, CPAI, Bar Association, and National Chamber of Notaries is also seen as key to the success of the strategy.

86. The document also outlines the importance of international cooperation and the need for continued collaboration with international organizations such as Interpol, Europol, Moneyval, the Egmont Group, the Group of Countries against Corruption (GRECO), and the Southeast European Cooperation Initiative. Regional cooperation is also cited as vital to the development and strengthening of financial crime investigations.

87. The guidance and coordination of the strategy is undertaken by an Inter-Institutional Technical Group which is comprised of General Directorate for the Prevention of Money Laundering (GDPML), General Prosecutor’s Office, the General Directorate of Customs, the General Directorate of State Police, State Information Service, the Ministry of Justice, the Central Office for the Registration of Immovable Property, the Agency for the Administration of Seized and Confiscated Assets, High Inspectorate for the Declaration and Control of Assets and the Bank of Albania. The Inter-Institutional Committee will be responsible to monitor the implementation of the action plan will also be a forum where operational issues can be discussed.

88. Progress has been realized in all areas of the strategy. Amendments to the AML/CFT Law have addressed some of the concerns outlined in the 2006 MER. The development of a National Risk Assessment is at an initial stage and is slated to be completed by 2011. Most organizations have participated in training programs destined to increase their capacity in the ML/FT fields. Inter-institutional cooperation has been improving with the creation of the Joint Investigation Units, the establishment of the Inter-Institutional Committee and the signing of Memoranda of Understanding to exchange information. The Organized Crime Law was enacted in 2009 and provides a promising mechanism to enhance asset recovery activities.

89. Despite the efforts made in the fight against ML/FT a number of areas outlined in the strategy still remain to be implemented. The strategy has a six year implementation timeframe from 2009 to 2015. In many instances timelines identified within the action plan should be accelerated to enhance the effectiveness of the regime in a more timely fashion. Initiatives to reduce cash usage have been implemented but the prevalence of cash in the economy remains an issue. Staff knowledge and capacity still requires improvement. Enhancements in evidencing and documentation remain at the initial stages of implementation. Inter-agency cooperation could benefit from strengthening in some instances particularly with respect to the relationship between the GDPML and other supervisory bodies. Public awareness initiatives are limited and many reporting entity sectors only have a partial understanding of their obligations. Asset recovery activities are nascent. The strategy has minimal focus on the judiciary (limited to training on international practices concerning financial investigations) which has been identified as one of the impediments to securing ML convictions.

90. Overall the strategy provides a blueprint to address most of the shortcomings identified during the 2006 MER. Although progress has been made in key areas, implementation shouldbe accelerated to address remaining deficiencies.

The Institutional Framework for Combating Money Laundering and Terrorist Financing

91. There are several institutions that are involved in the fight against economic and financial crime whose responsibilities, duties and legal framework are summarized hereunder.

Committee for the Coordination of the Fight against Money Laundering.

92. The Coordination Committee for the Fight against Money Laundering is a policy making body that is responsible for planning the directing the general state policy in the area of the prevention and fight against money laundering and terrorism financing.

93. The committee is chaired by the Prime Minister and consists of the Minister of Finances, the Minister of Foreign Affairs, the Minister of Defense, the Minister of Justice, the General Prosecutor, the Governor of the Bank of Albania, the Director of the State Information Service, and the General Inspector of High Inspectorate for the Assets Declaration and Auditing.

94. The Committee convenes periodically to review and analyze the reports on the activities performed by the GDPML and the reports on the documents drafted by the institutions and international organizations, which operate in the field of the fight against money laundering and terrorism financing.

Ministry of Finance

95. The Ministry of Finance (MoF) formulates and implements the policy of the Albanian Government regarding the state income formation and the management of public funds. Its primary functions related to AML/CFT include membership in the Committee for the Coordination of the Fight Against Money Laundering and the licensing and supervision of activities of private auditing companies, legal persons conducting audit activities, operators of prize gaming, lotteries and casinos. The MoF, through the Supervision Unit of the Games of Chance (SUGC), undertakes the licensing and supervision with respect to the casino activities and operators of prize gaming and lotteries.

Ministry of Justice

96. The Ministry of Justice (MoJ) is organized and functions in compliance with the Constitution of the Republic of Albania, legal provisions on the organization and functioning of the Council of Ministers, the Law on the organization and functioning of the MoJ (Law no. 8678, dated May 14, 2001, as amended) and the legislation in force on the civil service. The Ministry of Justice, based on this legal basis is empowered with drafting and following policies, preparing legal and sub-legal acts and exercising necessary services related to the judiciary, the system of enforcement of judicial decisions, the system of free legal professions, international judicial cooperation and other areas of justice. It is also competent for harmonization and improvement of Albanian legislation through cooperation with other institutions.

97. The MoJ is responsible, inter alia, for the performance of the general state policy in the area of justice, for drafting legislation in this area and for issuing specialized legal opinion on legislation drafted by other line ministries according to their area of competence. The MoJ follows the processes of returning and compensation of property, of registration of immoveable property, of enforcement of civil and criminal judicial decisions, of the publication of the Official Gazette, and of the compensation of the formerly politically sentenced. In so doing it coordinates the work of the following 10 subordinated institutions:

  • Agency for Return and Compensation of Property;
  • Office of Registration of Immoveable Property;
  • State Advocate Office;
  • General Directorate of Prisons;
  • Probation Service;
  • Legal Medicine Institute;
  • General Bailiff’s Directorate;
  • Albanian Adoption Committee;
  • Official Publication Center;
  • Institute for the Integration of the Formerly Politically Sentenced

98. The MoJ through its General Codification Directorate, General Directorate on Justice Matters, and Directorate of Jurisdictional Relations with Foreign Authorities, performs its responsibilities respectively on legislation drafting, supporting the judiciary, and acting as a Central Authority in international judicial cooperation on criminal matters. The MoJ is also responsible for licensing and supervision of Notaries.

Ministry of Foreign Affairs

99. The Ministry of Foreign Affairs (MoFA), formulates and implements the policy of the Albanian Government in the area of foreign affairs, as well as organizes and administers consular services, as so designated. The role of the MoFA in the field of AML/CFT is performed through its membership of the Committee for the Coordination of the Fight against Money Laundering.

100. The MoFA coordinates the signing and implementation of international treaties of the Republic of Albania in the field of AML/CFT, facilitates the membership of Albania within existing international organizations in the area of AML/CFT, and presents the UN Security Council Resolutions in connection with the terrorist financing, that shall be enforced, to the authorized bodies.

Financial Intelligence Unit

101. The General Directorate for the Prevention of Money Laundering (GDPML) is the Financial Intelligence Unit. Its mission is the fight against and prevention of money laundering and terrorism financing through the collection, verification, evaluation, control, and dissemination of information to law enforcement agencies; safeguarding of the information obtained from obliged entities; and overseeing the suspension and freezing of transactions aimed at preventing the transfer, conversion or change of ownership of the property and products generated from criminal activities.

102. GDPML cooperates with other law enforcement institutions such as Interior Ministry, General Prosecutor’s Office, State Information Service, supervisory agencies as well as international partner institutions. It prepares cooperation and mutual assistance programs aimed at preventing money laundering, with other countries, based on ratified international conventions.

103. In order to implement the standards and proper mechanisms for the fight against money laundering and terrorism financing, the General Directorate for the Prevention of Money Laundering has signed memorandums of understanding with several law enforcement agencies in the country as well as with Financial Intelligence Units in other countries.

Albanian State Police

104. Albanian State Police is responsible for ensuring order, fighting organized crime, and guaranteeing the integrity of the borders. The Law on State Police (Law no. 9749, dated June 4, 2007) guarantees the career development and rights in the police as well as prescribes responsibilities among which the prevention, discovery and investigation of crime in line with the criminal code and criminal procedural code, penal offences and their authors.

105. The State Police is equipped with a number of legal and sublegal instruments regarding the organization of police surveillance, application of special investigating techniques, controls, confiscations, flagrant apprehensions, searches, and other penal procedural actions attributed legally and delegated through the prosecutorial institutions. It is the state authority with human and technical capabilities for the implementation of the law.

106. The structures of the State Police is comprised of several departments such as the Department of the Crime Investigation; Department against the Financial Crime; Department against Organized Crime; Department against Serious Crimes; Department for the Protection of Witnesses; Directorate for the Criminal Analysis, Interpol, Europol, Border and Migration Directorate; as well as other supporting and special operation structures.

107. The Directorate against the Financial Crime, which identifies, uncovers, prevents, strikes, and investigates cases of financial crime, money laundering and financing of terrorism, identifies assets obtained through crime and acts to ensure their seizing and confiscation and as such has special importance in the fight against ML and TF.

108. The Albanian State Police formulates and implements the policy of the Albanian Government in the field of fight against crime and infringement of the law, safeguarding public order and security. The Albanian State Police is empowered to perform operative intelligence functions, pursuant to the above mentioned legislation hence it may also deal with ML/TF cases. The Albanian State Police and the Albanian FIU have a Memorandum of Understanding (MoU) in place governing the respective responsibilities of the two bodies in relation to AML and CFT.

General Prosecutor’s Office

109. The Prosecutor’s Office is a centralized constitutional institution that operates in accordance with the organization of the judicial system. The Constitution of the Republic of Albania states that the General Prosecutor is independent and empowered to pursue penal proceedings and represents State’s case in court.

110. The General Prosecutor is nominated by the President of the Republic with the approval of Parliament, while prosecutors are nominated by the President of the Republic based on the proposals of the General Prosecutor.

111. The General Prosecutor approves the structure personnel and functioning guidelines for prosecutors in First Instance Courts, Courts of Appeal as well as General Prosecutor’s Office. It does also issue orders and guidelines for the implementation of duties by the prosecutors.

112. The General Prosecutor’s Office in the Republic of Albania is a unified system empowered to:

  • to initiate criminal proceedings;
  • to ensure the legitimacy with respect to investigation and preliminary examination;
  • to pursue charges in the court;
  • to lodge claims with the courts for the sake of public interests;
  • to dispute court orders, judgments and decisions;
  • to ensure the legitimacy of execution of punishments and other compulsory measures.

113. The prosecution authority is involved in AML/CFT through its membership in the Committee for the Coordination of the Fight against Money Laundering. To this end GPO provides oversight in relation to the legitimacy of investigation and preliminary examination of the ML/TF cases; and the pursuit of criminal charges against the crimes that involve ML/TF in the court.

114. In 2004, a section for the Prosecution of the Serious Crimes was created in order to investigate penal offenses committed by structured groups and criminal organizations. In 2007, the Joint Investigation Unit was created in Tirana’s Prosecutor’s Office, as a specialized structure for the investigation of economic and financial crime, corruption, money laundering and the financing of terrorism. Six additional units similar to the initial one were created in Durrës, Shkodrër, Vlorë, Fier, Gjirokastrër and Korçë. They count among their members’ officers of the Judicial Police, State Police, Customs and Tax authorities as well as contact points in High Inspectorate for the Declaration and Auditing of Assets, State Supreme Audit, General Directorate for the Prevention of Money Laundering and State Information Service.

General Directorate of Customs

115. The Sector for the Prevention of Money Laundering in the Anti-Trafficking Directorate serves as a central unit which gathers, analyzes and reports on the information received from customs branches on cases of transportation of monetary values at the border and suspicious activity. This sector is part of the anti-traffic Directorate and is comprised of on Head of Sector and two specialists. It cooperates with contact points appointed by the Order of General Director of Customs.

116. The information received from customs officers in various branches that serve as points of contact is entered into the sector’s database and is then forwarded to the General Directorate for the Prevention of Money Laundering. In accomplishing its fiscal, economic and preventive mission the Customs Service co-operates with a number of other institutions, in particular with the Border and Migration Police.

117. Custom’s Authority conducts searches regarding transportation of cash and other valuables across national border of the Republic of Albania. This means that if any unusual cross-border movement of gold, precious metals or stones is detected the Customs authorities are notified. The customs authorities based on the collaboration they have with the Border and Migration Police arrange all the measures needed to evaluate, control and prevent this phenomenon.

118. Customs Service conducts searches for cash transit at the border. Citizens submit a completed standard form providing information on their identity (the commercial entity that they represent, as applicable), the amount transferred and currency, the reason for transfer, etc. The data collected is recorded in respective data bases; copies of the declaration forms for cash transit at the border are sent to GDPML. The legal threshold for the declaration of cash at the border is lek 1,000,000 or the equivalent in foreign currency.

119. In order to improve the overall performance as well as ensure a unified implementation of rules regarding the declaration in the border crossing points, a number of contact points were appointed by the Director General. Customs are also a subject of the AML/CFT Law and report to the FIU, regarding the cross border declaration of the monetary values as well as other valuables for terrorism financing related cases.

General Tax Directorate

120. General Directorate of Taxation (GDT) is vested with the authority to apply tax legislation in the Republic of Albania. At the same time GDT has the authority to administer national taxes, and tariffs, as prescribed in the relevant laws.

121. The main goal of the General Taxation Directorate is to assist the taxpayers to pay their tax obligation in accordance with the existing tax legislation and to ensure that the income obtained through those obligations will be disbursed in the state budget while offering the taxpayers an efficient and effective system.

122. The tax administration cooperates closely with the Customs, the Treasury, Regional Transportation Directorate, Interior Ministry, banks, the Chamber of Commerce, business associations as well as the partner administrations abroad.

123. The Directorate of Investigation and Internal Auditing (anti-corruption) created recently is aimed at striking at economic crime and the phenomenon of corruption. The mission of the Tax Investigation Directorate is to pursue and implement the penal legislation in the domain of taxation, in order to encourage and carry out, directly or indirectly the fulfillment of obligations by taxpayers in accordance with the tax legislation. The establishment in 2009 of a Tax Investigation Directorate has further strengthened the capabilities of GDT vis à vis the investigation of financial crime in general and money laundering in particular.

State Information Service

124. State Informative Service (SIS) is created based on the known principle that a country needs an effective, professional, and able institutions that provide intelligence, in accordance with the legal obligation, to state agencies and institutions that serves the national security. In order to fulfill this constitutional obligation and guarantee the national security as well as the political and economic interests, State Informative Service collects intelligence within Albania and outside.

125. State Informative Service does not carry out activities that have a police or military character. The activities of this institution are performed in accordance with the fundamental principles of legality, objectivity, and secrecy. The organization of its internal structures are in compliance with the requirements for the fulfillment of its mission, especially that of the protection of national security.

126. The SIS is engaged in the prevention of the laundering of proceeds derived from organized crime and particularly in the fight against the financing of terrorism. The Director of the State Information Service is also a member of the Committee for the Coordination of the Fight against Money Laundering.

High Inspectorate for the Declaration and Control of Assets

127. The High Inspectorate for the Declaration and Control of Assets became operational based on the Law on the Declaration and control of assets, financial obligations of elected and public officials (Law no. 9049, dated April 10, 2003). The High Inspectorate under the guidance of the General Inspector, administers the declaration of assets, financial obligations, conducts auditing controls directly, collects data, performs investigations and administrative inquiries regarding the declarations of persons that are legally obliged to disclose their private interests. HIDAA cooperates with auditing as well as other institutions responsible for fighting corruption and economic crimes.

Bank of Albania

128. The Bank of Albania performs the function of a Central Bank. The objectives of BoA are:

  • to achieve and maintain price stability;
  • to formulate, adopt, and execute the monetary policy of Albania, which shall be consistent with its primary objective;
  • to formulate, adopt, and execute the exchange arrangement and the exchange rate policy of Albania;
  • to license or revoke and supervise banks that engage in the banking business in order to secure the banking system stability;
  • to hold and manage its official foreign reserves;
  • to act as banker and adviser to, and as fiscal agent of, the Government of Republic of Albania; andto promote the smooth operation of payments systems.

129. The Bank of Albania is the supervisor responsible for monitoring and ensuring AML/CFT compliance by banks, foreign exchange bureaus, and money remittance businesses.

Financial Supervision Authority (FSA)

130. The Albanian Financial Supervisory Authority (FSA) was established in 2006 and is an independent public institution. The FSA is responsible for the regulation and supervision of non-banking financial system and the operators of the sector. The FSA reports to the Albanian Parliament.

131. The main areas of activity are regulation and supervision:

  • of insurance market and its operators;
  • of securities market and its operators;
  • of private supplementary pensions market and its operators;
  • of other non-banking financial activities.

132. The primary goals are the protection of consumers’ interests, the promotion of sustainability, transparency and reliability in insurance area, securities and private supplementary pensions’ area. Their activity is characterized by professionalism, transparency, and high standard services for all interested parties.

133. The FSA is also a supervisory authority for companies involved in life insurance or re-insurance, their agents and intermediaries as well as retirement funds. In order to accomplish its supervisory role, FSA carries out on site inspections to verify the compliance of the above mentioned entities with the obligations set forth in the provisions of the law, reports to the responsible authority about any suspicion, information or data related to money laundering or financing of terrorism for the activities falling under their jurisdiction. The FSA also takes the necessary measures to prevent an ineligible person from possessing, controlling and directly or indirectly participating in the management, administration or operation of an entity. It also cooperates and provides expert assistance in the identification and investigation of money laundering and terrorism financing, in compliance with the requests of the GDPML. It cooperates in the drafting and distribution of training programs in the field of money laundering and terrorism financing.

Supervision Unit of the Games of Chance

134. The Supervision Unit of the Games of Chance (SUGC) is subordinate to the Minister of Finance and is responsible for the control and monitoring of games of chance in Albania. The Supervision Unit of the Games of Chance exercises the following functions:

  • supervises and controls the activities of entities that organize games of chance in Albania;
  • decides the amount of the fine in cases when violations of the provisions are noticed;
  • checks and verifies whether the equipment of games of chance are certified by accredited authorities, in accordance with rules established. It certifies the equipment of bets, according to technical specifications set forth by instruction of the Minister of Finance;
  • supervises and controls entities authorized by the Minister of Finance to play the promotional games of chance;
  • maintains the register of entities that exercise this activity and of halls opened bythem throughout the territory of the country, the number of machines / equipment for any game hall and their specific characteristics, the number of employees and their relevant qualification, the number of national lottery tickets for sale and sold, the number of lots drawn by the organizer of the national lottery and organizers of television bingo;
  • checks and verifies income and profit of entities licensed for games of chance, and settlement of tax liabilities from them, reconciled in cooperation with the Directorate General of Taxation and its branches in the districts.

135. The SUGC is also responsible to notify the Director General of Taxation of all data related to taxes. The SUGC also sets fines, stops the activity and confiscates the equipment when a natural or legal person undertakes unlicensed gaming activities.

136. The structure and the personnel of the SUGC are approved by the Prime Minister on the proposal of the Minister of Finance. The Director of the SUGC is appointed by the Minister of Finance. The SUGC is composed of control inspectors, inspectors for the certification of games equipment and inspectors for implementation of coercive measures. The SUGC is responsible for ensuring compliance with the AML/CFT Law for the gaming industry.

The National Chamber of Advocates

137. The National Chamber of Advocates is responsible for regulating and controlling the legal profession in Albania. The Chamber is responsible, inter alia, for adopting a Code of Ethics for the legal profession; determining which lawyers can practice their profession; analyzing the activities of chambers of lawyers and determine whether it is in accordance with the Law on Legal Profession; coordinating the activities of chambers of lawyers, in order to guarantee the protection of the rights and interests of lawyers, and lawyers chambers; and adopting general rules for the development of the qualification exam to practice the profession of lawyer. The Chamber of Advocates is responsible for ensuring compliance with AML/CFT requirements in the legal profession but does not undertake AML/CFT examinations.

Agency for the Administration of the Seized and Confiscated Assets (AASCA)

138. The Agency for the Administration of the Seized and Confiscated Assets is subordinated to the Minister of Finance. Its main activity is the administration of seized and confiscated assets. The Agency exercises its activity in cooperation with other institutions involved in the process of administration of the seized confiscated assets, such as the courts, prosecutor’s office, banks, local government units as well as the local offices for the registration of the immovable properties, where the seized and confiscates assets are located. A civil confiscation involves the confiscation of assets that belong to persons suspected of participation in organized crime activities and their relatives or persons related to them.

139. A special fund is established for the prevention of criminality and legal education, which is administered by the Minister of Finance, relying on the supporting documentation provided by the Advisory Committee on the Measures against Organized Crime. The Agency is responsible for the verification and the preparation of the documentation regarding the requests for funding of projects from the special fund for the prevention of prevention of criminality as well as oversees their implementation.

Ministry Responsible for the Law Relating to Legal Persons and Arrangements

140. Based on the Law on the National Registration Center (NCR) (Law no.9723, dated May 3, 2007) the Ministry of Energy, Trade and Economy is responsible for the establishment and supervision of the Registration Center. The NRC is responsible for maintaining the Commercial Register in Albania. It performs registration functions for fiscal, social insurance, healthcare, and labor purposes. It is also responsible for disclosing the registered data to the public.

Central Office for the Registration of Immovable Property

141. The Central Office for the Registration of Immovable Property is an institution within the Ministry of Justice that performs its activity in accordance with the Law on the Registration of real estate (Law No.7843, dated July 13, 1994) and is responsible for the real estate registration process in Albania.

Approach Concerning Risk

142. There has been a limited application of the risk based approach to combating money laundering and terrorist financing in Albania by the GDPML and the BoA. Albania has not yet undertaken a systemic review of the ML and TF threats and risks that exist within the financial sector and other sectors operating in the country thus minimizing the impact of risk in policy development. The GDPML is spearheading the development of a National Risk Assessment through the Committee for the Coordination of the Fight against Money Laundering which is slated for completion in 2011. The model for the development of the risk assessment has not yet been established.

143. The AML Law requires obliged entities to conduct a risk assessment by specifying categories of clients and transactions against whom they will apply enhanced due diligence including for higher-risk countries, transactions and customers. Limited emphasis is being placed on ensuring compliance with the risk assessment requirement and obliged entities understanding of this obligation is very limited. There are no mechanisms by which obliged entities can apply reduced customer due diligence standards.

144. Elements of a risk-based supervisory approach are being incorporated by the Bank of Albania and the GDPML. Prior to 2010 the BoA incorporated AML/CFT risk in its prudential risk assessment. In 2010 it created a unit to monitor entities’ AML/CFT risk and drafted an AML/CFT supervisory manual that incorporates a risk based approach. Information provided by the GDPML is currently insufficient to conduct a comprehensive AML/CFT risk assessment thus impeding the implementation of a risk based supervisory approach.

145. The GDPML has also started to undertake a risk based approach to determine where their supervisory resources are focused. The GDPML’s annual examination plan is based on an assessment of AML/CFT risk, the size of the entity, the type of activities performed, the exposure to and occurrence of cash transactions, sector related risks, vulnerabilities associated with particular products offered and prevalence of business relations with Politically Exposed Persons (PEPs). This has resulted in the GDPML focusing its supervisory activities on particular sectors such as travel agencies and NGOs in 2006; commercial banks, car dealers, notaries and exchange bureaux in 2007; notaries in 2008; real estate and construction companies in 2009; and construction companies and exchange bureaux in 2010. This early stage of implementation of a risk based supervisory approach will be supplemented by the recent administration of self assessment questionnaires that will allow for a more comprehensive risk analysis of entities.

Progress since the Last IMF/WB Assessment or Mutual Evaluation

ReferenceRecommendationMeasures undertaken by the

Albanian authorities
1. General
2. Legal System and Related Institutional Measures
Criminalisati on of Money Laundering (R.1,2& 32)
  • - To make it clear in the Criminal code that Albania has jurisdiction over money laundering offences when the predicate offence was committed abroad by a foreign citizen;
  • - To specify that self-laundering is covered (bearing in mind that Albania has accepted this principle);
  • - To specify that knowledge, intent and purpose can be inferred from objective factual circumstances;
  • - Predicate activity in Albanian ML prosecution can occur outside Albania under Articles 287, 287/b and 6 and 7 of the CC.
  • - Article 287 CC covers self-laundering as confirmed by a decision punishing for self-laundering, but Article 287/b CC does not cover self-laundering.
  • - Under Article 152 of the CPC, knowledge, intent and purpose can be inferred from objective factual circumstances.
  • - To make sure (through guidance documents, general instructions or otherwise) that the standard of evidence for establishing the link between the illegal origin of assets laundered and the money laundering offence does not require a separate court decision as art.287 para.3 seems to suggest.
  • - To adopt the secondary legislation needed for the implementation of the Criminal Code provisions on corporate criminal liability;
  • - To review the order of sub-paragraphs of art.287 1) and to insert the ancillary offence of “helping” or assisting also in sub-para 1d) (and to move this sub – para at the end of sub-para 1))
  • - To examine whether greater use should be made of the provisions crimiminalizing money laundering when investigating all major proceeds –generating offences;
  • - Although no guidance was issued, standard of evidence does not require a separate court decision, but a very high standard of proof is required regarding illegal origin of assets.
  • - In 2007, the Parliament approved Law No. 9745 of June 14, 2007 “On the Criminal Liability of Legal Entities” which makes legal persons subject to criminal liability and provides sanctions legal entities for all offences. With the enactment of this law, legal entities are now subject to liability for violations of Albania’s ML criminal provisions.
  • - Article 287 CC was revised and Article 287/b CC enacted since the previous assessment. Assisting in the commission of a ML offence is covered in the case of Article 287/b but not in all cases for Article 287 offences.
  • - Authorities are reviewing use of ML provisions but under utilization continues.
Criminalizati on of Terrorist Financing (SR.II, SR.III)
  • - To review the current Criminal Code provisions criminalizing the financing of terrorism to make them more consistent and ensure they explicitly cover the various elements (terrorist acts, terrorist organisations, individual terrorists) and the collection of funds, along the lines of the UN Convention and FATF Special Recommendation II;
  • - To explicitly provide for the applicability of terrorist financing provisions regardless of whether the person alleged to have committed the offence is in the same country or a different country from the one in which the terrorist organisation is located or the terrorist act occurred;
  • - To specify that knowledge, intent and purpose can be inferred from objective factual circumstances;
  • - To provide explicitly for the applicability to legal persons of sanctions for terrorist financing;
  • - CC provisions were reviewed and 2007 CC amendments added a specific provision that criminalizes the collection of funds (Article 230/d) and revised Article 230 which sets forth a definition of terrorist acts. With the changes, there is clearer extension to the financing of an individual terrorist, but it is nonetheless limited to funds provided or collected to support terrorist activities. Provisions as a whole are closer to meeting the requirements but still fall short of compliance.
  • - Part of 2007 CC amendments was the adoption of Article 7/a that provides for universal criminal jurisdiction in certain criminal cases including for actions with terrorist purposes.
  • - Under Article 152 of the CPC, knowledge, intent and purpose can be inferred from objective factual circumstances.
  • - In 2007, the Parliament approved Law No. 9745 of June 14, 2007 “On the Criminal Liability of Legal Entities” which makes legal persons subject to criminal liability and provides sanctions legal entities for all offences. With the enactment of this law, legal entities are now subject to liability for violations of Albania’s FT criminal provisions.
Confiscation, freezing and seizing of proceeds of crime (R.3, R.32)
  • - To provide for confiscation from third parties along with the legal protection for bona fide third parties;
  • - To consider reviewing the legal framework so as to allow for the application of provisional measures before opening a formal investigation;
  • - To allow for the application of provisional measures under Articles 274 – 276 directly by the prosecutor in case of urgency (with ex-post approval by the judge);
  • - To analyse the reasons for the moderate use of temporary and final measures in money laundering cases and to take measures to encourage their use (e.g. training, internal circulars etc);
  • - To examine the functioning in practice of the automatic cessation of temporary measures under art.275 (when the court does not render a decision within 15 days of application) to make sure that measures applied against criminal proceeds are not revoked for undue reasons (court overload, insufficient file management, etc);
  • - To review in the Law no.9284 the definition of terrorism financing, in line with the similar recommendation already made concerning the Criminal Code;
  • - Articles 30 and 36 CC, as confirmed by practice, apply to committal means and proceeds without exception and therefore to assets wherever they may be found and regardless of who may be holding them.
  • - Framework was reviewed and provisional measures are available early in an investigation prior to the registration of an offence through use of Article 300 CPC and additionally through immediate registration of a criminal offence bringing the case into the formal investigative stage at an early juncture.
  • - Article 300 CPC provides in cases of urgency that the judicial police may seize material evidence and items connected with the offence and requires subsequent prosecutor affirmation and a court order of sequestration.
  • - It is not clear that a specific analysis was undertaken, and there continues to be infrequent use of measures in criminal ML cases. However, in 2009, Albania adopted Law No. 10192 of December 3, 2009 “On preventing and striking at organized crime and trafficking through preventive measures against assets.” This Organized Crime Law provides an alternative method to recover criminal property through court orders that, under a civil rather than criminal standard, impose sequestration and/or confiscation as a preventive measure. The provisions of this law currently are being used to sequester laundered property.
  • - Authorities determined that the functioning of Articles 275-276 CPC in practice did not result in revocations for inappropriate reasons.
  • - Terrorism financing provisions amended in 2007, but issues as noted in relation to SR II remain.
Freezing of terrorist funds used for terrorist financing (SR.III, R.32)
  • - To develop legal procedures for actions initiated by other jurisdictions (including the designation of an authority to deal with these);
  • - To ensure secondary provisions and mechanisms are in place to adequately deal with the requests for payments (of subsistence and other expenditures) from listed persons, and that those involving persons listed by virtue of Resolution 1267 are decided upon by Security Council;
  • - To develop guidance for the private sector in the field of reporting suspicions and information in relation with TF and to make sure they are checking their clientele against the Albanian list of persons elaborated by virtue of the security council resolutions;
  • - To keep figures on the origin of FT information and suspicion reports in order to assess the effectiveness of cooperation of the industry and other sectors;
  • - Authorities will use the same procedures as in domestic designations. No authority is specifically designated for foreign requests, but same authority as in domestic designations would be used.
  • - No secondary provisions or mechanisms are in place, although they could be issued pursuant to Article 21 para. 3 of the SFT Law.
  • - Specific guidance relating to lists and FT has not yet been developed with the exception of a Ministry of Finance notice dated August 8, 2010 advising the registrar for NGOs that in registering NGOs, there should be checks against the UNSCR list.
  • - GDPML monitors whether STR reports received relate to FT and maintains such figures.
The Financial Intelligence Unit and it functions (R.26,30 &32)
  • - To take any further measures that are deemed necessary to ensure definitely the autonomy and independence of the GDPML (e.g. fixed term for the post of General Director, statutory independence vis a vis instructions etc);
  • - To provide for clear rules guaranteeing the confidentiality and regulating the use/sharing of information centralised by the GDPML so that it is used only for AML/CFT purposes;
  • - To provide the GDPML with an adequate budget and equipment to make it less dependent on foreign assistance;
  • - To clarify the role of the GDPML, as an analytical administrative body instead of a body in charge of finding hard evidence on ML/FT investigations (which should remain the police and prosecutorial bodies’ responsibility);
  • - To ensure the increase of staff takes place as planned so that the GDPML can deal with its analytical work and start implement its new training programme for GDPML staff;
  • - To produce and publish a periodic report by the GDPML and to provide for consistent requirements on this matter;
  • - To establish as soon as possible a computerised information system to receive on-line, process and store rapidly the data transferred by the obliged entities and to help the GDPML improve access to information, the quality of its analytical work and its ability to cooperate domestically and internationally;
  • - To introduce a training scheme taking into account the newly recruited staff, the development of supervisory/inspections functions and the introduction of an IT system (an analytical software);
  • - To keep on an ongoing basis more detailed statistics on the origin of the reports received and the outcome of the cases forwarded to the prosecutor;
  • - Progress has been made in ensuring the independence of the FIU. The hiring of the General Director if governed by the Law on Civil Servant Status and the position must be advertised publicly. Staffing is done independently within the FIU. Processes governing the analytical process are documented. However, the Minister of Finance remains ultimately responsible for the hiring and firing of the General Director and there is no statutory confirmation of the independence of the FIU;
  • - The AML/CFT Law states that the exchange of the information by the FIU can be done only for AML/CFT purposes. The information received from the obligors is centralised and strictly guarded within the FIU on a need to know basis. The FIU’s database is kept on a separate server and the security of the FIU’s premises is certified by the Classified Information Bureau Directorate;
  • - The FIU has a dedicated budget attributed by the Ministry of Finance. An internal budget group within the FIU is responsible for budget allocation. No dependence of foreign assistance was noted in day to day operations of the FIU;
  • - The role of the FIU is defined in the AML/CFT law. It functions as a specialized financial unit for the prevention and fight against money laundering and terrorism financing responsible for production of financial intelligence. Activities observed by the assessment team confirmed that the FIU’s activities were focused on intelligence production not evidence gathering;
  • - GDPML’s staff complement has increased continuously. Allocated resources are sufficient to adequately handle the amount of analytical work. In addition to training provided through collaborations with foreign entities staff undergoes on-going on the job training;
  • - GDPML has continuously published annual reports since 2005;
  • - GDPML has established a computerised system that allows for the on-line delivery of reports from the obliged entities, improving access to data and the ability develop financial intelligence to cooperate within and outside the country;
  • - The training is available to staff with regard to overall functioning of the FIU including training on the analytical and supervisory functions as well as the use of the IT system;
  • - In light of the overall improvements in the collection and storing of information within the FIU the origin of the reports as well as the cases disseminated to Law Enforcement Authorities is also recorded.
Law enforcement, prosecution and other competent authorities (R.27,28,30 &32)
  • - To clarify the respective responsibilities of the GDPML on the other hand and the police and prosecutorial bodies on the other hand; the former should in principle be an analytical body generating possible ML and FT cases, in addition to investigating and prosecuting cases generated by the GDPML;
  • - To produce studies on ML including its trends and techniques;
  • - To increase the level of expertise at the level of judicial police (further training and guidance in all police departments that deal with the investigation of ML and financial crimes more generally, recruitment of experts with academic background etc);
  • - To review the adequacy of the staffing of the Police Directorate for Combating Organized Crime and Witness Protection (especially its central division on the fight against money laundering and terrorist financing, and increase it as necessary with transfers from district agencies);
  • - To provide further training to judges on ML and financial crimes more generally;
  • - To clarify the legal basis for controlled deliveries and the possibility to waive arrest of a suspect for the purpose of ML/FT investigations.
  • - The establishment of the Joint Investigative Units has helped clarify the role of the GDPML, the ASP and the GPO. GDPML activities are focused on the production of financial intelligence;
  • - GDPML publishes on yearly basis typologies reports based on its cases that have been forwarded to Law Enforcement Authorities as well as international typologies reports. These reports provide information on trends and techniques used in ML/FT offences and are used in the training activities that the obligors provide for their employees;
  • - Judicial Police have been provided with training during the activities of the two year (2007 - 2009) Twinning project with German Criminal Federal Office (BKA) as well as many other projects organized with the assistance of EU Delegation as well as the support of the US Embassy. The investigation of financial crimes has been part of these activities;
  • - The ASP has established the Directorate against Financial Crime which has a dedicated team of officers;
  • - Judges have participated in some training sessions that were listed above;
  • - Articles 294/a and 294/b of the Criminal Procedure Code provide for special investigative techniques such as simulated operations and infiltrated police officer.
3. Preventive Measures – Financial Institutions
Customer due diligence, including enhanced or reduced measures (R.5 to 8)
  • - To introduce general requirements in the LPML on the basis of the elements of FATF Recommendation 5, in particular as regards the concept of customer due diligence, identification of beneficial and ultimate ownership, on going due diligence on the business relationship, “know your customer” principle;
  • - To make it a duty for obliged entities to perform CDD measures in line with the FATF approach (risk-based etc.);and in any event
  • - To include the identification of customers when establishing a business relationship (as it is envisaged in the draft new LPML);
  • - To make it clear that CDD measures apply also in case of FT suspicion;
  • - To make sure that there is a unique definition of the client or customer which is broad enough to include also the persons requesting one-off transactions and clients with whom there is no contractual relationship;
  • - To include in the LPML, a general prohibition of anonymous accounts (to be understood broadly) as envisaged in the draft new LPML;
  • - To clarify the issue of bearer negotiable instruments available in Albania and to apply the CDD requirements in their respect;
  • - To reduce to the equivalent of 15,000 USD/EUR the threshold of transactions triggering the identification of customers (as it is envisaged in the draft new LPML);
  • - To implement in the LPML, and to detail in sectoral rules as appropriate, the requirements of recommendation 6,7 and 8 on politically exposed persons, correspondent banking relationships and risks associated with new transactions;
  • - The AML/CFT Law that was adopted by the Albanian Parliament on May 19,2008 has partially addressed these recommendations by introducing additional CDD measures.
  • - The AML/CFT Law requires customer identification when establishing a business relationship.
  • - CDD is required in cases where there is “reasonable doubt for money laundering or terrorist financing”, which does not meet the FATF requirement.
  • - The requirements extend to all customers/client relationships.
  • - Anonymous accounts are prohibited under the AML/CFT Law.
  • - There is no prohibition on bearer instruments.
  • - The AML/CFT Law requires identification of customers for transactions of not less than 1,500,000 ALL (approximately USD 15,000).
  • - There are still no provisions relating to foreign PEPs. The AML/CFT Law sets out various provisions for correspondent banking, which largely comply with the FATF requirements.
  • Some provisions have been introduced for new technologies but those for non-face to face transactions are limited to those involving the opening of a bank account.
Record keeping and wire transfer rules (R.10& SR.VII)
  • - To consider removing the current requirement of Article 4 and 5 of the LPML, which deals with the threshold approach concerning registration of transactions;
  • - To review the structure of art.6 of the LPML so as to make a separate provision on the information and record keeping requirements rather than these being included with other provisions dealing with “tipping-off”;
  • - To introduce a clear requirement to store information on transactions for a period of 5 year (or more if requested by a competent authority) following completion of transactions, whatever their amount;
  • - To be more explicit as to the information to be kept for a period of 5 years (or more if requested by a competent authority) after the termination of the relationship (to keep account files, a copy of the identification document and business correspondence, as well as information on the beneficiary);
  • - To review the provisions in the BoA regulation of 2004 on wire transfers so as to make them applicable to both incoming and outgoing transfers, to use the regular terminology (wire transfers rather than e-banking) and to draft it in sufficiently broad terms to cover also legal persons, not only individuals, as well as domestic and international transfers;
  • - To solve the conflicting issues raised by the diverging provisions on thresholds for wire transfers in the LPML and BoA regulation of 2005 and to lower it to the limit contemplated by SR.VII (USD/EUR 3000);
  • - To make provisions on wire transfers also in the LPML in order to cover all financial and other institutions involved in the wire transfer;
  • - The AML/CFT does no longer contain any requirement regarding the registration of transactions. At the time the Law includes separate provisions regarding record keeping for a period of five years (or longer when requested by the FIU) and “tipping off”.
  • - Regulation No.44 dated 10.06.2009 of the Bank of Albania states that the terms used have the same meaning as those defined in AML/CFT Law “On the prevention of money laundering and terrorism financing”.
  • - The BoA regulation No.44 is in line with the AML/CFT Law regarding wire transfers. The provisions of the law encompass all the institutions involved in wire transfers.
  • - The AML/CFT Law foresees the obligation to store information on transaction for a period of 5 years from the date of the execution of the financial transaction (FAFT standards require a minimum of 5 years following the termination of the business relationship)
  • - The AML/CFT Law does not differentiate between domestic or international wire transfers. No minimum threshold has been adopted.
  • - The AML/CFT Law has been amended to include a definition of “transaction’ and to define “electronic transfer” as a transaction made by a person individual or legal entity) through a financial institution, through electronic or wire transfer with the purpose of putting a certain amount of money or others means or instruments of the money and payment market at the disposal of a beneficiary in another financial institution. The mandatory and the beneficiary can be the same person.
Monitoring
  • - When finalizing the new draft AML, to pay special attention to the requirements of FATF Recommendations 11 and 21 and to introduce a requirement to examine the background and purpose of transactions and apply special prudential measures to countries and territories where ML/FT risks are high (and to provide appropriate countermeasures to be taken when transactions with those regions occur);
  • - To adopt measures to ensure that financial (and other) institutions are advised of concerns about AML/CFT weaknesses in other countries;
  • - Albania has not introduced specifically in its legal framework the principle of the application of the domestic legislation to foreign branches/subsidies which do not or insufficiently apply FATF Recommendations nor the adoption of the highest AML/CFT standards.
  • - This is limited to publicising details of the FATF statements.
Suspicious transactions reports and other reporting (R.13 – 14,19,25 & SR.IV)
  • - To take the appropriate measures to make it clear that obliged entities, as a rule, need to report directly to the GDPML and not their supervisor (subject to the admissible exceptions for certain DNFBP);
  • - To introduce the obligation of reporting of attempted transactions in the LPML;
  • - To extend the scope of reporting in relation to terrorist financing to the various elements contemplated in Recommendation 13 and SR.IV (“terrorism”, “terrorist acts”, “terrorist organizations”, “those who finance terrorism”).
  • - To keep statistics on reports concerning terrorist financing;
  • - To enlarge the reporting threshold to all transaction (not only cash and transfers) – except those which present limited risks (e.g. commodity service payments, transfers with the BoA) and adapt the amount to the situation of Albania;
  • - To urgently amend art.11 which introduces restrictions as to the categories of transactions that are subject to reporting; a list could be established that provide on the contrary for circumstances and transactions that need not to be reported;
  • - To consider, in the relation, to exclude those transactions that are deemed to be on no value in preventing or detecting money laundering or the financing of terrorism (commodity service payments, transfers with the BoA);
  • - To amend art.6 on “duty not to disclose” so as to cover also reports connected with terrorist financing and to clarify that the “duty not to disclose” applies also to entities apart from those listed under art.3 (customs and tax authorities, licensing bodies) and to any unauthorized person even though not connected with the transaction;
  • - To review the provisions on the protection of reporting persons in the LPML (to cover explicitly protection against civil actions);
  • - To review the drafting of “Guideline – Regulation” no.5 of 2004 so as to make it clear that reports filed in good faith are not subject to sanctions;
  • - To review the drafting of the LPML together with the various secondary texts (“Guidelines - regulations” sectoral texts etc) to ensure consistency; special care should be taken to the effect that these provisions are also consistent with the Criminal Code (e.g. definition of terrorist financing);
  • - To take measures to enhance awareness of all obliged entities about the reporting of suspicious transactions;
  • - The AML/CFT Law contains an explicit requirement for the obliged entities to report directly to GDPML.
  • - There is no specific requirement to report attempted transactions, although the FIU has identified a limited number of such transactions.
  • - Deficiencies remain in the criminalization of terrorist financing which limit the scope of the reporting obligation. In addition, the provisions appear to only cover intended terrorist financing, as opposed to where the funds are actually used.
  • - GDPML keeps detailed statistics regarding ML/FT reports from obliged entities.
  • - The requirement to report suspicious transactions now applies to all transactions regardless of the amount involved.
  • - The AML/CFT Law contains fewer exemptions for reporting suspicious transactions, but these are still not in line with the FATF standards.
  • - The AML/CFT Law contains fewer exemptions for reporting suspicious transactions, but these are still not in line with the FATF standards.
  • - The reporting requirements now include terrorist financing (subject to the deficiencies outlined above).
  • - Article 14 of the AML/CFT Law specifies that the subjects or supervising authorities, their directors, officials or employees who are in good faith reporting or submitting information in compliance with the stipulations of this law, are exempted from penal, civil or administrative liability arising from the disclosure of professional or banking secrecy.
  • - Reference included in the AML/CFT Law
  • - The GDPML has organized on its own as well as in cooperation with other law enforcement agencies and international partners training activities aiming at enhancing the awareness of the obliged entities about the reporting of suspicious transactions.
Cross border declaration or disclosure (SR.IX)
  • - To adopt the draft amending Chapter 8 of the Customs Code (on sanctions) making sure they provide for adequate sanction in case of under or false declaration;
  • - To review the current policy which consists in applying immediate seizure and confiscation measures so as to allow, in certain cases, for the gathering of further information and evidence on criminal activities and persons involved and to initiate more cross – border covert operations since organized criminal activities remain an important issue (stolen cars trafficking, smuggling etc.)
  • - To intensify training on AML/CFT issues for Customs employees, including on the detection and recognition of serious criminal activities (human being trafficking, drugs trafficking, smuggling of different goods) and movements of funds possibly related with ML/FT;
  • - No progress with regard to this recommendation. There are no sanctions for the case of under/false reporting.
  • - The current legal framework on seizure and confiscation and on international cooperation in criminal matters is enriched with two new laws, namely law 10192/2009 “On the prevention and striking of organized crime and trafficking through preventive measures against the assets” and law 10193/2009 “On jurisdictional relations with foreign authorities in criminal matters”. While the first law, including as designated category of criminal offences also money laundering and terrorism financing, is expected to help prevent such crimes through preventive measures against the assets whether instrumentalities or proceeds, the second law, while aligning domestic legislation with the Council of Europe Conventions on international judicial cooperation, is expected to facilitate jurisdictional relations. The application of preventive measures such as seizure and confiscation on the bases of law 10192/2009 before the opening of formal investigation permits the gathering of further information and evidence on criminal activities. The second law is aimed at facilitating cross border cooperation.
  • - The training of the Customs employees has been ensured though the cooperation with the GDPML and former and current EU backed twinning projects.
Internal controls, compliance, audit and foreign branches (R.15 & 22)
  • - To introduce a requirement for internal procedures to address CDD measures;
  • - To review the function of the institution of the “money laundering reporting officer” (MLRO) and to make this officer responsible not only for the reporting of transactions but also for the effective implementation of internal AML/CFT procedures and mechanisms (and to clarify on that occasion, as appropriate, the distinction between the MLRO and the central unit for the centralisation of reports; alternatively, the content of Guideline – regulation No.5 of 2004 could be reminded to reporting entities);
  • - To include in internal training programmes and awareness raising measures information on trends and techniques in the field of ML/FT;
  • - To provide for manager and employee screening;
  • - To require the establishment of computerised information and data management systems in all financial institutions (apart from the banking and insurance sector), and non financial institutions as appropriate;
  • - The AML/CFT Law sets explicit requirements for the obliged entities to draft and apply internal regulations and guidelines that take into account the potential risk of money laundering or financing of terrorism that can originate from clients or businesses, including but not limited to, a clients acceptance policy, and a policy for the application of procedures of enhanced due diligence for high risk clients and transactions.,
  • - The AML/CFT Law also nominates a person in charge for the prevention of money laundering and his deputy, both of administrative/ management level, in the central office and, according to the circumstances, in every representative office, branch, subsidiary or agency, to whom all employees shall report all suspicious facts related to money laundering or terrorism financing.
  • - To train their employees on the prevention of money laundering and terrorism financing through regular organisation of training programs is also foreseen in the Law
  • - To Apply “fit and proper procedures” when hiring new employees, to ensure their integrity is also a prevention measure to be undertaken by FIs, although the AML/CFT Law does not t include a definition of the term.
  • - The FIs have to establish a centralized system, in charge for data collection and analysis.
Shell banks (R.18)
  • - To insert in the LPML or banking regulations clear provisions defining and prohibiting the establishment of shell banks in Albania and the establishment of correspondent banking relationships with, or the opening of accounts by shell banks;
  • - The AML/CFT Legislation includes an obligation for Financial Institutions not carry out corresponding banking services with banks whose accounts are used by shell banks. Nevertheless the legislation has not be amended to include a clear provision defining and prohibiting the establishment of shell banks, and to enter o continue with correspondent banking relationship with shell banks. Based on the current prudential and financial legislation all the banks that are licensed in the Republic of Albania are required to have physical presence in the country
The supervisory and oversight system – competent authorities and SROs Role, functions duties and powers (including sanctions) (R.23,30,29,1 7,32 & 25)
  • - To implement measures to ensure effective AML/CFT supervision over the non – banking sectors covered by the BoA.
  • - To review the adequacy of staffing of the BoA supervision department and increase it as necessary to enable it to effectively supervise the various sectors under the responsibility of the BoA;
  • - To implement measures to ensure effective AML/CFT supervision over the insurance sector;
  • - To draft a development plan for the Insurance Supervisory Authority - in order to address its insufficient staffing and resources – taking into consideration the anticipated growth in the insurance sector;
  • - To adopt Regulation/Guidelines similar to the ones issued to banks for non- bank licensees (to address transactions particular to the activities performed by the non – bank licensees);
  • - To review the policy concerning sanctions and make sure they are adequately applied by supervisors and the GDPML when necessary;
  • - To review the sanction system in the LPML and Guideline Regulation No.5 to ensure consistency, to include explicit milder measure such as warnings and to make them applicable to legal persons; Albania should consider in this respect a simpler system (applicable to all requirements of the LPML without listing them) leaving more discretion to the responsible authority to decide.
  • - To examine the situation resulting from the provisions in art.24 of the LMSTF concerning the connection with LPML, and remedy to the possible conflict of norms by redrafting this article (and clarify its exact scope and purpose);
  • - To examine the need to introduce criminal law provisions on tipping – off (if existing measures are insufficient);
  • - BoA has created in 2010 a Compliance Unit. The functions of the Compliance Units are to verify the legal and regulatory compliance by entities subjects to the BoA’s supervision with respect to the AMLCFT prevention on ML and FT, as well as transparency issues. The offsite supervision is in a early stage.
  • - A Transparent/AML/CFT Unit has been created in 2010 withing the supervision department
  • - At present the FSA doesn’t supervise AML/CFT issues and its staff has not been trained on AML/CFT supervision.
  • - Regulation no..44 adopted by the BoA addresses the AML/CFT obligations for all its licensed entities including non-bank ones. Securities and Insurance sector regulations have not been developed yet.
  • - The sanctioning for violations of AML/CFT Law are applied by GDPML. The BoA and the FSA have never applied sanctions for any AML/CFT violations.
  • - The AML/CFT Law foresees a wide range of sanctions for AML/CFT violations but all are financial. No gradual scale of sanctions which includes early warning system of notifications and a list of graduated sanctions has been included in the AML/CFT Law
  • - New AML/CFT Law
  • - The current tipping off sanctioning provisions set forth in the AML/CFT Law are deemed sufficient. In addition there are legal mechanisms in place (Criminal Code, Law on Criminal liability of legal persons) that do provide for penal proceedings to be taken in this case.
Money value transfer services (SR.VI)
  • - To take rapidly all the necessary measures to ensure the proper implementation of SR VI and the related general FATF Recommendations, in particular Recommendation 23, to all economic agents providing money transfer services. The Albanian authorities (BoA) should identify all the ultimate operators affiliated and keep a list that would enable them to carry out direct inspections, depending on the seriousness of risks;
  • - The BoA licenses operators and agents providing money transfer services, and has conducted a limited number of on-site inspections. These entities have also been the subject of a limited number of inspections from the GDPML. However, the lack of a provision requiring that all agents be listed means that some independent operators might not be identified.
4. Preventive Measures – Non-Financial Businesses and Professions
Customer due diligence and record-keeping (R.12)To review the identification and CDD measures applicable to DNFBP;
  • - To cover explicitly real estate agents when they are involved in transaction for a client concerning the buying and selling of property;
  • - To introduce a clear requirement for traders of precious metals and stones to apply CDD principles when they engage in any cash transactions with a customer equal or above EUR/USD 15,000;
  • - To cover attorneys, notaries, other independent legal professions and accountants in the circumstances provided for in recommendation 12;
  • - Real estate agents are now covered by the AML/CFT Law.
  • - Dealers in precious metals and stones are covered by the AML/CFT Law when they are involved in any transaction exceeding the threshold of ~12.000 EUR in line with the standard.
  • - Attorneys, notaries and other independent legal professions and accountants are covered by the AML/CFT Law for circumstances provided for in Recommendation 12.
Suspicious transaction reporting (R.16)
  • - To develop an on-going dialogue between the GDPML and the various sectors of the DNFBPs so that legislative conflicts are identified and appropriate solutions proposed;
  • - To arrange a scheduled and continuous training program for the various non financial entities that have to report to the GDPML;
  • - To issue directives for all the sectors that is the supervisory authority and to assist in preparing a directive from other supervisory authorities;
  • - To review the reporting requirements and thresholds for DNFBP, along the lines of Recommendation 16;
  • - To consider the utility of a system where certain professions (e.g. lawyers) report through their organisation.
  • - GDPML has either individually or in cooperation with other national/international actors established an ongoing dialogue with the DNFBPs;
  • - Training activities has been made available to most DNFBP sectors;
  • - Guidance regarding reporting requirements has been published in accordance with AML/CFT Law;
  • - Reporting thresholds for DNFBP are in line with the standard;
  • - The GDPML has signed a Memorandum of Cooperation with the National Chamber of Notaries that provides for clear obligations to be fulfilled concerning the implementation of the legislation.
Regulation, supervision and monitoring (R.24 - 25)
  • - To urgently devise and implement a supervision mechanism for DNFBP along the lines of FATF recommendation 24 – 25;
  • - Specific supervisors have been designated for Lawyers, Notaries, Accountants, Casinos and Games of Chance while no supervisory/licensing authority is in place for the Real Estate Agents. The GDPML has undertaken examinations in most DNFBP sectors.
Other designated non-financial businesses and professions (R.20)
  • - To extend the scope of art.12 of the LPML, so as to cover also the tax administration, customs and licensing/supervisory bodies;
  • - To introduce further limits on cash payments and consider the usefulness of introducing a general prohibition to perform outside the banking system transactions above a certain amount (adapted to the situation of the country);
  • - To take the necessary measures, whether legal or interpretative, so that the wording of existing regulations obliging legal persons to disburse/pay amounts above ALL 300,000 through the banking system applies to all types payments;
  • - To take the necessary measures, whether legal or interpretative, to ensure that the definition of transactions in the LPML and elsewhere clearly applies to all payment instruments (and does not exclude for instance cheques);
  • - AML/CFT law does contain provisions regarding the tax and customs administration and licensing/supervisory bodies in the overall anti money laundering combating financing of terrorism financing;
  • - No additional limits on cash payments have been introduced;
  • - No changes requiring that all types of payments over ALL 300,000 be conducted through the banking system have been made.
  • - The definition of transaction in the AML/CFT Law means a business relationship or an exchange that involves two or more parties including thus among others cheques.
5. Legal Persons and Arrangements & Non-Profit Organizations
Legal persons – Access to beneficial ownership and control information (R.33).
  • - It is recommended to enhance the requirements regarding the establishment of companies along the lines of the FATF Recommendations:
    • To provide for a clear legal basis on deadlines for reporting changes to the Court Register;
    • To computerise the Court Register;
    • To review the regulations applicable to bearer shares and make sure that they take into account AML/CFT needs;
    It is also recommended
  • - To establish an AML/CFT policy at the level of the register of companies; this policy should provide for controls of the criminal background of applicants and investors, identification of ultimate beneficial ownership, controls over the origin of the funds;
  • - To consider extending the reporting duty of tax authorities and licensing bodies (art 10/1 and 10/2) also to FT;
  • - To devise ways to improve the transparency of businesses’ real financial situation and to avoid the practice of double balance sheets (e.g. development of audit requirement for sectors at risk.)
  • - A National Registration Centre (NCR) was created following the approval by the parliament on May 3, 2007 of the Law Nr 9273 “On the National Registration Centre”. The law states that all natural and legal persons should apply for the initial registration within 15 days of starting the activity (for natural persons) or the date of the incorporation (for legal persons). No significant progress concerning bearer shares.
  • - No policy has been developed.
  • - Based on the AML/CFT Law the reporting duty has been extended to tax and customs authorities as well as supervisory/licensing authorities.
  • - The enhancing of transparency of businesses has been ensured through the establishment of the National Registration Centre, National Licensing Centre, better control and auditing practices by tax authorities and private practitioners the establishment of a Tax Investigation Directorate.
Legal arrangements – Access to beneficial ownership and control information (R.34)
  • - To clarify the issue of the existence in practice of trust arrangements and businesses established by foreign trusts and adopt the measures required by recommendation 34 of the FATF;
  • - The Albanian Parliament has adopted law no. 9723, May 3, 2007 “On the national registration centre” which established a central system of registration whereby a national registry records detailed information on legal arrangements operating in the country.
Non Profit organisations (SR.VIII)
  • - To conduct a review of the AML/CFT risks and situation in the associative/non-profit sector;
  • - To review as appropriate the legal and financial regime applicable to NPOs in order to avoid common illegal practices such as dual bookkeeping, and therefore to increase transparency and the reliability of information available;
  • - To devise a policy for the control and supervision over NGOs/NPOs taking into account ML/FT considerations (dissemination of FT list to the registers, awareness raising actions of the register, tax and other administrative services dealing with the sector etc);
  • - No formal review of the NGO sector has been undertaken.
  • - The GDPML does disseminate updated FT lists and this might enhance awareness of TF risks amongst the sector.
  • - Supervision of this sector is still not taking place.
6. National and International Cooperation
National cooperation and coordination (R.31 & 32)
  • - To make better use of the various existing coordination levels to review the effectiveness of AML/CFT efforts; this would first require to identify the common patterns of money laundering and to devise more effective approaches to reduce current vulnerabilities. Cooperation with the obliged and reporting entities needs also to be fostered and diverging interpretations eliminated;
  • - To adopt urgent coordinated measures to stop the street foreign exchange business, which currently offers significant money laundering facilities and support to smuggling (and possibly other criminal) activities.
  • - GDPML cooperates with Prosecutor’s Office, Albanian State Police, State Intelligence Service, State Institutions, Supervisory Authorities and Foreign FIUs with respect to AML/CFT investigations. Common patterns of money laundering have been already identified and are used to evaluate the vulnerabilities and take appropriate countermeasures.
  • - A compulsory licensing system for the exchange offices by the BoA is already in place and unlicensed currency exchange are at times dealt with by law enforcement authorities.
The conventions and UN Special Resolutions (R.35 & SR.I)
  • - As regards the implementation of the UN Conventions, some adjustments are needed concerning the criminalisation, temporary and final measures, investigative means etc, which have already been discussed in other parts of this report;
  • - Status on implementation of Vienna, Palermo and FT Conventions covered in sections on R 1, SR II and R. 3 and implementation of UNSCRs in SR III. Laws enacted since last assessment, the Law “On the legal liability of Legal Persons”, the Law “On the preventing and striking of organized crime through preventive measures against the assets”, and the Law “On jurisdictional relations with foreign authorities in criminal matters” improve the framework to permit Albania’s implementation of the UN Conventions and resolutions.
Mutual Legal Assistance (R.36 – 38, SR.V, and R.32)
  • - To analyse the reasons why mutual legal assistance mechanisms are never used by Albanian authorities in ML/FT cases, and why no more requests reach the country despite certain factors (characteristics of Albanian organized crime, importance of Albanian diaspora living abroad etc);
  • - To issue guidance documents and take other initiatives aimed at judges and prosecutors, as appropriate to make it clear that international instruments take precedence over the Criminal Procedure Code provisions and can be directly applied for mutual legal assistance purposes in Albania;
  • - To amend the provisions of the Criminal Procedure Code to permit letters rogatory to circulate without passing through diplomatic channels (art. 509 of the PPC) and to consider providing for direct contacts of Albanian judicial authorities with foreign counterparts;
  • - To introduce provisions dealing specifically with the execution/recognition of foreign decisions on seizure and confiscation of assets that meet the requirements of Recommendation 38 and SR.V;
  • - To consider making provision on sharing of confiscated assets (with requesting countries when assets are confiscated in Albania);
  • - To keep more specific and detailed statistics on mutual legal assistance mechanisms;
  • - Although there has been no specific analysis of reasons, to enhance mutual legal assistance mechanisms, in 2009 Albania adopted a law setting forth procedures and practices for incoming and outgoing mutual legal assistance and extradition requests, Law No. 10193 of December 3, 2009 “On jurisdictional relations with foreign authorities in criminal matters.” The law supplements the Criminal Procedure Code (CPC) provisions on international requests with the CPC provisions taking precedence. It adds specificity in the case of some of the CPC provisions.
  • - Guidance documents have not been issued, but there has been some training for judges and prosecutors that addressed mutual legal assistance mechanisms.
  • - CPC not been amended. Law No. 10193/2009 provides for direct communication of letters rogatory in cases of urgency and for direct contacts of Albanian judicial authorities with foreign counterparts.
  • - Authorities continue to rely on CPC provisions in effect during last assessment to execute or recognize foreign decisions although new MLA law permits authorities also to transfer restrained assets for purpose of foreign authority’s confiscation action.
  • - Although no new provision enacted, authorities may enter into case specific agreements to share assets.
  • - Statistics maintained but remain insufficient.
Extradition (R.39, 37, SR.V & R.32)
  • - To regulate more precisely the discretionary power of the MoJ under art.491 para.3 of the Criminal Procedure Code;
  • - To keep more specific and detailed statistics on extradition;
  • - Article 491 para. 3 unchanged.
  • - Statistics on extradition are maintained.
Other forms of Cooperation (R.40, SR.V & R.32)
  • - As a priority to finalise throughout the country the computerisation of law enforcement authorities, the courts and all the other databases which are useful for AML/CFT purposes (e.g. registers of persons and identification documents, registers of property, registers of companies and non profit organizations, etc) and ensure as much as possible on line access to the GDPML;
  • - Also make clear provision in the LPML under art.15 on the competence of GDPML to cooperate in the CFT field;
  • - The computerisation of databases of law enforcement authorities, registers of companies and non profit organizations, civil registry, credit register, Motor Vehicles Department, Tax and Customs Authorities has already been completed. The computerisation of courts throughout Albania by introducing the CCMIC/ICMIC and ARKIT systems has been successful and it is now possible to have access to court databases giving detailed information on court decisions. The property registry and the courts are undergoing an extensive digitization process. GDPML does have access to all the above mentioned registers.
  • - The GDPML’s CFT mandate is outlined in the AML/CFT Law.
7. Other Issues
General Framework – structural issues
  • - It is recommended that Albania uses this opportunity to improve the drafting of the LPML and make it as accurate, coherent and user friendly as possible to avoid misunderstandings. The LPML should become backbone of the preventive AML/CFT system. Secondary legislation on guidance documents should deal with the specific and practical matters and not “amend” the law;
  • - Once the revised LPML has been adopted a general review of other texts should be undertaken to make them consistent with the LPML (Guideline Regulations of 2004, LMSTF, Regulation of the Bank of Albania on money laundering prevention 25.02.2004 etc).
  • - It is recommended to take urgent remedial action to counter the phenomenon of real estate transactions below their market value;
  • - The adoption of the AML/CFT Law by the Albanian Parliament marks a positive step forward in approximating the legislation with the FATF standards.
  • - Some changes have been reflected in the secondary legislation as well as relevant BoA regulation.
  • - The Ministry of Finance and Ministry of Justice have issued in 2008 a joint guideline that specifies real estate reference prices to be applied in all cases of real property sales and purchases. Compliance is ensured though the notary offices across the country.

2. LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES

Laws and Regulations

2.1. Criminalization of Money Laundering (R. 1 – rated PC and R. 2 rated LC in the 2006 MER)

2.1.1 Description and Analysis9

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

146. In the previous assessment report, the assessors concluded that, although the ML offence was largely in line with the UN Conventions, there were a number of flaws in the provision and its implementation. It was not clear that there was jurisdiction to undertake cases when the predicate offence occurred outside Albania if the offender was not an Albanian citizen. Legal persons did not yet have liability because secondary legislation had not been adopted. There was concern that a conviction on the predicate offence might be necessary in order to prove that property was the proceeds of crime. In addition, questions were raised concerning coverage of self-laundering and the ability to infer knowledge, intent or purpose from objective factual circumstances. The assessors noted that Article 287’s ancillary offence provision did not include assistance. Finally the authorities had only demonstrated modest use of the ML provisions and were not maintaining all relevant statistics.

Legal Framework:

  • Criminal Code Articles 287 and 287/b (hereinafter CC).
  • Law No.9754 of June 14, 2007 “On the criminal liability of legal persons” (Legal Persons Liability Law).

Criminalization of Money Laundering (c. 1.1—Physical and Material Elements of the Offense):

147. Article 287, para 1 of the CC criminalizes as “laundering of the proceeds of the criminal offence” the following conducts:

Laundering of the proceeds of the criminal offence committed through:

  • a) the conversion or transfer of an asset that is known to be a product of a criminal offence with the purpose of hiding, concealing the origin of the asset or aiding to avoid legal consequences related to the commission of the criminal offence;
  • b) the concealment or disguise of the true nature, source, location, disposition, movement or ownership of an asset or rights that are the proceeds of a criminal offence;
  • c) performance of financial activities and fragmented/structured transactions to avoid reporting according to the money laundering law;
  • d) advice, encouragement, or public call for the commission of any of the offences described above;
  • dh) the use and investment in economic or financial activities of money or objects that are the proceeds of a criminal offence.10

148. A different provision of the CC, Article 287/b criminalizes “whoever purchases, receives, hides or, in any other way, appropriates for himself or a third party, or assists in purchasing, taking, hiding of money or other goods, knowing that another person has obtained these money or goods, as a result of a criminal offence”.

149. Article 287 para 3 provides for the application of the Article “in cases where the person that has committed the offence the proceeds derive from, cannot be a defendant, cannot be convicted or there is a cause that wipes out the offence or one of the conditions for criminal proceedings of such an offence is missing.” A similar provision is also found in Article 287/b, which states that “the lack of responsibility of the person or the barrier for the prosecution of the related criminal offence does not exclude the responsibility of the person that committed the criminal offence of appropriation of stolen money or goods in the meaning of this article”.

150. ML is adequately criminalized on the basis of the Vienna and Palermo Conventions. This extends to both the conversion or transfer of property knowing it is proceeds as required, for instance, by Vienna Convention Article 3(1)-(b) (i), and to the concealment or disguise of such property as required by Vienna Convention Article 3(1)-(b) (ii).

151. However, these Conventions also require that, subject to constitutional principles and basic concepts of the legal system, States criminalize acquisition, possession or use of property knowing at the time of receipt that it was derived from an offence. See, e.g., Article 3(1)-(c) (i), Vienna Convention. Article 287/b applies only to acquisition and, in the prosecutor’s view, only to stolen goods not all proceeds. Representatives of the judiciary did not share the view that it was limited to application in the case of stolen goods. Article 287 para 1 (dh) covers one aspect of use, that is “use and investment in an economic or financial activity.”

152. Until 2007—when it was repealed through Law No. 9686 of February 26, 2007—Article 287 had a subsection (subsection c) which had criminalized acquisition, possession and use of any proceed (“gaining, possession or use of an asset when it is known that it is a crime proceed”). As discussed later on, the repealed provision did not limit its application, as Article 287/b does, to situations where “another person” has obtained the property as a result of a criminal offence.

Type and Kind of Property that may be Laundered (c. 1.2):

153. Meaning of Asset. The CC does not provide a definition of “asset” or “goods” that applies to criminal offence provisions. However, from a grammatical perspective, the Albanian word translated as “asset” used in the statute has a very broad meaning. It includes the concept of wealth which is anything of value. It was explained that it is the general practice not to have definitions in the CC. Rather, statutory terms are considered by looking to grammatical meaning, the meaning in the context of the specific CC chapter and the purpose of the legislation. Combining the latter two, the context and a legislative purpose of implementing obligations under international conventions, the meaning of terms as contemplated by the international instruments to which Albania is a party would apply. There is no monetary threshold and thus assets regardless of value are included.

154. Property Derived Indirectly. Article 287 covers “assets derived from criminal offence.” Article 287/b covers “money or other goods, knowing that another person has obtained these money or goods, as a result of a criminal offence.” Although no definition of these terms is provided that would indicate they extend to property derived indirectly from the offence, the prosecutors take the position that these terms are broad and include property derived indirectly. They cite Article 36 para 1 (b) of the CC which identifies the assets to be confiscated upon conviction. That provision defines criminal offence proceeds as “including all property as well as documents or legal instruments that prove title or other interests in the property that is derived or acquired directly or indirectly from the commission of the penal offence.” There is neither a judicial decision nor relevant practice on coverage of indirect proceeds.

Proving Property is the Proceeds of Crime (c. 1.2.1):

155. The criminal provisions on ML do not provide that a conviction for the predicate offence is required. The prosecutors confirmed that, in principle, a conviction on the predicate offence is not necessary to prove that property is the proceeds of crime. However, the courts require that prosecutors prove in full and with specificity the predicate offence activity in the course of a criminal prosecution for ML.

156. The authorities explained that, in practice, the proof requirements to establish in a ML prosecution that a predicate criminal offence occurred and that the offence produced proceeds are significant. The prosecutor must establish a specific crime not just a criminal offence and the specific acts that constituted a criminal offence (for instance the specific drug trafficking transactions) as well as the specific proceeds that resulted from the activity.

157. It is worth noting that in a civil confiscation case involving the 2004 Organized Crime Law (the law, as discussed later in the report, was replaced with a new law in 2009), a Supreme Court decision raised uncertainty within the Albanian law enforcement community whether in order to seize/confiscate assets, a specific link between each proceed and a specific episode of illegal activity would need to be established. A new Organized Crime Law was enacted in part to address this issue. In any event, judicial practice as it has developed in Albania, involves a high degree of specificity in the establishment of the predicate offence.

158. In addition, when the predicate offence is committed abroad, the prosecutors indicated that, although they could also try to prove the occurrence by establishing in full the elements of the predicate offence as in the case of a predicate offence committed domestically, a conviction in the foreign jurisdiction for the predicate offence, if one existed, would be preferred by the courts. In practice, it is difficult to prove an event occurring in a foreign jurisdiction.

159. Prosecutors indicated that in general courts would be very conservative, also with regard to the exceptions stipulated by Article 287 and 287/b. As mentioned earlier, Article 287 para. 3 provides that the ML offence applies even when the predicate offender “cannot be a defendant, cannot be convicted or there is a cause that wipes out the offence or one of the conditions for criminal proceedings of such an offence is lacking.” A similar provision exists also in the case of Article 287/b. These provisions are meant to allow a prosecution for ML offences even if there are circumstances that would have precluded a criminal responsibility for the offender of the predicate activity. This would be the case, for instance, if the predicate offender has died or legally lacked competence to face charges or the statute of limitations barred the action. Even in such situations the prosecutor must still establish the elements of the criminal activity with specificity including in matters where the predicate activity occurred in the distant past. It is often difficult to proceed in such situations because establishing the predicate activity is difficult with the passage of time.

160. Because of the need to establish in full the predicate offences, in practice prosecutors tend to prosecute the predicate activity and the ML together, and do not pursue stand-alone ML criminal cases.

The Scope of the Predicate Offences (c. 1.3):

161. The ML provision provides for an “all-offences” approach. By the reference in the ML provision to “criminal offences”, every criminal offence provided for in the CC constitutes a ML predicate. The CC covers the FATF designated categories as follows:

Predicate OffenseCitations to Albanian CC
Participation in an organized criminal group and racketeeringArticles 333, 333/a, 334
Terrorism, including terrorism financingArticles 230, 230/a, 230/b, 230/d
Trafficking in human beings and migrant smugglingArticles 110/1, 128/b, 298
Sexual exploitation, including sexual exploitation of childrenArticles 100, 101, 114/b
Illicit trafficking in narcotic drugs and psychotropic substancesArticles 283, 283/a
Illicit arms traffickingArticle278/a
Illicit trafficking in stolen and other goodsArticles 138, 138/a, 141/a
Corruption and briberyArticle 164/b, 244-245, 259-260, 312, 319, 319/a
FraudArticles 143, 143/a, 144,
Counterfeiting CurrencyArticle 183
Counterfeiting and piracy of productsArticles 147, 190, 288
Environmental crimeArticles 201 – 203
Murder, grievous bodily injuryArticles 76-85, 87-88
Kidnapping, illegal restraining and hostage takingArticles 109, 109/a, 110
Robbery or theftArticles 134-136, 138-141/a, 192/a
SmugglingArticles 171-177
ExtortionArticles 109/b, 152
ForgeryArticles 165, 183-185,187-191
PiracyArticles 111, 230
Insider trading and market manipulationNo provisions

162. As is apparent from the chart above, provisions exist for all designated categories except for insider trading and market manipulation.

Threshold Approach for Predicate Offenses (c. 1.4):

163. As noted above, Albania does not use a threshold approach but covers all offences under its criminal law.

Extraterritorially-Committed Predicate Offenses (c. 1.5):

164. The authorities confirmed that in applying the phrase “proceeds of a criminal offence” that appears in Articles 287 and 287/b, the reference to “criminal offence” includes not only domestic conduct but applies also to extraterritorially--committed predicate offences if the same conduct would be an offence under Albanian law. It is only necessary that the same conduct be established as a criminal offence in both countries. It is not necessary that Albanian criminal jurisdiction extend to the conduct that constitutes the predicate activity for the Albanian ML offence to apply to the laundering of the proceeds of the foreign predicate conduct. However, in the instances set forth in Articles 6 (applicable to conduct by Albania citizens abroad) and 7 (applicable to specifically defined conduct of foreigners abroad) of the CC, Albanian criminal jurisdiction does extend to such extra-territorial predicate conduct and it is possible for such conduct to be the subject of an Albanian prosecution. In these instances, dual criminality does not apply.

165. Although the predicate activity in the Albanian ML prosecution can occur outside Albania, the predicate activity must be proven with the same high degree of specificity as is required in domestic prosecutions, and, as it is a criminal prosecution, beyond a reasonable doubt. In these circumstances, where the predicate activity has occurred outside of Albania, it can be difficult in practice to establish it with this specificity and to the required standard in the absence of a foreign conviction and sentence.

Laundering One’s Own Illicit Funds (c. 1.6):

166. The language of Article 287 is all encompassing. It makes no exception in the case of a person laundering his or her own proceeds. Jurisprudence has confirmed that there can be prosecutions for self-laundering.

167. In 2007, the First Instance Court of Fier issued a decision that punished a person for self-laundering of the proceeds of the crime of “exploitation of prostitution.” Law enforcement authorities continue to develop cases that involve only self-laundering.

168. The second ML offence provision, Article 287/b, however, by its terms does not apply to self-laundering. It requires that a person know that “another person” obtained goods as a result of a criminal offence.

Ancillary Offenses (c. 1.7):

169. The CC provides criminal responsibility for attempts (Articles 22 - 23), and for collaboration which under Albanian law involves an agreement between two or more persons to commit a criminal act (Articles 25 - 28). There are a number of kinds of collaboration under the CC – organizers, executors, helpers, and instigators.

170. Helpers are those who “through advice, instructions, concrete means, abolitions of obstacles or promises to hide collaborators tracks or things relevant to the criminal act, help to carry it out.” Instigators are persons who instigate other collaborators to commit a criminal act. For a helper or instigator to be criminally responsible, there must be an agreement between two or more persons, although that agreement need not be formal. Simple acts to aid and abet or facilitate or to counsel commission do not appear to be encompassed under the CC provisions that deal with collaboration generally.

171. In addition to these general CC provisions under Chapter IV on collaboration, the ML offences themselves incorporate directly some ancillary conduct. Article 287 para. 1(d) criminalizes the “advice, encouragement or public call” for the ML offences that are specified in Article 287 (1) (a)-(c). In the case of Article 287/b offences, the provision provides that persons are liable if they assist in the conduct.

172. The CC provisions do not cover in full the required ancillary conduct. This is because they require an agreement between two or more persons and, as noted above, simple acts to aid and abet or facilitate or to counsel commission are not encompassed by the CC collaboration provisions. The gap left by the CC provisions is filled only partially by the ancillary conduct that is incorporated directly in the ML provisions themselves as noted above. As an example, in the case of offences under Article 287, aiding and abetting and facilitating are covered only if there is already collaboration – cooperation or an informal arrangement or agreement involving two persons. For Article 287/b offences, “assistance” is covered. This appears to extend to aiding and abetting and facilitating, but not to counselling. There is no practical experience with the use of these ancillary offence provisions in the case of ML. This existing framework has gaps in coverage for ancillary conduct. Where coverage is lacking, this is not based upon a fundamental principle of domestic law.

Liability of Natural Persons (c. 2.1):

173. The ML offences extend to natural persons who knowingly engage in ML activity. The knowledge element for both Articles 287 and 287/b is the perpetrator’s knowledge that the property is proceeds of an offence.

174. As noted in the 3rd assessment report, in addition to liability for intentional ML, under Article 14 CC there is also liability for negligent conduct. Article 14 provides that persons are guilty if they commit a criminal act intentionally or because of negligence. Article 16 CC sets forth what is meant by negligence as follows: “A criminal act is committed because of negligence when the person, although he does not want its consequences, foresees the possibility of their occurrence and with little consideration attempts to avoid them, or when he does not foresee the consequences, but according to the circumstances, he should and could have foreseen them.”

175. In this respect, the Albanian provisions go beyond the requirements of the Vienna and Palermo Conventions. There have not been any prosecutions for ML using the negligence standard.

The Mental Element of the ML Offense (c. 2.2):

176. The Albanian CPC at Article 152 provides that the court is to evaluate evidence “based upon its conviction after their examination in their entirety.” This Article also provides that indications must be important, accurate and in accordance with each other for them to establish a fact. Judicial authorities confirm that, with the application of this CPC provision which reflects the “intimate conviction” standard of civil law systems for evaluating evidence, it is possible for the mental element of criminal conduct to be inferred from objective factual circumstances.

Liability of Legal Persons (c. 2.3):

177. Article 45 of the CC provides for the responsibility of legal persons for crimes performed on behalf of or for their benefit. It also provides that sanctioning measures and procedures are to be regulated by a special law.

178. At the time of the 3rd round assessment, as an implementing law was not yet in place, legal persons were not yet subject to criminal sanction. In 2007, Albania adopted the Legal Persons Liability Law. Legal persons are now subject to criminal liability and sanctions for all offences in CC, including ML and all the FATF designated categories of offences. The law defines rules on liability, criminal proceedings, and types of penalties for legal persons that commit criminal offences. A legal person is liable for criminal offences committed on behalf of or for its benefits or by its subsidiaries or representatives and by persons who represent, lead or administer the legal person.

Liability of Legal Persons should not preclude possible parallel criminal, civil, or administrative proceedings (c. 2.4):

179. Article 2 para.1 and 3 of the Legal Persons Liability Law makes clear that civil and trade law also applies to legal persons, and that administrative sanctions may be imposed. Accordingly, parallel proceedings against legal persons are possible. In one case, an entity was sanctioned administratively and excluded from participation in public procurement for a two year period.

Sanctions for Money Laundering (C.2.5):

180. Article 287 of the CC provides the sanctions for the ML criminal offence for natural persons. They are:

  • three to 10 years of imprisonment and a fine from 500 thousand to lek 5 million (US$5,000 – 50,000) for the basic offences (Article 287 para.1);
  • five to 15 years of imprisonment and a fine from 800 thousand to lek 8 million (US$8,000 – 80,000) if the same offence is committed during the exercise of a criminal activity, in collaboration, or more than once (Article 287 para. 2); and
  • five to 15 years of imprisonment and a fine from lek 3 million to 10 (US$30,000 – 100,000) if the same offence has caused grave consequences (Article 287 para. 2). 11

181. For Article 287/b offences, the punishment is six months to three years of imprisonment and a fine of up to lek 100 000 (US$1,000). Grave consequences is not defined in Albanian law but in the context of robbery is recognized under Decision No. 5 2003 of the Supreme Court to be lek 1 million (US$10,000) in the case of an individual and lek 2 million (US$20,000) in the case of a juridical entity.

182. Under the Legal Persons Liability Law, legal persons are subject both to principal sanctions of a fine and termination and to supplementary sanctions. Article 12, provides for the following sentences:

  • if the offence is punishable by not less than 15 years of imprisonment, a fine from lek 25 to 50 million (US$250,000 - 500,000);
  • if the offence punishable by not less than seven years up to 15 years of imprisonment, a fine from five million to lek 25 million (US$50,000 – 250,000); and
  • if the offence is punishable by seven years of imprisonment maximum, a fine of lek 500 thousand to five million (US$5,000 – 50,000).

183. Under Articles 8, 11 and 12 of the Legal Persons Liability Law, a legal person may be terminated if it was founded with the purpose of committing the criminal offence; it has largely used its activity to serve the commission of the criminal offence; or the commission of the offence caused serious consequences. A sentence that includes termination may be issued if the commission of the criminal offence has occurred more than once, or in cases of other aggravating circumstances set forth in Article 50 of the CC, for instance where the act occurs after sentencing for another crime or the commission of the crime involves an abuse of public office. Under Article 45 of the CC, the liability of legal persons is also without prejudice to the criminal liability of natural persons who committed or collaborated in the commission of the same offence.

184. In all instances, under Article 36 CC, confiscation of instrumentalities and proceeds is mandatory.

185. These sentences appear to be consistent with the sanctions for other financial crimes under Albanian law. For instance fraud is punishable by imprisonment of up to five years or if committed with accomplices, repeated or producing specified harm, by three to ten years, or if causing serious consequences by 10 to 20 years. Fines for fraud are from lek 100,000 to three million (US$1,000 to 30,000). Extortion is sanctioned with two to eight years or if certain kinds of force are used by seven to 15 years. For extortion, the fine is from lek 600,000 to three million (US$6,000 – 30,000) or if there are serious consequences, two million to five million (US$20,000 to 50,000).

186. The available sanctions as far as imprisonment appear proportionate and dissuasive, but would need to be applied in a way that serves as a deterrent. The fines for natural and legal persons are consistent with those for other financial crimes in Albania. In the case of legal persons the fine for the most grave activity may not exceed US$500,000. It should be noted, however, that administrative fines, which are available in addition to the criminal fines, do not have a maximum cap and hence a higher administrative fine could be applied. For the imprisonment terms, they are comparable to those that apply elsewhere in the region. In addition, if the Council of Ministers recommended CC amendments are adopted, the minimum sentence will be increased.

187. Effectiveness of the sanctions is not yet established. This is because since 2006, there have been convictions under Article 287 only in four cases involving four individual defendants. The information available on the sanctions imposed in these cases is that the prison terms were in the range of two to five years. During the period 2007-2009, no fines were imposed in relevant cases.

Statistics (applying c. 32.2):

188. Statistics provided by the Prosecutor’s Office on ML penal proceedings at the investigative and trial stages is as follows:

Year

CC 287

Number ML

Investigations/

Prosecutions
20062007200820092010

(to Oct.1)
Cases

Registered/ No.

of suspects or

defendants
2

(0 suspects)
2

(2 dfndts)
13

(5 dfndts)
41

(5 dfndts)
42

(3 suspects)
Matters sent

for trial
013

(4 dfndts)
1

(1 dfndt)
0
Matters with

investigation

terminated
3111617
Matters

suspended
2
Proceedings in

which

conviction

obtained and

sentence issued
01

(1 dfndt)
1

(1 dfndt)
1

(1 dfndt)
1

(1 dfndt)
Year

CC 287b

Number ML

Investigations/

Prosecutions
20062007200820092010

(to Oct.1)
Cases

Registered/ No.

of suspects or

defendants
03

(2 dfndts)
10

(10 dfndts)
9

(12 dfndts)
2

(5 dfndts)
Matters sent

for trial
014104
Matters with

investigation

terminated
0111
Matters

suspended
1
Proceedings in

which

conviction

obtained and

sentence issued
01

(3 dfndts)
1

(3 dfndts)
10

(12 dfndts)
1

(2 dfndts)

189. These statistics show a total of 17 cases in which 24 defendants were convicted over a period of four and three-quarters years. Most of the convictions - 13 cases that involve 20 defendants - were on charges under Article 287/b of the CC. The information available on two of the four in which there was a conviction under Article 287 is that the Court in Fier decided a case in 2007 that involved self-laundering (Decision 109 of April 23, 2007, First Instance Court of Fier). A 2008 case involved the conviction of one defendant in a ML matter involving domestic fraud. The assets involved could not be located and the fraudulent transactions were conducted using cash.

190. The authorities provided the following table which represents a summary of the offences they consider to be the major source of illegal proceeds in Albania. It covers the period 2006 through the first half of 2010.

Offences that are Major Sources of Illegal Proceeds

Type of CrimeYearRegistered crimeConcluded

investigation
Persons charged
Drug related crimes2006453341559
2007524314501
2008701454688
2009647397568
Jan-Aug

2010
477373595
Robbery200616499169
200712390144
200814490140
200916989156
Jan-Jun

2010
1055587
Customs & tax crimes2006187167230
2007393379457
2008229219264
2009192186238
Jan- Jun

2010
219218284
Theft through abuse of office2006262659
2007232032
2008363468
2009272239
Jan- Jun

2010
232330
Fraud2006171153170
2007254191220
2008429409467
2009288281335
Jan-Aug

2010
261254297
Circulating falsified currency2006504762
2007393336
2008352949
20098270105
Jan- Jun

2010
7770102

Additional Element—Would an act that occurs overseas which does not constitute an offense overseas, but would be a predicate offense if it occurred domestically, lead to an offense of ML (c. 1.8):

191. There is no practice with respect to laundering the proceeds of actions that do not constitute a crime where committed but constitute a crime in Albania. However, Articles 7 and 7/a of the CC provide for criminal liability under Albanian law for ML acts committed outside of Albania by foreign citizens if the acts are against the interest of the Albanian State or an Albanian citizen.

Effectiveness:

192. Although, as the chart on proceeds-generating offences above demonstrates, the authorities have registered a number of cases that involve proceeds generating crimes in the period from 2006 to 2009 and in many such cases persons were charged, the authorities have undertaken only 124 investigations involving 44 suspects for ML in relation to these and other predicate criminal activity in that period. Although the number of investigations for ML is increasing, for instance in 2009 50 such investigations were opened, actual results thus far are quite limited. The Prosecutor’s Office has reported that for matters under the basic ML criminal provision (Article 287), since 2006 only four cases have been sent to court. A conviction was obtained in each case – one in each year 2007 through 2010. There have been 20 defendants convicted in 13 cases that were initiated under Article 287/b which relates to acquisition, possession or use of stolen goods.

193. These figures must be evaluated also in terms of the substantial risk that ML is occurring given the fact that organized criminal groups are active in Albania and that Albanian nationals that are part of such groups but operate elsewhere return proceeds to Albania. In addition, the risk for the laundering of proceeds is enhanced because of the relatively high levels of drug transit and considerable level of production, corruption and trafficking in women and minors that occur in Albania.

194. Considering the risks and the statistics provided for the predicate offences, it is clear there has been only modest use of the ML criminal provisions in the period since the last assessment, and that there continues to be a reluctance to use the provisions as an additional charge against a predicate offender. In addition, there has only been a single stand-alone ML prosecution.

195. The reasons for the few ML cases ultimately reaching the trial stage or for which a conviction has been obtained is several-fold. The Joint Investigative Unit that focuses on ML matters was only established in mid-2007. With it, the authorities began to give more concerted attention to developing and instituting ML criminal prosecutions. However the most concrete results from this organizational change will likely be in future years. Also, prior to 2007, prosecutorial and police resources devoted to ML cases were more limited. In addition, developing the expertise necessary to pursue various aspects of complex financial criminal activity has been a more recent priority as Albania has turned to use of a Joint Investigative Unit for implementing ML law enforcement initiatives.

196. One critical factor is likely the deterrent effect to prosecutors and investigating officers in developing cases because of the high degree of proof that is considered necessary in Albania to establish before the court the elements of ML. As mentioned earlier, although it is clear that a predicate offence conviction is not necessary to proceed and facts may be proven through indices (circumstantial evidence) if they are accurate, comprehensive and compliant with each other, as a practical matter the prosecutor is called upon to establish with specificity all the elements of the predicate activity (time, place, event, kind of criminal activity) and the specific proceeds (including amounts) in order to establish that a criminal offence occurred and that the offence produced proceeds. Once all these elements are established, the prosecutor must then establish the specific laundering activity.

2.1.2 Recommendations and Comments:

197. The authorities should:

  • Enact a provision or amend existing provisions so that self-laundering is covered for the Article 287/b offences;
  • Extend criminalization of use beyond the use and investment in economic or financial activities;
  • Amend Article 287/b so that it is clear that its coverage extends beyond acquisition, possession or use in the case of stolen goods;
  • Enact provisions to cover insider trading and market manipulation;
  • Make clear that property derived indirectly is covered, if needed by way of amendment;
  • Enact provisions so that required ancillary activity is covered in situations where currently it is not (for instance applies to facilitating even in the absence of an agreement);
  • Provide training for courts, prosecutors and judicial police that instruct regarding practices in Europe and elsewhere that will permit better use of existing provisions under more liberal standards;
  • Utilize Article 287/b CC more pro-actively by instituting proceedings for use of property knowing that it was obtained as a result of a criminal offence particularly in subject matter areas where there is a significant criminality problem;
  • Address the issue of the demanding proof levels by considering the legislative and practical approaches taken in other civil law systems where for instance the amount of the proceeds may be estimated, and confiscation may extend to proceeds of other criminal activity once a single criminal offence is established.

198. The authorities should also:

  • Evaluate whether the criminal fines available in the case of convictions of legal persons for ML will be sufficient in all instances.

2.1.3 Compliance with Recommendations 1 and 2

RatingSummary of factors underlying rating
R.1PC
  • Self laundering is not criminalized in the case of conduct under Article 287/b.
  • Article 287/b offences provision is limited to stolen goods.
  • Full coverage of predicate offences is lacking as insider trading and market manipulation are not criminalized.
  • Ancillary conduct is not covered in all instances.Effectiveness issues:
  • Few convictions for ML.
  • Demanding proof level impact ability to use provisions.
R.2LC
  • Effectiveness of sanctions not fully established because of limited numbers of prosecutions.

2.2 Criminalization of Terrorist Financing (SR. II rated as PC in 2006 MER)

2.2.1 Description and Analysis

Summary of 2006 MER factors underlying the ratings and recommendations

199. In the 2006 assessment, a general concern was that the FT provisions then in force did not cover all elements required by the FT Convention and SR II. Specifically, the report noted that it was not clear that existing provisions covered the financing of individual terrorists, financing for extra-territorial terrorist acts or domestic collection for terrorists or terrorist organizations that were located outside Albania. There was also a concern that the provisions did not extend to legal persons nor was it clear they would be applied in a way such that knowledge, intent or purpose could be inferred from objective factual circumstances. In the assessment report it was also noted that Article 230/a was not sufficiently specific in that it lacked a definition of “funds”.

Legal Framework:

  • UN Convention for the Suppression of the Financing of Terrorism (“FT Convention”) (ratified in 2002).
  • Article 230 CC - criminalizes terrorist acts (amended in 2007).
  • Article 230/a CC - (financing of terrorism) (added to the CC in 2003).
  • Article 230/b CC- (hiding of funds and other wealth/goods that finance terrorism).
  • Article 230/c CC- (giving information from persons carrying public functions or persons on duty or in exercise of the profession).
  • Article 230/ç CC - (performance of services and activities with identified persons) (added to the CC in 2004).
  • Article 230/d CC - (collection of funds for the financing of terrorism) (added to the CC in 2007).
  • Article 231 CC - (recruiting of persons for the commission of acts with terrorist purposes or for the financing of terrorism). (added to the CC in 2007).
  • Article 234/a and 28 CC - (terrorist organizations).
  • Law No.9754 of June 14, 2007 “On the criminal liability of legal persons” (“Legal Persons Liability Law”).
  • Law No. 9258 of July 15, 2004, “Law on Measures for the Suppression of Terrorism Financing” (“SFT Law”).

Criminalization of Financing of Terrorism (c. II.1):

200. Since the 2006 assessment, as relevant to FT, there have been two changes, both additions to the CC12: Article 230/d which criminalizes the collection of funds, and Article 231 which prohibits recruiting for financing activities.

200. The provisions that criminalize the financing of terrorism are Articles 230/a and 230/d. Article 230/a, which relates to the provision of support, in unchanged since the 3rd round assessment. However, that Article relies on Article 230 to define the activities for which support is prohibited, and Article 230 has been revised. Article 230/d, which covers collection for terrorist acts or organizations, is new. The text of the relevant provisions is as follows:

Article 230 Actions with terrorist purposes

“The commission of the following acts, that have the purpose to intimidate the public or compel an Albanian or foreign governmental agencies to do or refrain from doing any act, or seriously destroy or destabilize, essential political, constitutional, economical, and social structures of the Albanian State, or another State, institution or international organization, is punishable by no less than 15 years of imprisonment or by life imprisonment.

The actions for terrorist purposes include but are not limited to:

  • a) actions against person, that might cause death or serious body harm
  • b) hijacking or kidnapping
  • c) serious destruction of public property, public infrastructure, transport system, information system, fixed platforms on the continental shelf, private property in large scale
  • d) hijacking of aircrafts, vessels, and other means of transport
  • e) the production, possession, procurement, transportation or trading of explosive materials, fire arms, biological, chemical and nuclear weapons as well as the scientific research for the production of weapons of mass destruction, named above”.

Article 230/a Financing of terrorism

“Financing of terrorism or its support of any kind is punished by not less than 15 years of imprisonment or with life imprisonment and with a fine from lek 5 million up to lek 10 million”.

Article 230/d Collection of funds for the financing of terrorism

“The collection of any type of financial means, directly or indirectly, for the financing of terrorist organizations or the commission of acts for terrorism purposes, is punishable by 4-12 years of imprisonment and by a fine varying from lek 600,000 to lek 6 million”.

201. Other provisions exist in the CC that are related to FT.13

202. Although the FT criminal offence provisions as revised parallel FT Convention requirements much more closely than the provisions under review in the 2006 assessment, they continue to fall short of meeting fully the required FT Convention scope.

203. First, although Article 230/a makes “financing” a criminal act in the specified circumstances and Article 230/d prohibits collection of “any type of financial means”, in the absence of any court decision or practical application, it is not clear that these terms will cover the full extent of “funds” as required under the FATF recommendations. The authorities refer to the definition of funds in Article 2, para. 13 of the law No 9917 of May 19, 2008 “On the prevention of money laundering and terrorist financing” (AML/CFT Law) which provides a definition closely paralleling that reflected in the FT Convention and SR II. However, as noted in the 2006 report, this definition is part of an administrative rather than criminal legal order and although it might be used as a reference point by a court in determining meaning, there is no certainty that the full extent of funds would be recognized. Moreover, a provision within this group, Article 230/b CC, in differentiating “funds” from “other goods”, suggests there is a concept of “funds” that is narrower than funds as “assets of every kind” as per the FT Convention’s definition.14

204. Secondly, while as noted above, the relevant provisions now address collection (Article 230/d) and provision (Article 230/a) of funds in separate provisions, it is not clear that these provisions apply in all necessary situations as required by the standard.

Financing of Terrorism

205. Article 230/a (provision of funds) provides simply that FT or its support is punishable. While it is clear that any provision that results in a terrorist act is covered, there is no indication that a provision with the intention that funds be used for terrorist acts, regardless whether the terrorist act is actually committed or attempted is covered. The authorities have indicated that the Council of Ministers proposed CC amendments address this issue.

206. Third, there are a number of issues with Article 230 CC, the article that defines what constitutes a terrorist act. These issues on the definition of such acts affect the financing activities that are criminalized under Articles 230/a and 230d. Article 230 subsection (a) refers to actions against a person that “might” cause death or serious body harm. However, the FT Convention requires coverage for actions that “are intended to” cause such harms. The language of Article 230 CC would not cover amateur terrorist acts which could not or would not cause the harms, but nonetheless were intended to do so. The authorities have indicated that the proposed CC amendments also address this.

207. Other other issues also arise because of the relationship between revised Article 230 which defines acts with terrorist purposes and the provisions that relate to the financing of prohibited acts. Not all of the acts that constitute offences under the treaties annexed to the FT Convention are reflected in CC Article 230 subsections (b) – (e). For instance, the 1988 Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation requires that the act of disrupting the services of the airport if such an act endangers or is likely to endanger safety at that airport be covered (Article 2, para.1). The 1973 Internationally Protected Persons Convention specifies the activity of violent attacks on the private accommodations or means of transport of protected persons that are likely to endanger such persons’ person or liberty. The 1979 Convention against the Taking of Hostages covers threats to continue to detain a hostage. The Convention on the Physical Protection of Nuclear Material requires penalization of the possession or handling of nuclear material not only nuclear weapons. In these instances, as examples, some of the acts set forth in the annexed treaties are not covered by the Albanian CC provision which defines the terrorist acts for which financing must be prohibited. The authorities note that proposed CC amendments also address this.

208. Another such issue is that Article 230 imposes specific purpose or intent requirements on all terrorist acts including the conduct that must be made offences under the treaties annexed to the FT Convention. The current provisions apply the purpose/intent requirements found in Article 2 para. 1(b) of the Convention also to the conduct specified in Article 2 para 1(a) of the Convention (incorporating conduct specified in annexed treaties). Such specific intent or purpose requirements should not apply in the case of Article 2 para. 1(a) treaty offences.

209. Also, the offence as defined in Article 230 has a purpose to compel “Albanian or foreign governmental agencies” rather than the Albanian or a foreign “government.”

210. Article 230 also states that actions for terrorist purposes “include but are not limited to.” This Article would incorporate actions that are not specified, but could relate to other actions that legal provisions specify as ones with terrorist purposes. Although this appears to lack the specificity that is necessary to describe actions for which a person would have criminal liability, in the civil law and Albanian legal framework this may provide flexibility to encompass some actions not specifically mentioned in Article 230.

211. Finally, Article 230 refers to “actions with terrorist purposes” and Article 230/a uses the term “terrorism”. The authorities explained that the terms have exactly the same meaning. As explained, provisions within a Chapter (here Chapter VII “Terrorist Acts”) are considered together with initial provisions possibly using longer and more expressive terminology and the later references being of a more succinct nature.

212. Article 230/d in prohibiting the collection of “any type of financial means” to commit acts with terrorist purposes appears to mean that it would cover any kind of wealth from whatever source whether legitimate or ill-gotten. Without judicial interpretation or practice, however, it is difficult to know for certain that property acquired both legitimately and illegitimately would be covered.

Financing of Individual Terrorists as Reflected in SR II

213. Albania’s CC provisions cover the financing of individual terrorists only to the extent that the funds are provided or collected to support terrorist activities. The provisions that might apply to criminalize the financing of individual terrorists, Articles 230/a and 230/d, do so only if funds are provided with the intention to support a terrorist act. In the absence of such intent, the general provision of support to an individual terrorist, for example shelter, food or education, does not fall within the scope of the provisions. Although the provisions comply with the requirements of the FT Convention, they do not cover the full extent of the scope of SR II.

214. Although making funds available to a person designated domestically as a terrorist is an administrative violation under (SFT Law), as described in the part of this report that relates to SR III, this is limited to situations where there is an order from the Minister of Finance with respect to the funds.

215. In addition, Article 230/ç prohibits the giving of funds and other wealth for the performance of financial services as well as of other transactions with identified persons towards whom measures of terrorism financing are applied. The reference in Article 230/ç to persons towards whom measures of terrorism financing are applied is a reference to the domestic list that is issued by the Council of Ministers under the SFT Law. Currently that list is the same as the UN Consolidated List. Article 230/ç however prohibits financial support for the provision of such services rather than the provision of the services.

Financing of Terrorist Organizations as Reflected in SR II

216. Article 234/a makes the financing of a terrorist organization punishable. Article 230/d prohibits the collection of funds to finance a terrorist organization.

217. A terrorist organization is defined in Article 28 (2) of the CC. Article 28 was revised in 2007 to provide a simpler and broader definition of terrorist organization and to require only two rather than the three persons required in the case of other criminal organizations. It is “a special form of the criminal organization composed of two or more persons that have sustainable collaboration in time, aiming at the commission of actions with terrorist purposes.”

218. These provisions are clear in prohibiting both collection for and provision of funds to a terrorist organization. With the revision of the CC provision, in the case of a terrorist organization, only two or more persons are necessary.

Attempt and Ancillary Offenses under Article 2 (4) - (5) FT Convention

219. Article 2 paras. 4 - 5 of the FT Convention requires that States criminalize attempts to commit the FT conduct, and for both completed or attempted conduct, participation as an accomplice, the organization or direction to others to commit an offence, and contributions to the attempt or completed conduct through association or conspiracy.

220. The general provisions of the CC at Articles 22 - 28 on attempts and collaboration, discussed in relation to the ML offence apply to all offences including the FT offences. See, the discussion of this criterion under Recommendation 1, and the issues noted therein.

Predicate Offense for Money Laundering (c. II.2):

221. As indicated in the discussions under Recommendation 1 above, any offense under Albanian law may constitute a predicate offense for ML. FT acts that constitute offences under the Albanian CC are thus predicate offenses for ML.

Jurisdiction for Terrorist Financing Offense (c. II.3):

222. The FT criminal provisions can be applied to financing activities as to which Albania has criminal jurisdiction to proceed (actions occurring Albania, those by Albanian citizens wherever located, those against certain Albanian interests) regardless of whether the act or organization being financed is located in Albania or elsewhere.

The Mental Element of the TF Offense (applying c. 2.2 in R.2):

223. The discussion of the mental element set forth in Recommendation 2 applies in relation to the offence of FT as well. The intentional element of FT is inferred by the court as it assesses the evidence. The court analyzes both objective and subjective elements of the criminal offence.

Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2):

224. Legal persons are also liable for engaging in FT. As noted in the discussion under Recommendation 2, criminal liability is extended to legal persons and this applies with respect to all offences including FT. At the time of the 2006 MER although Article 45 CC provided for responsibility for legal persons, an implementing law had not yet been enacted. The implementing law, the Legal Persons Liability Law, was enacted in 2007.

Sanctions for FT (applying c. 2.5 in R.2):

225. The sanction for violating Article 230/a (financing of terrorism) is not less than fifteen years of imprisonment or with life imprisonment and a fine from lek 5 million up to lek 10 million.

226. For violations of Article 230/d (collection of funds for the financing of terrorism), the sanctions are four to12 years of imprisonment and a fine from lek 600,000 to 6 million. Article 230/b which criminalizes hiding funds that finance terrorism provides for four to 12 years of imprisonment and with a fine from lek 600,000 to 6 million; or if committed in the exercise of a professional activity, in cooperation or more than one time, by from seven to 15 years of imprisonment and a fine from lek one to 8 million; or if it causes serious consequences by no less than 15 years of imprisonment and a fine from lek five to 10 million.

227. These sanctions are substantial and exceed the sanctions many countries have established. There is a significant disparity between the sanctions for the provision of funds in Article 230/a of a minimum of 15 years compared with that for collection of funds of four to 12 years set forth in Article 230/d. The sanctions have potential to be dissuasive. However, with only a single conviction for hiding funds, neither dissuasiveness nor effectiveness of the criminal provision that is required by the FT Convention prohibiting the collection or provision of funds could be established.

Statistics (R.32):

228. There have been no prosecutions or convictions for FT under Articles 230/a or 230/d in the three year period 2006 - 2009. In 2009, however, one person was convicted of violating Article 230/b CC for concealing funds used to finance terrorism. In January 2008, a criminal trial commenced in Albania against Hamzeh Abu Rayyan on charges of concealing funds used to finance terrorism. In 2009 he was convicted in relation to his activities in administering funds for a person on the UNSCR list, Yassin al-Kadi. Authorities are awaiting a decision of the High Court to execute the decision of the Court of Appeals. The sentence imposed was four years imprisonment and a fine of lek 600,000.

229. Statistics provided by the prosecutor’s office indicate there have been only a few investigations in the period 2006 - 2009 as set forth in the chart below.

230. As the statistics below demonstrate, for prosecution-level investigations relating to FT since 2006, there have been five matters with only two identifiable persons. In each instance upon further investigation, it was found that the allegations were not supported.

FT investigations based on the confirmation provided by GPO.
Year2006200720082009
Activity reported43*3**0
Persons2000
Dismissed1130
To Court0000
2006 – Four investigations were initiated regarding two persons. One of these proceedings was dismissed in 2006 while three cases were transferred to 2007.

2007 – Three proceedings transferred from the preceding year. One of those was dismissed and two were transferred to the following year.

2008 – Three proceedings (two were transferred from 2007 and one registered in 2008). All three proceedings were dismissed.

2006 – Four investigations were initiated regarding two persons. One of these proceedings was dismissed in 2006 while three cases were transferred to 2007.

2007 – Three proceedings transferred from the preceding year. One of those was dismissed and two were transferred to the following year.

2008 – Three proceedings (two were transferred from 2007 and one registered in 2008). All three proceedings were dismissed.

2009 – There were no investigations.

231. Statistics provided by GDPML during the on-site mission are set forth below. They indicate that there have been a total of 11 STRs received in the period 2006 -2010 that relate potentially to FT. Of these, one referral was made in 2010 to the police for additional investigation based upon a possibility that ML had occurred.

STRs regarding FT during 2006 -2010
Year20062007200820092010
Number STRs00047
Referrals00001

Effectiveness:

232. The authorities have prosecuted one case relating to FT activities, and were successful in gaining a conviction. Because the case involved the charge of concealing funds used to finance terrorism rather a charge relating to financing itself, it is uncertain how prosecutions under the provisions that address directly the financing of terrorism, Articles 230/a and 230/d, would work in practice. There have been a few matters that reached the level of investigation after being registered but none of the matters, after further investigation, were found to be substantiated. The FIU has had only 11 STRs relating to FT in the period 2006-2010. All were received in 2009 and 2010. A single referral was made, and this was for a ML investigation.

233. With a history in the first half of the 2000s of the government freezing assets of terrorist financiers, curtailing activities of suspect Islamic NGOs, and expelling individuals suspected of having links to terrorism and the historical backdrop after the 1991 fall of the Communist regime of in-country activities by some Al Qaeda operatives and the presence of Islamic non-governmental organizations (some of them fronts for Al Qaeda-linked activities), Albania remains at risk regarding possible financing of terrorism activities.

234. The authorities appear vigilant regarding the presence of these risks, but they have thus far not been able to develop actionable criminal FT cases other than the one indicated above. Authorities noted that securing evidence to prove that funds are to finance a terrorist activity rather than a charitable or other legal cause is a challenge and often not possible. In at least one circumstance a request to foreign partners for supporting evidence also did not produce results. It was also noted that even when some evidence exists, it is often not possible to identify a perpetrator. In these circumstances, the authorities prefer to sequester funds based upon a UN designation, when this is possible, rather than using the criminal FT provisions.

235. The authorities do investigate matters that come to their attention and appear ready to act to undertake prosecutions in all FT matters for which there is sufficient evidence.

2.2.2. Recommendations and Comments

236. The authorities should:

  • Enact amendments to the FT criminalization provisions in Chapter VII of the CC provisions, so that:
    • Article 230/a applies regardless of whether the terrorist act is actually committed or attempted;
    • it is clear that the financing prohibited extends to the full extent of “funds” as that term is defined in the FT Convention;
    • the financing of individual terrorists regardless of whether the funds are provided or collected to support terrorist activities is criminalized.
  • Enact amendments to Article 230 CC so that:
    • it covers each specific action that is required to be criminalized under all the treaties that are annexed to the FT Convention;
    • it covers actions “intended to cause” death or serious bodily harm, not simply that “might” cause this;
    • the specific purpose or intent requirement set forth in Article 2 para. 1 (b) of the FT Convention is not required in the case of the conducts specified in the annexed treaties (Article 2, para. 1(a));
    • the purpose set forth in the Article is to compel the Albanian or foreign government rather than “Albanian or foreign governmental agencies”.
  • Either revise CC provisions on ancillary offences to deal with gaps in coverage as set forth in Recommendation 1, or incorporate coverage for all required ancillary conduct (facilitating in the absence of an agreement) directly in the CC Chapter VII – Terrorist Act provisions.
  • Work towards developing additional cases as domestic intelligence, coordination with foreign partners working on FT and terrorism matters, and STR reporting provide such opportunities.

237. The authorities should also:

  • Consider making it clear that the Article 230 reference of “actions with terrorist purposes” is coextensive with the Article 230/a use of the term “terrorism”.

2.2.3. Compliance with Special Recommendation II

RatingSummary of factors underlying rating
SR.IIPC
  • FT criminalization provisions in Chapter VII of the CC do not comply with the standard in that:
    • Article 230/a does not clearly apply regardless of whether the terrorist act is actually committed or attempted;
    • it is not clear that the financing prohibited extends to the full extent of “funds” as that term is defined in the FT Convention;
    • the financing of individual terrorists is criminalized only if the funds are provided or collected to support terrorist activities;
    • Article 230 CC does not cover each specific action that is required to be criminalized under all the treaties that are annexed to the FT Convention;
    • Article 230 CC does not covers actions “intended to cause” death or serious bodily harm, only those that “might” cause this;
    • specific purpose or intent requirement set forth in Article 2 para. 1 (b) of the FT Convention are required in the case of the conducts specified in the annexed treaties (Article 2, para. 1(a));
    • Article 230 sets forth a purpose to compel Albanian or foreign governmental agencies rather than such governments.
  • Not all ancillary conduct is covered.

2.3 Confiscation, Freezing and Seizing of Proceeds of Crime (R.3 rated as PC in 2006 MER and 32)

2.3.1 Description and Analysis

Summary of 2006 MER factors underlying the ratings and recommendations

238. The issues noted in the 2006 MER were that: no explicit provision addressed confiscation from third parties or provided legal protection for bona-fide third parties; provisional measures might not be available early enough in an investigation, and were subject to automatic cessation; prosecutors could not apply such measures directly in cases of urgency; and deficiencies in the material elements of FT could limit the application of measures in such cases. In addition, the assessors noted that the authorities had not established effective implementation nor were necessary statistics maintained in a systematic manner.

Legal Framework:

  • CPC Articles 208 – 220, 274 – 276.
  • CC Articles 30 and 36.
  • Law No. 10192 of December 3, 2009 “On preventing and striking at organized crime and trafficking through preventive measures against assets” (“Organized Crime Law”).

Confiscation of Property Related to ML, FT or Other Predicate Offences Including Property of Corresponding Value (c. 3.1):

239. Albania uses its general CC and CPC provisions to address confiscation for ML and FT in criminal proceedings. Criminal confiscation is governed by Articles 30 and 36 of the CC. These articles make confiscation a supplemental punishment and provide for mandatory confiscation of direct and indirect proceeds or value, instrumentalities, and objects of the offence. CPC Articles 208 - 220 (relating to securing evidence) and 274 - 276 (relating to seizure of criminal assets and instrumentalities) govern procedural aspects of confiscation and preliminary measures. None of these provisions have changed since the 3rd round assessment.

240. Article 36 CC provides for confiscation of direct and indirect proceeds, laundered property, instrumentalities used or intended for use in the commission of a crime and property of corresponding value. This applies to all offences including ML, FT and other predicate offences. That provision is explicit that “objects that have served or are specified as means for committing the criminal offence”, “criminal offence proceeds”, “any other asset whose value corresponds to the criminal offence proceeds”, and “objects” are all subject to confiscation.

241. A major development since the previous assessment is the adoption a new Organized Crime Law. This law provides an alternative method to recover criminal property by a court order imposing the preventive measures of sequestration and ultimately confiscation. Under the law a civil standard applies. Article 3 of the Law provides that its provisions can be used in the case of the following crimes in the CC:

  • Articles 333, 333/a - Participation in a criminal organization or structured criminal group;
  • Articles 234/a, 234/b - Participation in terrorist organizations or armed bands;
  • Chapter VII, special part, CC - Commission of other actions for terrorist purposes;
  • Article 109 - Kidnapping or keeping hostage a person;
  • Article 109/b - Forcing through blackmail or violence the submission of wealth (extortion);
  • Article 110/1 – Trafficking in persons;
  • Article 114/b - Trafficking of women;
  • Article 128/b - Trafficking of minors;
  • Article 278/a - Trafficking of weapons and munitions;
  • Article 282/a - Trafficking of explosive, burning, poison, and radioactive matters;
  • Article 283 - Manufacturing and selling narcotics;
  • Article 283/a - Trafficking of narcotics;
  • Article 284/a - Organizing and leading criminal organizations;
  • Article 114/a - Exploitation of prostitution with aggravated circumstances;
  • Article 287 - Laundering of crime proceeds.

Confiscation of Property Derived from Proceeds of Crime (Property in Third Party Hands) (c. 3.1.1 applying c. 3.1):

242. The CC provisions apply to any proceeds from the crime as well as laundered property, instrumentalities and property of corresponding value. All such assets are subject to confiscation regardless of whether the assets are held or owned by the defendant or by a third party. Although the CC provisions do not address with direct language the issue of third parties holding or owning such items, Articles 30 and 36 apply to committal means and proceeds without exception and so to assets wherever they may be found (whoever may hold or own them). The practice in Albania confirms that they apply when the property is held or owned by a third party. In a criminal prosecution, the prosecutor will be obliged to show that the property in third party hands is the proceeds or instrumentalities of crime or its substitute. Property held by third parties has been sequestered in a number of cases and in matters for instance involving the misappropriation of stolen goods, has been seized, confiscated and returned to the injured party or legal owner.

243. Also, one of the CPC provisions, Article 210, is explicit on the issue of third party-held property, in the case of bank accounts. It provides that the authorities, through a court order, may seize assets in a bank “if there are reasonable grounds to think that they are connected to a criminal offence, even though they do not belong to the defendant or are not under his name.”

244. Article 36 (1) and (4) CC provide for confiscation of property derived directly or indirectly from proceeds including income, profits or other benefits from proceeds.

245. When the Organized Crime Law is being applied, property in third party hands is also reachable. Under Article 3 the law applies not only to the assets of person as to which there exists a reasonable suspicion relating to one of the various covered crimes, but also to related persons, and to natural or juridical persons where there is evidence that assets held relate to the illegal activities of the person under investigation.

Provisional Measures to Prevent Dealing in Property Subject to Confiscation (c. 3.2):

246. CPC Article 274 provides for a court to order the seizure of property of any kind that is covered by CC Article 36, that is property that ultimately may be confiscated in a criminal case. It may also order that any item connected to a criminal offence be seized if it might aggravate or prolong the consequences of the offence or facilitate the commission of other offenses. Article 300 of the CPC also provides that the judicial police in cases of urgency may seize material evidence and items connected with the offence. Within 48 hours, the police must have the prosecutor affirm the seizure and an appropriate sequestering order is obtained. A sequestration order immobilizes assets through a freeze or seizure.

247. Provisional measures are available early in an investigation prior to the registration of an offence through use of Article 300 of the CPC and through the usual procedure of the prosecutor, at the request of the law enforcement officer who would like the assets sequestered, immediately registering the criminal offence, thereby moving the case into the formal investigative stage. The prosecutor then immediately seeks the order from the court under CPC Article 274 for the sequestration of the assets. The prosecutor needs only a minimum level of data to register the offence, a suspicion that a criminal offence occurred, and his decision is not subject to challenge. In practice, prosecutors often will register an offence at law enforcement request and then immediately seek a sequestration order. In essence, the police undertaking the preliminary investigation can secure these measures by seeing that the case moves to the next stage.

248. In urgent matters, under Article 210 of the CPC, the prosecutor may also order seizure of bank records and assets in bank accounts. This is not subject to later validation by the court, and has been used in some cases.

249. In addition, as noted above, in many situations the authorities are now able to seize and confiscate property independently of the criminal process using the preventive measures provisions of the Organized Crime Law. In the case of the serious crimes to which it applies, including ML, FT and many proceeds-generating crimes including drug and human trafficking, a sequestering of assets, and ultimately confiscation, is available independently of the criminal investigation or proceeding through a civil process.

250. Under Article 10 of the Organized Crime Law, the court is to order a sequestering of assets if it finds:

  • a reasonable suspicion that the person is involved in criminal activity;
  • that the person has assets or income that do not correspond to lawful activities; and
  • either there is a real danger that the assets will be alienated or lost, or a reasonable suspicion that the person’s continued possession or use of the assets constitutes a danger or will facilitate criminal activities.

251. Thereafter, the prosecutor seeks verification of the person’s income/assets and reviews the source of income. If there is a disparity, a reverse burden applies with the person called upon to demonstrate the lawful origin of the assets.

252. The Organized Crime Law may be applied autonomously of any criminal proceeding. If assets also become subject to measures in a criminal proceeding, the measures under the Organized Crime Law are suspended.

253. Under Article 22 para. 1 (j) of the AML/CFT Law, GDPML is also empowered to order a temporary blocking of transactions or financial actions for a period of up to 72 hours. If it believes a criminal offence is involved, it refers the case to the GPO.

254. Article 276 of the CPC provides for an appeal by the person whose property has been seized. A seizure is lifted automatically if the court fails to rule within 15 days. As recommended, following the 3rd round assessment, the authorities undertook a review of how this provision had worked in practice. They indicate that it has not resulted in the release of proceeds on procedural grounds because of a court delay. It is the view of the assessors, however, that there is no guarantee going forward that courts will always rule in a timely manner.

255. In the case of sequestrations under the Organized Crime Law, under Article 27, appeals are available and regulated by the Code of Civil Procedure.

256. As noted in the 3rd round, assessment even when there is an acquittal or a case is dismissed, proceeds and instrumentalities may be confiscated.

Ex Parte Application for Provisional Measures (c. 3.3):

257. The authorities have indicated that provisional measures are issued on an ex parte basis and without prior notice. This has been the long accepted practice in matters under the CC and CPC, although no CPC provision addresses this explicitly. Until recently, there had never been a challenge. Currently in a case under review in the Supreme Court, the issue is being considered. The lower court upheld a provisional measure in a criminal case that was challenged on the basis that the defendant was not represented as it was imposed.

258. For proceedings under the Organized Crime Law, under Article 12, the request is to be examined by the court with the participation of the prosecutor only.

Identification and Tracing of Property Subject to Confiscation (c. 3.4):

259. Law enforcement authorities use their powers to secure documents from State offices and provisions of the CPC to identify and trace property. In the case of matters arising under the CC, police authorities stated they were able to secure documents from State offices as part of their preliminary investigation. Such offices are required, pursuant the Law on State Police and sector specific laws as the Law on Banks and the AML/CFT law, to provide such documents. The authorities then rely to identify and trace assets on the provisions of the CPC which provide generally for the gathering of evidence for criminal prosecutions. See the discussion of general law enforcement powers under Recommendation 28 of this report.

260. Provisions exist for special investigative techniques (interception, etc.). However, there are no specific provisions that would allow investigators to secure information on whether a person is a customer of a financial institution or to monitor activity in financial accounts for specified periods of time. In practice, financial institutions provide this information to investigators based upon letters of request from the prosecutor. Failure to abide by such a letter of request would be considered an obstruction of justice. In Albania there is not a centralized register of bank account holders.

261. Article 210 of the CPC provides for access to bank records based upon a court order or in urgent matters through the action of the prosecutor alone, once there is a showing of reasonable grounds for a connection to a criminal offence. Bank secrecy is lifted when this provision is applied. The Law on Banking at Article 91 para. 2 provides for the lifting of bank secrecy in the case of criminal investigations and prosecutions. In addition, law enforcement authorities indicated that bank information may be available because a STR was filed. The authorities indicated that through these means they are able to secure necessary information to trace and identify assets, and the assessors consider that these provisions would permit adequate access.

262. For the analysis of the provisions concerning access to information which is protected by professional secrecy, refer to Recommmendations 26 and 28 and the issues noted therein. Article 211 of the CPC provides for an assertion of a duty relating to professional secrecy, and access to such information if there is a conclusion the assertion is without merit.

263. The authorities indicated they have ready access to the information they need to identify and trace proceeds and instrumentalities. Since Article 36 of the CC provides for a broad range of assets that may be confiscated, CPC provisions are available to support the gathering of the evidence not only of the criminal activity but of the proceeds, substitute proceeds, etc., and as a practical matter such provisions have been used in investigations of proceeds of crime.

264. For matters arising under the Organized Crime Law, under Article 9, any person, entity or public office so requested must provide data and documents deemed essential for the investigation. This provision permits authorities to undertake actions that assist in locating and identifying property subject to confiscation.

Protection of Bona Fide Third Parties (c. 3.5):

265. For assets that are sequestered for purposes of confiscation in a criminal proceeding whether they be proceeds or instrumentalities, under Article 276 of the CPC any person who asserts an interest in the property is entitled to appeal the order within 10 days of receiving knowledge. The court is obliged to rule on the challenge within 15 days from its receipt of the documents. In addition, Articles 58 - 68 of the CPC provide for injured parties to intervene in a criminal proceeding to assert a civil dispute.

Power to Void Actions (c. 3.6):

266. Article 677 of Albania’s Civil Code provides that a contract is deemed to be illegal if it is in contradiction with the law, the public order or if the contract is serving as a means to avoid the application of a legal norm. If a contract is entered into in order to prejudice the recovery of property, it would be in contradiction of the law and it could be put aside.

Statistics (R. 32):

Property Frozen, Seized and Confiscated in ML Cases

267. In the first ten months of 2010 (January – October) after the adoption of the Organized Crime Law in late 2009, 26 civil confiscation matters were sent to the Serious Crimes Prosecutor’s office. Seven of these relate to ML. Prior to the enactment of the new Organized Crime Law, ML was not a covered offence, so there were not properties frozen or confiscated in ML cases using civil procedures before 2010. There has been no property confiscated in the ML cases prosecuted under Article 287.

268. GDPML maintains statistics on the assets frozen by the GDPML in ML-related matters, and of the sequestered assets, those that are ultimately seized and confiscated. The data for the last four years is as follows:

Money Laundering2007200820092010
Number of freezing orders052323
Amounts frozen (EUR)0504,9343,736,275891,881
Amounts frozen (US$)0486,04620,00011,163
Amounts frozen

(LEK)
0952,03231,737,8508,355,972
Frozen land lots and apartments001,060 m27 Apartments, value EUR 301,800; US$45,960; and lek 9,333,280.

Total: EUR 403,625
Seized by the Prosecution and Courts00EUR 2,946,275

lek 31,662,565

1,060 m2
EUR 480,000 (bank)



six Apartments valued at EUR 301,800; US$45,960 and lek 6,300,000.

Total (apts): EUR 381,755

269. This chart indicates that on the GDPML level in the four year period since 2007, there have been 51 orders freezing property issued by the GDPML. The assets frozen in total in US$ equivalent are about US$7.64 million and US$1.03 million and 1060 m2 for real property (apartments). The prosecutor’s office does not maintain statistical data on other assets that might be seized during the investigative stage of a criminal case.

Property Frozen, Seized and Confiscated in FT Cases

270. During 2006 - 2010, the period since the last assessment, there have been no restraints or confiscations of FT assets in criminal FT cases. In this period, there has been a single FT criminal case. In that case, which is addressed in the section on criminalization of FT, a conviction was obtained for concealing funds to finance terrorism. There was neither a restraint of assets nor a criminal confiscation in that case. However, the funds the defendant concealed (in the amount of lek 10,089,604 (US$100,896) are frozen in a related matter in which the Minister of Finance issued an order based upon UN Security Council Resolution 1267 listing.

Property Frozen, Seized and Confiscated in Predicate Offence Criminal Cases

271. The Albanian State Police provided information that in the first ten months of 2010 (January – October 2010), 26 civil confiscation matters were sent to the Serious Crimes Prosecutor’s office as follows:

  • 6 - criminal organizations (two arms trafficking; drug trafficking)
  • 11 - drug trafficking
  • 7 - money laundering
  • 2 - women trafficking and exploitation

272. Ten of these (of which five involve ML as the involved offence) have reached the court. In each instance a sequestration was ordered by the court. The total amount involved is approximately US$8.2 million. In addition, the Agency for the Administration of Seized and Confiscated Assets provided data on the total properties seized, seized and released and actually confiscated under the previous and current Organized Crime Laws. The data provided is as follows:

273.

Properties Seized According to Organized Crime Laws (previous and current):

Year 2008

  • One decision of the court.
  • One person is concerned.
  • One bank account seized.
  • The value of seized properties is about 607, 500 Albanian lek.

Year 2009

  • One decision of the court.
  • One person is concerned.
  • One car seized.
  • The value of properties assets is about 2, 000, 000 Albanian lek.

Year 2010

  • 10 decisions of the court.
  • 13 people are concerned.
  • 50 properties seized.
  • The value of seized properties is about 728, 188, 939 Albanian lek.

Total seizure in three year

  • 12 decisions of the court.
  • 15 people are concerned.
  • 52 properties seized.
  • The value of seized properties is about 730,796,439 Albanian Lek, as follow:
  • 28 bank account with a value of 420, 887, 399 Albanian lek.
  • Nine vehicles with a value of 7, 440, 000 Albanian lek.
  • Three commercial companies with a value of 50, 000, 000 Albanian lek.
  • 12 real estate properties with a value of 252,469,040 Albanian lek.

Properties Confiscated According to Organized Crime Laws (previous and current):

Year 2005

  • One decision of the court.
  • One person is concerned.
  • Two properties are confiscated.
  • The value of confiscated properties is about 2, 785, 000 Albanian lek.

Year 2006

  • Two decisions of the court.
  • One person is concerned.
  • Five properties are confiscated.
  • The value of confiscated properties is about 2, 223, 514 Albanian lek.

Year 2007

  • One decision of the court.
  • One person is concerned.
  • One property is confiscated.
  • The value of confiscated properties is about 865, 000 Albanian lek.

Year 2008

  • Three decisions of the court.
  • Three people are concerned.
  • Eight properties are confiscated.
  • The value of confiscated properties is about 62, 274, 820 Albanian lek.

Year 2009

  • No confiscation have been taken

Year 2010

  • Two decisions of the court.
  • Two people are concerned.
  • 12 properties are confiscated.
  • The value of confiscated properties is about 14, 305, 000 Albanian lek.

Total confiscation in five year

  • Nine decisions of the court.
  • Eight people are concerned.
  • 28 properties are confiscated.
  • The value of confiscated properties is about 85, 476, 849 Albanian lek, as follow:
  • a. Eight bank account with a value of 2, 621, 529 Albanian lek.
  • b. 13 vehicles with a value of 6, 895, 000 Albanian lek.
  • c. Seven real estate properties with a value of 75, 960, 320 Albanian lek.

Properties Recovered (seized then released) According to Court Decisions:

Year 2006

  • One decision of the court.
  • One person is concerned.
  • One property is recovered.
  • The value of recovered property is about 78, 000, 000 Albanian lek.

Year 2007

  • One decision of the court.
  • One person is concerned.
  • Two properties are recovered.
  • The value of recovered properties is about 8, 794, 718 Albanian lek.

Year 2008

  • Six decisions of the court.
  • Six peoples are concerned.
  • 14 properties are recovered.
  • The value of recovered properties is about 280, 102, 095 Albanian lek.

Year 2009

  • Four decisions of the court.
  • Four peoples are concerned.
  • 12 properties recovered.
  • The value of recovered properties is about 41, 339, 514 Albanian lek.

Year 2010

  • Four decisions of the court.
  • Four peoples are concerned.
  • 41 properties are recovered.
  • The value of recovered properties is about 345, 674, 970 Albanian lek.

274. The value of all recovered (seized then released) properties in five years, according to court decisions, is 753, 911, 297 Albanian lek.

275. This data show that a total of properties seized under the Organized Crime Law in the period 2008-2010 was about lek 730,800,000 or about US$7.31 million. For the lengthier five year period of 2005-2010, lek 85,500,000 or about US$855,000 was actually confiscated. For the four year period, 2006 to 2010, lek 754,000,000 or US$7.5 million was seized and then released.

276. Information on the level of predicate activity for the major proceeds-generating crimes in the period 2006-2010 is set forth in the chart found in the statistics section of Recommendation 1. In this period, over 7100 persons were charged with such crimes.

Additional Element (c. 3.7):

277. As noted above, the Organized Crime Law that was enacted in 2009 provides a form of non-conviction based preventive confiscation in the case of some kinds of criminal activity. Among the situations when its provisions may be applied are when the criminal activity is ML or participation in a criminal or terrorist organization.

278. The Law permits the court to sequester and ultimately to confiscate assets that are beyond that which a person can demonstrate he acquired legitimately. Under Article 21, persons to whom the Law is being applied must demonstrate the lawful origin of their property.

Effectiveness:

279. The enactment of a new Organized Crime Law since the 2006 MER that provides for civil preventive confiscation in the case of many serious offences has added significantly to a framework for addressing criminal assets.

280. Although the framework provided by the CC and CPC, as noted in the previous assessment, lacks an explicit reference to reaching proceeds in the hands of a third party, it is clear that it calls for the sequestering and confiscation of proceeds wherever found and that any person with a claim on assets that are sequestered may appeal to the court for a lifting of the freeze. In addition, practice has confirmed that assets in the hands of third parties are reachable. The new Organized Crime Law also has specific provisions for reaching assets held by related persons and other involved persons or entities.

281. The assessors are of the view that sequestering is available as needed even relatively early in an investigation (because a formal investigation can be commenced with a relatively low level of evidence/information and prosecutors will register the offence and open the investigation as needed in order to seek the sequestering of assets even at an early stage) and, in cases of urgency, even prior to the registration of a criminal case (because judicial police can use Article 300 of the CPC).

282. While the provision for the automatic cessation of provisional measures remains, the authorities confirmed that in practice the court has acted as needed. A provision that requires that the court act within 15 days rather than providing for automatic cessation would ensure that, going forward, an inappropriate lifting does not occur for technical reasons.

283. Although the sequestering of assets remains the prerogative of the court (the prosecutor as a usual matter is not invested with this authority and may do so only in cases of urgency), the freeze authority of the GDPML provides the ability to freeze bank and accounts and other assets on a temporary basis. In addition, the prosecutor may in cases of urgency when the assets are in a bank issue the freeze order.

284. The limitations on the scope of the FT criminal offence identified in the discussion under SR II would have a cascading effect on Albania’s ability to freeze and confiscate should it need to do so in a FT criminal case. Many of the deficiencies in the FT criminalization provision are likely to be remedied if amendments to the CC recommended by the Council of Ministers are enacted.

285. Although law enforcement authorities are in practice able to secure customer information and monitor financial accounts, explicit provisions in these areas that set forth law enforcement’s powers, their extent and the manner in which they can be used would improve the framework. See discussion under Recommendations 27 - 28.

286. The most significant issues relate to effectiveness. Although the legal framework is sound and does not appear to pose impediments for confiscation, nonetheless confiscation remains a rare event. There have been only a handful of ML and FT cases prosecuted successfully since 2006.

In none of these cases were there assets confiscated. In none of these cases were assets sequestered in anticipation of a confiscation. There have been no confiscations as yet in ML cases under the current Organized Crime Law. This is not surprising given that this law has only been in force since December 2009. Of the ten sequestrations that have occurred since the enactment, five are in matters where the registered offence is ML.

287. The authorities have not in the past maintained full range of statistics that would show sequesters and confiscations in the course of the criminal proceeding for proceeds-generating predicate offences generally. In the case of confiscations using civil means, it appears that in the five year period (2005-2010) only lek 85,500,000 or about US$855,000 was actually confiscated.

288. In the absence of a demonstration that either criminal or civil confiscation provisions are used to recover property in such cases, effectiveness is not established. It is clear that significant proceeds-generating crime has occurred since 2006. Over 7100 persons have been charged with such crimes.

289. It is important that the framework Albania has established actually be used to take assets out of the criminal economy and keep them from being invested in additional crimes. It is clear, for reasons at least in part of restrictive court interpretations as well as the more limited scope of the previous Organized Crime Law, that the previous law did not have the potential to be effective to recover proceeds in the same way as the new law does. It is also clear that the GPO and Albanian State Police are committed to vigorously using the law and have taken steps to tap its potential to address criminal proceeds.

290. For criminal confiscation related to ML the prosecutors are of the view and the representatives of the courts confirmed, that the courts will require in practice very specific evidence of the ML activity, and impose exacting standards in order for the prosecutor to the recover proceeds on behalf of the State. The GPO was of the view that prosecutors must trace specific amounts through all steps from predicate activity to ML, showing a clear link between the amount and a specific event that is part of the criminal activity.

291. In the absence of either changes in legislation that modify this or a more liberal view of existing provisions by the courts, the prospects for actual confiscation in criminal cases is limited. For instance, were a prosecutor to demonstrate the three incidents of drug trafficking for which he has the best evidence in specific (small) amounts as part of a pattern of activity or three specific instances, of many, of Ponzi scheme fraud that had many victims, the confiscation recovery would be limited to the small amounts involved. Other civil law States in Europe and elsewhere have faced this same issue and adopted provisions and practices that address it. With the now broader and more vigorous Organized Crime Law, some of the difficulties faced may well be able to be addressed through parallel Organized Crime Law proceedings. These are permissible under the law.

292. At the same time, in the criminal confiscation context, it would be useful for the judiciary and prosecutors to have a more developed understanding of the approaches other countries use, some with similar provisions, and how to make full use of existing provisions consistent with the criminal nature of confiscation and the protections in such cases.

293. It is also noteworthy that although Article 36 of the CC provides for the recovery of assets of equivalent value, this provision has never been used. Were this provision viewed as a general value confiscation provision, it would alleviate some of the issues that prosecutors now face regarding in tracing proceeds for confiscation. It will be important going forward to try to use this provision and avoid a narrow interpretation of the Article 36 para. 1 (cc) of the CC “of any other asset, whose value corresponds to the criminal offence proceeds.”

294. In the period up until the enactment of the new Organized Crime Law, there was no general directive to prosecutors to pursue and develop the proceeds aspects of the case for every proceeds-generating crime or a culture that the proceeds aspects of the crime were of equal importance. With recent directives as this law has come into effect, there is a new directive that prosecutors are to consider these aspects of their dockets at least in the case of certain specified crimes.

295. The maintenance and use of statistics appears to be improving but could be further improved.

2.3.2 Recommendations and Comments

296. The authorities should:

  • Criminalize FT in conformity with the standard as set forth SR II, so that instrumentalities used and to be used and proceeds can to be sequestered and confiscated and extend ML criminalization to insider trading and market manipulation as set forth in Recommendation 1.
  • Use the CC provision permitting the confiscation of assets of equivalent value to seek recoveries in a wide range of circumstances.
  • Through enhanced CC or CPC legislative provisions and/or the better use of existing provisions in criminal cases and/or parallel use of Organized Crime Act civil proceedings, work towards developing a framework that is effective in actually recovering criminal assets without the same degree of tracing, specificity and linkage between specific criminal acts and specific monies.
  • Provide training to the judiciary and prosecutors so they have a greater understanding of how provisions similar to the existing CC and CPC provisions for criminal confiscation in other civil law contexts are applied in a more lenient and effective fashion.
  • Make fuller use of the provisions in part by emphasizing the importance to law enforcement and prosecutors that criminal assets be pursued early on in every proceeds-generating crime under investigation/prosecution.
  • Establish a national registry of bank accounts administered by the BoA, which, upon proper authority, can be accessed on request by Law Enforcement authorities’ powers to facilitate the investigation of ML/FT, in order to enhance their capacity to identify and trace property that is or may become subject to confiscation or is suspected of being the proceeds of crime.
  • With corruption as an important proceeds-generating crime, include corruption as an offence under the Organized Crime Law which provides a civil standard and reverse onus in the recovery of proceeds of crime.
  • As necessary, provide explicitly in the CPC that provisional measures are to be issued on an ex parte basis.

297. The authorities should also:

  • Even in the absence in practice of inappropriate automatic cessations of provisional measures on technical grounds, consider amending Article 276 CPC and replacing it with an affirmative requirement on the court to act within a certain period to ensure that, going forward, an inappropriate lifting of sequestered assets does not occur because of inaction by a court.
  • Consider enacting specific provisions on law enforcement powers to secure customer information and monitor financial accounts so that there is an improved ability to identify and trace for both domestic and foreign cases.

2.3.3. Compliance with Recommendation 3

RatingSummary of factors underlying rating
R.3LC
  • Deficiencies in criminalization of ML (no market manipulation or insider trading offences) and of FT (noted in SR II) will limit ability to sequester and confiscate.
  • Effectiveness not established as there are few actual confiscations and limited use of sequester authority in ML cases.

2.4 Freezing of Funds Used for Terrorist Financing (SR III rated LC in previous MER & R. 32)

2.4.1 Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

298. In the 2006 assessment, there were concerns expressed about: the absence of legal procedures for dealing with, and an authority with clear responsibility for, foreign requests; the absence of secondary provisions or mechanisms to address requests for subsistence and other expenditures; a lack of guidance for the private sector or supervisor review of their implementing measures; and the absence of information on the number and origin of reports relating to the UN measures or any confiscation measures applied.

Legal Framework:

  • United Nations Security Council Resolutions 1267 and 1373 (“UNSCRs 1267 and 1373”).
  • Law on Measures for the Suppression of Terrorism Financing “Law No. 9258 of July 15, 2004” (“SFT Law”).
  • Law 10192 of December 3, 2009 “Law on the prevention and striking of the organized crime through preventive measures against property” (“Organized Crime Law”).

299. Albania implements its obligations to freeze funds of persons and entities subject to sanctions under UNSCR 1267 and successor resolutions and UNSCR 1373 and related resolutions through its SFT Law.

300. The SFT Law provides a positive framework for Albanian authorities to meet the obligations under the UNSCRs. Articles 6, 10 and 15 of the law set forth systems: 1) for orders of the Minister of Finance imposing administrative freezes of assets with provisions in cases of urgency for a freeze even before a decision by the Council of Ministers to list a person or entity; and 2) for reporting both by covered institutions and persons under Albania’s AML/CFT law and the public at large (imposing obligations on any persons who know that funds are aimed at terrorist financing) to report information on, and suspicions of, terrorist financing.

301. The framework provided by law and practice, however, has areas that the authorities should consider anew in light of the more developed understanding since the 2006 report of the practical measures necessary to implement adequately UNSCR obligations.

Freezing Assets under UNSCR 1267 (c. III.1):

302. Article 6 of the SFT Law provides the Minister of Finance with the authority to freeze the assets of those persons designated by the Council of Ministers under Article 5, and also to prohibit persons from providing such designated persons with funds, financial services or assets.

303. The Council by Decision No. 718 of October 29, 2004 designated all persons and entities on the United Nations’ 1267 list as of that date. Since that time, the Decision has been amended four times to reflect the UN’s updated 1267 list (Decisions No. 671 (October 26, 2005), No. 767 (November 14, 2007), No. 442 (June 16, 2010) and No. 721 (September 1, 2010). The Decisions taken together:

  • list named individuals/organizations;
  • oblige all persons and entities with knowledge of a listee’s funds, assets, financial transactions or other activities to inform the Minister of Finance immediately;
  • instruct the Minister of Finance to take the measures to freeze, seize, and prohibit the provision of services of the listed persons/entities;
  • provide that, until there is compliance with the Minister of Finance’s freezing/seizing/prohibiting services measures, anyone holding or controlling the funds is prohibited from performing legal acts or services with respect to such assets.

304. The authorities indicated that the Council Decisions were sent by the GDPML to all entities subject to the AML/CFT Law and to the national property registry. In addition the lists are made available on the websites of the Council of Ministers, the GDPML and the National Publication Center. The UN Consolidated list, as continuously updated by the relevant UN Committee also appears on the GDPML website.

305. Freeze orders are issued by the Minister of Finance under Article 6 of the SFT Law when specific property is found. The orders name specific individuals and organizations. Article 18, para. 2 provides that such orders become effective immediately at the time of issuance. The orders typically provide for the immediate seizure of “all properties (accounts, investments and assets)” of the named person, prohibit the provision of financial services and funds to the person, and list financial accounts to be seized immediately. The order also provides for its execution by institutions that are prohibited from providing services and by various government entities.

306. Under Article 16 of the SFT Law, the Minister of Finance may, as noted above, issue a freeze order that is valid for 30 days, even before the Council of Ministers has issued its decision. Furthermore if a suspicion is reported pursuant to law AML/CFT, a freeze order for 72 hours can be issued by GDPML in order to allow for possible criminal proceeding. The freezing order issued by Minister of Finance applies to persons designated under the resolutions of UN Security Council, respective acts of the international organizations or other international agreements where the Republic of Albania is a party.

307. Since 2004, there have been sixteen such orders issued, all in the period 2004 to 2006. In some cases, a second order (included in this total) was issued to another financial institution or entity for additional assets after the public notification of the initial order caused the reporting of other assets of the same individual or related individuals or entities. Assets of 14 individuals and associations have been frozen. All assets remain frozen. The assets consist of 26 bank accounts (lek 340,331,974, approximately US$3.4 million) and 42 real estate assets valued in total at lek 1,222,819,184 or approximately US$12.2 million).

308. The official notifications of the five Council of Minister Decisions, as well as of the 16 freeze orders, were made by publication in the Official Journal. The Council of Minister Decisions are also sent to all persons and entities required to report STRs under the AML/CFT Law.

Freezing Assets under UNSCR 1373 (c. III.2):

309. Under Article 5 of the SFT Law, the Council of Ministers is empowered to list on its domestic list “persons designated by these resolutions” (referring to the relevant UNSCRs) and persons “designated through acts of other international organizations or other international agreements to which Albania is a party”.

310. UNSCR 1373 however does not identify or designate persons or entities to which it applies. Rather it requires that States determine who is covered by the UNSCR 1373 mandate to freeze the funds and assets of “persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts,” of associated entities and those under their direction and/or control.

311. Although the Albanian authorities indicated they would rely on the SFT Law for UNSCR 1373 implementation, since there are no specific designations by the UN Security Council under UNSCR 1373, nor designations by other international organizations or agreements, the SFT Law does not appear to provide sufficient legal authority to designate and freeze the assets of persons that domestic authorities might determine fall within the category of persons committing terrorist acts within the meaning of UNSCR 1373. This is because Article 5 provides authority as relevant to UNSCR 1373 only for the listing of persons “designated through acts of other international organizations or other international agreements to which Albania is a party.” However, other international organizations do not designate such persons nor do international agreements do this. States make these designations.

312. Considering Article 15 of the SFT Law in relation to Article 5, however, it becomes clear that the intention of Article 5 was to provide a procedure for making designations to comply with Albania’s obligations under UNSCR1373. Article 5 at para. 3 contemplates including additional persons other than UNSCR 1267-listed persons in a Council of Ministers Decision.

313. Article 15 provides a procedure for, and standard to be used (“reasonable grounds”), for the Council of Ministers in making such a determination.

314. Albanian authorities have not designated or listed persons pursuant to obligations under UNSCR 1373 nor has it sought to freeze assets of such persons. All freeze orders that have been authorized by the Council of Ministers and issued by the Minister of Finance relate to UNSCR 1267 persons/entities.

Freezing Actions Taken by Other Countries (c. III.3):

315. Albanian authorities advise they are prepared to consider freezing actions of other States at a State’s request, but they have not been asked to do so. If the authorities received a foreign request, they would use the same procedures as used for a domestic designation as set forth in the SFT Law. Upon a conclusion that a reasonable basis existed, the Council of Ministers would issue a decision, and the Minister of Finance would then issue a freeze order. In the case of a freeze request relating to a person or entity on the UNSCR 1267 list, the Minister of Finance would issue an order specific to the assets located as the Council of Ministers Decision would already cover such person or entity.

316. To meet the “without delay” obligation, the Minister of Finance is invested with temporary freeze authority under Article 16 of the SFT Law. In addition, if the foreign freeze action involved a criminal matter, they would use the CPC and AML/CFT Law. These procedures will permit a prompt determination of whether there is a reasonable basis, and a subsequent freezing without delay.

317. Albanian authorities that are responsible for UNSCR implementation do not use as a reference point, nor apparently consult, the external terrorist list that applies in the European Community through EC Regulations or any EC internal lists, or other lists such as the US’s OFAC list.

318. In addition, actions by other States designating persons subject to targeted sanctions under UNSCR 1373, that is names on foreign lists, such as EC lists or the US OFAC list, are apparently taken into account on a voluntary basis only by a few financial sector participants.

Extension of c. III.1-III.3 to Funds or Assets Controlled by Designated Persons (c. III.4):

319. Under Articles 3, 6, 15 paras. 4 - 6 and 16 of the SFT Law, and as noted in the previous MER, the obligations apply to: all kinds of property; assets derived or generated from funds; assets that are controlled; and assets whether wholly or jointly owned.

320. The law provides coverage for “control rights” but does not specify both direct and indirect control. Given the broad interpretation generally afforded terms under Albanian law, indirect control would likely be covered but there is no jurisprudence or practical experience.

Communication to the Financial Sector (c. III.5):

321. As previously noted, the five decisions of the Council of Ministers making designations and the 16 Minister of Finance orders were published in the Official Journal. In addition, Council of Ministers decisions are sent to all persons and entities required to report STRs under the AML/CFT Law. Authorities indicate that the Minister of Finance freezing orders were communicated quickly to the financial and other institutions where assets had been located as well as published in the Official Journal.

Guidance to Financial Institutions (c. III.6):

322. Albanian authorities have not issued any guidance to financial institutions or others in the private sector regarding obligations under the UNSCRs. Other than publication of the Council of Ministers Decisions on the Council of Ministers, GDPML and National Publication Center websites, and the availability of the UN Consolidated List on the GDPML website, there is no guidance provided whether general in nature or relating to actions required by a Ministerial Decision or specific freezing order. The authorities are aware of the FATF Best Practices paper regarding the freezing of terrorist assets but as yet have not adopted all of the practices suggested.

323. Although the authorities have communicated directly with the specific institution named in a freeze order at the time they must freeze, there is a question regarding the subsequent notification to other financial institutions of the freeze orders. The notice of freeze orders is through the official publication three or four weeks later in the Official Journal and on the website of the National Publications Center.

324. In addition, authorities in Albania have not undertaken steps to communicate with all institutions, the general public, DNFBPs, etc. regarding the general obligation to freeze as a sanction (not to make funds available) and to whose funds such an obligation applies (those whose names appear on the list issued by the Council of Ministers).

325. The MoF provided a notice dated August 8, 2010 to the registrar for NGOs that checks should be undertaken in the process of registering NGOs against the list and provided a copy of the most recent Council of Ministers Decision and list.

De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7):

326. The Council of Ministers makes the designations. Under Article 18 para. 1, the Council may also issue a decision to de-list persons at their request or at the request of the Minister of Finance. Under Article 23 para. 3 of the SFT Law, a de-listing is to occur only based upon a subsequent decision of the UN Security Council, or because continued listing is unnecessary to carry out UN Charter or treaty obligations. De-listings of persons on the 1267 list thus would take place only in consultation with UN Sanctions Committee.

327. Under Article 19 of the SFT Law, a designated person is provided 15 days from the time of his/her appearance on the domestic list to appeal the Council of Minister’s designation. However, the right to challenge is limited to a claim regarding mistaken identification. These provisions while consistent with the obligation to de-list in the UNSCR 1267 context only using UN procedures, do not address the right of persons listed in the UNSCR 1373 context to seek a de-listing. This is because a challenge is possible only on the grounds of mistaken identity which falls under the next criteria C.III.8.

328. In the case of a request to for unfreezing, Article 22 provides that interested persons and third parties may challenge a freezing of funds in the Tirana District Court. There are ongoing challenges to several of the freezes with no final determinations at the time of the assessment.

329. There are no publicly-known procedures in place for seeking the de-listing provided for by Article 23 para. 3. Other than the SFT Law provision at Article 19 (appeal in the circumstance of mistaken identification) which affected persons may become aware of, there is no guidance or issued procedure. In the absence of any practical implementation of UNSCR 1373, procedures also have not been developed to notify persons listed under UNSCR 1373 of their designation and their right to seek a de-listing and unfreezing of their funds. Finally, there is no procedure or public practice regarding notification to persons listed pursuant to UNSCR 1267 whose funds or other assets have been frozen in Albania of the freezing of their funds and their right to challenge such freeze.

330. In practice, there have been no requests to Albanian authorities for de-listing or unfreezing.

Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c. III.8):

331. As noted, Article 19 of the SFT Law provides for an appeal to the District Court of Tirana by persons whose funds have been frozen to challenge the freeze on the basis that they are not the designated person. An affected person has 15 days after notified of the freeze to appeal to the court.

332. The procedures for unfreezing are not however publicized nor is information provided to the person affected at the time the freeze order is issued.

Access to frozen funds for expenses and other purposes (c. III.9):

333. Article 21 of the SFT Law provides for access to funds. Within 72 hours of a request from a designated person, the Minister of Finance may authorize that payments from the frozen funds be made for medical, family or personal needs of a designated person, for his debts/liabilities to the government, or for debts from executed performance or obligatory insurances. The designated person may also file an appeal with the Tirana District Court challenging any order of the Minister of Finance refusing a request for access.

334. Article 21 para. 3 provides that the Minister of Finance is to impose detailed rules and procedures for permitted expenses in line with the criteria set forth in the relevant UNSCRs. No regulation has yet been issued providing for such procedures. In addition, there is no notification or guidance document provided to the person whose funds have been frozen of the procedures for access to the funds.

Review of Freezing Decisions (c. III.10):

335. Albania has a procedure in place that permits a person or entity whose funds have been frozen or seized as a sanction pursuant to UNSCR implementation to challenge the measure. Article 22 of the SFT Law provides that interested persons, as well as third parties who are acting in good faith, may appeal to the District Court in Tirana any freezing/seizing decision within 30 days of receiving notice of the freeze or seizure.

Freezing, Seizing, and Confiscation in Other Circumstances (applying c. 3.1-3.4 and 3.6 in R.3, c. III.11):

336. Provisions to freeze seize and confiscate terrorist-related funds in a criminal law context, rather than as a sanction under UN resolutions, also exist in Albania. The provisions that apply generally to criminal offenses discussed in relation to Recommendation 3 for freezing and confiscation apply equally to terrorism-related criminal offences whether the investigation or prosecution is for terrorist activities or for their financing. Funds and assets are subject to preventive measures and confiscation in such cases to the extent that they are the proceeds, instrumentalities or intended instrumentalities all in accordance with the provisions of the CC and CPC. See discussion under the section related to SR II. In addition, the Organized Crime Law provides in certain circumstances for imposition of preventive measures as seizure and confiscation independently of a criminal process and before the formal opening of criminal investigation. The provisions of the law may be applied to the unexplained assets of persons as to whom there exists a reasonable suspicion based upon indicia of the commission of acts for terrorist purposes or participation in a terrorist organization.

Protection of Rights of Third Parties (c. III.12):

337. Article 22 of the SFT Law provides that interested persons and third parties, who are acting in good faith, may appeal to the District Court in Tirana any freezing/seizing decision within 30 days of receiving notice of the freeze or seizure. Thus, third parties have access to review if they believe their rights have been infringed. Protections for third parties in criminal cases are set forth in the discussion of Recommendation 3 and SR II.

Enforcing the Obligations under SR III (c. III.13):

Monitoring Compliance

338. Pursuant to Articles 22 and 24 of Albania’s AML/CFT Law, compliance with AML/CFT preventive measures and with the duty to report suspicions of FT is verified through inspections that GDPML carries out jointly with supervisory authorities or on its own. In the case of financial institutions and non-bank financial institutions, the Bank of Albania by its Decision 44 at Article 6 para.7 requires that such institutions consult the updated list of persons approved by the Council of Ministers Decision prior to establishing a business relationship or carrying out transactions.

339. There is, however, no specific legal mandate in the AML/CFT Law for supervisors designated therein to review the compliance of financial institutions or other entities covered by the law with the obligations to review the list of listed persons and entities issued by the Council of Ministers and to freeze funds/assets.

340. In addition to the lack of legal authority for overseeing certain aspects of UNSCR implementation, there are no specific materials in supervisory manuals, or checklists for compliance, or instructions for financial institutions or others regarding their obligations to with respect to locating assets of persons on the list or, should they receive a freezing order from the Ministry of Finance, on obligations with respect to the order.

341. In supervisory oversight, GDPML apparently does not sufficiently monitor whether participants use screening mechanisms to check against the domestic list, UN lists, the other relevant lists (e.g. EU external lists or internal lists).

342. Understanding of FT requirements among FIs was varied. Banks demonstrated the strongest understanding of the requirements, as the list is publicized by both the BoA and the GDPML. Banks which are part of international groups had a greater understanding of the screening requirement, and group policies sometimes referred to OFAC requirements and the EU list. These were, however, the result of group policies rather than adherence to requirements of Albanian law. Some non-bank financial institutions and services had limited knowledge of the list, and there was often some confusion between this list and the one produced by the FIU relating to PEPs and that relating to countries that do not adequately apply the FATF standards.

343. There is a limited understanding of terrorist financing requirements within the DNFBP sectors. Entities subject to an inspection by the GDPML were aware of the terrorist financing list. Entities aware of the list would only consult it if individuals were deemed suspicious or corresponded to a particular profile. In theoretical instances where a match with the list was made, entities would stop the transaction and report to the GDPML. No entity was aware of the requirement to freeze the assets. Entities that were not inspected by the GDPML were unaware of the list or any related requirements.

344. As noted above, on August 8, 2010, the MoF by notice dated advised the registrar for NGOs that in registering NGOs there should be checks against the list.

Sanctions

345. Article 24 para. 1 provides that any failure by an entity listed in the SFT Act or AML/CFT act to abide by the provisions of the SFT Act constitutes an administrative violation. Thus, failure to comply with an order issued by the Minister of Finance to freeze funds under Article 6; the failure to report suspicions under Article 10; the disclosure of information under Article 12; and the taking of any action or undertaking a transaction with frozen funds under Article 15 para. 7 are all subject to an administrative fine of lek 50,000 to 10 million and indemnification for the amount of the asset involved.

346. In the case of violations of a freeze order issued by the Minister of Finance or a Council of Ministers Decision, there would be criminal liability under Article 230/ç of the CC which prohibits the giving of funds and other wealth for the performance of financial services as well as of other transactions with identified persons towards whom measures of terrorism financing are applied. The sanction is four to ten years of imprisonment and a fine from lek 400,000 to 5 million.

Statistics (R.32):

347. As noted above, 16 freezing orders have been issued by the Minister of Finance since 2004 when the SFT Law came into effect. These relate to 14 different individuals and associations. Financial institutions and others have frozen or seized approximately lek 1,563,151,158 (US$15.8 million) pursuant to administrative freeze orders issued under the law. All assets frozen under the orders remain frozen.

348. No administrative cases have been instituted against entities for failure to comply with the provisions of the SFT Law.

349. GDPML monitors whether STR reports received relate to FT, and within the larger FT category, whether they relate to a Council of Ministers’ listed person/ entity. There have, however, not been any STRs relating to persons/entities on the Council of Ministers’ list in the period since the last assessment report.

Additional Element (SR III)—Implementation of Measures in Best Practices Paper for SR III (c. III.14):

350. Albania’s legislative framework and procedures reflect a number of the practices set forth in the Best Practices Paper. For instance, there is a competent authority to designate persons or entities and procedures that permit a freeze to occur without delay and without prior notice. Measures are not conditional upon the existence of criminal proceedings. There is close cooperation among law enforcement and intelligence authorities who coordinate among themselves and as required with the private sector. As noted above, however, not all best practices particularly relating to guidance have been adopted.

Additional Element (SR III)—Implementation of Procedures to Access Frozen Funds in UNSCR 1373 matters (c. III.15):

351. The SFT Law provides for access to frozen funds but, as noted, the Minister of Finance has not issued rules and procedures for permitted expenses in line with the relevant UNSCR and it is not clear what would occur in the case of a request for access by a person designated based upon UNSCR 1373.

Effectiveness:

352. To comply with its obligations under UNSCRs 1267 and 1373 and successor resolutions, Albania relies on an administrative system that permits it to act quickly to freeze funds as noted above. Using this framework, it has cooperated extensively with foreign partners and successfully frozen substantial assets. The legal framework provides for the combination of a Decision of the Council of Ministers that prohibits anyone from allowing or performing legal acts or services with respect to assets of a person it has listed (all persons and entities on the UNSCR 1267 list) and a specific freezing order issued by the Minister of Finance for the located assets of specified persons/entities in conformity with UNSCR 1267. The procedures have been used in a number of instances, and as noted funds are frozen. However, one important issue is that the legal basis to act under the SFT Law in a UNSCR 1373 matter appears questionable. Moreover, this is untested as the authorities have never used their framework to designate administratively individuals or entities other than those that appear on the UN’s 1267 list.

353. Additionally, a number of the problems noted in the previous assessment have not yet been addressed adequately. There is no clarity regarding an authority responsible to receive foreign requests. The authorities have not yet adopted secondary provisions or mechanisms to address potential requests by affected persons for subsistence or other expenditures. There continues to be a lack of guidance to the private sector and inadequate review of private sector practices for complying with UNSCR obligations. Guidance to financial institutions and others on how to deal with freezes and outreach efforts to ensure that such institutions and others are aware of UNSCR obligations need improvement.

354. A number of new issues were also identified in this review. Among the most important are:

  • As noted above, the provision in the SFT Law that authorities rely on as the legal basis for a Council of Ministers designation pursuant to UNSCR 1373 is questionable.
  • The authorities do not update the domestic list on a regular basis. It has only been updated four times since it was originally promulgated in 2004.
  • Authorities do not actively consider whether there are persons/entities that should be designated domestically under UNSCR 1373 and make designations if appropriate.
  • Affected persons are not provided adequate information on how to seek a delistings or unfreezing of funds.

2.4.2. Recommendations and Comments:

355. The authorities should:

  • Revise the SFT Law to provide a clear legal basis for the Council of Ministers to make a designation pursuant to UNSCR 1373.
  • Enact a provision that gives persons listed in the UNSCR 1373 context a right to challenge not only a freeze but their listing (on grounds in addition to mistaken identity).
  • Adopt secondary provisions or mechanisms to address potential requests by affected persons for subsistence or other expenditures.
  • Provide a legal mandate for the review of the compliance by entities subject to the AML/CFT Law with their obligations regarding the Council of Ministers list and regarding freezing of funds.
  • Continuously update the Council of Minister’s domestic list or provide a legal mechanism for automatic incorporation of the UNSCR 1267 list.
  • Consider on a regular basis whether there are persons/entities that should be designated domestically under UNSCR 1373 and make such designations.
  • Provide clear information to other States regarding the authority within Albania responsible (e.g., MoFA, FIU) to receive foreign requests under UNSCR 1373.
  • Adopt practices such that freezing orders issued by the Ministry of Finance are available more quickly to other institutions and entities that may hold assets of the same person/entity.
  • Provide guidance to the private sector and the public at large about their obligations.
  • Undertake more vigorous supervisory review of institutions for compliance with UNSCR obligations and include material in supervisory inspection manual/checklists.
  • Develop guidance and make it available publically on how to seek de-listings or unfreezing of funds for instance through appropriate websites.

356. The authorities should also:

  • Consult and use in an appropriate manner as a reference point the EU lists of designated terrorists as well as other lists developed by neighboring countries.
  • Consider wether it is necessary to make it clear that the law in covering “control rights” extends to both direct and indirect control.

2.4.3. Compliance with Special Recommendation III

RatingSummary of factors underlying rating
SR.IIIPC
  • SFT Law does not provide clear legal basis for Council of Ministers designation pursuant to UNSCR 1373.
  • Secondary provisions or mechanisms not yet adopted to address potential requests by affected persons for subsistence or other expenditures.
  • Absence of legal mandate for supervision of the compliance of those covered by the AML/CFT Law with the obligations arising from Council of Minister Decisions and Ministry of Finance freeze orders.
  • Responsibility for reviewing the compliance with resolution obligations by supervised entities is not clear.
  • Persons listed in the UNSCR 1373 context do not have a right to challenge their listing (on grounds in addition to mistaken identity) only a freeze.
  • No publically-available information on how to seek de-listings or unfreezing of funds.Effectiveness:
  • Council of Minister’s domestic list not updated frequently.
  • No clarity for other States regarding a responsible Albanian authority to receive foreign requests under UNSCRs.
  • Freezing orders not available immediately to other institutions and entities that may hold assets of the same person/entity.
  • No consideration on a regular basis of whether there are persons/entities that should be designated domestically under UNSCR 1373 or designations made.
  • Lack of adequate guidance to the private sector and the public at large about their obligations.
  • Inadequate supervisory review of institutions for compliance.

Authorities

2.5. The Financial Intelligence Unit and its Functions (R.26 - rated PC in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

357. The 2006 MER noted a number of shortcoming related to the FIU function. The autonomy and independence of the GDPML was deemed to be insufficient and needed to be strengthened through fixed terms for the Director and statutory independence regarding instructions. Protection of information held by the FIU needed to be strengthened with clear rules being required to guarantee confidentiality and regulate the sharing/use of information. The role of the GDPML needed to be clarified as an analytical, administrative body rather than a body in charge of investigations. Resources were deemed insufficient to meet its analytical and supervisory mandate. The GDPML was not publishing reports on its activities. Access to its information holdings needed to be improved through the implementation of an IT system. A training program needed to be developed taking into account the newly established supervision function. Statistics maintenance also needed to be enhanced.

2.5.1. Description and Analysis

Legal Framework:

  • Law on the Prevention of Money Laundering and Terrorism Financing (Law no. 9917 dated May 19, 2008), herein after “AML/CFT Law”.
  • The Criminal Procedures Code (Law no. 9749, dated April 6, 2007), hereinafter CPC.
  • Law on State Police (Law no. 9749, dated June 4, 2007).
  • Law on the Civil Servant Status (Law no. 8549, dated November 11, 1999).
  • Law on Information Classified “State Secret” (Law no. 8457, dated November 2, 1999).
  • Reporting Methods and Procedures of Nonfinancial Professions (Instruction #11, dated February 5, 2009).
  • The Reporting Methods and Procedures of the Obliged Entities (Instruction #12, dated April 5, 2009).

Establishment of FIU as National Center (c. 26.1):

358. Article 21 of the AML/CFT Law foresees the General Directorate for the Prevention of Money Laundering (GDPML) as Albania’s Financial Intelligence Unit and as “the responsible national centre for collection, analysis and dissemination to law enforcement agencies of information and the potential money laundering and terrorism financing activities”. The GDPML is an administrative FIU and is part of the Ministry of Finance.

359. The responsibilities of the FIU outlined in Article 22 of the AML/CFT Law which entered into force on September 9, 2008 have been expanded from the ones prescribed by Article 8 of the Law for the Prevention of Money Laundering which was in force and served as the legislative basis for FIU activities during the third round assessment. The most notable change is the inclusion of the financing of terrorism in the FIU’s mandate. The GDPML also has an expanded mandate to: inform responsible authorities of the conclusion of criminal proceedings; issue a list of countries to limit the transactions or business relationship of entities with these countries; provide feedback on reports it receives from reporting entities; notify supervising authorities when observing that an entity has failed to comply with its AML/CFT obligations; and publish annual reports. Furthermore, many existing provisions have been defined more broadly.

360. With regard to the FIU’s core responsibilities envisaged by R26, the receipt and analysis functions are outlined in Article 22 (a): “collect, manage and analyze reports and information from other entities and institutions in accordance with the provisions of this Law”.

361. With regard to dissemination, rather than having an explicit requirement to disseminate disclosures to law enforcement the AML/CFT Law outlines a duty to “exchange information” with “the Ministry of Interior, State Intelligence Service and other responsible law enforcement authorities regarding individuals or legal entities, if there is ground to suspect that this entity has committed ML or FT”. The wording of “exchanging information” is less specific than the standard to “disseminate disclosures of STRs and other relevant information concerning ML or FT activities”. Most importantly, the function of “exchanging information” is broader than the “dissemination” mentioned by Recommendation 26 as one of the core function of the FIU, in the sense in which the dissemination function has been usually interpreted by FATF, which implies a notification of the STRs or other relevant information related to ML/FT to the agency that is competent to initiate an “investigation”.

362. Furthermore the AML/CFT law confuses something that is a responsibility/ entitlement, such as the “exchange of information” with domestic authorities with what should be a legal obligation to disseminate disclosures of STRs to law enforcement authorities competent for the initiation of a criminal investigation (or some other action).

363. It should be noted that the concept of ‘exchange of information’ as outlined in the AML/CFT does not provide the Ministry of Interior, State Intelligence Service and other responsible law enforcement authorities with direct access to the GDPML’s information. Rather it appears to imply that relevant authorities involved should pro-actively share information although the scope and nature of the information is not defined. With regard to the recipient of the disseminated information it is also not clear who would be the competent authority responsible for receiving the information for the purpose of initiating a criminal investigation for ML (in the case of FT, all related disclosures are referred to the Serious Crime Prosecutor’s Office (SCPO) for investigation.

364. In practice the GDPML disseminates disclosures on ML/FT to both the Albanian State Police (ASP) and to the General Prosecutor’s Office (GPO). The GDPML indicated that when the case includes a previous conviction or when the intelligence gathered can support knowledge/close awareness rather than suspicion of money laundering the information is sent to the GPO. Cases that require additional investigation to achieve knowledge of ML or TF and instances where the predicate offence is unknown are referred to a centralized section of the ASP. The GPO has indicated that intelligence provided by the GPDML cannot be used as evidence to justify the registrations of a case. This results in disclosures provided to the GPO being rerouted to the ASP.

365. From the Law on Police (LP) and the Criminal Procedure Code (CPC) it could be inferred that it is the ASP that should be the main recipient of the disseminated information: on the one hand the LP states that the Police has the responsibility “to prevent, detect and investigate in compliance with Criminal Code and Criminal Procedure Code, the criminal offences and their perpetrators” and that “every member of the ASP possesses the attributes of judicial police” (Article 4 (1) of the LP) and, on the other, the CPC states that “on receiving notice of a criminal offence the judicial police, without delay, report in writing to the prosecutor, the essential elements of the fact (act) and other elements gathered until that point in time”.

366. Although the assessment team recognizes that the GDPML can disseminate information through the authority to exchange information, it believes that the current legislative provision is unclear and confusing. This issue should be addressed by the AML/CFT law, which should specifically provide for a “dissemination” function for the FIU, in addition to the existing possibility to exchange ML/FT-related information. The GDPML should also be sensitive to the roles and responsibilities attributed to the ASP and GPO. The previous practice of sending disclosures exclusively to the GPO was inefficient given that the LP and the CPC provides for the responsibility of the ASP to conduct ML investigations, including in the capacity of judicial police under the direction of the GPO. A solution that authorities could consider is to disseminate disclosures related to ML to the ASP, with copy to the GPO. In this way, the GPO could monitor more closely the ML related investigations as it would deem appropriate, rather than having to take action—that ultimately is to send the disclosure related to ML/FT received by the GDPML back to the ASP—for each and every disclosure, while, at the same time, being informed of all the outgoing flow of information from the GDPML to the ASP. As in the current practice, the designation of the Serious Crime General Prosecutor’s Office as the recipient for FT related disseminations, seems to be appropriate.

367. With regard to the types of information that the GDPML receives from entities subject to the reporting requirement, it should be noted that the requirement to report suspicions related to ML/FT is outlined in two requirements under Article 12. The first obligation requires obliged entities to “immediately present to the responsible authority a report” when “the entities suspect that the property is the proceeds of a criminal offence or is intended to be used for financing of terrorism”. The second obligation states “when the entity, which is asked by the client to carry out a transaction, suspects that the transaction may be related to money laundering or terrorism financing, it should immediately report the case to the responsible authority and ask for instructions as to whether it should execute the transaction or not. The responsible authority shall be obliged to provide a response within 48 hours”. The GDPML has indicated that almost all suspicions are reported under the first obligation with very few reports having been received under the second obligation where obliged entities ask for instructions from the GDPML whether the transaction should be executed.

368. The GDPML also receives cash transactions reports from obliged entities over lek 1,500,000 (US$15,000) and non-cash transactions over lek 6,000,000 (US$60,000) pursuant to Article 12 and 22 (a) of the AML/CFT Law. Non-financial businesses such as construction companies, motor vehicles, and companies involved in transportation and delivery as well as travel agencies have been designated obliged entities and are required to report prescribed and suspicious transactions. The AML/CFT Law also designates the Agency for the legalization and integration of informal construction assets15 as an obliged entity who must comply with all AML/CFT requirements including reporting.

369. In addition to receiving reports from obliged entities, the GDPML also receives cross-border reports from the Customs Directorate related to cash amounts, negotiable instruments, precious metals and stones, valuables or antique objects equal or greater than lek 1,000,000 (US$10,000) pursuant to Article 17 of the AML/CFT Law. Article 19 of the Law requires the Central Immovable Properties Registration Office to report transfer of property rights for amounts equal to or more than lek 6,000,000 (US$60,000) to the GDPML.

370. In addition, designated state authorities such as the Customs Directorate, the Tax Directorate, and the Central Immovable Properties Registration Office are required to report suspicions of ML/FT to the authorities. They are also required to apply prevention measures detailed in Article 11 of the AML/CFT Law. With regard to reports received from other state institutions (including customs, tax and property registration), they are analyzed and, following the analysis carried out, the findings are sent in a timely manner to the ASP. Please refer to the section on effectiveness for a more detailed explanation and analysis of the characteristics of the receiving and analysis process and the dissemination of disclosures to domestic entities.

Guidelines to Financial Institutions on Reporting STR (c. 26.2):

371. Secondary legislation has been enacted by the Ministry of Finance, in conjunction with GDPML, to direct reporting entities with respect to requirements related to reporting and the prevention of ML and FT. Instruction no. 11 (February 5, 2009) and Instruction no. 12 (April 5, 2009) prescribe the manner in which reports should be submitted and provide guidance on how to report suspicious activity transactions, cash transaction reports, value transaction reports and self auditing reports including the specifications of the reporting forms and the procedures that should be followed when reporting.

372. The SAR contains information on the person conducting the transaction and details of the transaction, it also requires a description of the suspicious activity and information about the reporting entity. The cash transaction report (CTR) and value transaction report (VTR) require information on the person performing the transaction, the person on whose behalf the transaction is being performed, beneficiary persons, transaction details and information about the reporting entity. The guidance for all reports provides a field-by-field explanation of what information is required.

373. The reporting form for SAR does not collect information on the person on whose behalf the transaction is being performed, information on the beneficiary or information on the disposition of the transaction (ie. where the money went).

Access to Information on Timely Basis by FIU (c. 26.3):

374. Article 22 (b) of the AML/CFT Law empowers the FIU to have access to databases and any information managed by state institutions as well as in any other public registry. The FIU can access a number of databases directly through their IT interface. The following databases are accessed directly by the FIU:

Databases Accessed DirectlyMechanism by which information is

downloaded into database
Old passport databaseCD-ROM
Tax information related to legal companiesThrough VPN connection
Importation data from Customs Directorate related to import companiesCD-ROM
Driving license registryCD-ROM
Vehicle registrationCD-ROM
Domestic PEPs list provided by the High Inspectorate for the Declaration and Auditing of Assets (HIDAA)CD-ROM
Civil RegistryCD-ROM
Agency for the legalization and integration of informal construction assetsCD-ROM
Domestic Politically Exposed Persons ListThrough e-mail
Cross-Border DeclarationsCD-ROM

375. The above databases are available through the GDPML’s case management system and are updated periodically with the exception of cross-border declarations that are updated on a weekly basis. Relevant information contained in the databases appears automatically when conducting searches on individuals or legal entities. The GDPML can also request information from any state body pursuant to Article 22 (b) of the AML/CFT Law. This includes information from the Tax and Customs Directorates where there are no restrictions on the information that can be provided. In instances where information is requested from other state authorities a response is provided in writing within 10 days. The GDPML does however have the ability to obtain information within 24 hours in urgent cases through a telephone request that is followed by a formal written request.

376. Information available to the GDPML is extensive and is available in a timely basis. The integration of databases directly in the case management system and the capacity to query any state authority provides comprehensive access to administrative and law enforcement information. Outreach to certain border crossing has resulted in improving the quality of cross-border declarations in certain regions. However, the data received from certain border crossings still requires improvement. The GDPML has indicated that they are currently negotiating an MOU with the ASP to gain direct access to a database that contains information on current passports, on-going investigations and customs information. The direct access to this information will address information gathering inefficiencies that currently exist.

Additional Information from Reporting Parties (c. 26.4):

377. Pursuant to Article 22 (c) the GDPML can “request, pursuant to its legal obligations, financial information from the entities on performed transactions with the purpose of ML and TF prevention”. The term ‘entities’ in the legislation refers to both persons and legal entities. The drafting of the provision does not seem to provide the FIU with the authority to request information that is not of a financial nature, as well as non-transaction related information. This specific language seems also to limit the legal authority of the GDPML to request additional information from entities related to financial information and for completed transactions. Despite this absence of legal authority the GDPML interprets the meaning of this clause more broadly and has requested various types of information including the account information which was not related to a particular transaction and information not related to the submission of a SAR. The authority to request this information has not been challenged by obliged entities, although some of the reporting entities with which the mission met, acknowledged these technical limitations.

Dissemination of Information (c. 26.5):

378. As noted earlier, there is not a specific reference in the AML/CFT law to the responsibility of the FIU to disseminate “disclosures of STRs and other relevant information concerning suspected ML/FT activities”. Instead there is a broader reference to the power of the GDPML to “exchange information with the Ministry of Interior, State Intelligence Service and other responsible law enforcement authorities if there are grounds to suspect that an entity has committed money laundering or terrorist financing”. The provision is also silent with respect to suspicions related to attempts of ML and FT.

379. With regard to dissemination for investigation see discussion under criterion 26.1 for the legal analysis. The GDPML provides information to the State Intelligence Service (SIS) in cases related to FT. The GDPML also provides information to High Inspectorate for the Declaration and Auditing of Assets (HIDAA), to which the GPDML reports financial transaction and other information related to domestic PEPs and other public servants that are required to declare assets to HIDAA. The information exchanged between the GDPML and HIDAA is regulated through an MOU signed in March 2009. However, the authority to exchange information is unclear, considering that this agency is not mentioned by Article 22 nor is it considered a “law enforcement agency” and the Law does not provide a mechanism for the GDPML to sign MOUs with domestic agencies.

380. Some prioritization of cases is undertaken. Financing of terrorism cases are designated the highest priority. These cases are carried out through prompt communication with the relevant contact points in SIS, ASP or GPO in order to guarantee swift action. With regard to money laundering, cases related to a transaction that is about to be carried out receive priority attention.

381. The following criteria are followed in order to reach a decision to disseminate:

  • Reliable/credible information about commission of predicated offence (ML/FT);
  • Information by law enforcement agencies about potential involvement in criminal activity;
  • Persons linked (family member, close associates) to those individuals about whom GDPML has already disseminated information;
  • ML/FT typologies and indicators;
  • Requests for information from partner FIUs about Albanian citizens;
  • Unusual series of patterns/ transactions reported by various obliged entities.

382. Disclosures are considered timely and of good quality by the ASP and GPO with the new threshold reporting providing a more comprehensive picture of the financial activity. GDPML liaison officers within the Joint Investigative Unit (JIU) assist in obtaining information on active cases allowing the GDPML to be responsive to the investigation priorities of the GPO.

383. Strong collaboration has been established between the GPDML and the SIS. The SIS receives information on both the suspicions of ML and FT. The GDPML has also provided intelligence to the SIS with respect to individuals and NPOs with suspected links to terrorism financing. The SIS considers the financial intelligence provided by the GDPML to be timely and of high quality.

384. The relationship between the GDPML and the Investigation Branch of the Tax Directorate is very strong. They regularly exchange information with the GDPML providing financial transaction and other related information related to suspicions of tax evasion. The Tax Directorate had indicated that the intelligence provided is considered of high quality and timely.

385. HIDAA is required to provide the GDPML a complete and updated list of domestically politically exposed persons every six months pursuant to Article 28 (2) of the AML/CFT Law. The list provided is generally the basis for ML disclosures provided to HIDAA. The organization has indicated that the information provided by the GDPML is of good quality. They have also indicated that they would benefit from additional pro-active information with respect to foreign holdings of domestic PEPs.

Operational Independence (c. 26.6):

386. Article 21 (a) stipulates that the GDPML is an institution subordinated to the Minister of Finance. The General Director reports directly to the Minister of Finance. The General Director approves disseminations of financial intelligence and has final signing authority on the Annual Report.

387. Article 21 (4) also stipulates that the organization and functioning of the Directorate shall be regulated by a Council of Minister’s (CoM) Decision. Council of Minister’s Decision #108 does outline the organization and functioning of the GDPML however the decision is based on the the previous Prevention of Money Laundering Law and does not reflect the new responsibilities outlined in the 2008 AML/CFT Law. In addition to defining the (old) functions of the FIU the Decision also outlines a salary scale for employees and management of the GDPML. The General Director of the GDPML and the Minister of Finance are charged with the implementation of the decision.

388. An analysis manual developed in July 2010 outlines the workflow for the development of tactical cases. It also defines the roles and responsibilities of the various units involved in the analytical process. The document provides good overview of functions of the FIU; however a clearer detailing of the analytical process would help clarify the key decision points related to the dissemination of financial intelligence.

389. The hiring of the General Director is governed by the Law on the Civil Servant Status. As with all positions in the civil service the position of General Director of the GDPML must be advertized publically. Candidates must complete a written test with the three candidates with the highest scores being invited to an interview. The Minister of Finance makes the final determination with respect to the hiring of the General Director. The Law on Civil Servants governs the dismissal of the General Director. The General Director is not appointed for a fixed term with dismissal being determined by the Minister of Finance.

390. Staffing of the GDPML is done independently with the GDPML having its own human resources department. Staff is hired pursuant to the same process as defined above for the General Director pursuant to the Law on Civil Service. Resources within the GDPML cannot be reassigned to other directorates within the Ministry of Finance. The Minister makes the final determination whether the additional resources are approved. A request for four additional resources was made in 2010 and approved.

391. The budget for the GDPML is allocated by the Ministry of Finance. The GDPML has an internal budget group responsible for budgetary planning who determines the allocation of resources attributed by the Ministry of Finance. The budget group details budgetary allocation for the three upcoming years and submits the budget allocation to the Ministry of Finance who endorses it. Requests for additional resources are forwarded to the General Directorate of Budgets within the Ministry of Finance who evaluate the request and make a recommendation to the Minister of Finance.

392. Anti-corruption measures within GDPML are carried out through periodic declarations of assets to HIDAA by the General Director as well as both Deputy Directors as well as through adherence to the avoidance of conflicts of interest and external auditing.

393. The assessment team believes that the operational independence does not appear to be affected by relations with the Minister of Finance. Information holdings are held separately from the Ministry of Finance and GDPML employees cannot be reassigned to other Ministry of Finance function. Although the Minister of Finance is responsible for the dismissal of the General Director the Law of Public Service governs the hiring, conduct and dismissal of the General Director. However the authorities should consider explicitly entrenching the autonomy of the FIU in legislation to confirm its full independence. Fixed terms should be established for the General Director to ensure stability and consistency in governance and minimize the potential for undue influence in the appointment of the position.

Protection of Information Held by FIU (c. 26.7):

394. The information received from reporting entities is stored in the FIU’s database which is protected through a separate restricted area, video surveillance and internal policies governing staff conduct. Only FIU employees have access to the database with no other government agency (including law enforcement) having access to the information holdings, although back-up data is located at a centralized government site. The FIU’s databases are held on a separate server from that of the Ministry of Finance and only FIU employees are responsible for its maintenance. Employees’ access to the database containing reporting data from obliged entities is on a need-to-know basis. Managers have the ability to view their employees’ activities electronically and employees’ searches in the database are monitored periodically. The protection of information is governed by Law on Information Classified “State Secret”.

395. The FIU’s physical premises as well as its IT systems are certified by the Classified Information Security Directorate. Archives are held in a high security area with video surveillance and controlled access limited to employees who require access. Analytical information is secured in locked cabinets and enhanced protocols are in place to deal with information classified as Secret. The premises are subject to 24 hour on-site security.

396. Disseminations by the GPDML do not all appear to be in line with the authority to exchange information under Article 22 (g) of the AML/CFT Law. As noted earlier, the GPDML has exchanged information with HIDAA even though it is not a law enforcement agency as required by the law.

Publication of Annual Reports (c. 26.8):

397. Article 22 (o) requires the FIU to release an annual report that provides detailed statistics on the origin of the received reports, and the results of the cases referred to the law enforcement and the prosecution office. The document also contains an overview of the GDMLP’s awareness raising and examination activities as well as feedback for some reporting entity sectors. The information contains information of the GDPML’s activities as well as analysis on the types of SARs received. There is however no specific analysis on ML/FT trends. The report is posted on the GDPML website and is published in Albanian and English. A separate typologies document is produced annually.

Membership of Egmont Group (c. 26.9) Egmont Principles of Exchange of Information Among FIUs (c. 26.10):

398. The General Directorate of Money Laundering Prevention has been a member of the Egmont Group for since July of 2003. The GDPML appears to effectively collaborate with other Egmont members. In 2010 the GDPML has received 42 requests from foreign FIU and responded to 25. The response time varies from one day to three months with the majority of requests being responded to within three weeks. In addition to disclosing information contained in its information holdings the GDPML also consults with law enforcement and other domestic authorities in all requests from foreign FIUs it receives. The GDPML provides updates to its cases where applicable. The GDPML has made a total of 95 queries (including one that was sent to all Egmont member FIUs) and received 172 responses. The GDPML has disseminated 6 spontaneous disclosures from January to October 2010. Recommendation 40 provides further details on international cooperation.

Adequacy of Resources—FIU (R. 30):

399. The GDPML is comprised of three departments: Analysis and IT; Inspection and Legislation and Human Resources. The General Director is also supported by a Foreign Relations Specialist. It has a total of 27 employees. This is an increase of five additional staff from 2008 staffing levels. Following the increase in the number of employees the GDPML has doubled the number of disseminations from 2008 to 2009 as well as maintained the number of on-site examinations conducted.

400. The GDMLP’s budget allocation has been relatively consistent over the past five years. Some budget reductions were applied in 2007 and 2009, however as demonstrated by the chart below the allocated funds have never been fully utilized.

Burimet buxhetore në vite / Budgetary Allocations over the years

401. The Human Resources Department oversees evaluation procedures regarding employees’ performance including the maintaining evidence of documentary action. Every employee undergoes a vetting process and background check through the National Agency for Information Security.

402. Employees have undertaken training coordinated through a number of organizations: Training and Assistance Information (TAIEX); International Criminal Investigative Training Assistance program (ICITAP), Office for Prosecutorial Development Assistance and Training (OPDAT), Project Against Corruption in Albania (PACA) and the United Nations Office on Drugs and Crime (UNODC). The GDPML was also the leading institution in a twinning project with the German Federal Criminal Office which included a training component. GDPML employees participated in study visits as well as targeted training sessions.

403. Resources for the GDPML’s core analytical mandate appear to be sufficient. Additional resources have been added in 2010 which combined with training provided by foreign counterparts appears to have contributed to a significant increase in the output of the Analysis Division. The supervisory function has also demonstrated great efficiency in its activities conducting a significant number of examinations given its limited resources. It is however believed that additional resources would help strengthen the Inspection Division’s entity assistance function. Recommendation 23 and 24 provides further analysis on the GDPML’s supervisory function.

Statistics (R.32):

404. The following table outlines the receipt of SARs over the last five year. The significant increase in reports in 2007 is explained by the authorities as being related to defensive reporting. It should be noted that these statistics include reporting from state authorities. In 2010 these reports represented 18 % of SARs reported.

I. YearII. 2006III. 2007IV. 2008V. 2009VI. 2010
No. of SARs15748152186211

405. In 2010, 7 reports were reported on TF. None of the reports submitted were related to matches on the TF list. Analysis of these SARs determined that none met the threshold of suspicion required to disseminate to law enforcement with respect to terrorist financing. One of these TF related SARs was eventually disclosed as part of a case related to the suspicion of ML.

REPORTS RECEIVED BY GDPML**
Reporting

Entities
200520062007200820092010
CTR

VTR*
SARCTR

VTR*
SARCTR

VTR*
SARCTR

VTR*
SARCTR

VTR*
SARCTR

VTR*
SAR
Banks26,746646,5071460,650748231,531152972,8521221,602,611163
Bureaux de

change
75179219
Customs

Directorate
33114336382851152015
Notaries89605911.277417,5896
Central

Office of

Registration

of Real Estate
13641004
Non Bank FI792138901,2343
Car Dealers190294
Games of

Chance
3819
Other556149821,7312
Tax

Directorate
26
Foreign FIU4310
HIDAA26
TOTAL26,74610746,6271561,342748238,813152985.4471861,624,983211

Includes both CTR and Value Transaction Reports over ~EUR 45.000.

- As of 25.11.2010

Includes both CTR and Value Transaction Reports over ~EUR 45.000.

- As of 25.11.2010

406. The statistics provided by the authorities on the number of SARs reported are not consistent as demonstrated in the previous tables.

407. It should be noted that public institutions such as the General Directorate for Tax and Customs are required to report information related to suspicions of ML and TF to the FIU. A breakdown of the SAR reporting from January to October 2010 demonstrates a concentration of reporting from the banking sector with minimal reporting from MSBs and notaries. All other reporting sectors did not submit any reports. It should be noted that reporting statistics reflect reporting from obliged entities as well as state authorities and foreign FIUs. For 2010, 18% of SARs were received by either state authorities or foreign FIUs.

408. The authorities believe that reporting levels and the quality of reports are low. The assessment team concurs that the level of reporting is not commensurate with the risk of ML and TF. Please refer to Recommendation 13 in Section 3 and 4 for a more detailed analysis of reporting levels.

409. The number of dissemination disclosed has increased substantially since 2005. Staff training and additional GDPML staff, the expansion of reporting requirements and the implementation of a new IT system has resulted in disseminations doubling from 2008 to 2009. The table below provides an annual breakdown of disseminations by recipient as well as the number of investigations registered by the GPO. No statistics were provided on the number of disseminations made to HIDAA and the GDT.

Number of Annual Disseminations Disclosed to Police and Prosecutors
200520062007200820092010
Referred to Albanian State Police1011546135137
ASP ML Investigations resulting from disseminations1317344947
Investigations registered by the General Prosecutor’s Office1132265967

410. The following table provides outlines the number of cases generated by SAR.

YearCases generated by SARs% of total cases
2007457
20082839
20092111
20106130

411. FIU disseminations contributed to one conviction in 2009 and one person in 2010. No statistics are maintained on the number of FIU disseminations that have resulted in seizures or confiscations.

412. The 2010 disseminations to Prosecutors Office are categorized as follows with respect to the underlying predicate offence. In 35 cases the predicate offence was the trafficking of narcotics, human beings, armed robberies. In 8 cases the predicate offences was tax evasion, smuggling, fraud or use of forged documents. In 5 cases the predicate offence was corruption and abuse of authority. The remaining cases the predicate offence was organized crime.

Effectiveness:

413. The GDPML receives 95% of its reports in electronic format. Bigger banks file their reports through a batch facility. Most entities file to the FIU via a web based reporting mechanism. Entities can request access through an on-line form filling out information with respect to their organization. They are subsequently contacted by telephone by the GPDML who verifies the information and provides them a username and password. The Inspections division is responsible for entering paper reports in the database and checking the quality of reports. The web based software has field level validation. Although the manual entry of reports has decreased significantly the GDPML would like to further streamline the process.

414. With the 2008 amendments to the AML/CFT Law the GDPML’s information holdings are vast. The number of obliged sector is extensive and designated state authorities must provide prescribed information as well as report suspicious transaction reports. Threshold reporting also provides an important source of information. The notary sector appears to provide an important source of data given their role in notarizing all transactions related to the sale of movable and immovable property. Threshold reporting related to cash transactions of over lek 1,500,000 (US$15,000) and other transactions over lek 6,000,000 (US$60,000) have also expanded the GPDML’s information holdings.

415. However, information collected by the SAR is not comprehensive. The SAR form does not collect key information that would be helpful in development of financial intelligence such as information on the person on whose behalf the transaction is being performed, information on the beneficiary or information on the disposition of the transaction (ie. where the money went).

416. Suspicious transaction reporting is low and poorly understood by obliged entities impacting on the quality of information available to the GDPML. Although threshold reporting provides an important source of data, obliged entities are often exclusively focused on reporting threshold transactions to the detriment of reporting suspicious transactions. Obliged entities had limited knowledge of their suspicious transaction reporting obligations and many believed that if they reported a threshold transaction they were not required to report SARs. Very few of the DNFBP sectors understood the ML/FT vulnerabilities faced by their sector. The GDPML has conducted a number of awareness sessions, however entities appear to have exclusively retained information related to threshold reporting.

417. The number of reports related to terrorism financing is particularly low. Of the seven FT suspicions reported in 2010 none were considered by the GPDML as meeting the suspicion threshold required to exchange with law enforcement. Lack of understanding of FT vulnerabilities is certainly a factor contributing to low reporting and possibly misreporting.

418. The GDPML has implemented a new IT system in the last year. It consolidates access to reports received by obliged entities with a number of databases provided by state authorities. The new system provides an ability to flag information although this ability did not appear to be used widely as analysts were still learning to use the system. The system does not allow for the prioritization of SARs, nor does it generate automated red flags. No visual link software was being used at the time of the on-site assessment. However, the authorities have purchased I2 software and were planning to implement its use in the coming months.

419. All SARs are the subject of analysis, SARs are assigned to analysts who search the database and also request additional information from obliged entities, the BoA, the ASP, the Tax Directorate and Customs, foreign FIUs, and other state agencies as appropriate. Information is then consolidated in a dissemination report that contains details regarding the person of interest, transactional information including bank accounts. Specific criteria are used to determine whether the information should be disseminated. SARs and information gathered during the analysis phase (bank statements, information from state authorities) is not included in the dissemination package.

420. In addition to reporting suspicions that property is the proceeds of crime or intended to be used for the financing of terrorism, obliged entities are required to report suspicions of ML and TF as well as ask for instructions from the GDPML as to whether it should execute the transaction when the suspicious threshold is met. The GDPML confers with the ASP and the Prosecutor’s Office to determine whether the transaction involves a person of interest and whether the transaction should proceed. The GDPML has 48 hours to make the determination. The General Director makes the final determination whether the transaction should be subject to a freezing action. Very few reports are reported under this authority; however the process of consulting the ASP and the Prosecutor’s Office appears to mitigate the risk that the GDPML would negatively impact the seizure activities undertaken by the GPO.

421. Limited resources are dedicated to strategic analysis. The GDPML analyzes intelligence reports by the ASP, SIS, BoA. However, it does not appear that it has produced its own strategic intelligence product.

422. Despite issues with the legislative drafting regarding its powers to disseminate, the GDPML is disseminating disclosures of SARs and other relevant information to the Albanian State Police, the General Prosecutor’s Office and the Joint Investigation Units focused on financial and serious crimes. Intelligence is also provided to other state agencies such as the State Intelligence Service (SIS), the Tax Directorate and HIDAA. Feedback received from all recipient agencies on the quality, quantity and timeliness of disclosures is positive.

423. The creation of Joint Investigation Units where liaison officers from the FIU are part of the teams appears to have been instrumental in improving the FIU’s perceived responsiveness. Recipients have also commented on the quality of disclosures remarking that threshold reporting has resulted in more complete intelligence packages.

424. The JIUs have also helped clarify the roles of the ASP and the General Prosecutor’s Office to a certain extent. The GDPML had a previous practice of disclosing information directly to the GPO when they thought there was sufficient evidence of ML/FT. However, the GPO could not use the dissemination provided by the GDPML as evidence and referred the case to the ASP for evidence gathering prior to investigation being registered. This practice has largely stopped with disseminations being transmitted directly to the ASP with the GPO being copied. Given the concerns expressed by the 2006 MER on roles and responsibilities, the GDPML should be sensitive to respecting the separation of duties between the ASP and GPO.

425. The number of disseminations resulting in investigations and subsequently in registered cases is satisfactory. The number of disseminations contributing to investigations has been steadily increasing. The financial intelligence cases are generated both as a result of requests from other agencies as well as from SAR submitted by reporting entities. Over recent years the number of cases of generated by SARs has decreased due to additional information received by the GDPML from reporting entities. A reasonable balance appears to have been achieved between the number of financial intelligence cases generated from SARs and the number of financial intelligence cases responding to requests from law enforcement.

426. The legal basis for dissemination should be clarified. The current provision refers to “exchange of information” rather than an explicit requirement to disseminate. Furthermore, the provision does not provide an authority to “exchange information” regarding suspicions related to attempts of ML/FT.

427. The law should clearly determine who should be the recipient of disseminated information concerning SARs and other ML/FT-related information, when the aim of the dissemination is the potential start of an investigation related to ML/FT. Given that the LP and the CPC provides for the responsibility of the ASP to conduct investigations, including in the capacity of judicial police under the direction of the GPO, a solution that authorities could consider is to disseminate disclosures related to ML to the ASP, with copy to the GPO. For TF the current practice of referring to the Serious Crime Prosecutor’s Office should continue.

428. The GDPML is also disseminating (i.e. “exchanging”) information when the legal basis to do so is unclear. Information unrelated to money laundering or the financing of terrorism is disseminated to the Tax Directorate and HIDAA. Although there is an MOU in place with HIDAA it is unclear that HIDAA is considered a law enforcement authority as required by legislation. To address this lack of clarity in the legislation, the AML/CFT Law should be amended to include a specific provision on exchange of information citing which agencies would be subject to information exchange.

429. Dissemination activities should be prioritized. A distinction should be made between disseminations to agencies that are responsible for investigation and intelligence gathering related to ML and FT and the exchange of information with those agencies that have AML/CFT as an ancillary activity to their mandate. Although the GDPML does appear to focus on disclosures to the ASP, GPO and SIS, with increasing demands on its time it should be made clear that support of ML/FT investigations is its primary mandate.

430. The protection of information held by the GDPML has seen some improvement. Information is held for 10 years. This is shorter than the statute of limitation for ML and FT which is 20 years. The GDPML’s IT system and physical premises have been certified by the Classified Information Security Directorate. The Law of Information Classified “State Secret” provides a framework for the protection of classified information held by the GDPML. Archives are located in a high security area under camera surveillance with access being limited to essential staff.

431. Although the GDPML maintains a number of different statistics the reliability of statistics provided is questionable. This is demonstrated by the inability to obtain a consistent statistics on the number of SAR reported by sector. Additionally, no statistics are maintained on the number of FIU disseminations that have resulted in seizures or confiscations.

432. Additional measures are still required to address concerns related to operational independence. The independence of the GDPML is not explicitly stated in legislation; the Director is not appointed for a fixed term and can be dismissed directly by the Minister of Finance. Given the general concerns related to corruption within the public service the presence of concrete measures to address the potential for influence are all the more relevant.

433. The legislative framework detailing the GDPML’s governance and functioning is not comprehensive. The current Council of Minister’s Decision outlining the organization and functioning of the GDPML has not been updated to reflect the new responsibilities that were conferred in the 2008 AML/CFT Law.

434. In conclusion the GDPML has implemented a number of substantive changes enhancing its effectiveness and addressing many of the concerns outlined during the 2006 assessment. The quality and quantity of disseminations by the GDPML has improved. Measures have been put in place to improve the autonomy and independence of the Directorate. Various training programs have been delivered to enhance employee capacity and typologies and annual reports are published.

435. Concerns remain with the independence of the GDPML. The number of SARs does not reflect the ML/FT risks in Albania and the quality of reporting needs to be improved. The legislative authority to exchange information does not appear to provide all the necessary authority to disseminate to HIDAA and information not related to ML and FT is being disclosed. The authority to request additional information from obliged entities is limited to financial information on performed transactions. Strategic analysis and trends analysis capacity needs to be strengthened.

2.5.2. Recommendations and Comments

436. The authorities should:

  • Expand the GDPML’s authority to request additional information by specifically allowing it to request non-financial information that could assist in its functions.
  • Amend the Council of Minister’s Decision outlining the organization and functioning of the GDPML to reflect the FIU’s new responsibilities.
  • Clarify the GDPML’s authority to exchange information with non law enforcement authorities.
  • Enhance the GDPML’s strategic analytical capacity by conducting an in-depth review of existing disseminations to identify ML/FT trends specific to Albania.This information should be disseminated to help inform risk assessment activities by both authorities and obliged entities.
  • Enhance the IT system so that it allows for the prioritization of SARs and identifies patterns of suspicious transactions generating cases based on these findings.
  • Specify the autonomy and independence of the GDPML in legislation and establish a fixed term for the General Director and include a provision on the independent status of the Director.
  • Reinforce guidance related to reporting by providing enhanced sector specific training, expanding the list of sector specific indicators as well as clarifying that SARs should be reported even when a threshold report is required.
  • Maintain consistent and comprehensive statistics on SAR reporting and the number of FIU disseminations that have resulted in convictions, seizures or confiscations.

437. The authorities should also consider:

  • Amending Article 22 of the AML/CFT Law to clarify the power to disseminate information concerning suspected ML/FT activities.
  • Amending the AML/CFT Law to require obliged entities and state authorities to report to the GDPML electronically unless they do not have the capability to do so.
  • Entrenching the practice of disseminating suspicions of ML activities to the ASP with a copy to the GPO in order to increase efficiency and respect attributed roles and responsibilities. As in the current practice the Serious Crime Prosecutor’s Office should be designated the recipient of FT disseminations (with copy to SIS, if and as appropriate).
  • Amending the SAR reporting form to require information on the person on whose behalf the transaction is being performed, information on the beneficiary or information on the disposition of the transaction (ie. where the money went).
  • Consider extending the retention period for reports to 20 years to align with the statute of limitations for ML and FT.

2.5.3. Compliance with Recommendation 26

RatingSummary of factors relevant to s.2.5 underlying overall rating
R.26LC
  • The legislative framework detailing the GDPML’s governance and functioning is not comprehensive.
  • GDPML does not have the authority to disseminate when there is a suspicion related to attempted ML/FT.
  • The GDPML does not have the legislative authority to request non-financial information from reporting entities or for attempted transactions.
  • Issues of operational independence such as the absence of fixed terms for the General Director.
  • Dissemination to HIDAA not in accordance with the law.
  • Effectiveness issues with regard to the GPDML’s analytical capacity:
    • - The GDPML does not conduct sufficient trends analysis.
    • - Lack of prioritization in the analysis of SARs/CTRs.

2.6. Law enforcement, prosecution, and other competent authorities—the framework for the investigation and prosecution of offenses, and for confiscation and freezing (R.27 and 28 - rated PC in the 2006 MER)

Summary of 2006 MER factors underlying the ratings and recommendations

438. The 2006 MER noted a number of shortcomings with respect to the framework for the investigation and prosecution of offenses. The distribution of tasks was unclear between the GDPML, law enforcement and the prosecutorial bodies with police and prosecutors paying little attention to ML. No studies on ML, including trends and typologies were produced. The level of expertise within the judicial police and the judiciary was insufficient. The ability to waive the arrest of a suspect for the purposes of ML/FT investigation needed to be clarified.

2.6.1. Description and Analysis

Legal Framework:

  • The Criminal Code (Law no. 7895, dated January 27, 1995), hereinafter CP.
  • The Criminal Procedures Code (Law no. 9749, dated April 6, 2007), hereinafter CPC.
  • Law on State Police (Law no. 9749, dated June 4, 2007).
  • Law on Prevention and Fight against Organized Crime (Law no. 10192, dated December 3, 2009), hereinafter “Organized Crime Law”.
  • Law on the Organization and Functioning of the Prosecutor’s Office in the Republic of Albania (Law no. 8737, dated February 12, 2001).
  • Law on Employees of the State Police (Law no. 9749, dated June 4, 2007).
  • Law on Banking (Law no. 9662, dated December 18, 2006).

Designation of Authorities ML/FT Investigations (c. 27.1):

439. The General Prosecutor’s Office (GPO) and the Albanian State Police (ASP) are responsible to undertake ML investigations. The Prosecutor’s Office is responsible for overseeing the conduct of penal investigations through the judicial police as well as undertaking penal proceedings. Joint Investigation Units (JIU) have been established to investigate economic crime and corruption. The units are comprised of prosecutors and judicial police officers from the GPO, judicial police officers from the Albanian State Police (ASP), judicial police officers from the General Tax Directorate and from the Customs Department of Operational Investigation. Liaison officers from GDPML and High Inspectorate for the Declaration and Audit of Assets (HIDAA) also form part of the JIUs. JIUs have been established in Tirana, Durres, Vlore, Fier, Shkoder, Korce and Gjirokastra. The ASP has 21 officers (acting as judicial police) dedicated to ML with four located in headquarters and the remaining 17 in the 6 regional JIUs. In total the JIUs have 92 employees from all the participating agencies.

440. FT investigations are performed by the Serious Crimes Prosecutor’s Office. No specialized unit exists to investigate cases of terrorist financing. Cases are referred to available prosecutors within the unit.

Ability to Postpone/Waive Arrest of Suspects or Seizure of Property (c. 27.2):

441. Law enforcement does not have a specific legislative provision to postpone or waive the arrest of suspected persons and/or the seizure of money for the purposes of identifying persons involved in such activities or for evidence gathering. However, the timing of arrests is determined by the prosecutor who pursuant to provisions outlined in Article 228 to 231 of the CPC.

Additional Element—Ability to Use Special Investigative Techniques (c. 27.3):

442. The ASP has a series of investigative methods at their disposal including surveillance methods - including interceptions of communications, electronic surveillance, staging (simulated actions) and infiltration. Article 221 of the CPC outlines the conditions where interception and surveillance is permissible. Article 294 (a) of the CPC provides the authority to conduct simulated actions and 294 (b) confers the ability for the ASP to infiltrate a criminal group. The simulated actions are applicable for the investigation of all criminal offences including those related to ML and FT. On the other hand, infiltration can only be applied for the investigation of serious crimes that fall under the jurisdiction of the Serious Crime Court. Interception and surveillance have been used as tools to further money laundering investigations. No simulation or infiltration activities have been specifically applied to money laundering or terrorism financing cases.

Additional Element—Use of Special Investigative Techniques for ML/FT Techniques (c. 27.4):

443. The ASP has made use of various special investigation techniques when investigating ML. These include the use of surveillance methods and undercover operations.

444. Article 222 (3) of the CPC specifies that interceptions cannot exceed a period of fifteen days. The time limit can be extended by 20 days for crimes and 40 days for serious crimes on the request of the prosecutor. Pursuant to Article 223 of the CPC minutes and records related to the interception shall be handed over to the prosecutor and within five days from the conclusion of the action they should be filed with the secretariat. Defense lawyers and representatives of the parties are immediately informed on the filing with the secretariat and of their right to examine the documents and listen to the records. When the filing may damage the investigation, the court can authorize the prosecutor to postpone the filing. Law enforcement authorities have indicated that this requirement to notify defense counsel hinders their capacity to collect additional evidence prior to the defense lawyer being notified.

Additional Element—Specialized Investigation Groups and Conducting Multinational Cooperative Investigations (c. 27.5):

445. As noted above, JIUs have been established to investigate economic crime. These JIUs have been involved in the seizure of criminal proceeds. Joint investigations have been undertaken with foreign law enforcement agencies. Most international cooperation is conducted through mutual legal assistance channels and Interpol. Please refer to Recommendation 36 for additional information related to mutual legal assistance and Recommendation 40 with respect to cooperation with foreign law enforcement agencies.

Additional Elements—Review of ML and TF Trends by Law Enforcement Authorities (c. 27.6):

446. No review of ML/FT trends has been conducted by law enforcement.

Ability to Compel Production of and Searches for Documents and Information (c. 28.1):

447. The Prosecutor’s Office is empowered by Chapter III of the CPC, Articles 198 to 213, to collect evidence which can apply to transaction records, identification data obtained through CDD process, account files and business correspondence and other records, documents or information. Article 198 provides the authority to examine places, persons and items when it is necessary to discover traces and other material consequences of the criminal offence. Further details on the examination of persons and places are specified in Articles 199 and 201 respectively. Article 203 provides the proceeding authority the capacity to request the handing in of a certain item. Articles 204 and 205 detail the procedures for conducting searches of the body and premises including the requirement to produce a search order. Article 207 allows items found during the search to be seized with further seizures procedures being detailed in Articles 208 to 220.

448. Specific provisions for seizures in banks are outlined in Article 210. Special conditions are also established for persons bound to maintain professional or state secrecy in Article 211. Article 91 (2) of the Law on Banking provides an exception for the banks to maintain professional secrecy when the request stems from ‘juridical authorities whose right derives from the law’.

449. The CPC powers are exercised through searches (Article 202), request to hand in (Article 203) and seizures (Articles 208-210). The powers can be used for all investigations and prosecutions of ML/TF and other underlying predicate offenses or confiscations.

450. Article 211 of the CPC stipulates that persons bound to maintain professional secrecy must immediately hand in to the proceeding authority acts and documents unless “they declare that it is a secret related to their duty or profession. In the latter case, the necessary verifications are conducted and, when it results that the declaration is groundless, the proceeding authority orders the seizure”.

451. Article 114 (3) of the Law on State Police stipulates that: “public administration, physical and juridical persons, when asked by the Police, are obliged to present identification data and other information collected on a legal basis, except for the ones which distribution is forbidden by law.” The police uses this authority to access bank documents and other types of documentation during the course of a money laundering or terrorist financing investigation.

452. The ASP has also been obtaining financial information prior to an investigation being registered through the GDPML which request information from obliged entities although the legislative basis of this authority is limited as discussed in Recommendation 26.

453. The General Prosecutor’s Office has also, prior to the investigation being registered, issued written requests to financial institutions requesting to provide information on whether specific persons are customers. Non-compliance with the request is construed by the prosecutor as obstruction of justice under Article 301 of the Criminal Code. This practice does not appear to have been challenged, however the legal basis of this practice could be called into question. Although such requests can always be made and financial institutions might comply, it is not clear under the Albanian framework that financial institutions are obliged to comply and could be subject to criminal sanctions for obstruction if they did not.

454. Assets associated with criminal offences in the field of organized crime, illegal trafficking of drugs and human beings, participation in a terrorist group or money laundering are subject to sequestering under civil confiscation proceedings under the Organized Crime Law. Article 9 of this Law creates an obligation to hand over information and documents. With the authorization issued by the prosecutor or the Court, the Judicial Police Officers may impose the seizure of documents according to the rules foreseen in Articles 208 to 211 of the Penal Procedure Code.

455. Article 11 of the Organized Crime Law outlines the conditions under which assets can be sequestered “when there is a reasonable suspicion based on indicia that shows that the person may be included in criminal activity and has assets or income that do not respond obviously to the level of income profits or lawful activities declared”. This provision is frequently used by the ASP in ML cases to seize and ultimately confiscate assets (through Article 21 to 24 of Law) given the reverse onus imposed on the accused._It should be noted that the Organized Crime Law does not apply to corruption offenses.

Power to Take Witnesses’ Statement (c. 28.2):

456. The Prosecutor’s Office and the Judicial Police are authorized to take statements pursuant to Articles 312 and 297 of the CPC respectively. This ability to obtain information is governed by Articles 155-160 of the CPC which detail the circumstances under which individuals can testify. The information obtained can be used in investigations and prosecutions of ML, FT, and other underlying predicate offences or in related actions. The powers appear to be in line with the criteria.

Statistics (R.32):

457. The following provides a breakdown of GDPML disseminations to the ASP, ML cases investigated by the ASP in the last five years:

20062007200820092010
GDPML

Referrals to ASP
11546135137
ASP ML

Investigations

resulting from

GDPML

referrals
13173441

January – October, 10, 2010

January – October, 10, 2010

458. Both the number of GDPML referrals to the ASP and ASP ML investigations substantially increased since the implementation of the JIUs and the changes to the AML/CFT Law. The ratio of ASP investigations based on GDPML disseminations have been increasing. In 2010, of the 49 investigations, 41 were related to GDPML disseminations and all of these cases were registered by the Prosecutor’s Office.

459. The tables below detail the number of ML/FT offences identified, criminal offenses detected, number of perpetrators and arrests, in free state and who have left the scene from 2006 to 2010. These statistics demonstrate an increase in the number of offences detected but the ultimate difficulty to convert those into arrests.

Number of ML cases, perpetrators involved and arrested persons 2006 - 2010 (October)

Albanian State Police – Statistical Data on Criminal Offences of Money Laundering and Terrorist Financing

Statistical Data for 2006
Criminal

Offences
A. Criminal

B. Offences



C. identified
D. Criminal

E. Offences

F. Detected
G. Perpetrators

H. Total

number
I. Arre

sted
J. In

free

state
K.

left the

scene
Laundering of proceeds of crimeL. 1M. 1N. 1O. 0P. 1Q. 0
Terrorism fundingR. 0S. 0T. 0U. 0V. 0W. 0
SUMARYX. 1Y. 1Z. 1AA. 0BB. 1CC. 0
Statistical Data for 2007
Criminal

Offences
Criminal

Offences

identified
Criminal

Offences

Detected
Perpetrators

Total number
arrestedIn free

state
Left

the scene
Laundering of proceeds of crime335050
Terrorism funding000000
SUMARY335050
Statistical Data for 2008
Criminal

Offences
Criminal

Offences

identified
Criminal

Offences

Detected
Perpetrators

Total number
ArrestedIn free

state
Left

the scene
Laundering of proceeds of crime1717175102
Terrorism funding000000
SUMARY171717552
Statistical Data for 2009
Criminal

Offences
Criminal

Offences

identified
Criminal

Offences

Detected
Perpetrators

Total number
ArrestedIn free

state
Left

the scene
Laundering of proceeds of crime3433450450
Terrorist financing000000
SUMARY3433450450
Statistical Data for 2010 (January - October)
Criminal

Offences
Criminal

Offences

identified
Criminal

Offences

Detected
Perpetrators

Total number
ArrestedIn free

state
Left

the scene
Laundering of proceeds of crime4949900900
Terrorist financing000000
SUMARY4949900900

Adequacy of resources—LEA (R. 30)

460. The Prosecutor’s Office is a centralized structure provided by the Prosecutor General. The main departments related to prosecutions are: General Prosecution Section, Prosecution in the Serious Crimes Appeals Court, Prosecution in the Appeals Court and Prosecution in the Courts of First Instance. There are 313 prosecutors assigned to these sections. Specialized structures have also been established including a Prosecution for Serious Crimes Section (18 prosecutors), Prosecutions for the Appeal of Serious Crimes (three prosecutors) and 23 prosecutors in the Joint Investigation Unit.

461. Within the ASP, the Directorate against Financial Crimes which has primary responsibility for Money Laundering investigations has 146 employees, 18 of which are based in headquarters. The Sector Against Money Laundering has a staff of 21 officers of which four are located in ASP headquarters and the remaining 17 in the JIUs in Tirana and district police departments.

462. The Department against Financial Crime has an annual budget of EUR 2,104,688 divided amongst salaries and benefits (EUR 1,488,990), operating expenses (EUR 577,836) and capital expenditures (EUR 37,862). The ASP believes that with the new JIU structure that relies on resources from a number of agencies that the resource allocation is adequate. Based on the substantial increase of both investigations and registered cases by the Prosecutor’s Office, the assessment team concurs that the level of resources allocated to ML investigations is adequate.

463. Article 49 of the Law on State Police establishes the criteria to be admitted as a police officer within the State Police. Among other criteria candidates are required to be an Albanian citizen, in good health and physically fit, have no criminal convictions and have completed high school. An officer must qualify for a security certificate which is required to recognize, treat, keep, produce, and manage state secrets. Staff confidentiality is subject to verification procedures.

464. Prosecutors are nominated by the President of the Republic of Albania upon the proposal of the General Prosecutor. Conditions for their nomination are explicitly outlined in Law on the Organization and Functioning of the Prosecutor’s Office in the Republic of Albania. These conditions include: being an Albanian citizen, having a higher legal education, having completed the School of Magistrate, not having been convicted of a criminal offense; not having been removed for disciplinary violations, from the public administration with a period of three years from the date of application; and be of high moral and professional qualities. Public competitions are run for all vacancies regarding prosecutors’ positions.

465. Pursuant to Article 50 of the Law on Employees of the State Police are required to complete basic police training. A variety of training on investigative techniques and financial crime are available to officers. The twinning project developed in cooperation with the German Federal Criminal Office has trained 67 police officers in the prevention of money laundering, financial crime investigation and corruption. The State Police has also been the recipient of training from Belgium, the US and the Police Assistance Mission of the European Community to Albania (PAMECA). It is unclear whether a specific training program has been developed for the employees of the Directorate against Financial Crime.

466. Judges and prosecutors have received training through the Albanian School of Magistrates. Training is delivered on confiscation, asset recovery, organized and economic crime and terrorism as part of the School’s curriculum. Several training activities have been organized with international organization such as Police Assistance Mission of the European Union to Albania (PAMECA), Office of the Overseas Prosecutorial Development, Assistance and Training (OPDAT), EUROJUST, Organization for Security and Co-operation in Europe (OSCE), the United Nations Office on Drugs and Crime. Training topics included technicalities of financial investigations, seizure and confiscations of criminal assets, combating financing crime (money laundering and asset tracing), seizure of criminal assets, financial investigations of financing of terrorism and money laundering cases, administration of seized and confiscated assets and combating terrorism. It is unclear whether additional training in the area of ML and FT is required for prosecutors working in the area of financial crime.

Effectiveness:

467. The establishment of the JIUs has greatly increased the efficiency of ML investigations. Since their expansion to six regional centers in 2009 the number of investigations doubled from 2008 to 2009. The JIUs have clarified to some extent the roles and responsibility between the GDPML, the ASP and the Prosecutor’s Office although as noted under Recommendation 26 there are at times confusion with respect to the role of the GPO. Cooperation between the GDPML, the ASP and the Prosecutor’s Office also appear to be productive with consultations between agencies taking place at every stage of the investigation. The recent increase in resources allocated to the JIU would appear to be adequate.

468. The Department of Criminal Investigations of the ASP is structured with separate directorates having been established for fighting organized crime, serious crime and financial crime. The creation of a directorate focused on financial crime results ensures that ML investigations are not lost within the investigation of the predicate offense.

469. The ASP has used most of the investigative techniques and powers related to search and seizures that are at their disposal for the purposes on ML investigations. Investigators compel documents and conduct search of premises and have made use of surveillance methods. Use has been made of the powers to infiltrate criminal organizations for the purposes of ML investigations.

470. Drugs and human trafficking, armed robberies, tax evasion, smuggling, fraud, the use of forged documents, as well as corruption are the main predicate offences for money laundering in Albania. The enhanced collaboration between the GPDML, the ASP and the GPO has resulted in a significant increase in the number of cases being investigated by the ASP including the number of cases generated as result of GDPML disseminations. The ratio of cases registered by the GPO with respect to cases referred to the JIU is also on the increase. However, despite these increases in ML investigations they have translated in only a limited number of convictions and prosecutions which are not commensurate with the level of laundering activities in Albania.

471. Three cases related to FT were disclosed to the Serious Crimes Prosecutor’s Office and investigated with the three cases not proceeding due to an inability to substantiate that an offense was committed.

472. Despite increases in the number of investigations registered, challenges persist in establishing arrests and prosecutions. Concerns have been expressed about judges’ knowledge of ML cases and their inherent complexities. Anecdotal evidence and an assessment by the European Commission16 suggest that the corruption and lack of independence of judges hinders the ability to put forward successful prosecutions. Obstacles exist to the investigation of corruption cases in the judiciary due to the fact that judges enjoy full immunity which can only be lifted on a decision of the High Council of Justice (or of Parliament, for the Supreme Court justices). The concerns regarding the independence and transparency of the judiciary may be impacting the effective prosecution of proceeds of crime cases.

473. The GPO has an array of powers with respect to gather evidence once the investigation is registered. The new Organized Crime Law is used in matters covered by that law by the GPO to sequester assets based upon reasonable suspicion of criminality and there may be a shifting of the onus to the defendant to prove that assets were acquired legitimately. Given the significant potential that the provisions contained in the Organized Crime Law have to address criminal proceeds consideration should be given to extending these provisions to corruption offenses.

474. A variety of special techniques are available to the General Prosecutor, some requiring Court approval, following the registration of the case. Concerns have however been expressed with respect to the effectiveness of interception provisions where the defense lawyer is advised five days after the interception that the activity has occurred. Although exception exists when such a disclosure would compromise the investigation, this could constitute an additional burden for the judicial police to effectively conduct investigations.

475. The training has been made available to police officers and in the areas of financial crime, ML and TF. Collaboration with international organizations and other countries have been maximized with Albanian officials benefiting from the experience of foreign counterparts. However it is unclear if all officers and prosecutors working in the areas of financial crime have been able to benefit from the training. Core training on financial investigation available to the JIU and the Sector against Money Laundering.

476. Some deficiencies identified in the last mutual evaluation have remained largely unaddressed. There are no provisions on the ability to waive arrest warrants and controlled deliveries and no research on ML/TF trends have been undertaken. Statistics are now available on law enforcement’s activities with respect to ML investigations. However the information is not consistent between different agencies involved.

2.6.2. Recommendations and Comments

477. The authorities should:

  • Amend the relevant legislation to specifically allow law enforcement to have the ability to waive arrests warrants of suspected persons or the seizure of money for the purpose of identifying persons involved in such activities or for evidence gathering.
  • Conduct targeted training to the judiciary to increase their knowledge of ML, its inherent complexities and proceeds of crime in general.
  • Amend the provisions related to interception to remove the requirement to advise defense counsel that an interception activity has occurred five day following the activity.
  • Centralize the collection of ML, FT and proceeds of crime statistics to improve consistency of data collected.

478. The authorities should also consider:

  • Initiating a review of ML and TF methods, techniques and trends by law enforcement authorities. This information should be disseminated to authorities involved in fighting AML/CFT to inform risk assessment exercises.
  • Developing core training on financial and proceeds of crime investigations targeted specifically at the JIU and the Sector against Money Laundering in the ASP.
  • Making full use of simulation or infiltration techniques that are available in legislation for money laundering or terrorism financing cases.
  • Extending the application of the Organized Crime Law to corruption offenses.
  • Amending the provisions related to judicial immunity to facilitate the conduct of corruption investigations within the judiciary.
  • Establishing a national registry of bank accounts administered by the BoA, which, upon proper authority, can be accessed on request by LEAs to facilitate the investigation of ML/FT.

2.6.3. Compliance with Recommendations 27 & 28

RatingSummary of factors relevant to s.2.6 underlying overall rating
R.27PC
  • No specific provision for law enforcement to postpone/waive arrest warrants.Effectiveness:
  • Low number of prosecutions.
  • The requirement to advise defense counsel that an interception has taken place constitutes an additional burden which could hinder an investigation.
R.28C
R.30PC
  • Training of the judiciary on money laundering and financial crimes is insufficient.
  • Concerns have been expressed about the integrity of the judiciary.
R.32PC
  • Statistics on money laundering investigations, arrests, convictions, seizure and confiscations are not always consistent across agencies.

2.7. Cross-Border Declaration or Disclosure (SR.IX - rated PC in the 2006 MER)

2.7.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

479. The 2006 MER noted that sanctions were inadequate, that Customs placed too much focus on immediate seizure and confiscation and noted issues of effectiveness due to the lack of familiarity of Customs authorities with the ML/FT provisions and to the risk of corruption (noting that the situation was improving). The MER recommended to amend the Customs Code provisions on sanctions to ensure that sanctions were adequate in the case of false/inaccurate declaration; to review the policy to apply immediate seizure/confiscation in order to allow for the possibility of covert operations to discover organized crime networks; and to intensify training of Customs on AML/CFT and on the detections of serious crimes.

Legal Framework:

  • Customs Code (Law no. 8449, dated January 27,1999, as amended).
  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, herein after “AML/CFT Law”.
  • Council of Ministers Decision no.1077, dated October 27, 2009” On the adoption of a national strategic document ‘For the investigation of financial crime’, (Official Journal: Year 2009, No. 164, Page 7247; Date of publication: December 3, 2009).
  • Albania has developed and is implementing a strategic program for the prevention of illegal movement “Cash it” to limit liability for all institutions includes FIU-n, Customs, State Police, Border Police and the Bank of Albania.
  • Guidelines of the Ministry of Finance no. 15, dated February 16, 2009 “On Prevention of Money Laundering and Terrorism financing at the Customs System”“, (Official Journal: Year 2009, No. 14, Page 1005; Date of publication: February 20, 2009), hereinafter “MoF Guidelines”.

Mechanisms to Monitor Cross-border Physical Transportation of Currency (c. IX.1):

480. Albania has established a declaration system (2008) whereby, pursuant to Article 17 of the AML/CFT Law every person (Albanian or foreigner) that enters or leaves the territory of the Republic of Albania, is obliged to “declare cash amounts, negotiable instruments, precious metals or stones, valuables or antique objects, equal to or greater than lek 1,000,000 (appr. US$10,000), or the equivalent amount in foreign currency” as well as to “explain the purpose for carrying them and produce supporting documents”. The notion “negotiable instruments” is not defined, but it interesting to note that the Criminal Code (Article 187a, which establishes as a misdemeanor the “non declaration of money and of valuable objects”) has a more restrictive definition, as it refers to “any type of bank check”, which leaves out other financial instruments that may be issued in bearer form in Albania (certificate of deposits, shares, passbooks etc.).

481. The declaration requirements do not apply to the shipment of currency through containerized cargo or in the case of mailing of currency.

482. The information requested on the declaration form consists of the name, whether the declaring person is an individual or legal person, date of birth and residence, whether the declaration concerns an inbound or outbound transportation (and the indication of the port of entry), the reason why the currency is being brought in/out; the denomination of the currency, the name of the Customs official who receives the declaration and the date of the declaration.

483. Albania has 24 border points. The authorities informed the assessment team that the declaration forms are available in all the 24 border points. (Seven are sea points; one is airport; one is railway and the remaining land border points).

Request Information on Origin and Use of Currency (c. IX.2):

484. The Border and Migration Police (BMP) is the competent authority which is involved if a non-Customs related crime - such as the one envisaged by Article 287a CC, or in the case of a person suspected of ML/FT - is suspected and have the authority to request and obtain further information from the carrier with regard to the origin of the currency and its intended use. Authorities were not able to point out the specific legal provisions underpinning the legal authority of the BMP. Pursuant to the Strategy of the Integrated Border Management and related action plan, the principle “one stop, on control” is applied. In practice, since it is the Customs that check arriving/departing customers for compliance with Customs-related requirement, it is the Customs that are involved in checking the compliance with the declaration requirements and, in the context of the “Customs control” can also ask questions related to the compliance to the declaration requirement and, in case of false declaration/failure to declare can request and obtain further information from the carrier with regard to the origin of the currency and its intended use (the latter information is required by the declaration form). According to the Customs Code, the Customs control includes the “carrying out official inquiries and other similar acts, with a view to ensuring that customs rules and, where appropriate, other provisions applicable to goods subject to customs supervision are observed in the customs territory of the Republic of Albania”.

Restraint of Currency (c. IX.3):

485. In the case of a suspicion of ML/FT or when there is a false declaration/failure to disclose, the main way to stop or restrain the currency in order to ascertain whether evidence of ML/FT can be found is to call in the BMP (who are legally empowered to stop/restrain currency and, if needed, the person). The Customs official could also stop the person (and restrain/stop the currency) but, in this case, since there are no Judiciary Police officers among Customs officials employed in the border points (who would be legally entitled to stop/restrain), a Judicial Police Customs officer from the Customs HQ in Tirana must be called in.

Retention of Information of Currency and Identification Data by Authorities when appropriate (including in Supra-National Approach) (c. IX.4):

486. The amount of the currency and the identification data of the bearer is retained in all the three cases envisaged by criterion IX.4. Every declaration is registered by the Customs at each Border point and, every day/two day sent via email and in hard copy to Customs HQ (General Directorate of Customs-Unit for the Prevention of ML). The ML Prevention unit collects the information and enters it into a database. The data which are registered/kept are the ones contained in the declaration form (IX.4 (a). In the case of failure to report (as noted later on, the case of false declaration is not specifically contemplated by the Law) an official report must be made (IX.4 (b). In this case the information would be kept by the authority who was involved in the process (BMP or Customs, if a Customs Judicial Police Officer is involved from Tirana, in practice this is done mostly by the BMP). In the case in which only the BMP is involved it is not clear whether the information concerning the false declaration/failure to declare is made available to the local Customs point or to the Customs HQ (presumably this information, especially if the ascertaining of the violation was made by the BMP, is not shared with Customs HQ). The BMP should copy Customs in the reports of the ascertained violations concerning the non-compliance with the declaration reporting, but this does not always happen (Customs authorities indicated that they do not have statistics on the number of cases of non-declaration/amounts of the fine as these relate to the BMP).

487. The information concerning the declarations, but not the information concerning cases of false declaration/failure to disclose (which confirms that such information may not be made available to the Customs HQ) is sent periodically (every 3/4 weeks, until July 2010, on a weekly basis afterwards) to the General Directorate for the Prevention of ML (GDPML), in a CD-rom and in hard copy (in hard copy only until July 2010, in CD-rom afterwards). Pursuant to the AML/CFT Law Customs (Article 17) Customs are also required to report “immediately and no later than 72 hours to the GDPML every suspicion, information or data related to ML or FT for the activities under their jurisdictions” (IX.4.(c).

488. The Customs informed the mission that the ML Prevention Unit analyses the data received from the various Customs point to check for past records of declarations and detect cash couriers; if a commercial company is involved the ML Prevention unit also check, in the case in which the declaration of cross border transportation of cash is done by a commercial company if the company is involved in import/export activities (through access to a database named ASSICUDAWORLD in which all import/export-related information is stored), also for compliance with the requirement to make import/export related payments through banks. The Customs informed the mission that certain typologies of import/export transactions that are associated with the cross border transportation of cash are currently being subject to closer scrutiny (for example imports of cars which were paid more than their actual value). The ML prevention unit can also seek information from other units in the General Directorate of Customs (a. anti drug trafficking; b. stolen cars and antique objects and arts; and c. anti trafficking of weapons of mass destructions and radioactive substances). However, these more comprehensive checks are only restricted to companies; as far as individuals are concerned, the only possibility to conduct strategic analysis is limited to queries of the declaration database to check for past declaration records on the same person. Also, Customs do not have access to the TIMS database (where all individuals who enter/leave Albania are registered) and, as a result, cannot determine, for example, how frequently and from where/to an individual has left /entered the country (unless he/she has made a declaration). The ML Prevention Unit at Customs receives from the GDPML the lists of suspected terrorists, but it is not fully clear whether this list is also disseminated to the Customs points. After the onsite visit the authorities informed the mission that the lists are also disseminated to the Customs points. In any case it appears that the analysis done at the ML Prevention Unit is mainly related to ML and Customs-related offences.

489. In order to improve the overall performance and to ensure a unified implementation of rules regarding the declaration in the border crossing points a number of contact points was established and a uniform computer program for the registration of the declarations was completed in 15 border points.

NoBranch/Border pointDate of establishment
1Custom’s Branch RinasFebruary 17,2010
2Custom’s Branch DurresFebruary 18, 2010
3Custom’s Branch VloreMarch 4, 2010
4Custom’s Branch ShkoderApril 8, 2010
5Border point Hani HotitApril 7, 2010
6Border point MurriqanApril 8, 2010
7Custom’s Branch Qafe-ThaneApril 20, 2010
8Border point TushemishtApril 20, 2010
9Custom’s Branch KapshticeApril 21, 2010
10Custom’s Branch Tre UratMay 5, 2010
11Custom’s Branch KakavijeMay 6, 2010
12Custom’s Branch SarandeMay 7, 2010
13Custom’s Branch LezheMay 14, 2010
14Custom’s Branch MorineJune 16, 2010
15Custom’s Branch BlladeJune 17, 2010

However these systems are not interconnected, which means that a certain Customs point can only determine how often an individual has left/entered the country (assuming a declaration was made, since Customs do not have access to TIMS) if that individual has left/entered the country in that particular Customs point. Most importantly, the various Customs points do not have access to the database maintained at the ML Prevention Unit in the Customs HQ, hence they cannot see information that could help them establish whether a person is a cash courier.

Access to Information by FIU (including in Supra-National Approach) (c. IX.5):

490. As mentioned earlier, the Albanian system envisages two ways by which SRIX-related information is made available to the FIU: 1) pursuant to Article 17 of the AML/CFT Law the Customs authorities are required to 1) send a copy of the declaration form and the supporting document to a “responsible authority” (that is the General Directorate for the Prevention and Control of Money Laundering—GDPML); and 2) “report immediately and no later than 72 hours” to the GDPML “every suspicion, information or data related to money laundering or financing of terrorism for the activities under their jurisdiction”.

491. It is the ML Prevention unit in the Customs HQ that, as a result of the analysis of the data received from the various Customs point, reports suspicious activities (SAs) to the GDPCML, not the Customs point themselves. Although the GDPML is notified of SAs, it does not receive, nor has access to, information concerning non-declaration/inaccurate/false declarations instances, unless these instances have triggered a suspicious transaction report. The GDPML states that the quality of the information it receives from Customs is good.

492. The GDPML’s report for 2008 states that the total number of declarations (outgoing only) was 462, out of which 455 in Rinas Airport and only three in Vlora and four in Qafe Customs. The total amount declared for 2008 was EUR 5,817,100 and US$5,855,950. The report states that the number of declaration has increased from 336 (in 2007) to 462 2008), 551 (2009) and 520 (2010).

493. The statistics below note the number of people entering and leaving Albania in the period 2008/2010.

YearEnteringTOTALExitingTOTAL
Alb. CitizensFor. CitizensAlb. CitizensFor. Citizens
20083,097,1781,419,1914,516,3693,176,4801,273,5554,450,035
20093,280,1601,855,6385,135,7983,404,3601,646,5345,050,894
20103,160,1422,417,3375,577,4793,443,5102,362,2675,805,777
15,229,64615,306,706

494. The statistics below show the number of STRs reported by Customs in the period 2005-2010.

Reporting EntitiesYear 2006Year 2007Year 2008Year 2009Year 2010
STRSTRSTRSTRSTR
Customs0386415

495. The statistics below show the number of declaration/total amounts declared during the period 2006-2009

Year 2006Year 2007Year 2008Year 2009Year 2010
Number of declarations33336462551520
Amount in EUR1,804,7353,629,0405,817,1007,491,7357,089,427
Amount in USD1,168,4313,989,6605,855,9505,985,5704,689,050
Amount in GBP7,00011,000125,57032,500

Domestic Cooperation between Customs, Immigration, and Related Authorities (c. IX.6):

496. The Customs authorities cooperate with the General Directorate of State Police (Border and Migration), the GDPML, the General Directorate for Taxes and the General Directorate of Highway Transportation with whom they have Memorandum of Understandings. They also cooperate with the General Prosecutor’s Office and have a liaison officer from the General Directorate of Customs in the Joint Investigations Unit (JIU). The General Directorate of Customs is one of the agencies involved in the “National Strategy for the Investigation of Financial Crimes”. Customs are also involved in the Strategy for Integrated Border Management. Authorities pointed to a “Cash Strategy” which addresses the risk associated to the use of cash, including cross border transportation of cash. Domestic cooperation between the Customs and the GDPML is deemed appropriate.

International Cooperation between Competent Authorities Relating to Cross-border Physical Transportation of Currency (including in Supra-National Approach) (c. IX.7):

497. Albania has signed Memoranda of Understanding with Customs authorities of several countries17. These agreements are in the area of Customs legislation and can be used also for cooperation and information exchange on cross border transportation of currency.

Sanctions for Making False Declarations/Disclosures (applying c. 17.1-17.4 in R.17, c. IX.8):

498. Failure to declare “amounts of money, any type of bank check, metals or precious stones, as well as of other valuable objects, beyond the value provided by law” is a misdemeanor (criminal contravention), and it is punished by fine or imprisonment up to two years (Article 179a). The statutory fines for misdemeanours range between lek 50,000 and 5,000,000 (between US$50 and 50,000). The minimum fine is too low and it is not proportionate or dissuasive. The criminal provision does not cover the case of false declaration, nor does the AML/CFT law (which, under Article 27, lists the sanctions for non compliance with the obligations stipulated by the AML/CFT law: Article 17, which sets forth the declaration requirements is not mentioned by Article 27). Moreover, as noted earlier, the criminal sanction does not extend to “negotiable instruments” (which are not legally defined), as only “any type of bank check” is mentioned.

499. The statistics below indicate amounts that were seized in cases of non-declaration and the amounts of currency which was subject to sequestration. Authorities could not confirm whether the currency was later subject to confiscation. In these cases charges were brought against Article 179a but authorities could not confirm the punishment, if any, which was applied in these cases. Hence it is not possible to determine whether the sanctions are effective.

YearNon-

declarations

cases
No. of

cases
PersonsArrestedFreeIn searchAmounts

seized
20083342207.000.000 lek
200944514040.001.088 lek
2010111-1031.800 EUR

Sanctions for Cross-border Physical Transportation of Currency for Purposes of ML or TF (applying c. 17.1-17.4 in R.17, c. IX.9):

500. If the cross-border transportation of the currency consists of actions that constitute criminal conduct under the CC provisions on ML or FT, the authorities may institute criminal proceedings and the sanctions are those that apply in the case of ML and/or FT. Those sanctions are addressed under Criterion 2.5 in R. 1 and Criterion II.4 in the section on SR II.

Confiscation of Currency Related to ML/TF (applying c. 3.1-3.6 in R.3, c. IX.10):

501. If the cross-border transportation of the currency consists of actions that indicate that ML or FT has occurred, the GPO is notified and may undertake a prosecution for such conduct. In such a case, the powers to freeze assets and to confiscate the currency are those that are available under the CC and CPC provisions in criminal cases. These are addressed in the discussion of R. 3 (criteria 3.1 -3.6).

Confiscation of Currency Pursuant to UN SCRs (applying c. III.1-III.10 in SR III, c. IX. 11):

502. If assets carried by persons who are physically moving currency or bearer negotiable instruments across the border are those of persons or entities designated by the Council of Ministers pursuant to the Suppression of Terrorist Financing Law, the assets are subject to freezing under the laws and procedures set forth in the discussion in this report in relation to SR III. Given the shortcoming noted with regard to the UN1373 designations it is not clear how a 1373-designated person would be known to the BMP.

Notification of Foreign Agency of Unusual Movement of Precious Metal and Stones (c. IX.12):

503. If any unusual cross-border movement of gold, precious metals or stones is detected the Customs authorities would be notified by the BMP. Authorities have not indicated whether this has ever occurred in practice and what would be the additional measures that would be taken in such cases.

Safeguards for Proper Use of Information (including in Supra-National Approach) (c. IX.13):

504. Authorities indicated that the measures in place to ensure proper use of the information gathered and processed by Customs consist of restricting access to files to authorized users, verifying the identity of a prospective user by requiring the use of a password; locking the rooms where the database is located; restricting access to those allowed to make changes to the computer system and checking that radrware and software are used according to security policies.

Training, Data Collection, Enforcement and Targeting Programs (Including in Supra-National Approach) (c. IX.14):

505. The head of Customs based on the Action Plan of the Customs Administration, approves an Annual Training Plan. The ML prevention unit of the GCD stated that the unit was part of the trainings organized between the GDPML and the Republic of Germany in the context of an EU-funded “twinning project” concerning the investigation of financial crime, including ML. Based upon this project, 14 trainings and workshops have been organized. Overall, from January 2009 the staff of the ML prevention unit of the GCD has taken part in more than 30 training events. In addition, based on Law no. 9749 date. 04.06.2007 of the State Police Art. 46, and in a memorandum of collaboration between GCD and State Police joint trainings with experts from the customs and the police are being organized at different border crossing points on topics tailor made to address the specific issues these Border Crossing Points (BCP) encounter in their daily work. Authorities report that a total of 34 officials were trained in the period 2006-2010 on AML/CFT 9out of a total of appr. 3,158 customs officials who undertook Customs-related training in the same period). Customs have developed a data collection program and, to a limited extent, they apply targeting techniques for cash couriers.

506. The authorities also indicated that on the basis of memorandum of cooperation signed between the Border Police Department and General Customs Directorate with regard to joint training among the institutions, the ML prevention Unit has carried out training activities related to its area of expertise in the following border points: Rinas, Durres and Kapshtice.

507. The Head of the Sector for the Prevention of Money Laundering in the Custom’s Directorate was part of the joint team Customs - Police in the Border Crossing Point “Qafe Thane” based on the program of the Exchange of best practices of Shengen area.

508. Authorities stated, and the mission concured, that more dedicated training is needed in the area of AML/CFT, particularly with regard to the detection of cash couriers.

Supra-National Approach: Timely Access to Information (c. IX.15):

509. N/A

Additional Element—Implementation of SR.IX Best Practices (c. IX.16):

510. Albania has implemented, to an extent, the “Best Practices for detecting and preventing the illicit cross-border transportation of cash and bearer negotiable instruments”. The mission saw posters in the Rinas airport drawing the attention of incoming passengers to the obligation to declare currency. However, given the low number of declarations and the relatively low figures for the amount of currency declared yearly, there is a need to promote an enhanced campaign to raise awareness on the declaration requirements. The mission received a declaration form (in Albanian and in English). Customs do some risk assessment and check incoming/outgoing passengers to certain countries (Turkey, Greece), but these seem to be driven more by the import/export related payments and obligation rather than specifically for ML or FT. The data which are gathered are used proactively, but the lack of interconnection between the databases among the various Border Points and between the border points and the ML Prevention unit, as well as the lack of resources (such as cash sniffing dogs) hamper the detection of cash couriers. The sharing of information between the Customs authorities and the GDPML is good and it is done in electronic forms; however the sharing of information between BMP and Customs should be improved.

Additional Element—Computerization of Database and Accessible to Competent Authorities (c. IX.17):

511. The establishment of computerized databases at each of the Customs border point is a significant development. The ML Prevention Unit in the GDC has also a database, which is populated with the data received from the different Border points regarding the declaration of cash. However the databases at the Customs Border Points are not interconnected between each other and with the one at the ML prevention unit. The fact that Customs do not systematically receive data in cases in which non-compliance with the declaration requirements is ascertained by the BMP also prevent the use of significant data for the detection/repression of cash couriers.

Statistics (R.32):

512. Please refer to the tables in the paragraphs above for the statistics that were provided to the assessment team. Authorities were not able to provide statistics broken down per border point. Statistics on the amounts of the penalties applied (fine/imprisonment) in the case of non compliance with the declaration requirements have also not been provided.

Adequacy of Resources—Customs (R.30)

513. Authorities did not provide the total number of officials employed by the Customs authorities and BMP, so the assessment team is not able to conclude whether these institutions are adequately staffed. The Unit for the Prevention of ML is understaffed (3 persons only) to properly undertake its functions. Although the BMP is readily available at Border Points to apply coercive measures, the fact that there are no Customs Judicial police officers at the border point may be a shortcoming, especially considering that the information concerning the adoption of coercive measures by the BMP (including sanctions) is not systematically made available to Customs. There is a need of more resources to help authorities detect cash couriers (such as dogs trained to sniff cash).

514. The 2006 assessment report noted the risk of corruption, which had also been acknowledged by the authorities. In addition to the measures noted in the 2006 report, the authorities stated that the decrease of excise and other customs-related taxes and the informatization of the Customs procedures (for clearing trucks and cargos) have also contributed to reduce the risk of corruption for Customs-related operation. However, as anecdotal evidence suggests that the risk of corruption remains high in Albania, authorities should remain vigilant in order to minimize the risk of criminals/financiers of terrorism using bribes to facilitate the smuggling of cash into/out of Albania.

Effectiveness:

515. There has been an improvement in the effectiveness of the implementation of the cross-border currency transportation and FATF Recommendations-related requirements since the 2006 report. The number of declaration has increased steadily from 2006; the establishment of computerized systems at each Border point, the informatization of the data concerning the declaration, and the availability of this data to the GPPML; the analytical work done by the ML Prevention unit; all these are encouraging signs.

516. Howeverthe number of declarations is still significantly small. It is also interesting that the majority of declarations concern departing passengers. The cases of non declarations that were detected are also mostly related to departing passengers (the average range of declared money is between EUR 15,000-20,000) and, although in some instances, the amounts discovered were significant (Customs pointed to two cases in which EUR 70,000 and EUR 200,000 were detected), many of these cases relate to money that is being brought abroad for purchasing goods. The fact however remains that, although there is a significant amount of remittances from abroad, the majority of which is brought in cash (including by organized networks that use buses for transporting passengers to provide also transportation for cash, as the mission was informed) the level of incoming declarations and the number of detected cases of non declaration are significantly small. This is particularly relevant for Border points other than Rinas airport, where the number of declarations is almost close to none. Considering the widespread use of passenger buses to transport also cash from Albanians who are resident abroad and, more in general, the figures on incoming remittances, authorities should significantly enhance the implementation of the declaration requirement and the capacity to detect smuggling of cash especially at Border points other than Rinas airport.

517. The fact that the computerized databases at the Customs points are not connected to each other nor are they connected to the database maintained by the ML Prevention Unit also hampers the effectiveness of the system, in that it does not allow for the possibility to search for past records that could confirm that a person is a cash courier. This shortcoming should be remedied by creating a secure network in which all data maintained by the various Border Points and the ML Prevention Unit can be accessed. The analytical work of the ML prevention unit for the detection of potential cash couriers for ML/FT could also benefit from wider access to data: except the data contained in the declaration and the data accessible for import/export undertaken by commercial entities the ML prevention unit does not have access to data concerning individuals (such as the data contained in TIMS) which could also strengthen the analytical work. Authorities should consider extending access to TIMS also to Customs officers operating at the Border point. Lists of terrorists (including intelligence on suspected terrorists) which it is assumed are available for the BMP should be systematically made available also to Customs at the Border Points (to help detecting cash couriers who could be terrorist financiers or related to terrorism). Considering the risk of FT, as discussed under SRII, this is a shortcoming that authorities should address as a matter of priority.

518. The analytical work could be more streamlined and focus more on pattern/trends/risk of Ml/FT associated to cross-border transportation of cash, and the result of this work (including the identification of routes and of the type of passengers that are more at risk, as well as typologies) could be more proactively studied and made available at the Border points. Customs have identified categories of passengers/routes/destination that could be more at risk, and check passengers arriving from/departing to these destinations randomly; however, it appears that the focus is more on checking compliance with import/export related requirements, rather than a more systematic approach that would also specifically take into account ML/FT. This is also particularly relevant for FT, given the risk of FT evidenced under SRII.

519. While domestic cooperation is good and the data provided to the GDPML is provided in an effective manner; the division of responsibility between Customs and BMP should be clarified. The mission understands that the BMP is readily available at each Border points to take coercive measures when these are necessary, including fines and seizures for non-declaration of currency. However the data on these measures do not appear to be systematically shared with Customs and, ultimately, with the GDPML, which has no access to such data. This is also a significant shortcoming that should be remedied.

2.7.2. Recommendations and Comments

520. Authorities should:

  • Define the notion of “negotiable instruments”, so that it is fully consistent with the FATF definition of “bearer negotiable instruments”, and harmonize Article 187a of the Criminal Code so that a proper reference to bearer negotiable instruments is included.
  • Extend the declaration requirements also to the shipment of currency through containerized cargo or in the case of mailing of currency.
  • Improve Customs officers’ access to information by:
    • Providing Customs access to TIMS;
    • Requiring the BMP to provide Customs all information related to the declaration requirements (such as in the case of ascertained violations concerning the non-compliance with the declaration reporting false declarations/failure to declare);
    • Making sure that all Customs points receive the lists of terrorists;
    • Interconnecting the databases at the Customs point and the database at the Customs HQ Unit for the Prevention of ML, so that they can be mutually queried.
  • Provide the GDPML the data concerning the non-compliance with the declaration reporting false declarations/failure to declare.
  • Amend the Criminal Code or the AML/CFT law to include sanctions for the case of false/inaccurate declaration.
  • Increase the minimum statutory fine for failure to declare.
  • Develop analysis techniques of the data received from the declaration-related requirement with the view of creating intelligence that can be used for the detection of cash couriers.
  • Develop more comprehensive programs to target cash couriers.
  • Boost the implementation of the declaration requirements and increase monitoring especially at Border points other than Rinas airport.
  • Extend the uniform computer program for the registration of the declarations of currency to all border points.
  • Require that cash deposits that are purported to be remittances from abroad are accompanied by the Customs declaration, when they exceed the threshold.
  • Provide more training in the area of AML/CFT, particularly with regard to the detection of cash couriers.
  • Increase the staff of the Unit for the Prevention of ML.

521. Authorities should consider:

  • Clarify the division of responsibilities between Customs and BMP for checking compliance with the implementation of the declaration-related requirements.
  • Have Customs Judicial Officers at Customs point that may present a higher risk of cash smuggling.

2.7.3. Compliance with Special Recommendation IX

RatingSummary of factors relevant to s.2.7 underlying overall rating
SR.IXPC
  • Definition of “bearer negotiable instruments” not in line with the FATF standard.
  • No requirements in the case of the shipment of currency through containerized cargo or in the case of mailing of currency.
  • No sanctions for the case of false/inaccurate declaration.
  • Minimum statutory fine is too low.
  • Issues of effectiveness (number of declarations very low, access to data not satisfactory, analysis of data could be improved; assessors cannot determine whether the sanctions are effective).

3. PREVENTIVE MEASURES—FINANCIAL INSTITUTIONS

Customer Due Diligence and Record Keeping

3.1. Risk of Money Laundering or Terrorist Financing

522. The Albanian authorities do not operate a risk-based approach to the scope of the key AML/CFT preventive measures and the requirements in the various legislative provisions apply equally to all financial institutions (FIs) within the scope of Law No. 9917 dated 19 May 2008 (the AML/CFT Law).

523. Certain risk-based elements are included in the required CDD measures in relation to ongoing monitoring (on the basis of risk), and the requirement to conduct enhanced due diligence for certain categories of customer.

524. The Albanian financial system is dominated by banks, but there is also a sizeable bureau de change sector, and several savings/credit associations. Money remittance is carried out under the auspices of two main remittance companies which have a number of agencies. Given Albania’s largely cash-based economy and its geographical location, all of these sectors are potentially vulnerable to risks associated with money laundering. The banking and remittance sectors are arguably more vulnerable than the other sectors to the risks of terrorist financing. Money changing activity has, historically, also taken place via unlicensed money changers. This trend is diminishing. Albania’s aim to implement an AML/CFT strategy is to be encouraged, as a greater knowledge of the risks in these sectors will enable it to target its resources better.

Legal provisions – Law, Regulations and Other Enforceable Means

525. The AML/CFT Law came into effect on September 10, 2008, and sought to address the main deficiencies identified in the 3rd Round Mutual Evaluation Report. This repealed the Law “On the Prevention of Money Laundering 2000 (amended in 2003) which was in existence at the time of the Second and Third Round mutual evaluations.

526. For the purposes of the assessment process, the AML/CFT law can be regarded as law. The AML/CFT Law was issued by the Assembly of the Republic of Albania and approved by the President. It imposes mandatory requirements, and contains sanctions for non-compliance.

527. Instruction No. 12 dated 12 April 2005 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917” applies to the FIs covered by the AML/CFT Law. This re-states some of the preventive measures contained in the AML/CFT Law, with some additional information on the timing of submission of STRs, and some of the acceptable forms of customer identification. The Instruction was issued by the Ministry of Finance pursuant to Article 102 para 4 of the Constitution and Article 12 para 3 of the AML/CFT Law. Sanctions for noncompliance can be imposed by the FIU under the main AML/CFT Law. For the purposes of the assessment, it can be regarded as regulation, as it is issued by the Council of Ministers under powers conferred by Parliament (under the AML/CFT Law), contains mandatory language, and has sanctions for non-compliance. Bank of Albania Supervisory Council Decision No. 44 dated 10 June 2009 contains additional provisions applicable to those financial institutions regulated by the BoA. It re-states some of the provisions of the AML/CFT Law, but has more guidance on factors to be considered when determining if a business relationship or transaction is unusual or suspicious.

528. It is issued, inter alia, in accordance with Article 12 para a of Law No. 8269, dated December 23, 1997 “On the Bank of Albania”. This provision obliges the BoA “to issue such rules and regulations as necessary to ensure the soundness of the banking system in accordance with and to implement the law”. However, Law 8269 does not refer to AML/CFT matters. In addition, the Decision is issued in accordance with Article 9 of Law 9662 dated December 18, 2006 “On Banks in the Republic of Albania”, which obliges the BoA to “implement the requirements emanating from” the AML/CFT Law. Article 10 paras 4 and 5 of Decision No. 44 requires the BoA to provide evidence of infringements of the Decisions to the FIU and to take “supervisory measures against the subjects of this Regulation if concluding these subjects do not implement the applicable legal and regulatory framework on the prevention of money laundering and terrorist financing.” For the purposes of this evaluation, Decision 44 is treated as other enforceable means, as it sets out enforceable requirements with sanctions for non-compliance and is issued by a competent authority.

529. In the following sections reference is made to the primary legislation (the AML/CFT Law). Instruction No. 12 (which is treated as “regulation”) is mentioned when its provisions satisfy the asterisked or non-asterisked criteria not dealt with in the AML/CFT Law. Decision 44 is mentioned when its provisions meet the non-asterisked criteria. Where Decision 44 and Instruction No. 12 merely duplicate the AML/CFT Law, reference is only made to the primary legislation.

Scope

530. The main categories of financial institution as defined in the FATF Glossary are covered in the AML Law (see section 1.3 for more information). The main categories of FI operating in Albania are:

Type of financial

activity

(See glossary of the

40

Recommendations)
Type of financial

institution that

performs this

activity
AML/CFT

regulator &

supervisor

In addition to the

FIU
AML/CFT

Law Article

preventive

measures

applicable for scope/supervision
Additional

AML

preventive

measures
1. Acceptance of deposits and other repayable funds from the public (including private banking)1. Banks18

[2. Saving and credit companies and their unions]
1. Bank of Albania

(BoA)
1. 3(a)/24(a)

2. 3(d)/24(a)
1. BoA Dec 44

2. BoA Dec 44
2. Lending (including consumer credit; mortgage credit; factoring, with or without recourse; and finance of commercial transactions (including forfeiting))1. Banks

2. Non-bank financial institutions19
1. BoA

2. BoA
1. 3(a)/24(a)

2. 3(b)/24(a)
1. BoA Dec 44

2. BoA

Dec 44
3. Financial leasing (other than financial leasing arrangements in relation to consumer products)1. Banks

2. Non-bank financial institutions (Leasing companies)
1. BoA

2. BoA
1. 3(a)/24(a)

2. 3(b)/24(a)
1. BoA

Dec 44

2. BoA Dec 44
4. The transfer of money or value (including financial activity in both the formal or informal sector

(e.g. alternative remittance activity), but not including any natural or legal person that provides financial institutions solely with message or other support systems for transmitting funds)
1. Banks

2. Non-bank financial institutions (Money remitters)

3. Postal services that perform payment services
1. BoA

2. BoA

3. BoA
1. 3(a)/24(a)

2. 3(b)/24(a)

3. 3(e)/24(a)
1. BoA

Dec 44

2. BoA Dec 44

3. BoA Dec 44
5. Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller’s cheques, money orders and bankers’ drafts, electronic money)1. Banks [2. Any other physical/legal entity that issues/manages payments]201. BoA

[2. Financial

Supervisory

Authority (FSA)]
1. 3(a)/24(a)

[2. 3(f)/24(b)]
1. BoA

Dec 44
6. Financial guarantees and commitments1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
1. 3(a)/24(a)

2. 3(b)/24(b)
1. BoA

Dec 44

2. BoA

Dec 44
7. Trading in:

(a) money market instruments (cheques, bills, CDs, derivatives etc.);



(b) foreign exchange;



(c) exchange, interest rate and index instruments;



(d) transferable securities;



(e) commodity futures trading
1. Banks

2. (b) Foreign Exchange Offices

3. Stock

exchange/broker/agents
1. BoA

2. BoA

3. FSA
1. 3(a)/24(a)

2. 3(b)/24(a)

3. 3(g)/24(b)
1. BoA

Dec 44

2. BoA Dec 44
8. Participation in securities issues and the provision of financial services related to such issues1. Banks

2. Stock

exchange/brokers/dealers
1. BoA

2. FSA
1. 3(a)/24(a)

2. 3(g)/24(b)
1. BoA

Dec 44
9. Individual and collective portfolio management1. Banks

2. Stock

exchange/brokers/dealers
1. BoA

2. FSA
1. 3(a)

2. 3(b)
1. BoA

Dec 44
10. Safekeeping and administration of cash or liquid securities on behalf of other persons1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
1. 3(a)

2. 3(b)
1. BoA

Dec 44

2. BoA

Dec 44
11. Otherwise investing, administering or managing funds or money on behalf of other persons1. Banks1. BoA1. 3(a)1. BoA

Dec 44
12. Underwriting and placement of life insurance and other investment related insurance (including insurance undertakings and to insurance intermediaries (agents and brokers))1. Life insurance companies/agents/intermediaries/pension funds1. FSA1. 3(h)/24(b)
13. Money and currency changing1. Banks

2. Foreign exchange offices
1. BoA

2. BoA
1. 3(a)/24(a)

2. 24(c)
1. BoA

Dec 44

2. BoA

Dec 44

3.2. Customer due diligence, including enhanced or reduced measures (R.5 to 8) Customer Due Diligence (R 5 – rated NC in the 2006 MER)

3.2.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

531. Albania was rated as non-compliant (NC) for Recommendation 5 in the 3rd Round Mutual Evaluation Report. This was largely on the basis that key provisions were not set out in law or regulation, but there were also gaps in provisions assessed to be other enforceable means. In particular, there were no provisions dealing with identification in the all the required cases, beneficial ownership and ongoing due diligence.

532. Since then Albania has passed a new AML/CFT Law which aims to address the gaps in the legislative measures in law. Further amplification of these requirements is given in Instruction 12 (treated as “regulation”) and BoA Decision 44 (treated as “other enforceable mean”).

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Instruction no. 12 dated April 5, 2009 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917”, hereinafter “Instruction 12”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Prohibition of Anonymous Accounts (c. 5.1):

533. Opening of an anonymous account is criminalized by Article 287a of the Criminal Code of the Republic of Albania (Law No. 7895, dated 27 January 1995, as amended on December 1, 2004). Violation of this provision of the law is punishable by imprisonment of up to three years and with a fine from lek 200,000 up to 2,000,000 21. This does not appear to have retrospective effect, and thus does not cover anonymous accounts in existence at the time it came into force (December 1, 2004).

534. Article 11 para 2 of the AML/CFT Law contains a prohibition on opening or maintaining business relations with anonymous clients or clients using fake names. In addition, FIs are not permitted to open or maintain numbered accounts. Sanctions are available in Article 27 para 5 for breach of this requirement, which include fines for individuals of lek 300,000 up to lek 1,500,000, and for legal entities, fines from lek 1,000,000 up to 3,000,000. In practice, there appear to be no existing anonymous accounts.

535. There are legal provisions concerning passbooks, for example in Articles 1025 and 1026 of the Civil Code. According to these legal provisions passbooks can also be issued in bearer form.

536. The use of checks with multiple third party endorsements is also recognized in Decree no. 3702, dated July 8, 1963 “On Checks”, and the authorities confirmed that they could, in theory, be used.

537. Certificates of Deposit in bearer form are also permitted under BoA Guideline no. 79, dated October 3, 2001.

538. Although practically the FIs spoken to stated that they do not offer passbooks or certificates of deposit in bearer form the legal availability of such instruments could pose a risk of ML/FT. The transferability and the negotiability of these instruments render them de facto legal tender, making it difficult for identification of the true beneficial owner (especially in the case in which these instruments are transferred several times before encashment) and, therefore, more susceptible and higher risk of being used for ML and FT. Neither require the existence of an account. Passbooks allow similar operations to those in savings accounts, including deposits and withdrawals, which must be reflected in the passbooks. It is not usually possible to make wire transfers or have a checkbook issued against the account, and thus differ from normal “current accounts”. Certificates of deposit do not necessarily presuppose the existence of accounts. It is usually the bank that decides whether to issue certificates of deposit to customers who are not account holders of the bank. As such, the anonymity and transferability regime would pose a significant challenge for financial institutions to conduct ongoing due diligence throughout the life of the business relationship with the “customer”. These provisions do not appear to be directly affected, in practice, by the provisions of the Criminal Code or the AML/CFT Law.

539. Implementation: Although bearer instruments are not prohibited in Albania, none of the FIs spoken to by the assessment team was aware of their use, and none were offering them. The fact remains that they could still be in use, and thus the authorities should carefully consider how to reduce the risk of ML/FT associated with these instruments. Authorities should prohibit the use of passbooks and certificates of deposit in bearer form, and prohibit the multiple endorsements of checks over certain limits, if necessary by making the provisions of the Criminal Code and AML/CFT Law directly applicable to circumstances where bearer instruments are able to be issued.

When is CDD Required (c. 5.2):

540. Article 4 of the AML/CFT Law requires FIs to “identify their clients and verify their identities by means of identification documents” in the following circumstances:

  • a) Before establishing a business relationship;
  • b) For direct transfers inside or outside the country;
  • c) For transactions of not less than lek 1,500,000 (approximately US$15,000), including linked transactions22;
  • d) When there are doubts about the identification data previously collected;
  • e) In all cases where there is “reasonable doubt for money laundering or terrorist financing”.
    • Direct transfers include wire transfers, and there is no threshold.
    • These provisions only apply to identification and verification of identity, whereas criterion 5.2 applies to the wider concept of customer due diligence. This is a gap in the legislation.
    • The term “reasonable doubt” is not defined in the AML/CFT Law or secondary legislation, and discussions with the Albanian authorities suggest that this is a higher standard of proof than normally required for submission of a suspicious activity report. This section of the AML/CFT Law is, therefore, not in compliance with the standard.

541. Implementation: The FIs spoken to by the assessment team confirmed that they were following most of the legal requirements for identifying customers. However, there was inconsistent interpretation of the concept of “reasonable doubt” of money laundering or terrorist financing, with some thinking that it applied when they had grounds to submit a suspicious activity report. This is not the understanding of the FIU, and should be clarified.

Identification measures and verification sources (c. 5.3):

542. Article 5 of the AML/CFT Law requires obliged entities to “register and keep” information relating to an individual or legal entity’s 23 identity including name, address, date of birth, type and number of identification document for natural persons, and name, number and date of registration for legal entities. The authorities indicated that legal entities included both legal persons and legal arrangements, and this interpretation was confirmed by the financial institutions met.

543. In practice, the assessment team did not meet with any FIs that had trust clients. It appears that their use and operation in Albania is rare.

544. Article 5 provides some detail of the measures to be used for “confirmation and identification” of clients. These are:

“a) In the case of individuals: name, father’s name, last name, date of birth, place of birth, place of permanent residence and of temporary residence, type and number of identification document, as well as the issuing authority and all changes made at the moment of execution of the financial transaction;

b) In the case of individuals, which carry out for-profit activity: name, last name, number and date of registration with the National Registration Center, documents certifying the scope of activity, Taxpayer Identification Number (TIN), address and all changes made in the moment of execution of the financial transaction;

c) In the case of private legal entities, which carry out for-profit activity: name, number and date of registration with the National Registration Center, documents certifying the object of activity, Number of Identification as Taxable Person (NIPT), address and all changes made in the moment of execution of the financial transaction;

d) In the case of private legal entities, which do not carry out for-profit activity: name, number and date of court decision related to registration as legal person, statute and the act of foundation, number and date of the issuance of the license by tax authorities, permanent location, and the type of activity;

e) In the case of legal representatives of a client: name, last name, date of birth, place of birth, permanent and temporary residence, type and number of identification document, as well as the issuing authority and copy of the affidavit.”

545. Instruction 12 Article 4 provides examples of the types of information that meet the requirement. These are:

  • - Identity Card;
  • - Passport;
  • - Picture Certificate;
  • - Driver’s license.

546. There is a further provision for natural persons for the verification of address:

  • - Payment booklet for water, electricity and water;
  • - Electricity, water and telephone bill;
  • - Lease contract of the apartment;
  • - Apartment purchase contract.

547. Article 4 also contains examples of documentation for legal entities:

  • - An extract issued by the National Registration Center;
  • - Licenses relevant to the exercising of the activity;
  • - NIPT (Tax Identification Number);
  • - The Statute, articles of incorporation, decisions of the shareholder’s assembly (or the sole partner) with all the amendments.
  • - Court’s decision for the registration as a natural or legal person.

548. These appear to be satisfactory requirements for the basic identification and verification of domestic natural and legal persons, but there is no additional guidance for steps to be taken for foreign clients, who might not have all of the above documentation available. In addition, although the identification and verification requirement extends to legal arrangements, there are no specific requirements as to what might be acceptable documentation. Discussions with the authorities and institutions confirmed the view that the reliability of identity documents in Albania had improved significantly in recent years, with more robust systems for the issue of passports and identity cards.

549. Implementation: FIs appear to be following the legal requirements as far as documentation for individuals is concerned. Some are applying additional measures as a result of group policies.

Identification of Legal Persons or Other Arrangements (c. 5.4):

550. Article 5 para 1 let. E) of the AML/CFT Law requires identification of “legal representatives of a client”, which refers to the need to obtain a “copy of the affidavit”. This does not strictly meet the FATF requirement to verify that a person acting on behalf of another is so authorized (criterion 5.4 (a)). Article 9 paragraph 7 does, however, require enhanced due diligence (“EDD”) to be applied to transactions carried out by clients in the name of third parties. Given the wide-ranging definition of “enhanced due diligence” (“EDD”) (see analysis below), this goes some way to meeting the criterion. However, given the lack of guidance on the steps to be taken in circumstances where EDD is required, a specific requirement in the Law would give clarification.

551. For NPOs, Article 5 para 1 let. D) requires details of registration, tax license, address and details of the type of activity undertaken.

552. Although Albania does not formally recognize the formation of trusts, and is not a signatory to the Hague Convention on The Law Applicable to Trusts, it is technically possible for trusts to operate in Albania. Further provisions on how to deal with these entities is to be encouraged.

553. Although Article 5 para 1 of the AML/CFT Law requires information about the legal status of the customer to be obtained, it does not include a requirement to obtain details of directors and provisions regulating the power to bind the legal person (criterion 5.4 (b)). The information that is required under Article 5 para 1 is set out above (criteria 5.3). Again, the EDD requirement in Article 9 para 7 goes some way to meeting this, requiring “the representation documents with which third parties have authorized the transactions”.

554. Implementation: Most of the FIs spoken to during the assessment adopted measures to verify that a person acting on behalf of another person is authorized to do so, usually by checking company documentation naming them as authorized individuals. Some would also take additional steps, including making contact with the companies concerned.

Identification of Beneficial Owners (c. 5.5; 5.5.1 and 5.5.2):

555. Article 4 para 2 of the AML/CFT Law requires the identification of “beneficiary owner”. “Beneficiary owner” is defined in the Law as “the individual or legal entity, which owns or is the last to control a client and/or the person in whose interest a transaction is executed”. The term “client” is defined in Article 2 para 6 of the AML/CFT Law as “every person who seeks to be a party in a business relation with one of the entities” to whom the law applies. It thus covers legal “persons” and natural “persons”, but not legal arrangements.

556. It also includes the concept of “last effective control24” which is refers to control via majority shareholding/votes, control of the selection, appointment or dismissal of the company’s administrators, and “de facto” control over the decision-making of the legal person.

557. Although not defined in the AML/CFT Law, the authorities confirmed that the definition of majority is that of a simple majority, namely 50% + 1 of the shares of the company or the voting rights.

558. The concept of majority is defined differently in Instruction 12 as “owns directly or indirectly the majority of shares, voting rights of a legal person or possesses over 25% of the shares”. The concept of owning a majority of shares and possessing over 25% is not entirely consistent.

559. Whilst these provisions go some way to requiring obliged entities to understand the ownership of legal entities, they do not specifically cover the control structure of the customer, and the concept of “majority shareholding” is not consistent between the AML/CFT Law and Instruction 12, and does not mean that the ultimate natural owner is identified. The reference to “de facto control” of decision making of a legal person was felt, by the authorities, to include the situations not otherwise covered above (for example, when share ownership is dispersed at levels below the thresholds). However, in the absence of any guidance to this effect, this is not a clear interpretation.

560. Article 4 para 2 of the AML/CFT Law only refers to the identification of “beneficiary owner” and, in the absence of a specific provision requiring reasonable measures to verify identity, this is a gap in the legislation.

561. There is no express provision for financial institutions to determine whether a person is acting on behalf of another, although the definition of “beneficiary owner” does include a person in whose interest a transaction is executed. Thus identification (but not verification) of such a person is technically required. Article 5 para 1 let. (e) sets out the required identification documents for a legal representative of a client, but this does not necessarily equate to the beneficial owner.

562. Implementation: The concept of “beneficiary owner” set out in the AML/CFT Law appeared to be poorly understood, and was considered by some FIs to be confusing. Several FIs preferred to adopt group policies which were more in line with the Third EU Money Laundering Directive, which refers to beneficial ownership in terms of ownership or control of shareholdings with 25% or more of the shares. There is no specific guidance on steps to be taken for identifying foreign legal entities, and one FI felt that this was very difficult to achieve in practice. The concept appeared to be best understood in the banking sector, although banks frequently would go no further than checking names listed on the national share ownership register. The concept of establishing the mind and management of a company (beyond mere shareholding) was not widely understood, and the legal requirement to establish “de facto control” was considered by FIs spoken to as merely including the requirement to establish shareholdings.

Information on Purpose and Nature of Business Relationship (c. 5.6):

563. There is no specific provision in the AML/CFT Law or the secondary legislation requiring financial institutions to obtain information on the purpose and intended nature of the business relationship. There are some very limited provisions in other legislation relating to commercial foreign exchange activities 25, and loan agreements 26 which require FIs to record details of the purpose of the transactions. However, this requirement is limited in scope and, except in the case of commercial transaction transfers in foreign exchange, does not fully extend to obtaining information on the nature and the purpose of the transaction. Some of the FIs spoken to were, in fact, gathering this information, but this tended to be as a result of more stringent group/parent company requirements.

Ongoing Due Diligence on Business Relationship (c. 5.7; 5.7.1 and 5.7.2):

564. Article 6 of the AML/CFT Law requires FIs to carry out “continuous monitoring of business relations” with clients in order to ensure that they are consistent with the FI’s knowledge of the client and “according to the level of risk they represent”. As the term “business relations” does not specifically include transcations 27, this does not amount to a specific requirement to scrutinize transactions, and, in the absence of any further guidance on risk factors to be taken into account, it remains up to FIs how to carry out this requirement.

565. Article 6 requires FIs to “periodically” update client data, and to update it “immediately” when they suspect that the client’s situation has changed. Although there is no definition of “periodically”, the requirement to update “immediately” when circumstances change would appear to meet the essential criterion (5.7.2).

566. In addition, for FIs supervised by the BoA, Article 8 para 11 of Decision 44 requires them to “carry out ongoing monitoring of business relationships with their customers, to ensure they are in line with the information subject owns about the customer, purpose of activity etc.” This reference to “purpose of activity” is not underpinned by primary or secondary legislation.

567. Implementation: Interpretation of the provision of “continuous monitoring differed between the FIs spoken to, giving rise to questions about how clear and effective the provision is in practice.

568. Very few FIs considered that the requirement to carry out continuous monitoring of the account did include an obligation to monitor all transactions. The absence of a definition of “periodically” was also a concern to the FIs spoken to, and practice in the banking sector varied according to internal policy. Some FIs did not appear to be carrying out any monitoring of accounts, except in circumstances where enhanced due diligence (“EDD”) is required.

569. The practical application of what constitutes a “change in circumstances” varied from a simple change in client details to circumstances giving rise to a suspicion of ML/TF.

570. Overall, the understanding of the provisions in this part of the AML/CFT Law give rise to concerns about how consistently and effectively the requirement to conduct ongoing monitoring is being applied in practice.

Risk—Enhanced Due Diligence for Higher-Risk Customers (c. 5.8):

571. Article 7 of the AML/CFT Law contains a requirement for FIs to “specify categories of clients and transactions (in addition to those referred to in Articles 8 and 9, described below) against whom they will apply the enhanced due diligence”. This is a general provision that appears to leave a degree of discretion to FIs.

572. The AML/CFT Law then specifies certain categories of clients and transactions to which EDD measures should always be applied.

573. Article 8 para 3 sets out specific measures to be taken in relation to non-profit organizations (NPOs). These include establishing the source of finance, reputational checks, obtaining senior management approval for the relationship and “extended monitoring”. In addition, the term “increased and continuous monitoring” is used when setting out the requirements for dealing with PEPs (Article 8 para 1). Discussions with the authorities and FIs led the assessment team to conclude that the concept of “extended monitoring” and “increased and continuous monitoring” was no different from the concept of “continuous monitoring” set out in Article 6. It is, therefore, doubtful as to whether this provision adds anything to the existing requirement which is, in any event, poorly implemented by FIs.

574. Article 9 paras 3 to 8 contain additional circumstances of types of transaction when enhanced due diligence should be carried out. These include those circumstances covered by Recommendation 11 (complex transactions and all types of unusual transactions that do not have a clear economic or legal purpose), and Recommendation 21 (clients residing or acting in countries that do not apply or partly apply the relevant international standards on the prevention and fight against money laundering and financing of terrorism, but additionally mentions nonresident clients (Article 9 para 4), trusts and joint stock companies (Article 9 para 6), and transactions carried out in the name of third parties (Article 9 para 7).

575. Decision 44 contains more detailed measures about factors to be taken in consideration when an FI regulated by the BoA is considering the risk profile of a customer or a transaction carried out by a customer. Non-exhaustive categories of client that might be classed as high risk include, inter alia, non-profit organizations, offshore customers, trusts, and import/export companies.

576. The enhanced measures required to be taken under Article 7 of the AML Law in high risk scenarios require the physical presence of the client prior to establishing a business relationship and executing transactions on their behalf. In addition, Article 2 defines “enhanced due diligence” as including “a deeper control process… the aim of which is to create sufficient security to verify and evaluate the client’s identity and to assess the possible risk of money laundering/terrorism financing”.

577. Instruction 12 contains further information on the types of measures to be taken for NPOs. These include (Article 4 para 6) obtaining “information and documents that prove the financing sources, previously derived income, nature of the activity, administration and management methods”.

578. Implementation: The authorities confirmed that they are developing guidance on applying a risk-based approach to enhanced due diligence in circumstances where FIs are required to determine additional categories of client and transaction to which enhanced measures should apply. At present, FIs appear to be aware of the main categories of higher risk as detailed in Articles 8 and 9, and not adding their own categories, except in some parts of the banking sector where there are higher requirements at group level. However, little is being done in practice for clients who are NPOs. Bearing in mind the large number of NPOs in Albania (and the issues noted under Recommendations 33 and SRVIII), this would appear to be a major issue, also considering the analysis of risk under SRII.

579. In addition, some banks are using a risk categorization system (typically low, medium and high, and some FIs have also a category of “non-acceptable customers”, such as those on the terrorist financing list), in which high risk includes the categories of client mentioned in Articles 8 and 9. This risk categorization is often done for new clients when they are first taken on, but not necessarily for existing ones.

580. The concept of “extended monitoring” was not widely understood, with most FIs only triggering further research and investigation in circumstances where there were grounds for suspicion. One bank only routinely checked high risk accounts on an annual basis, which the assessment team considers to be too infrequent.

581. A small number of FIs in the banking sector were, however, more aware of the need to monitor the accounts of higher risk customers, with reports of account activity being examined on a frequent basis.

Risk—Application of Simplified/Reduced CDD Measures When Appropriate (c. 5.9); Risk—Simplification/Reduction of CDD Measures Relating to Overseas Residents (c. 5.10); Risk—Simplified/Reduced CDD Measures Not to Apply When Suspicions of ML/TF or Other High-Risk Scenarios Exist (c. 5.11):

582. The AML/CFT Law does not make reference to situations where FIs might be permitted to apply simplified customer due diligence measures, and thus simplified customer due diligence is not permitted under Albanian law.

Risk-Based Application of CDD to be Consistent with Guidelines (c. 5.12):

583. Although FIs in Albania are not permitted to apply simplified customer due diligence, they are allowed a degree of flexibility in determining which customers present higher risks. As set out above (criterion 5.8), the AML/CFT Law and Instruction 12 contain information on enhanced measures for certain types clients.

584. BoA Decree 44 gives examples of higher risk categories of customers and transactions, and these appear to be used by several FIs. There are no additional guidelines outside the main legal/regulatory regime.

585. Implementation: Although categories of clients and transactions to which EDD measures should be applied are set out in law/other enforceable means, there is little guidance as to what measures should be taken in practice. FIs in the banking sector were often applying internal procedures as a result of group/parent company policy, but there is a need for consistent guidance across all sectors.

Timing of Verification of Identity—General Rule (c. 5.13):

Timing of Verification of Identity—Treatment of Exceptional Circumstances (c.5.14 and 5.14.1):

586. Article 4 para 1 (a) of the AML/CFT Law makes it clear that identification and verification of customers should take place “before” a business relationship takes place. For transactions this is to be completed “when” they are being carried out.

587. There is no express provision permitting FIs to carry out identification and verification after establishment of the business relationship, and the private sector confirmed that this would not happen in practice.

588. Implementation: Discussions with the private sector confirmed that identification and verification of clients are taking place before a transaction is carried out and before a business relationship is commenced.

Failure to Complete CDD Before Commencing the Business Relationship (c. 5.15):

589. The AML/CFT Law does not mention what steps an FI should take if it is unable to complete CDD before commencing a business relationship, except in cases where enhanced due diligence is required. In these circumstances Article 9 para 9 requires FIs to not establish or carry on the business relationship and to report its inability to fulfill the enhanced due diligence obligations to the FIU and to declare the reasons why.

590. BoA Decree 44 contains additional requirements for FIs supervised by the BoA. Article 6 para 8 requires FIs to refuse to open an account or enter into a business relationship if it cannot perform customer identification (which also, by virtue of Article 6 para 1, includes verification of identity). However, this does not cover situations where an FI is unable to establish the nature and intended purpose of the business relationship (which, in any event, is not a requirement in Albania). FIs are required (under Article 6 para 9) to suspend all operations with the client and inform the responsible authority (the FIU) if there are any suspicions relating to the customer’s identity. This does not, therefore, specifically refer to being unable to complete the whole range of CDD measures, and, in any event, only applies to FIs supervised by the BoA.

Failure to Complete CDD After Commencing the Business Relationship (c. 5.16):

591. The provisions of the AML/CFT Law (Article 4 para 1) require identification before establishing a business relationship, so in theory FIs would not be in a position to carry out any transactions for a client.

592. As mentioned above, BoA Decision 44 (Article 6 para 9) requires FIs to suspend operations with clients and to inform the FIU if there any suspicions relating to the customer’s identity. This only applies to FIs supervised by the BoA.

593. Implementation: FIs spoken to confirmed that CDD measures are carried out before any financial activity is carried out.

Existing Customers—CDD Requirements (c. 5.17):

594. Article 6 of the AML/CFT Law contains provisions relating to ongoing monitoring and FIs are obliged to “periodically update the client data” and to do so “immediately” when the client’s circumstances have changed. There is, however, no definition of how regularly this should be done, and no specific requirements as to how to treat customers in existence at the time the AML/CFT law came into force.

595. Implementation: Implementation of this requirement was inconsistent, with at least one FI confirming that not all customers had been subjected to the CDD requirements in the AML/CFT Law, and that they had not interpreted any of the legislative provisions as requiring this to be done. Another one confirmed that updating of CDD for existing clients would only be carried out when that client visited a branch, and thus there was no overall plan for updating this information.

Existing Anonymous-Account Customers—CDD Requirements (c. 5.18):

596. Provisions in the Penal Code prohibiting the opening of anonymous accounts, although this is not retrospective. The AML/CFT Law also prohibits the opening, but also the maintaining of anonymous accounts and accounts in fictitious names, which appear to address the issue of existing anonymous accounts. The assessment team was told that bearer passbooks and certificates of deposit could still be in existence, although none had been issued recently to the authorities’ and FIs’ knowledge.

Effectiveness:

597. Albania has certain of the key elements relating to customer due diligence clearly set out in law or regulation, with some of the elements covered by other enforceable means. However, the overall picture is fragmented, with certain inconsistencies, such as those relating to ongoing monitoring and the identification of beneficial owners, and the omission of key criteria such as a requirement to verify the beneficial owner and to obtain details of the purpose and intended nature of the business relationship. In addition, the provisions do not technically apply to legal arrangements.

598. In the financial sector, the banks appear to be the most aware of the requirements of the AML/CFT Law, and BoA Decision 44. Some banks apply their own, higher standards, especially those that are part of a larger group with a foreign parent company. Whilst this arguably increases effectiveness, the steps they are taking are as a result of individual group policies as opposed to an interpretation of the measures set out in the existing legislation and regulatory guidance.

599. The assessment team had some notable concerns about the banking sector in relation to ongoing monitoring, where the provisions in the AML/CFT Law are causing some confusion and an inconsistent approach.

600. Compliance with the CDD provisions in the non-bank sectors appears to be less consistent overall.

601. Particular areas of concern in all sectors are the uneven approach amongst FIs towards the concept of identifying the ultimate natural persons who own or control the company and the ownership and control structure of a company. The measures taken for legal arrangements were also found to be lacking.

602. Ongoing monitoring and the application of CDD requirements to existing clients appear to be poorly implemented, and partly result from inconsistent provisions in the relevant legislation.

603. Understanding of the ML/TF risks in the Albanian system is something that was not particularly well demonstrated, with FIs having a variety of ways of assessing customer risk. The measures taken by the Bank of Albania to provide indicators of unusual/suspicious transactions and the types of risk posed by categories of clients is to be encouraged, but steps should be taken to create a more consistent understanding of the status and potential use of these indicators. Given Albania is largely a cash-based economy, greater awareness of the risks that this presents, rather than concentrating on cash and value transaction reporting is something that the assessment team would encourage.

604. Enhanced due diligence requirements are implemented inconsistently. This is of particular concern in relation to NPOs, given the number of them operating in Albania, and the potential TF risk that they represent.

605. Further development of the guidance for assessing risk and especially the steps to take to mitigate risk, rather than relying solely on the requirement to submit STRs, would doubtless enhance the effectiveness of the CDD requirements.

Politically Exposed Persons (R 6 – rated NC in the 2006 MER)

Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

606. Albania was rated as non-compliant (NC) for Recommendation 6 as there were no provisions covering the essential criteria. The MER states that the BoA Regulations 2004 “On Money Laundering Prevention” did contain some provisions, but these were not set out in the MER.

607. The AML/CFT Law now seeks to address several of the requirements of Recommendation 6, as detailed below.

Legal Framework:

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Law no. 9049 dated April 10, 2003 “On the declaration and auditing of properties and financial obligations of elected officials and public employees”, hereinafter “Declaration Law”.

Foreign PEPs—Requirement to Identify (c. 6.1); Foreign PEPs—Risk Management (c. 6.2; 6.2.1); Foreign PEPs—Requirement to Determine Source of Wealth and Funds (c. 6.3); Foreign PEPs—Ongoing Monitoring (c. 6.4):

608. Albania has no provisions dealing with foreign PEPs, and thus none of the essential criteria are met.

Domestic PEPs—Requirements (Additional Element c. 6.5):

609. The law in Albania only applies to domestic PEPs. For the sake of completeness, an analysis of these measures against the main criteria of Recommendation 6 is set out below.

610. Article 2 of the AML/CFT Law defines politically exposed persons (PEPs) as persons who are obliged to declare their properties pursuant to the Declaration Law. These include government ministers, local government officials, senior military figures, high ranking civil servants, the judiciary, prosecutors and directors of certain types of joint stock companies. Article 28 para 2 of the AML/CFT Law requires that the General Inspector of High Inspectorate for the Assets Declaration and Auditing keep an updated list of PEPs.

611. The definition in the AML/CFT Law and the list does not include families and close associates of PEPs.

612. The list of categories of person in the Declaration Law arguably covers most if not more of the categories of PEP in the FATF definition (albeit that the whole list only covers domestic PEPs). However, it does not include political party officials and elected national government officials apart from ministers.

613. Article 8 para 1 of the AML/CFT Law requires FIs to verify, on the basis of the list referred to in Article 28 para 2, if a client or “beneficiary owner” is a PEP. If this is the case, under Article 8 para 1 let. (a), they are required to obtain approval from higher management before establishing the relationship (criterion 6.2). In addition, if an existing client (but not, apparently, a “beneficiary owner”) becomes a PEP, higher management approval is required. This does not specifically cover the situation where an existing customer is subsequently found to be a PEP. In any event, purely referring to a list would not satisfy criterion 6.1, which requires FIs to have risk management systems to determine if a customer, a potential customer or a beneficial owner is a PEP.

614. Article 8 para 1 let. (b) requires FIs to “obtain a declaration on the source of the client’s wealth that belongs to this financial action”. This does not fully meet criterion 6.3 which requires that source of wealth as well as source of funds be obtained. Despite the reference to “wealth”, the Albanian provision would appear to cover only source of funds (i.e. the source of funding for the current transaction.)

615. Implementation: Some FIs considered this section of the AML/CFT Law to be unclear, as they were not sure what “obtain a declaration” amounted to. In particular, they were not clear if a written statement was required from the client, or if additional information (e.g. contracts showing land ownership) were required. Some FIs appeared to be confused about the list produced by the FIU, and often thought it referred to the terrorist list.

616. Article 8 para 1 let. (c) requires FIs to perform “an increasing and continuous monitoring of the business relations” on a PEP’s account. There is no definition of or guidance as to what this should entail, and discussions with the private sector led the assessment team to conclude that the concept of “increasing and continuous monitoring” was no different from the concept of “continuous monitoring” set out in Article 6. It is, therefore, doubtful as to whether this provision adds anything to the existing requirement which is, in any event, poorly implemented and understood by FIs.

Domestic PEPs—Ratification of the Merida Convention (Additional Element c. 6.6):

617. Albania is a signatory to the Merida Convention and ratified it on 25 May 2006, and the authorities reported that it has been implemented.

618. Effectiveness: The legal provisions in Albania are clearly not compliant with the FATF requirements, as they extend only to domestic PEPs. In addition, the use of a list, as opposed to requiring risk management systems (criterion 6.1) would not meet the standard, even if the list extended to foreign PEPs. A list could be a tool which assists FIs in complying with the requirement, but would not be an overall solution. In addition, as the Albanian approach has a broad definition of who is a PEP, there is a risk that FIs will be overwhelmed by the number of them, and not target measures against those posing the most risk.

619. A small number of banks spoken to by the assessment team were applying a higher standard which included identifying foreign PEPs, but this was a result of group policy set by a foreign parent company.

Cross-Border Correspondent Banking (R 7 – rated NC in the 2006 MER)

Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

620. Albania was rated as non-compliant (NC) in the Third Round MER, as there were no specific provisions in the relevant legislation. The MER states that the BoA Regulations 2004 “On Money Laundering Prevention” did contain some provisions, but these were not set out in the report.

621. Albania has sought to remedy these deficiencies in the AML/CFT Law.

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.

Cross-Border Correspondent Accounts and Similar Relationships—Introduction

622. Article 9 of the AML/CFT Law requires banks to undertake various additional CDD measures in respect of cross-border correspondent banking activities. The measures are required to be undertaken before the business relationship is established.

623. It should be noted that Recommendation 7 technically applies to “banking and other similar relationships”. The measures in Albania only extend to “correspondent cross border banking services provided by banks subject to this law” (Article 9, para 1). This is not considered by the assessment team to be a material deficiency, given the lack of development in other financial sectors.

Requirement to Obtain Information on Respondent Institution (c. 7.1):

624. Article 9 para 1 requires banks to gather sufficient information about the respondent institution in order to fully understand the character of its activity (let. (a)) and to determine the reputation of the recipient institution and the quality of its supervision through public information (let. (b)). This does not specifically require information on whether the institution has been subject to a ML/FT investigation, and there is nothing further set out in guidance that requires this.

625. Implementation: Banks spoken to by the assessment team generally appeared to be aware of an overall need to carry out some form of research on respondent banks, but this did not always include an assessment of the supervisory regime in which those respondents operate or whether the respondent had been subject to a ML/TF investigation.

Assessment of AML/CFT Controls in Respondent Institution (c. 7.2):

626. Article 9 para 1 let. (c) requires banks to evaluate whether or not the “internal control procedures” of the respondent financial institution for AML/CFT are satisfactory and effective. There is no additional guidance as to how this should be carried out.

627. Implementation: Banks spoken to generally would not establish a correspondent relationship without carrying out some checks on the internal control procedures of a respondent institution. This might include requesting operating procedures for AML in written form, and generally appeared to be adequate.

Approval of Establishing Correspondent Relationships (c. 7.3):

628. Article 9 para 1 let. (d) obliges banks to obtain the approval of higher administration/management before the business relationship is commenced.

629. Implementation: All banks spoken to confirmed that approval of senior management was required before establishing correspondent relationships.

Documentation of AML/CFT Responsibilities for Each Institution (c. 7.4):

630. Article 9 para 1 let. (d) requires banks to document the respective responsibilities of each institution.

631. Implementation: Banks spoken to confirmed that written agreements would be established between themselves and respondent institutions before commencing correspondent relationships.

Payable-Through Accounts (c. 7.5):

632. The AML/CFT Law requires banks to draft “special procedures for the constant monitoring of direct electronic transfers” (Article 9 para 1 let. (e)). Article para 18 defines these transfers in similar terms to those used in payable through accounts. However, these “special procedures” are not further elaborated, and thus the provisions do not meet the requirements of criterion 7.5.

633. Implementation: The banks spoken to by the assessment team did not operate payable-through accounts, and thus this activity appears not to be carried on in Albania.

Effectiveness

634. Banks spoken to by the assessment team confirmed that they were engaged in correspondent banking relationships, predominantly with banks in Italy, Greece, Germany, the US, and UK. Group policy in some banks required that international standards be followed, with research being undertaken on the reputation etc. of the respondent institution. Senior management approval was sought in each case.

635. Generally banks did not appear to be carrying out many checks on the nature of supervision of respondent banks. There is nothing in the AML/CFT Law that requires a check on whether the correspondent has been the subject of a money laundering or terrorist financing investigation.

636. One bank considered that Albanian banks were not always looked upon favorably by international institutions, and thus an invitation to become a correspondent for or acceptance of an invitation to become a correspondent with one of these institutions was advantageous to the Albanian bank. In these circumstances, the bank concerned stated that it would not undertake additional research beyond a basic check in the Bankers’ Almanac. Although an isolated incident, this an area of potential concern if banks are keen to increase the number of correspondent relationships without necessarily considering the quality and ML/TF risks of these relationships.

637. Present practice would indicate that Albanian banks are carrying on respondent relationships with larger, well known banks in jurisdictions where information about the bank and the supervisory structure are readily available. As the Albanian economy develops this might change, with expansion of correspondent operations to less developed or transparent jurisdictions, this is a risk that the authorities and the banks themselves should bear in mind.

New Technologies and Non-Face to Face Transactions (R 8 – rated PC in the 2006 MER)

Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

638. The 2006 MER noted that limited provisions were in place for the banking sector, which prohibited the opening of bank accounts without the physical presence of the account holder, and nothing specific relating to new technologies. However, it was noted that the use of new technology in the financial sector was limited.

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Misuse of New Technology for ML/FT (c. 8.1):

639. Article 9 para 8 of the AML/CFT Law specifically requires FIs to adopt policies or respond appropriately to prevent the misuse of new technological developments. This is not further defined, and there is no guidance as to what developments financial institutions should be aware of.

640. Implementation: The use of new technology in the Albanian financial system is not particularly well developed, with a few banks introducing internet banking. As this involves opening a bank account, the physical presence of the customer was still required to the open the account (see analysis under criteria 8.2. and 8.2.1.). Practice varied as to the services offered by internet banking, with some restricted to the payment of bills etc. whereas others could be used for international transfers. Access to such accounts is password protected. The use of other technologies such as prepaid cards is beginning to develop, and will continue to do so if Albania moves away from a cash-based economy. At present, the use of these is linked to bank accounts. The Bank of Albania also reports an increase in the number of ATMs.

Risk of Non-Face-to-Face Business Relationships (c. 8.2 and 8.2.1):

641. Article 7 para 1 of the AML/CFT Law requires the physical presence of a customer in cases where enhanced due diligence should be applied. Otherwise, there appears to be no provisions for how enhanced due diligence should be conducted.

642. In the banking sector, Article 6 para 5 of the BoA Decision 44 requires the physical presence of a customer before a “banking account” is opened “even in case it shall be used for transactions carried out electronically”.

643. There appears to be no explicit provisions for non face-to-face business relationships/transactions, except that in the banking sector all accounts must be opened only with the physical presence of the customer.

644. There is no such requirement for the other sectors (except in cases where EDD is performed pursuant to Article 7 of the AML/CFT Law), and this is a potential gap in the legal framework.

645. Implementation: FIs spoken to in all sectors appeared to require the physical presence of customers before an account is opened, despite it only being a formal requirement for opening a bank account.

Effectiveness

646. The potential risks of both new technologies and non-face to face customers are currently being mitigated in the banking sector by the bank’s internal controls, and especially the requirement that all bank accounts must be opened with the physical presence of the client.

647. The risk of new technological developments at present appears limited at present elsewhere in the financial sector, but this is an area that should be kept under review as the financial sector in Albania develops. In particular, the use of pre-paid cards and ATMs is reportedly growing, and the risks associated with these delivery mechanisms should be kept under review.

648. There appears to be no requirements to deal with the risks of non-face to face transactions or business relationships in the financial sector other than banking, and, although practice suggests that FIs require the presence of the client before commencing financial activity on their behalf, it is recommended that this practice be formalized.

3.2.2. Recommendations and Comments

Recommendation 5

649. The authorities should:

  • Amend Articles 1025 and 1026 of the Civil Code and/or pass legislation to prohibit the issuing of bearer passbooks;
  • Pass legislation to prohibit the issuing of any other bearer instruments (e.g. certificates of deposit);
  • Prohibit the use of cheques with multiple endorsements over a certain threshold;
  • Extend the circumstances when “CDD” is required to all aspects of CDD, not just identification and verification;
  • Clarify or amend the term “reasonable doubt for money laundering or terrorist financing” in Article 4 of the AML/CFT Law to ensure that it fully covers cases where there is a suspicion of money laundering or terrorist financing;
  • Clarify in law or regulation the requirement to verify that a person acting on behalf of another is so authorized;
  • Include a requirement in law or regulation to verify the identity of a beneficial owner;
  • Extend the requirements in relation to beneficial ownership to include beneficial ownership of legal arrangements;
  • Clarify the inconsistency between the AML/CFT Law and Instruction 12 regarding the threshold for identifying the shareholding and voting rights of legal persons in determining beneficial ownership;
  • Clarify the meaning of “de facto controls the decisions made by the legal person” in the AML/CFT Law, or otherwise provide a specific requirement in law, regulation or other enforceable means (“OEM”) to understand the ownership or control structure of customers who are legal persons, and in law or regulation the requirement that obliged entities must take reasonable measures to determine who are the natural persons who exercise effective control over a legal person or arrangement;
  • Establish a requirement in law or regulation to determine whether a person is acting on behalf of another;
  • Include a requirement in law, regulation or OEM that obliged entities obtain information on the purpose and intended nature of the business relationship;
  • Clarify the requirements in the AML/CFT Law on carrying out “continuous monitoring”, and on “periodically” updating client data by either amending the Law itself or issuing further guidance to ensure that ongoing monitoring is fully and consistently implemented by the obliged entities;
  • Provide further guidance on the categorization of clients deemed to require enhanced due diligence for all obliged entities, and (for entities supervised by the BoA) clarify that the indicators of suspicious activity given in Annexes I and II of Decision 44 can be used for this purpose, as well as for STR reporting.
  • Clarify in law, regulation or OEM, or in guidance, the steps to be taken in when obliged entities are required to apply enhanced due diligence;
  • Establish in law, regulation or OEM requirements for all obliged entities not to open accounts and to consider submitting an SAR when they are unable to comply with criteria 5.6, and additionally for all obliged entities not supervised by the Bank of Albania when they are unable to comply with criteria 5.1 to 5.5;
  • Set out in law, regulation or OEM a requirement to apply CDD measures to existing clients on the basis of materiality and risk, for example by clarifying what is meant by the term “periodically” in Article 6 of the AML/CFT Law.

650. The authorities should also:

  • Consider prohibiting cash transactions in all currencies over a certain threshold, given the AML risk in Albania associated with the use of cash;
  • Consider prohibiting cash transactions in all currencies over the amount of lek 1,000,000 in circumstances where the customer declares that the source of funds is from his/her employment abroad, unless accompanied by a relevant customs declaration form.

Recommendation 6

651. The authorities should:

  • Extend the requirements relating to PEPs to foreign PEPs;
  • Extend the definition of PEPs to include family members and close associates of PEPs;
  • Require obliged entities to have appropriate risk management systems to determine whether a customer is a PEP/becomes a PEP, rather than relying solely on a list produced by the authorities;
  • Provide a clear requirement to obtain on source of wealth and source of funds of PEPs;
  • Clarify what is meant by the requirement in the AML/CFT Law to perform “an increasing and continuous monitoring” of business relationships with PEPs.

652. The authorities should also:

  • Consider revising the definition of domestic PEP to include public officials that give rise to greatest concern, given the perceived level of corruption in Albania.

Recommendation 7

653. The authorities should:

  • Include a requirement for obliged entities to obtain information on whether a respondent institution has been subject to a ML/TF investigation.

654. The authorities should also:

  • Consider providing guidance to the banking sector as to the steps to be taken when establishing cross-border correspondent banking relationships to ensure consistent and effective implementation of the legal requirements, including the need to assess the supervisory regime in which the respondent operates.

Recommendation 8

655. The authorities should:

  • Provide guidance to FIs on the types of policies and procedures they should put in place to prevent the misuse of new technologies;
  • Raise awareness of the ML/TF risks in new technologies amongst obliged entities which are likely to encounter them (especially the banking sector);
  • Take steps to require FIs to manage the risks of non-face to face transactions.

3.2.3. Compliance with Recommendations 5 to 8

RatingSummary of factors underlying rating
R.5PC
  • Availability of financial instruments in bearer form;
  • CDD provisions only apply to identification and verification;
  • Inconsistent legislative provisions for ongoing monitoring leading to poor implementation by FIs;
  • No requirement to verify the identity of beneficial owners;
  • No requirement to establish whether a person is acting on behalf of another;
  • Inconsistent legislative provisions for beneficial ownership;
  • Very limited requirement to establish nature and intended purpose of business relationship;
  • Incomplete requirements for legal arrangements;
  • No requirement for CDD on existing clients.
Effectiveness:
  • Inconsistent application of CDD measures in circumstances where is a suspicion of ML/TF among FIs;
  • Poor implementation of beneficial ownership requirements;
  • Inconsistent implementation of requirement to conduct ongoing due diligence;
  • Inconsistent implementation of measures to be taken when enhanced due diligence
R.6NC
  • No legislative requirements for foreign PEPs.
R.7LC
  • No requirement to establish if respondent has been subject to a ML/TF investigation or regulatory action;
  • Poor implementation of requirement to assess quality of supervision.
R.8PC
  • No formal requirement to manage the risks of non-face to face transactions/business relationships except for opening bank accounts.

3.3. Third Parties and Introduced Business (R 9 – rated N/A in the 2006 MER)

3.3.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

656. The 2006 MER states that whilst the existing legislation contained no specific provisions to regulate or prohibit introduced business, the evaluation team accepted that the activity of third party reliance was not conducted in Albania.

Legal Framework:

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Ministry of Finance Instruction no. 12 dated April 5, 2009 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917”, hereinafter “Instruction 12”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Legal Framework:

Requirement to Immediately Obtain Certain CDD elements from Third Parties (c. 9.1); Availability of Identification Data from Third Parties (c. 9.2); Regulation and Supervision of Third Party (applying R. 23, 24, and 29, c. 9.3); Adequacy of Application of FATF Recommendations (c. 9.4); Ultimate Responsibility for CDD (c. 9.5):

657. Albanian legislation does not contain express provisions dealing with third party reliance, but the Albanian authorities report that reliance is not permitted in practice, as all obliged entities are required to perform CDD on their own account. This is not a direct requirement in the AML/CFT Law, and only Article 6 para 5 BoA Decision 44 requires the physical presence of a customer before a bank account is opened, and thus reliance would appear to be not permitted for FIs opening bank accounts. However, for other types of transaction, and for FIs not supervised by the BoA, the situation is not clear.

658. It would be advisable for Albania to clarify whether reliance on third party is permitted or not in law, regulation or other enforceable means, as i there are no provisions in place should a financial institution start the practice of relying on third parties to carry out CDD.

Effectiveness:

659. Some non-bank FIs spoken to said that they occasionally obtained CDD information gathered by its group parent or by banks involved in other transactions to which their business related, especially when the parent had more detailed information on beneficial ownership of corporate clients. It would appear, therefore, that reliance is happening in practice, and that the provisions supposedly preventing it are not working, and/or are not being interpreted by FIs as prohibiting reliance on third parties.

3.3.2. Recommendations and Comments

660. The authorities should:

  • Consider the ML/TF risks in allowing third party reliance, and then decide whether allowing third party reliance would be appropriate and feasible in Albania;
  • Either: expressly prohibit the practice of third party reliance in law, regulation or OEM and raise awareness amongst obliged entities of the CDD measures that they should perform on their own account, and that third party reliance is not permitted; or establish a system for allowing third party reliance in accordance with Recommendation 9.

3.3.3. Compliance with Recommendation 9

RatingSummary of factors underlying rating
R.9NC
  • No measures in place for third party reliance despite evidence of it happening in practice.

3.4. Financial Institution Secrecy or Confidentiality (R.4- rated C in the 2006 MER)

3.4.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

661. This Recommendation was rated C in the 2006 MER.

Legal Framework:

  • Law No 9917, dated May 19, 2008 “On the Prevention of Money Laundering and Financing Terrorism” hereinafter “AML/CFT Law”.
  • Law No 9662, dated December 18, 2006 on Banks on the Republic Of Albania hereinafter “Banking Law”.
  • Decision No 14, dated 11.03.2009 “On granting the License and the exercise of banking activity of banks and branches of foreign banks in the Republic of Albania hereinafter “Decision 14”.
  • LawNo. 9870 of February 21, 2008 on Securities hereinafter “Securities Law”.
  • Law No. 9887 dated 10.03.2008 On Protection of Personal Data, hereinafter “Data protection law”.
  • Law No 8457, on information classified “State Secret Law”.

Inhibition of Implementation of FATF Recommendations (c. 4.1):

662. Albanian financial institutions have an obligation to maintain the confidentiality of the information that they acquire in the course of their business relationships. Financial secrecy is regulated by Article 91 125, 127, Para 6 of the Banking Law and Article 64 of Securities Law. In Albania there is also a Data Protection Law (which provides for the protection of personal information).

663. Para 2 of the Article 91 of Banking Law states that the information obtained in the exercise of their activity in the bank or branch of a foreign bank shall be kept confidential by the administrators, employees (current as well as former) and it shall not be utilized for personal profits or third parties outside the bank or branch of a foreign bank, which they serve or have served. “The referred information shall be made available only to the Bank of Albania, the statutory auditor of the bank or branch of the foreign bank, administrators, agents and employees of every information system or official service, foreign supervision authority and judicial authorities, as well as when it is necessary for the protection of the bank”.

664. In practice banks and securities companies include a standardized contract clause pursuant to which the customer gives the FI permission to use customer’s data for statistical and commercial purposes

Access to information by relevant authorities

665. Financial secrecy provisions in Banking and securities laws do not hamper authorities’ ability to access information they require to properly perform their functions in combating ML or FT.

666. Financial secrecy does not apply where there is a public law obligation to provide information to authorities duly authorized to request it. This includes information requested by the supervision authorities (BoA28 and the FSA29) in the context of supervision and also by the GDMLP (the FIU) as it is noted in Article 14 of AML/CFT Law30.

667. In order to comply with their obligations established in the AML/CFT Law, FIs must keep and provide the relevant information, including information on the customer and his or her accounts, to the competent authorities, and may not refuse to file STRs on the grounds of professional or banking secrecy. (Article 14 AML/CFT Law). This provision protects the financial institutions from potential claims for breach of confidentiality when an STR was made in good faith in compliance with the stipulations of the AML/CFT Law.

668. Finally, in the course of criminal proceedings. Article 210 of the CPC provides access to financial records based upon a court order or in urgent matters through the action of the prosecutor alone (once there is a showing of reasonable grounds for a connection to a criminal offence). The Law on Banking, Article 91 para 2 provides for the lifting of the bank secrecy provision in the case of criminal investigations or prosecutions.

Exchange of information between relevant authorities

669. Article 22 of the AML/CFT law guarantees that there are no restrictions to sharing information between competent authorities for the purpose of combating money laundering. Moreover, the GDMLP may request and obtain from all competent authorities any data or information needed for the purpose of carrying out its duties, whose include, among other the exchange of information with any foreign counterpart, entity to similar obligation of confidentiality, for purposes of preventing and fighting ML/FT.

Exchange of Informationbetween Financial Institutions as Required by R. 7, R. 9 and SR VII

670. The obligations stipulated by the AML/CFT law in the area of correspondent banking relationships and wire transfers override the financial secrecy provisions in the Banking and Securities laws and presuppose the ability of financial institutions to share information for the purpose of Recommendation 7 and Special Recommendation VII (see analysis of these Recommendations). However, given the lack of provisions concerning reliance on third parties (see analysis of Recommendation 9), it is unclear if financial institutions could provide information to their customers in the absence of a specific indication in this sense.

Effectiveness:

671. The financial secrecy provisions do not inhibit the implementation of the FATF Recommendations by the authorities. The law enforcement, FIU and supervisory authorities have sufficient legal basis to request access to information held by FIs to fulfill their respective functions. In practice, none of the authorities with whom the mission met raised any difficulty in obtaining that information because of the financial secrecy provisions. FIs are aware of their obligations to disclose information when the conditions for disclosure set out in the AML/CFT Law are met and cooperate with the authorities in this respect. The authorities informed the assessors that they are satisfied that the current framework enables them to obtain all necessary information and that the financial secrecy law does not constitute an obstacle to carrying out their responsibilities.

3.4.2. Recommendations and Comments

672. The authorities could consider establishing provisions to regulate specifically the procedures and scope for the exchange of information between financial institutions if reliance on third parties will be allowed and regulated.

3.4.3. Compliance with Recommendation 4

RatingSummary of factors underlying rating
R.4CThis Recommendation is fully observed

3.5. Record Keeping and Wire Transfer Rules (R.10 & SR.VII)

Record-keeping and wire transfer rules (R.10—rated PC & SR.VII—rated NC in the 2006 MER)

3.5.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

673. The 2006 MER noted the existence of a US$15,000 threshold to keep customer identification data and the lack of clarity in Albania’s laws relating to this Recommendation.

674. On SR VII the 2006 MER noted the absence of general requirements other than those stipulated by the Bank of Albania Regulation of 2004, which were considered unduly restrictive. Issues were also noted with regard to the thresholds.

Legal framework:

  • Law No. 9917 date May 19, 2008 “On the Prevention of Money Laundering and Financing Terrorism” hereinafter “AML/CFT Law”.
  • Law No. 9662 dated December 18, 2006 “On Banks on the Republic Of Albania” hereinafter “Banking Law”.
  • Decision No. 44. dated 10.06.2009, on the approval of the regulation “On prevention of money laundering and terrorist financing” hereinafter “Decision 44”.

Record Keeping and Reconstruction of Transaction Records (c. 10.1 and 10.1.1):

675. Article 16, para 2 of the AML/CFT Law requires entities to keep data registers, reports on financial transactions, both national or international, regardless of whether the transaction has been executed in the name of the client or third parties, for five years at least from the date of execution of the transaction. This timeframe can be extended if the responsible authority (which, according to the AML/CFT Law is the General Directorate for the Prevention of ML-GDPML) requests it.

676. The use of the term “financial transactions” might constrain the scope of the record keeping obligations. The use of this term in the paragraph requiring the keeping of data registers, reports and supporting documentation could be interpreted as applying only to “financial” transactions rather than all transactions conducted by the customer. The scope of the term “financial” is not defined in the AML/CFT Law and there is scope for ambiguity because Article 2, para 16 of the AML/CFT Law only defines “transactions” but not “financial” transactions. However the FIs spoken to seemed comfortable with the interpretation of the requirement.

677. Regarding criterion 10.1.1, Article 16 AML/CFT Law, para 3, explicitly mentions that the information of data transactions (which includes also domestic and international money or value transfers by way of a cross reference to Article 10) must contain “all the necessary details to allow the re-establishing of the entire cycle of transactions, with the aim of providing information to the authority” which requested it. There is no specific guidance explaining what constitutes “the necessary details” and as a result, the FIs are left to make this determination.

Implementation:

678. The FIs spoken to indicate that, in practice, they keep all documents that are related to transactions for a period that is between 5 and 10 years. Some FIs indicated that they would keep transaction documents (as well as identification data) regardless of any time limits, even after the business relationship has ended.

Record Keeping for Identification Data, Files and Correspondence (c. 10.2):

679. Article 16, para 1 of the AML/CFT Law requires FI to keep the documentation used for the identification of the client and the client’s beneficial owner. The minimum period is five years from the date of the termination of the business relation, or longer if requested by the GDPML. The GDPML stated that, so far, there have been no cases in which it was deemed necessary to request an extension of the record keeping obligation period.

680. In the context of the record keeping requirement for transaction records there is also an obligation to maintain “account files and business correspondence” (among the “supporting documentation”); however the record keeping requirement for these types of documents is five years from the execution of the financial transaction. This is not in line with the FATF standards which requires that account files and business correspondence be kept for five years “following the termination of an account or business relations”.

681. For the entities supervised by the BoA31, the obligation to maintain the information related to the customer identification and their financial transactions is also mentioned in Article 7, of Decision 44 which cross-references to Article 16 of the AML/CFT Law.

682. In addition to this requirement, the BoA decision, in the context of the obligation to verify the customer’s identity, also requests that the documents used for the verification, as well as any other document that may be used at a later stage, should be maintained in the customer’s file (Article 6, para 4 Decision 44).

Availability of Records to Competent Authorities in a Timely Manner (c. 10.3):

683. The requirement to keep data available to domestic authorities is also specifically addressed by Article. 16, para 4 of the AML/CFT Law. This provision states that FI “must make sure that all client and transaction data, as well as the information kept according to this article, shall be immediately made available upon the request of the GDPML”. In the view of the assessors this provision satisfies the standard with regard to the “timely” element requirement. More specifically, in the case of banks there is also a provision in the Banking Law, which stipulates the obligation of banks to “provide the BoA with the necessary documentation required or the performance of the supervisory power”. According to the FIs/supervisors spoken to, the information can be either made available in the course of an inspection or, if requested, by certified mail.

684. The following table summarizes the record keeping requirements established in the AML/CFT Law:

ObligationYearsCounting time from
Store documentation used for the IDENTIFICATION of the customer5From the termination of the business relation
Keep data registers related to financial transactions5From the date of the execution of financial transaction
Keep reports related to financial transactions5From the date of the execution of financial transaction
Keep documents related to financial transactions5From the date of the execution of financial transaction
Keep rest of the supporting documentation including account files and business correspondence5From the date of the execution of financial transaction

Obtain Originator Information for Wire Transfers (applying c. 5.2 and 5.3 in R.5, c.VII.1):

685. Article 10 of the AML/CFT Law requires the FI that performs activities which include money or value transfers “to ask for and verify first the name, last name, permanent and temporary residence, document identification number and account number of the originator, if any, including the name of the financial institution from which the transfers is made”.

686. The requirement applies regardless of any threshold and for both domestic and international wire transfers.

687. Article 10 of the AML/CFT Law requires that the information must be included in the form of the message or payment attached to the transfer and that, where there is no account number, the transfer shall be accompanied by a unique reference number. The ordering financial institutions are required to transmit the information together with the payment, including where they act as intermediaries in a chain of payments. The inclusion of the address is mandatory and hence the AML/CFT Law does not envisage any alternative to replacing the address with the date and place of birth.

688. The interpretation of the scope of Article 10 provided by the GDPML is that it covers all types of money and value transfer services and products including transactions using credit/debit cards, under the definition of ‘money or value transfer service” in Article 2, para 15. However, the interpretation of this legal requirement was not entirely clear to the FIs spoken to, and the general understanding is that the provision would cover money remittances and wire transfers, both domestic and international, but should not be applied to transactions using credit/debit cards.

Inclusion of Originator Information in Cross-Border Wire Transfers (c. VII.2):

689. As mentioned above Article 10 applies regardless of any threshold and to both domestic and international wire transfers.

690. For cross-border wire transfers, the Albanian Law does not provide the possibility of bundling several transfers from a single originator in a batch file.

Inclusion of Originator Information in Domestic Wire Transfers (c. VII.3):

691. The AML/CFT Law does not differentiate between the information required in relation to international transfers and that in relation to domestic wire transfers.

Maintenance of Originator Information (“Travel Rule”) (c.VII.4 and VII.4.1.):

692. Under Article 10.2 of the AML/CFT Law, the ordering financial institution is required to ensure that all the information received is maintained with the transfer along the chain of payments. This requirement is also applicable to the intermediary entities or ordering financial institutions.

693. The Albanian AML/CFT Law does not contemplate specifically the situation where technical limitations prevent the full originator information accompanying a cross border wire transfer from being transmitted with a related domestic wire transfer.

694. Article 10, para 3 requires that where the FI has received a money/value transfer (including direct electronic transfer) without the “necessary information about the ordering person”, it should request the missing information from the “sending institution or from the beneficiary” of the electronic transfer (direct or not). The provision does not specify any timeframe; this is neither for sending the request nor for receiving the answer. The option given by the AML/CFT Law of obtaining the wire transfer missing information from the beneficiary does not seem to be in line with the FAFT standard which requires originator information to accompany qualifying cross-border wire transfers and, in case of missing information to request it from the originator.

695. Article 10 also specifies that if the receiving FI “fails to register the missing information, it should refuse the transfer and report it to the GDMLP”.

696. The obligation on FIs to keep the record for five years, required by the standard, is captured by the obligation to keep records relating to transactions, described under Recommendation 10.

Risk-Based Procedures for Transfers Not Accompanied by Originator Information (c. VII.5):

697. As mentioned earlier, Article 10.3 requires that in the case of an incompleteness of “necessary information about the ordering person”, the FI receiving the transfer should request the information or refuse to pay the transfer and report it to the GPML.

698. Apart from rejecting the transactions where the FI fails to complete the originator missing information, beneficiary FIs interviewed by the mission did not appear to take any additional measure or consider whether the transaction is suspicious and whether it should be reported to the FIU. They also did not appear to consider restricting or even terminating the business relationship with the FIs that fail to meet the requirement.

Monitoring of Implementation (c. VII.6):

699. FIs including those providing money or value transfer services are subject to the supervision of the BoA (see analysis under Recommendation 23 and 29). The inspection manual of the BoA specifically indicates wire transfer operations as an area to check during onsite inspections. A random check of one of the inspection reports for an onsite visit undertaken in 2010 by BoA confirmed that the BoA checked compliance with these requirements during that inspection. BoA stated that this is normal practice during onsite inspections.

Application of Sanctions (c. VII.7: applying c.17.1-17.4):

700. Article 17 of the AML/CFT Law provides for sanctions for non compliance with the AML/CFT requirements including those related to wire transfers, described above. Non compliance with the requirement to include full originator information in the transfer message is subject to a fine of ALL 400,000 to 1,600,000 (appr. US$4,000 to 16,000) for individuals and ALL 1,200,000 to 4,000,000 (appr. US$12, 0000-40,000) in the case of legal persons. Non compliance with the obligation to require missing or incomplete originator’s information from the ordering FI, to register the full originators’ information when executing the payment transfer without such information and not reporting it to the GDPML is subject to a fine of ALL 500,000 to 2,000,000 (appr US$5,000-20,000) for individuals and ALL 2,000,000 to 5,000,000 (appr. US$20,000 to 50,000) in the case of legal persons.

701. The assessors cannot determine whether the sanctions are proportionate, dissuasive or effective as no sanctions have been applied for non compliance with these provisions.

Additional elements—Elimination of Thresholds (c. VII.8 and c. VII.9) (c. VII.8 and c. VII.9):

702. As noted earlier the requirements envisaged by the AML/CFT law, describe above, are in force regardless of any threshold.

Effectiveness:

Recommendation 10

703. In practice, the FIs spoken to, confirmed that they keep the data concerning customer identification for more than five years, in most cases in an electronic format (scanned documents). However, the shortcomings noted with regard to the implementation of the obligation to identify the beneficial owner may have an impact on the effective implementation of the record keeping requirements as far as they concerns beneficial owners.

Special Recommendation VII

704. The FIs spoken to appeared knowledgeable of the AML/CFT Law requirements related to wire transfers. Albanian banks with parent European banks apply the group policy standards on the information on the payer accompanying the wire transfers32 in addition to the requirements of the Albanian AML/CFT Law, which includes also the temporary residence among the originator data required.

705. Regarding the obligations stipulated in the AML/CFT Law with respect to this Recommendation, the FIs’ general understanding is that the these requirements would cover money remittances and wire transfers, both domestic and international, but should not be applied to transactions using credit/debit cards.

706. Although the AML/CFT Law does not mention a minimum threshold to reject the transfer if the ordering FI fails to complete the missing payer information, some FIs seem to have adopted an informal minimum threshold below a meaningless amount or low risk even if the information is missing, the transfer is settled instead of being stopped and the information completed or being rejected.

707. The possibility for FIs to confirm the incomplete/missing information from the beneficiary (of the payment) could lead to an abuse of the wire transfer system and hamper the accuracy of the information obtained, if the information on which the FIs rely is not accurately verified due to the source, might be the beneficiary of the transfer itself. The FIs spoken to indicated that, in practice, in cases of incomplete/missing information a request for that information would be made to the beneficiary as the main source of information. In the case of banks with correspondent banking relationships, the banks indicated that they seek the information from the correspondent bank (a response is usually received between 3-5 days).

708. FIs do not seem to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by completed originator information. The failure of the payer FI to provide the missing information is not considered as a risk- in the business relationship.

709. Even though some of the FIs indicated that there were few cases involving missing/incomplete information, they did not report those cases to the GDPML, as required by the AML/CFT law).

3.5.2. Recommendations and Comments

Recommendation 10

710. Authorities should:

  • Amend the record keeping requirement for “account files and business correspondence” in the AML/CFT Law so that the five year period is calculated “following the termination of an account or business relations”, as required by the FATF standard.
  • Clarify the scope of “financial transactions” ensuring that it covers all types of transactions linked with the FI’s customer operations.

711. The authorities should also:

  • Consider providing specific guidance to FIs on the “necessary details” needed to ensure the reconstruction of the entire cycle of customer’s transactions in order to ensure, if necessary, evidence for prosecution, and guidance on the records to be kept in the case of beneficial owners.
  • Consider clarifying the term “financial” transactions in the AML/CFT Law to ensure that it fully covers all the types of FIs customer transaction records.

Special Recommendation VII

712. Authorities should:

  • Remove the option of requesting missing wire transfer-related information from the beneficiary of the transaction.
  • Ensure that the obligation to report in the case of missing information, established by article 10.3, is fully observed.

713. The authorities should also:

  • Consider introducing a minimum threshold to identify the originator in international incoming wire transfers. This threshold should be in line with the Albanian economy and financial system characteristics.
  • Consider developing guidelines to assist FIs to understand relation to the monitoring process of wire transfers and to ensure the accuracy of the data used to complete the payer information that is missing from incoming transfers received by the FIs.

3.5.3. Compliance with Recommendation 10 and Special Recommendation VII

RatingSummary of factors underlying rating
R.10LC
  • The mandatory record keeping period requirement for account files and business correspondence” is not in line with the FATF standards
  • Issues of effectiveness:
    • No specific guidance on “the necessary details” to be kept in order to to ensure the reconstruction of the cycle of transactions.
    • Because of the shortcomings noted about the identification of beneficial owners, the data about beneficial owners may not be fully accurate.
SR.VIIPC
  • The option of requesting missing wire transfer information from the beneficiary of the transaction is not in line with the FATF standard.
  • Issues of effectiveness:
    • Poor implementation of the effective risk-based procedures for identifying and handling wire transfers with missing originator information and of the requirement to consider whether such transfer is suspicious and whether it should be required to be reported to the FIU.
    • No sanctions imposed for the non- compliance with the reporting obligation established by the AML/CFT law in the case of missing/incomplete information.
    • Concerns about the FIs practical understanding of the scope of the wire transfer-related requirements with regard to credit cards transactions.

3.6. Monitoring of Transactions and Relationships (R.11 and 21)

3.6.1. Description and Analysis

Unusual transactions (R 11 – rated PC in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

714. The 2006 MER noted that there was no explicit requirement to examine the background or purpose of the transaction except for some indicators in the BoA Regulation.

715. The AML/CFT Law seeks to remedy these defects, and there are now provisions in Article 9 requiring measures to be applied.

Legal Framework:

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Special Attention to Complex, Unusual Large Transactions (c. 11.1):

716. Article 9 para 3 requires FIs to “examine through enhanced due diligence all complex transactions and all types of unusual transactions that do not have a clear economic or legal purpose”.

717. Although the provision does not specifically require FIs to look for “unusual large transactions” or “unusual patterns of transactions” (as set out in criterion 11.1), its provisions contain general requirements that take into account all complex and unusual transactions as part of the steps required to be taken in applying enhanced due diligence. In addition, the requirement under Article 12 para 3 of the AML/CFT Law to report cash transactions equal to and above lek 1,500,000 and non-cash transactions equal to and above lek 6,000,000 (including linked transactions) means that FIs are required to look for large transactions.

718. For those institutions regulated by the BoA, Decision 44 contains some further guidance. Annex II, which is referred to in Article 8 para 5 as a list of indicators which FIs may refer to when establishing internal controls for categorizing clients refers to, inter alia, complex, unusual, and large transactions.

719. The concept of “enhanced due diligence” is very broadly defined in Article 2 para 20 of the AML/CFT Law as including an assessment of the possible risk of money laundering/terrorism financing. However, given the generally poor implementation of EDD measures (see analysis of Recommendation 5), it is recommended that Albania should have a specific provision (not linked to EDD) requiring FIs to pay special attention to all complex, unusual large transactions or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose.

720. Implementation: Implementation of this requirement was inconsistent among FIs spoken to during the assessment. Those supervised by the BoA were aware of the indicators in Annex II to Decision 44, but several thought that these were indicators of matters that should be reported as suspicious transactions. The leasing and insurance sectors do not, in practice, deal with unusually large sums of money, as premiums/repayments in both sectors were found to be relatively low. However, these sectors tended to consider AML/CFT measures as more important in the banking sector, and would not necessarily look for unusual patterns of transactions.

721. Large transactions are routinely reported to the FIU (see analysis under Recommendation 13/Recommendation 30) for further information, suggesting that identification of large transactions is taking place. However, these are targeted at transactions involving cash, and complying with the reporting requirements do not demonstrate compliance with the requirement to examine unusual or complex transactions.

Examination of Complex and Unusual Transactions (c. 11.2):

722. There is no specific requirement to examine the background and purpose of an unusual transaction. There is additionally no requirement to set forth the FIs’ findings in writing.

723. Implementation: Although there is no formal requirement to examine the background and purpose of unusual and complex transactions, there was some evidence in the banking sector that group policies of foreign parent companies were requiring banks to gather additional information and consider whether the transaction was unusual. Otherwise there was little evidence that this was being done. In addition, all sectors appeared to place greater emphasis on the currency transaction provisions in the AML/CFT Law than on otherwise unusual characteristics of transactions.

Record Keeping of Findings of Examination (c. 11.3):

724. As there is no explicit requirement to record findings, there is consequently no requirement to keep such findings for a period of five years.

Effectiveness:

725. All FIs in Albania were aware of the need to identify and report large currency transactions in accordance with Article 12 para 3 of the AML/CFT Law. This was in part due to a perception that the FIU would not hesitate to use its enforcement powers under Article 27 of the AML/CFT Law, which permits them to impose a fine of between 10% and 50% of the amount of the unreported transaction. Banks with foreign group parent companies had a greater understanding of the need to examine complex and unusual transactions, but this was usually as a result of group policies, as opposed to a strict understanding of the Albanian requirements.

726. FIs did not, however, generally demonstrate an awareness of the need to check for unusual transactions, except for those banks that are part of foreign-owned groups. The authorities consider that the use of the term “unusual” might have caused some confusion amongst FIs.

Special Attention to Countries Not Sufficiently Applying FATF Recommendations (R 21 – rated PC in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

727. The 2006 MER noted that there were no specific provisions except for some indicators in the BoA Regulation.

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Ministry of Finance Instruction no. 12 dated April 5, 2009 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917”, hereinafter “Instruction 12”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Special Attention to Countries Not Sufficiently Applying FATF Recommendations (c. 21.1 and 21.1.1):

728. Article 9 para 5 of the AML/CFT Law obliges FIs to apply enhanced due diligence to business relationships and transactions with clients residing or acting in countries that do not apply or partly apply the relevant international standards on AML/CFT. Article 22 let. i) empowers the General Directorate for the Prevention of Money Laundering (GDPML) to issue a list of countries to which these measures should be applied.

729. The GDPML has notified FIs of the availability of the FATF statements about jurisdictions with strategic deficiencies on its website. Parts 1 and 2 of the October 2010 FATF statement has been placed on the FIU’s website. This names Iran and the Democratic People’s Republic of Korea. The second half of the list is not reproduced, and the authorities appeared to consider that this list was politically sensitive as it includes Greece, which is one of Albania’s neighbors and trading partners. The absence of the second part of the list arguably means that FIs do not have complete information about countries that are not applying the FATF standards through their own authorities. The authorities explained that the complete list was published on the website when the June 2010 was released, but they felt that doing this again in October would cause confusion. As the October 2010 list contains updates and details of additional countries, it is recommended that full list be published.

730. There is no further guidance as to how an FI might go about assessing whether a country is not or is insufficiently applying the FATF standards.

731. Implementation: Most FIs were aware of the existence of the FATF statement, and were aware of the need to identify any business relationships with countries on the list. Some banks which are subject to more stringent overseas group policies had more information and awareness of the risks of doing business with countries other than those on the list.

Examinations of Transactions with no Apparent Economic or Visible Lawful Purpose from Countries Not Sufficiently Applying FATF Recommendations (c. 21.2):

732. The requirement in Article 9 para 5 does not appear to extend to an examination of transactions with no apparent economic or visible lawful purpose, and there is no specific requirement to make written findings available to competent authorities.

733. The high-level “enhanced due diligence” definition in Article 2 para 2 of the AML/CFT Law suggests that FIs are required to do some exploration to “assess the possible risk of money laundering terrorism financing”, but this does not amount to a specific requirement as envisaged by the criterion.

734. Instruction 12 also contains steps to be taken when dealing with clients from countries that do not apply or partly apply the FATF standards. These include (Article 5 para 8) obtaining “information regarding the legal regime of those countries concerning the prevention of money laundering and financing of terrorism before they establish a business relationship with this category of customer”. Again, this does not meet the essential criterion.

735. The FIU considered that FIs should submit a suspicious activity report if they had dealings with the two countries on the FATF list. This is not a formal requirement.

736. Implementation: Although some FIs were aware of the FATF list, few appeared to be taking any steps other than checking that clients were not either from or dealing with the 2 countries mentioned. Most felt that the likelihood of dealing with these countries was small.

Ability to Apply Counter Measures with Regard to Countries Not Sufficiently Applying FATF Recommendations (c. 21.3):

737. Article 22 let. (i) permits the FIU to list countries which do not adequately apply the FATF Recommendations. Other than the informal requirement of the FIU that FIs should report suspicious activity reports in cases involving Iran and North Korea, there is no formal procedure for applying counter-measures to them.

Effectiveness:

738. The availability of part of the FATF public statement on jurisdictions of concern appeared to be known by most FIs spoken to. However, given that the October 2010 FATF statement contains more information on other jurisdictions, this might be useful to FIs in Albania when considering the potential ML/TF risks of countries where clients come from or with whom they carry out transactions. Given Albania’s strategic geographical position, and the fact that the FATF list currently contains details also of 2 countries nearby, the authorities should consider whether this information could be useful, and that the updated list should be published.

739. In addition, there is no guidance to FIs as to the type of factors to be considered when assessing whether a country is not or is insufficiently apply the FATF Recommendations. This would be a potential alternative to publishing the whole of the FATF list, although reference to it would appear to be desirable.

3.6.2. Recommendations and Comments

Recommendation 11

740. The authorities should:

  • Increase awareness amongst FIs of the need to examine complex and unusual transactions.
  • Impose a specific requirement fir FIs to pay special attention to all complex, unusual large transactions and unusual patterns of transactions which have no apparent economic or visible lawful purpose.
  • Require obliged entities to record the findings of their examination of complex and unusual transactions in law, regulation or OEM.

Recommendation 21

741. The authorities should:

  • Require obliged entities to examine and make written findings of business relationships and transactions with persons in countries with poor AML/CFT controls, if they have no apparent economic or visible lawful background.
  • Give guidance as to the factors to be taken into consideration when determining if a country is not applying or is insufficiently applying the FATF Recommendations.
  • Specify the counter-measures to be taken in cases where an FI deals with a person in or from such a country.

742. The authorities should also:

  • Consider asking FIs to take into account the wider information contained in the FATF statements on improving global AML/CFT compliance.

3.6.3. Compliance with Recommendations 11 & 21

RatingSummary of factors underlying rating
R.11PC
  • No requirement to record findings of examinations of complex and unusual transactions;
  • Monitoring of transactions takes place only as part of EDD;
  • Concerns about effectiveness given the prominence of the currency transaction reporting requirement.
R.21PC
  • No requirement to record findings of examinations of transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations;
  • Concerns about effectiveness, given lack of information about countries of concern or factors to be taken into consideration.

3.7. Suspicious Transaction Reports and Other Reporting (R.13-14, 19, 25 and SR.IV)

3.7.1. Description and Analysis33

Suspicious transaction reports (R 13 – rated PC/SR IV – rated LC in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

743. The main findings of the 2006 MER were that there was a lack of direct reporting to the FIU, attempted transactions were not covered, and it was felt that the categories of suspicious activity which banks were required to report were overly restrictive. There was also found to be a poor level of awareness of the reporting obligation amongst FIs.

Legal Framework:

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Ministry of Finance Instruction no. 12 dated April 5, 2009 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917”, hereinafter “Instruction no. 12”.
  • Bank of Albania Supervisory Council Decision no. 44 dated June 10, 2009 “On the Approval of the Regulation “On prevention of money laundering and terrorist financing”, hereinafter “Decision 44”.

Requirement to Make STRs on ML and TF to FIU (c. 13.1 and IV.1):

744. The AML/CFT Law envisages two reporting requirements: one concerning suspicious activities and one concerning suspicious transactions.

745. The first one is set forth by Article 12 para 1 of the AML/CFT Law, which requires that when “entities suspect that property is proceeds of a criminal offence or is intended to be used for financing terrorism, they shall immediately present to the responsible authority a report, in which they state their doubts by the time limit set forth in the sublegal acts pursuant to this law.”

746. The term “criminal offence proceeds” is defined (in Article 2 para 11) by reference to Article 36 of the Criminal Code. This provision, which deals primarily with confiscation, refers to “any kind of asset, as well as legal documents or instruments verifying other titles or interests in the asset waiting upon or gained directly or indirectly form the criminal offence committal.”

747. Insider trading and market manipulation are not criminal offences in Albania and this is, therefore, something that affects the suspicious activity reporting requirement. In addition, given the deficiencies in the definition of terrorist financing, noted under SRII, reporting of suspicions relating to funds linked to terrorism, terrorist acts or by terrorist organizations or those who finance terrorism are not fully covered. In particular, the AML/CFT Law defines the financing of terrorism by reference to Articles 230a to 230d of the Criminal Code, but not Article 230 (“Actions with terrorist purposes”), which might restrict the scope of the reporting obligation.

748. The “sublegal acts” referred to in Article 12 para 1 refers to Instruction 12. Article 8 of this Instruction requires obliged entities to report their suspicions “immediately and no later than 72 hours”. This appears to be in line with international practice, and meets the requirement that suspicion be reported “promptly”.

749. The form of the Suspicious Activity Report (SAR) is set out in Annex 1 of Instruction 12, and there are guidelines for its completion.

750. For FIs regulated by the BoA, Decision 44 gives some guidance on what constitutes a suspicious transaction. Annex II lists types of suspicious operations, and makes it clear that the list is not exhaustive, and “does not substitute any legal obligation related to the reporting of suspicious or unusual transactions.” (Annex II para 3). These are regarded by the FIs spoken to, and the authorities, as being indicators. As such, they are treated as guidance for the purposes of this assessment.

751. The second reporting requirement is set forth by Article 12 para 2 of the AML/CFT Law, which additionally requires FIs to report on a slightly narrower basis, when the FI “is asked by the client to carry out a transaction” which it suspects may be related to money laundering or terrorist financing. The FIU is then required to give or withhold its consent within 48 hours of the request. For the purposes of this assessment, only reports submitted under Article 12 para 1 meet the criterion, as Article 12 para 2 (see below) refers only to transactions related to money laundering or terrorism financing.

752. Implementation: FIs spoken to often appeared to confuse the requirement to report SARs under Article 12 para 1 with the requirement to submit currency threshold reports (“CTRs”) under Article 12 para 3. This requires obliged entities to report all cash transactions equal to or greater than lek 1,500,000 and all non-cash transactions equal to or greater than lek 6,000,000. The figures provided by the FIU for CTRs and STRs show a far greater number of CTRs than SARs/STRs. Although this is to be expected, given that CTRs are reported on an objective basis, discussions with the private sector suggest that it is much easier to devote resources to implementing CTR systems (as these can be generated automatically by IT programs) than it is to the requirement to report SARs. As identified under Recommendation 11 (above), FIs are concerned that the FIU will use its powers under Article 27 para 6 to fine FIs for failing to report CTRs. The figures provided by the FIU also reveal that in 2009, one STR (under Article 12 para 2of the AML/CFT Law) was reported, and 20 were reported in 2010. Given that these are technically not covered by Recommendation 13/SR IV, this further reduces the effectiveness of implementation.

753. Some FIs expressed concern at having to wait 48 hours for consent under para 2, especially as no guidance has been given about what should be communicated to the client in these circumstances. This would appear to give grounds for concern that FIs could be in danger of tipping clients off.

754. FIs supervised by the BoA considered that the criteria in Annex II were purely indicative, but that they found them useful.

STRs Related to Terrorism and its Financing (c. 13.2):

755. The requirement in Article 12 para 1 covers explicitly the financing of terrorism.

756. “Financing of terrorism” is defined (in Article 2 para 4) by reference to Article 230 let. (a) to 230 let. (d) of the Criminal Code. Although these provisions are fairly broad, the lack of a reference to Article 230 of the Criminal Code might limit the scope of the obligation. In addition, the obligation to report suspicions of terrorist financing appears to be restricted to circumstances where it is “intended to be used for financing terrorism”, which would not include circumstances where the funds are actually used.

No Reporting Threshold for STRs (c. 13.3):

757. Article 12 para 1 does not contain any threshold. There is no specific requirement to report attempted transactions. The Albanian authorities report that 6 attempted transactions were reported in 2009 and 2 in 2010. These were submitted under paragraphs 1 and 2 of Article 12 of the AML/CFT Law, and the fact that they were attempted transactions was picked up from the narrative in the written suspicious activity report. This system does not appear to impose a direct requirement to report attempted transactions, although it appears to be happening in practice. A direct requirement would provide greater clarity.

758. There is a complete exemption under Article 13 for the reporting of the following transactions:

  • a. Cross bank transactions, except ones performed on behalf of their customers;
  • b. Transactions between entities of this law and the Bank of Albania;
  • c. Transactions performed on behalf of public institutions and entities.

This outright exemption is not compliant with the FATF standards. The Albanian authorities indicated that these exemptions were fewer than had been the case at the time of the 2006 MER.

Making of ML and TF STRs Regardless of Possible Involvement of Tax Matters (c. 13.4, c. IV.2):

759. Apart from the exemption referred to above, all SARs should be reported, including those relating to tax. However, tax evasion is only strictly a criminal offence after a first violation of the obligation to declare (which is an administrative offence), and thus a first offence would not necessarily trigger the need to report a SAR. Besides, given this different regime, it is unlikely that FIs would report SARs if they suspect tax evasion, as they would not have the possibility to ascertain whether the funds would involve an administrative offence rather than a criminal offence.

760. The tax authorities themselves have a duty to report STRs. Article 18 of the AML/CFT Law requires tax authorities to report “every suspicion, notification or data related to money laundering.”

Additional Element—Reporting of All Criminal Acts (c. 13.5):

761. The Albanian system requires STRs to be submitted for all criminal offences.

Tipping off/protection from civil and criminal liability (R 14 – rated PC in the 2006 MER)

Summary of 2006 MER factors underlying the ratings and recommendations

762. The 2006 MER noted that there was a contradiction between the relevant legislation and Article 305 of the Criminal Code, which criminalized “false reporting of a crime”. In the absence of a good faith provision for the reporting obligation, this was felt to be inconsistent. The offence of tipping off did not cover financing of terrorism, and did not apply to all reporting entities. There were also considered to be implementation issues, especially as reports were being disclosed to the bank of Albania.

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Ministry of Finance Instruction no. 12 dated April 5, 2009 on “The reporting methods and procedures of the obliged entities pursuant to Law No. 9917”, hereinafter “Instruction 12”.
  • Law no.8457 dated February 11,1999 “On Information classified “state secret”, hereinafter “Law on state secrecy”.

Protection for Making STRs (c. 14.1):

763. Article 14 of the AML/CFT Law has a general exemption from civil, penal and administrative liability for FIs, supervising authorities, their managers, officials or employees who submit information, in good faith, in accordance with the provisions of the Law. This appears to be a broad exemption which the Albanian authorities consider extends to circumstances where there is no knowledge of the underlying criminal activity and regardless of whether the criminal activity actually occurred.

Prohibition Against Tipping Off (c. 14.2):

764. Article 15 prohibits employees of reporting entities from informing the client or any other person about the facts behind a suspicious case, and the fact that an STR is being reported.

765. This part of the Law does not explicitly mention directors and other officers (who are not classed as “employees”), and this is an inconsistency with the FATF requirement.

Additional Element—Confidentiality of Reporting Staff (c. 14.3):

766. STR information is treated as “Confidential information” in accordance with Article 3 para c) of the Law on State Secrecy. However, these provisions do not appear to impose any obligation that guarantees the confidentiality of the names and personal details of staff from FIs that make STRs.

Effectiveness:

767. Article 12 para 2 of the AML/CFT Law requires FIs to obtain consent for transactions (not yet carried out) which they suspect are related to money laundering or terrorist financing. The FIU has 48 hours to provide a response. One FI considered that this posed difficulties in the context of tipping off, whereas another said that training run by the FIU had dealt with this issue, and that they would tell a customer that the transaction had not been completed due to IT issues.

Currency Transaction Reports (R 19 – rated PC in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

768. The 2006 MER considered that the thresholds in existence at the time were too high, given that much non-suspicious criminal activity could go unreported, and supported a proposal in the draft AML/CFT Law that this be lowered34.

Legal Framework

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Law no.8457 dated February 11,1999 “On Information classified “state secret”, hereinafter “Law on state secrecy”.

Consideration of Reporting of Currency Transactions Above a Threshold (c. 19.1):

769. Following the Third Round MER, Albania reduced the threshold for reporting transactions. Article 12 para 3 requires FIs to report to the FIU transactions in the following circumstances:

a. All cash transactions, equal to or greater than lek 1,500,00035 or its equivalent in other currencies

b. All non-cash transactions, equal to or greater than lek 6,000,00036 or its equivalent in other currencies executed as a single transaction or as a series of linked transactions.

770. Albania, therefore, meets the requirement of Recommendation 19.

Additional Element—Computerized Database for Currency Transactions Above a Threshold and Access by Competent Authorities (c. 19.2):

771. The currency transactions required to be reported under Article 12 are kept by the GDPML in a computerized system, and is held as confidential information under the Law on state secrecy. The GDPML stated that they are used only for the purposes of combating ML/TF.

Additional Element—Proper Use of Reports of Currency Transactions Above a Threshold (c. 19.3):

772. Information stored in the computerized system is subject to the Law on state secrecy, which establishes a monitoring body, the Classified Information Security Directorate. This Directorate has examined and approved the systems in place for storing information, including CTR information, at the FIU.

Feedback and Guidelines for Financial Institutions with Respect to STR and Other Reporting (c. 25.2):

773. Article 22 of the AML/CFT Law requires the GDPML to provide feedback/guidance in the following ways:

  • 1) Provide its feedback on the reports presented by the entities to this authority;
  • 2) organize and participate, together with public and private institutions, in training activities related to money laundering and terrorism financing, as well as organize or participate in programs aimed at raising public awareness.” The Albanian authorities report that the FIU provides feedback to reporting entities on STRs filed, and periodically issues typologies reports with trends and indicators. The FIU website contains a section on international typologies for 2008, 2009, and 2010, and Albanian typologies for 2009. It also contains a link to the FATF Best Practices paper on Trade-Based Money Laundering.

774. In addition, the FIU website contains indicators of potential money laundering. They suggest reporting entities “should include these indicators in staff training, and encourage their staff to use these indicators when describing suspicious behaviours of suspicious transactions.”

775. Discussions with FIs revealed that the FIU had run training courses, which were thought to be useful. These contained general information on typologies and trends.

776. In addition, the Bank of Albania reports that in April 2010 it wrote to all Bureaux de Change calling for greater attention to all aspects of the AML/CFT framework and that it provides FIs with the decisions of the Council of Ministers concerning list of terrorists. As yet, this does not appear to have resulted in additional SARs.

777. Implementation: FIs considered that the feedback given by the FIU was very limited, and often amounted to no more than an acknowledgement of receipt of a SAR. There was no further information on the quality of the SAR, or further information about the use made of it. In addition, FIs felt that further training on methods and trends would be useful.

Statistics (R.32):

778. The Albanian authorities have provided the following statistics for numbers of STRs filed over the past five years:

ReportingYear 2005Year 2006Year 2007Year 2008Year 2009Year 2010
Entities
CTRSARCTRSARCTRSARCTRSARCTR*SARCTR*SAR
Banks26,74646,5071460,65748231,531748972,8521211,602,61163
601
Bureaux75179219
de Change
Customs331143362851152015
Notaries896,05911.277417,5896
Central13641,004
Office for Reg’n of RE
Non Bank792138901,2343
FI (MVT)
Car Dealers190294
Games of Chance3819
Other556149822
(State institutions, public notifications)
Tax26
Directorate
Foreign4310
FIU
HIDAA26
Construction companies1,731
Total26,7410746,6271561,34748231,531748985,4471861,624,98211
6237338

- Includes both CTR and Value Transaction Reports over – EUR 45.000.

- Includes both CTR and Value Transaction Reports over – EUR 45.000.

779. Of the figures for SARs reported in 2010, the FIU provided the assessment team with the following breakdown of those submitted by banks:

BankNumber of SARs
Bank 13941
Bank 28
Bank 321
Bank 418
Bank 51
Bank 67
Bank 76
Bank 818
Bank 93
Bank 102
Bank 1128
Bank 125
Bank 135
Total163

Effectiveness overall for STR reporting:

780. The sharp decrease in the number of SARs from 2007 onwards is explained in the FIU’s Annual Report for 2009 as being because that year marked an increase of SARs relating to that unlicensed currency exchange operations, multiple transactions directed to one beneficiary and tax evasion. Given the fact that in 2007, only 1% of the total SARs were referred to law enforcement agencies, the FIU itself considers that the quality of these was poor.

781. The figures for 2009 and 2010 also contain a total of 21 STRs (reported pursuant to Article 12 para 2 of the AML/CFT Law), which do not meet the requirements of Recommendation 13. In addition, the potential lack of reporting of suspicions relating to evasion (which is only considered a criminal offence after the second time it has occurred), would have a negative impact on reporting figures.

782. It was apparent from discussions with financial institutions that a greater degree of attention was being paid to the requirement to submit currency transaction reports than to SARs. Some institutions appeared to think that the AML/CFT Law only required currency transaction reporting, and another one, despite knowing of the requirement and having submitted SARs, felt that the requirement to submit CTRs was given greater emphasis by the authorities and FIs themselves, especially as an FI could be fined up to 50% of the value of the transaction if they failed to report it.

783. The greater proportion of SARs from the banking sector compared to other sectors is not surprising, given that the banking sector is the most significant. However, it is worthy of note that just 0.012% of all the reports received from banks in 2009 related to suspicious activity. This figure reduces to 0.007% in 2010.

784. Of the SARs received from banks, over 70% were reported by just 3 of the 16 banks operating in Albania, and 40% were submitted by one bank with a parent company based in the European Union. These figures suggest that SAR reporting is greater in an FI which is required to perform its activities to a potentially more stringent external standard.

785. The overall figures suggest a lack of awareness in the Bureau de Change sector, which submitted no SARS in the past two years, despite dealing with transactions which triggered CTRs. In addition, the non-bank financial institutions (which potentially includes remitters) submitted only 1 SAR in the past 2 years.

786. There is lack of SARs relating to the financing of terrorism. In 2009 there were 4 reports related to terrorist financing, and 7 in 2010. This appears to be a low. This might be as a result of the potentially restricted scope of the reporting requirement, as the AML/CFT Law does include Article 230 of the Criminal Code in its definition of terrorist financing.

787. The overall figures are considered by the assessment team to be low, given the potential ML/FT risks in the country (see discussion under Recommendation 1 and SRII), giving rise to concerns about the effectiveness of the reporting provisions, especially in the light of discussions with FIs backed up by the overall figures for SARs, and the figures for CTRs compared to SARs.

3.7.2. Recommendations and Comments

Recommendation 13

788. The authorities should:

  • Ensure that the SAR requirement extends to all categories of offences required in the FATF standards;
  • Extend the definition of STR (Article 12 para 2) to include the proceeds of criminal activity;
  • Set out an explicit requirement in law or regulation that attempted transactions should be reported;
  • Remove the exemptions in Article 13 of the AML/CFT Law that relate to SARs;
  • Take steps to raise awareness amongst obliged entities of the difference between the currency transaction reports, suspicious activity reports and suspicious transaction reports that are required under the AML/CFT Law;
  • Encourage greater reporting of SARs by obliged entities by raising awareness of the reporting requirement in sectors/parts of sectors which have submitted few SARs;
  • Ensure that all instances of tax evasion are reported.

789. The authorities should also:

  • Consider reviewing the whole CTR reporting system to determine whether it adds value to the fight against ML/TF, especially given that FIs give it precedence over reporting suspicion;
  • Provide adequate and timely feedback to obliged entities which report SARs.

Recommendation 14

790. The authorities should:

  • Clarify the AML/CFT law so that the prohibition against tipping off explicitly applies to directors and officers as well as employees;
  • Provide guidance to obliged entities on the steps to be taken to avoid tipping off when an STR is submitted under Article 12 para 2 of the AML/CFT Law.

Special Recommendation IV

791. The authorities should:

  • Encourage greater reporting of SARs related to TF by obliged entities by raising awareness of the reporting requirement in sectors/parts of sectors which have submitted few SARs;
  • Ensure that the SAR requirement extends to all categories of TF required in the FATF standards, and that it applies to situations beyond intended terrorist financing.

Recommendation 25

792. The authorities should:

  • Enhance feedback to reporting entities having regard to the FATF Best Practices Guidelines on Providing Feedback to Reporting Financial Institutions and Other Persons.

3.7.3. Compliance with Recommendations 13, 14, 19 and 25 (criteria 25.2), and Special Recommendation IV

RatingSummary of factors underlying rating
R.13PC
  • Deficiencies in criminalization of ML (insider trading and market manipulation);
  • Definition of FT might limit the scope of the reporting obligation;
  • Provisions only extend to “intended” terrorist financing;
  • Exemptions from requirement to report are not in line with the FATF standard;
  • No explicit requirement to report attempted transactions;
  • The number of SARs overall and in comparison with CTRs give concerns about the effectiveness of the reporting regime.
R.14LC
  • Prohibition against tipping off does not explicitly extend to directors and officers.
R.19C
  • This Recommendation is fully met.
R.25PC
  • Insufficient feedback.
SR.IVPC
  • Deficiencies in criminalization of TF;
  • Definition of FT might limit the scope of the reporting obligation;
  • Provisions only extend to “intended” terrorist financing;
  • Exemptions from requirement to report are not in line with the FATF standard;
  • No explicit requirement to report attempted transactions;
  • Low numbers of SARs relating to TF give rise to concerns about the effectiveness of the reporting regime.

3.8. Internal Controls, Compliance, Audit, and Foreign Branches (R.15 & 22)

3.8.1. Description and Analysis

Internal Controls, Compliance, Audit, and Foreign Branches (R.15—rated PC and 22—rated C in the 2006 MER)

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

793. The 2006 MER noted that there was no explicit requirement for internal procedures to deal with CDD or the responsibilities of the Money Laundering Reporter Officer (MLRO), the “central unit’ needed clarification, the lack of requirements relating to training in ML/FT trends and techniques and the lack of specific provisions on employee screening.

Legal Framework:

  • Law no. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.

Banks and other Non banks financial Institutions

  • Law No. 9662 dated December 18, 2006 “On Banks in the Republic of Albania”, hereinafter the “Banking Law”;
  • Law No. 8269 dated December 23, 1997 “On the Bank of Albania”, hereinafter the “BoA Law”;
  • Decision No. 44, dated June 6, 2009 ‘On the approval of the Regulation On prevention of Money Laundering and Terrorist Financing” hereinafter “Decision 44”;
  • Decision No. 14, dated March 3, 2009 “On the Approval of the Regulation on Granting License and The exercise of Banking Activity of Banks and Branches of Foreign Banks in the Republic of Albania” hereinafter “Decision 14”.

Establish and Maintain Internal Controls to Prevent ML and TF (c. 15.1, 15.1.1 and 15.1.2):

794. According to Article 11 of the AML/CFT Law FIs are required to establish and maintain internal procedures, policies and controls to prevent ML/ TF. The Law requires that FIs must draft and apply internal regulations and guidelines taking into account the ML/TF risks, which might be posed by their clients or business.

795. Under Article 11 of the AML/CFT Law, para 1, those internal regulations should address, at a minimum, the clients’ acceptance policy and a policy for the application of procedure of enhanced due diligence in the case of high-risk clients and transactions.

796. For Banks and the rest of FIs supervised by BoA, Article 8 para 5 requires FIs to prepare, approve and submit to the BoA for its approval, a copy of the internal AML/CFT procedures.

797. While the AML/CFT law is silent with regard to the obligation to communicate policies and procedures to the FIs’ employees, BoA, Decision 44, para 9 specifically requires the person responsible for AML/CFT (compliance officer) to inform employees periodically of changes relating to applicable legal provisions and their obligation concerning the AML/CFT requirements.

798. Article 11 para b of the AML/CFT Law requires FIs to appoint “a responsible person and his deputy for the prevention of money laundering” (the financing of terrorism is not mentioned), at the “administrative/management” level in the central office and in every representative office, branch, subsidiary or agency. Employees are required to report to the compliance officer “all suspicious facts, which may comprise a suspicion related to money laundering or terrorism financing”.

799. It is not clear for the assessors if the law foresees a two-tier level: management level for the compliance officer/deputy and administrative level for the branches/subsidiaries, or if an option is given between administrative/management for the appointment of the compliance officer. The case of the administrative level option would not be in compliance with the standard.

800. The BoA Decision 44 clarifies the obligations for entities subject to its supervision and also removes the ambiguity with regard to the level at which the compliance officer should be appointed. This is reflected in Article, para 4, of the Decision 44 which requires entities to establish a structure/structures and infrastructure for the prevention of money laundering and financing terrorism. Para 2 requires entities to assign one of their executive directors as a responsible person to perform duties related to the prevention of ML/FT. FIs shall submit the name of the responsible person to the BoA40.

801. However this Decision 44 applies only for those FIs that are supervised by the BoA.

802. The AML/CFT law does not foresee that the compliance officer be given timely access to data (customer identification and other CDD information, transaction records and other relevant information).

803. The Article 11 of the AML/CFT, which settles the prevention measures to be undertaken by the entities, does not mention specifically the obligation to have in place procedures to detect unusual and suspicious transactions.

Independent Audit of Internal Controls to Prevent ML and TF (c. 15.2):

804. Article 11 of the AML/CFT Law requires FIs to “assign the internal audit” to check the compliance with the AML/CFT obligations in the Law. While this would presuppose the existence of an internal audit, there is no specific requirement to establish an independent audit function. Moreover, considering that the audit is required to check for compliance with the AML/CFT requirements, it would appear that the responsibility of the compliance officer is limited to the role of prevention (and as the recipient of the reporting of ‘suspicious facts, including suspicions of ML/FT”).

Ongoing Employee Training on AML/CFT Matters (c. 15.3):

805. Under Article 11(e) of the AML/CFT Law FIs are required to train employees specifically in AML/CFT through “regular organization of training programs”. Specifically for banks, non-bank financial institutions, savings and loans institutions and credit unions, money exchange companies and consumer financing entities, the Decision 44 assigns the responsibility to the AML/CFT compliance officer to draft an annual training program and to implement it. The purpose of the training is to inform the employees about the internal regulations and procedures adopted by the FI for the purpose of preventing money laundering and financing terrorism. There is no similar provision in the FSA Law and no specific requirement for non-BoA supervised entities in relation to the compliance officer’s obligation to inform employees periodically of their obligations under the AML/CFT Law.

Employee Screening Procedures (c. 15.4):

806. Article 11.d of the AML/CFT Law requires FIs to apply fit and proper procedures when hiring employees, to ensure their integrity. Neither the AML/CFT law nor the BoA Decision 44 defines what these fit and proper procedures are for employees. A definition can be found in Article 18 on Collective Investment Funds (CIF law) which defines ‘fit and proper’, but in this case, this definition does not apply to employees but rather to companies’ owners or auditors41).

Additional Element—Independence of Compliance Officer (c. 15.5):

807. There is no specific provision for an independent compliance officer. However the compliance officer should be independent. In the case of banks and BoA supervised institutions, the requirement of the Decision 44 specifies the position as “an executive director of the entity”. For other entities subject to the AML/CFT Law the ambiguity of Article 11 might make it difficult for compliance to be independent if the compliance officer is at the administrative level.

Effectiveness:

808. From the interviews the mission conducted with FIs, it appeared that manual and internal procedures to prevent ML/CF have been developed. However, as noted elsewhere in this report, in the case of Enhanced Due Diligence (EDD) it was unclear as to the existence of elaborated procedures.

809. In practice, as a consequence of the licensing requirements, banks as well as other non-banking FIs spoken to have an internal auditor/department which reports directly to the Board, and that the internal auditor (or department) also checks the AML/CFT operations and procedures. Only banks owned by a parent bank located in a member country of the European Union have an internal auditor/department separate from the compliance department. In the case of bureau the change businesses, there is no requirement for an internal auditor in the Bureau de Change Law.

810. There is no specific provision requiring that the compliance function should have timely access to any data. The FIs spoken to stated that, in practice, the compliance officer has no impediment to obtaining any information or data recorded or collected. However, for the FIs that keep the records in hard copy only, much of the data would not be kept at the FIs headquarters office, but in separate archives located in a different building, which is, in some cases, located outside of Tirana and poses an issue of timeliness of access.

811. The FIs spoken to had mixed practices regarding the appointment of the compliance officer, in some cases the compliance officer is at management level whilst in other cases the compliance officer is at administrative level.

336. In practice, the FIs interviewed by the mission confirmed that the recruitment process is more focused on the accuracy of the professional profile. Some entities declared that the absence of criminal records is checked through an official document issued by the Ministry of Justice while others rely on employee self-declaration.

812. The mission noted that for large FIs the implementation of the requirements concerning the development of AML/CFT policies and procedures, training of existing and newly hired staff were satisfactory. Training materials would be normally developed in-house (or at the group level). The percentage of trained employees appears satisfactory. However, with regard to other financial sectors (securities and insurance companies) the training is very poor or does not exist and consists mainly of informing the employees about the changes in the AML/CFT legislation.

Application of AML/CFT Measures to Foreign Branches and Subsidiaries (c. 22.1, 22.1.1 and 22.1.2):

813. Article 11f of the AML/CFT law establishes a requirement for FIs to ensure that their branches, sub-branches and agencies, whether located in Albania or in other countries apply the requirements of the AML/CFT Law. There is no specific requirement to pay particular attention to the principle of the application of the domestic legislation to branches/subsidiaries that operate in countries which do not or insufficiently apply the FATF Recommendations. There is also no specific requirement to apply the higher AML/CFT standard when the AML/CFT requirements of the home and host countries differ.

Requirement to Inform Home Country Supervisor if Foreign Branches and Subsidiaries are Unable to Implement AML/CFT Measures (c. 22.2):

814. Article 11 g of the AML/CFT Law states that the requirements in countries where the Albanian branches/subsidiaries are located are in contrast with the Albanian laws there is an obligation on the Albanian FIs to report to the GDPML and the competent supervisory agency.

Additional Element—Consistency of CDD Measures at Group Level (c. 22.3):

815. There is no explicit provision requiring the application of consistent CDD measures at group level. The Article 11, para g, requirement on branches and agencies means that the same measures would apply throughout a group. The Albanian FIs belonging to European banking groups interviewed informed the assessors that they follow group standards and policies.

Effectiveness

816. In practice, the Albanian FIs with branches and agents in Albania or abroad (Macedonia or Kosovo) mainly stated that a local compliance officer is designated for each branch or agency. Generally speaking those branches agents that are responsible for AML/CFT issues, shall report to the headquarters office compliance officer who is the principal AML/CFT person responsible for compliance entity.

817. In the case of FIs with branches abroad, the obligation to report and follow the group AML/CFT policy does not appear clear, especially in non European Union countries where the AML/CFT laws are different and, as a consequence, the compliance officer designated in the ‘foreign branches” seems to be more independent and not every situation or case is always reported to the “group compliance officer” in the Albanian head office. Procedures might be also different as they follow the host country branch legislation. Therefore there are no single AML/CFT procedures at group level.

3.8.2. Recommendations and Comments

Recommendation 15

818. Authorities should:

  • Clarify that the ‘compliance officer” should be at management level.
  • Specifically include FT among the responsibilities of the compliance officer.
  • Specify that the FIs internal regulations should include prodedures to detect unusual and suspicious transactions.
  • Require that compliance officer has timely access to the data he/she may need.
  • Require FIs to establish an independent audit function.
  • Ensure that non-banking FIs provide proper AML/CFT training to their employees.
  • Ensure that FIs put in place screening procedures to follow high standards when hiring employees.

819. Authorities should also:

  • Consider developing guidelines on employee screening procedures requirements.
  • Consider introducing the requisite of the independence of the compliance officer.

Recommendation 22

820. Authorities should:

  • Introduce a specific requirement for FIs to pay particular attention to the principle of the application of the domestic legislation to foreign branches/subsidiaries that operate in countries which do not or insufficiently apply the FATF Recommendations.
  • Introduce a specific requirement to FIs adopt the highest AML/CFT in case of branch subsidiaries or branches in foreign countries.
  • Ensure that the Albanian AML/CFT standards are applied in a consistent way among the Albanian FIs foreign branches as a part of a group policy.
  • Consider to introduce a requirement to FIs draft a group AML/CFT policy manual to ensure consistent CDD measures at the group level.

3.8.3. Compliance with Recommendations 15 and 22

RatingSummary of factors underlying rating
R.15PC
  • Not clear if compliance officer should always be appointed at management level.
  • CFT not among the responsibilities of the compliance officer.
  • No direct provision requiring timely access to data by the compliance officer.
  • No specific provision requiring an independent audit function.
  • Issues of effectiveness:
    • Weak AML/CFT employees training in the non-banking financial sector.
    • No specific requirement, for non-BoA supervised entities, of the compliance officer obligation to inform employees periodically of applicable AML/CFT Laws requirements.
R.22LC
  • No specific requirement to pay particular attention to the principle of the application of the domestic legislation with respect to branches/subsidiaries that operate in countries which do not or insufficiently apply the FATF Recommendations.
  • No specific mention to apply if there is the case, a higher standard.

3.9. Shell Banks (R.18)

3.9.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

821. In the 2006 MER this Recommendation was rated PC. The 2006 MER noted that although it was a practice for FIs not to operate with shell banks, there was no specific prohibition in the Law.

Legal Framework:

  • Law No. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law42”.
  • Decision 14 “On the approval of the regulation “On granting the license and the exercise of banking activity of banks and branches of foreign banks in the Republic of Albania, hereinafter “Decision 14.”

Prohibition of Establishment Shell Banks (c. 18.1):

822. The Albanian Law does not explicitly prohibit the establishment or operation with shell banks, but the effect of the criteria for licensing in article 7 of Decision 14 and in article 17 of the Banking Law seems to prevent these activities due to the requirements relating to the documentation to be submitted for granting the license of a bank and branch of the foreign bank. Among the documentation required to be presented and approved by the supervisory authority previously to a FI operates in the Albanian financial system, the financial laws include FIs shareholders information (for further details see Recommendation 23).

Prohibition of Correspondent Banking with Shell Banks (c. 18.2):

823. The AML/CFT law does not forbid specifically establishing a direct correspondent relationship with a shell bank; neither prohibits to continue a previously established relation.

Requirement to Satisfy Respondent Financial Institutions Prohibit of Use of Accounts by Shell Banks (c. 18.3):

824. The provision of Article 9 para 2 of the AML/CFT Law prohibits any correspondent banking relationship with a bank that is known to allow a shell bank to use its accounts. The FIs shall terminate any business relationship and report to the responsible authority if they notice that the accounts of the corresponding bank are used by shell banks.

825. It is important to note that the Albanian AML/CFT Law prohibits business relationships with banks which permit their accounts to be used by shell banks.

Effectiveness:

826. The FIs spoken to understood the provision of the article 9 AML/CFT Law as a general prohibition against operating with shell banks.

827. The BoA and the FIU confirmed that no case has been denounced.

3.9.2. Recommendations and Comments

828. The absence of a general prohibition against operating with shell banks leaves a potential gap in the framework, although, in practice, FIs confirmed that they do not operate with shell banks as if it was totally prohibited.

829. Due to the gap in the redaction of the Article 9 AML/CFT Law, the authorities are recommended to amend the AML/CFT Law forbidding FIs specifically from operating with shell banks (either as a customer or as a correspondent).

3.9.3. Compliance with Recommendation 18

RatingSummary of factors underlying rating
R.18PC
  • No specific legal prohibition on establishing or continuing to operate with shell banks.
  • No specific ban on the establishment of a direct correspondent relationship with a shell bank.

Regulation, Supervision, Guidance, Monitoring and Sanctions

3.10. The Supervisory and Oversight System—Competent Authorities and SROs. Role, Functions, Duties, and Powers (Including Sanctions) (R. 23, 29, 17 & 25)

(R 23 – rated PC/R 29 – rated LC/R17 – rated PC in the 2006 MER)

3.10.1. Description and Analysis

Summary of 2006 MER Factors Underlying the Ratings and Recommendations

830. Albania was rated PC for R23 during the last ME in 2006 largely because of inadequate supervision of non-bank and insurance institutions. In addition, it was concluded that supervisory powers under R29 were not being effectively used by the regulators resulting in a rating of LC. Finally it was determined that the supervisory authorities (especially the insurance supervisor) were not sufficiently resourced to effectively conduct ongoing AML/CFT supervision.

Legal Framework:

831. The designation and supervisory powers of authorities responsible for AML/CFT supervision are contained in the following laws, regulations and other related instruments:

Applicable to All Obliged Institutions

  • Law No. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Decision No. 343 April 8, 2009 “On reporting Methods or Procedures of the Licensing and/or Supervisory Authorities” hereinafter “Decision 343”approved by the Council of Ministers.

Banks and other Non-banks financial Institutions: Supervisor the BOA

  • Law No. 9662 dated December 18, 2006 “On Banks in the Republic of Albania”, hereinafter the “Banking Law.
  • Law No. 8269 dated December 23, 1997 “On the Bank of Albania”, hereinafter the “BoA Law”.
  • Decision No. 44, dated June 6, 2009 “On the approval of the Regulation on Prevention of Money Laundering and Terrorist Financing” hereinafter “Decision 44” approved by the Supervisory Council of the Bank of Albania.
  • Decision No 14, dated March 3, 2009 “On the Approval of the Regulation on Granting License and The exercise of Banking Activity of Banks and Branches of Foreign Banks in the Republic of Albania” hereinafter “Decision 14”, approved by the Supervisory Council of the Bank of Albania.
  • Decision No. 11, dated February 25, 2009 “On the approval of the Regulation On the Granting of License to Non Bank Financial Subjects” hereinafter “Non Banks Financial Subjects Law”, approved by the supervisory Council of the Bank of Albania.

Exchange Bureaus- Supervisor: BOA

  • Regulation No.70 on Foreign Exchange Activities. Approved by the Supervisory Council of the Bank of Albania, hereinafter “Regulation 70”.
  • Regulation No. 31 “On licensing, Organization, Activity and Supervision of Foreign Exchange Bureaus” approved by the Supervisory Council of the Bank of Albania, hereinafter “Exchange Bureau Regulation”.

Securities and Insurance: Supervisor FSA

  • Law 9572 of July 3, 2006 “On the Financial Supervisory Authority”, hereinafter “FSA Law”.
  • Decision No 98 dated April 30, 2007 “On the Approval of the Structure of the Albanian Financial Authority” approved by the Parliament of the Republic of Albania.
  • Guideline No 2 of November 21, 2007 “On the Procedures for Inspections at Non-banking Financial Entities” approved by AFSA Board 2007 hereinafter “FSA G2”.
  • Law No 9267 of July 29, 2004 “On the Activity of Insurance, Reinsurance and Intermediation of Insurance and Reinsurance” hereinafter “the Insurance Law”.
  • Law No 10197 of December 10, 2009 “On Voluntary Pension Funds” hereinafter “VPF law”.
  • Law No.10198 of December 10, 2009 “On Collective Investment Undertaking” hereinafter CIU Law”.
  • Law No.9870 of February 21, 2008 on Securities hereinafter “Securities Law”.
  • Regulation No. 165. on the licensing of the brokerage/intermediary companies, the broker, and the investment advisor.
  • Regulation No.120.on the licensing and supervision of the securities exchange.
  • Decision No. 79, dated January 28, 2008 “On setting the criteria and procedures concerning insurance intermediaries’ licensing and the rules of supervising their business, as well as, the cases of refusing the license”.
  • Regulation No. 14. Dated 08 February 2007 on some criteria to be met by elected or appointed individuals in leading positions of insurance and reinsurance companies.
  • Regulation No. 13, Dated February 8, 2007 on the procedures for accepting and reviewing of applications regarding providing with license to conduct insurance or reinsurance business in the Republic of Albania adopted upon Board decision No. 13, date February 8, 2007.

832. The legal sanctions regime are contained in the following laws:

  • The Criminal Code, the Criminal Procedures Code (Law no. 9749, dated April 6, 2007) “Laundering of proceeds of crime”.
  • Art. 45 “The Application of the Criminal Law on Legal Persons/Entities” of the Civil Code.
  • Law No.9754. on the “criminal responsibility of the legal persons” contains provisions regarding the penal sanctions applied for breaches of the national AML/CFT requirements.
  • Law No. 9917 dated May 19, 2008 “On the Prevention of Money Laundering and Terrorism Financing”, hereinafter the “AML/CFT Law”.
  • Law No.9258, July 15, 2004 “On Measures Against Financing Terrorism” hereinafter FT Law.

Competent authorities—Powers and resources: Designation of Competent Authority (c. 23.2) Power for Supervisors to Monitor AML/CFT Requirement (c. 29.1); Authority to conduct AML/CFT Inspections by Supervisors (c. 29.2); Power for Supervisors to Compel Production of Records (c. 29.3 and 29.3.1); Adequacy of Resources—Supervisory Authorities (R.30)

Designation of Competent Authority (c. 23.2)

833. The Albanian financial regulatory system has two prudential supervisors- the Bank of Albania (BoA) -- for supervising banks and the rest of non banking financial activities excluding insurance, which is supervised by the Financial Supervisory Authority (FSA). The FSA is also responsible for supervising securities and insurance companies. These two financial supervisors, designated in the AML/CFT Law as “supervisory authorities” are responsible, inter alia, for licensing and for ongoing supervision, including for compliance with the requirements of the AML/CFT Law (Article 24). In addition to these supervisors, the General Directorate for the Prevention of Money Laundering (GDPML) has also supervisory responsibilities.

834. The legal authority for AML/CFT supervision for the three Albanian authorities is provided under Articles 21 para 1, 22 and 24 of the AML/CFT Law. Article 21 states the organization and functions of the GDPML, Article 22 provides the duties and functions of GDPML as Albania’s Financial Intelligence Unit (FIU) which, among others, is “to supervise the compliance of the entities with the obligation to report”, including onsite inspections, alone or in collaboration with other relevant supervising authorities. Article 24, finally gives, the power to supervise, through on site inspections, to the supervising authorities (BoA and FSA). This Article also includes the obligation for the Supervisory authorities to immediately report to the FIU every suspicion, information or data related to money laundering or financing terrorism for the activities supervised.

BoA Authority

835. The BOA’s role as the AML/CFT supervisory authority is also mentioned in Article 10.1 of Decision 44 which designates the BoA as the AML/CFT supervisor by reference to the provisions of Article 24 of the AML/CFT Law. For Non-bank financial activities the obligation is addressed in Article 9 of the “Banking Law”.

836. In line with AML/CFT Law, the BOA’s supervisory responsibilities extend to foreign exchange bureaus, pursuant to Article 18 of the Exchange Bureau Regulation. For the rest of non-bank financial activities, BOA prudential supervision extends to credit, leasing, factoring companies and remittance firms.

837. BoA has issued Decision No. 44 which restates some of the provisions of the AML/CFT Law and provides additional guidance on the implementation of the procedures and documentation of the identification of the customer, regulation for record keeping, preservation of data and their reporting to the responsible authority for the subjects under its supervision, including not only commercial banks, but non-bank financial institutions, exchange offices, saving and loans companies, postal services that perform payments services and other physical or legal entities that issue or manage payments means or handle value transfers.

Financial Supervision Authority (FSA)

838. In addition to Article 24 of the AML/CFT Law, the Financial Supervisory Authority’s (FSA) powers are provided by Articles 2, 3 and 13, 14 of Law No. 9572 that establish the Financial Supervisory Authority, Articles 120, 121 of the Insurance Law, Articles 70 and 71 of the “VPF Law”, Articles 124,125 of the CI Law and the articles of the Securities Law.

839. The AML/CFT-specific supervisory powers are mentioned in Article 24 para b) of the AML/CFT Law where the FSA is mentioned as a AML/CFT supervisor of the stock exchange and any other entity (agent, broker, brokerage house, etc) which carries out activities related to issuing, counseling, mediation, financing, and any other activities related to securities trading and companies involved in life insurance or re-insurance, agents and their intermediaries as well as collective investment and retirement funds.

840. The FSA has not issued by-laws regarding its attributions as AML/CFT supervisor. The CIF43 and VPF44 laws are the single laws where a cross-reference to AML/CFT Law provisions is made. Due to the nature of their activities, Collective Investment Funds (securities) and Voluntary Pensions Funds (retirement funds) fall within the scope of FSA prudential and AML/CFT supervision.45 The FSA is currently working on updating the law regarding insurance and reinsurance activity which pre-dates the AML/CFT law.

841. The following chart shows the authority responsible for prudential, market conduct and AML/CFT regulation and supervision in 2009:

Subjects (FIs)Number licensedPrudential supervisor/regulatorAML/CFT supervisor
Banks and Foreign banks16BOABOA
Non-Bank Financial Institutions (NBFI)1746BOABOA
Foreign exchange bureaus285BOABOA
Savings and Credit associations135BOABOA
Savings and Credit Associations Unions2BOABOA
Non- life insurance companies (Non life insurance 91%)7FSANA: No obliged

under AML/CFT

Law
Life insurance companies (Total insurance life 9%)2FSAFSA
Mix (life and Non life)1FSAFSA
Reinsurance companies1FSAFSA
Insurance agencies8FSAFSA for life
Insurance agents166FSAFSA for life
Insurance brokerage companies8FSAFSA for Life activity
Insurance broker10FSAFSA for life
Insurance claims adjustors companiesFSANA
Insurance claims adjustor54FSANA
Private pensions funds3FSAFSA
Pensions funds management companies1FSAFSA
Depositaries of the assess of private pensions funds2FSAFSA
Securities brokerage companies12FSAFSA/BOA
Securities brokers16FSAFSA/BOA
Registration of securities1FSAFSA
Organized market of securities1FSAFSA

842. Apparently there is an inconsistency between the AML/CFT Law47 and the Decision 34348 concerning the supervisory authority for the category of FIs defined as “any other physical or legal entity that issues payments or handles value transfers”. According to the AML/CFT law the supervisory authority is the FSA whereas Decision 343 places this responsibility on the BoA.

843. The BoA explained to the assessment team that there is not a contradiction; however there is a duplication of requirements. The Decision 343 that provides for the BoA’s supervisory powers includes any other natural or legal entity that issues or manages means of payments or handles value transfers. However, the AML/CFT Law also provides for the FSA’s supervision of entities that carry out those services. The BoA staff assured the assessors that all the entities that issue or manage payments or handle value transfers are included in the category of non-bank financial institutions and are under the BoA’s licensing regime and supervision. The assessors were satisfied with the explanation provided by the BoA but suggested that the law be amended to make it clearer and avoid possible future confusion.

The General Directorate for the Prevention of Money Laundering (GDPML)

844. In addition to the BoA and the FSA, the GDPML has also a supervisory role. Pursuant to Article 22 (d) of the AML/CFT Law, the GDMLP has the responsibility to supervise compliance by the reporting entities with respect to their reporting obligations, including through onsite inspections either on its own or in collaboration with other relevant supervisory authorities.

845. Regarding the scope of the FIU’s supervisory powers, the assessment team and the FIU had different interpretations of Article 22. para d) of the AML/CFT Law. According to the FIU, the scope of the supervisory activities extends to the schecking compliance on with all the obligations imposed by the AML/CFT Law. This interpretation is based on the FIU’s view that its primary function as a financial intelligence unit, (collection, analysis and dissemination) implicitly covers ML/FT risks affecting the reporting entities (Art. 21 and 22 AML Law). Consequently, the compliance with the reporting obligations should be interpreted as to extend also to the preventive measures such as customer identification, record keeping.

846. The assessors do not share this view and deem that if this is the interpretation of the FIU’s supervisory role amendments to the AML/CFT law should be made to clarify it..

847. The table below illustrates the AML/CFT supervisory framework in Albania:

AML/CFT supervisory authorities (Implementation and ongoing supervision)

BoA on- site inspections: scope and internal procedures.

848. With regard to the BOA’s on-site inspections, it is necessary to distinguish two periods:

  • - Before 2010, when the AML/CFT risk was a component of the general/prudential on-site inspections and evaluated within the overall risk profile of the institution supervised.
  • - After 2010, when a specific unit was created with “assigned inspectors” within the BoA to address compliance, transparency, consumers protection and ML/FT risk.

Before 2010

849. BoA’s AML/CFT on-site inspections were carried out on the basis of written examination procedures. The AML/CFT component was included within the scope of an ongoing integrated supervisory process that aimed to monitor a FI through the whole inspection cycle. The methodology was based on the CAMELS (Capital, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk) rating system (1 to 5, with 1being strong and 5 critical). This rating system was used for banks and savings and loans and credit unions. Anti-money laundering (and transparency) was embedded in the management (M) as one of many other components, for example IT and operational risk, that may impact the entity rating

850. The BoA applied the CAELS as a simplified system framework, to supervise the non bank financial entities. For the assessors the ML/FT risk was not so clearly covered since this method does not contemplate the Management component for rating the entity where ML/FT risk would normally be captured.

851. The BoA updated the ratings for the CAMELS during the on-site inspections calendar. The examination cycle depended on the ratings assigned. The cycle ranged from six months for institutions rated four to 18 months for those rated “one”. For institutions rated “five” or critical, monitoring was ongoing. It is important to note that BoA had not rated the non banking financial entities which include remittance activity and exchange bureaus which are large in number and are considered to have a higher ML/FT risk profile.

852. Prior to 2010, no offsite specific AML/CFT surveillance was undertaken and the onsite AML/CFT issues were reviewed as part of routine prudential (CAMELS based) supervision using procedures contained in the “Examination of Banks and other financial institutions on AMLFT” manual for Banks, Saving and Credit Unions entities. For other entities, the BoA used the 2005 guidelines “Examination procedures on prevention of money laundering and terrorism financing”. In these inspections there were no specialized AML/CFT inspectors.

2010, new AML/CFT supervisory structure

853. In 2010, the BoA established a specialized AML/CFT and transparency unit 49 named the “Compliance Unit” within the Supervision department inside of the “Non-Credit Risk Inspection Division”. The “Compliance Unit”50 inspections could be general inspections covering ML/FT and transparency entity risk or focused on some aspects.

854. The Compliance/AML/CFT unit has five persons (the head of the unit plus four inspectors) for supervisory activities. The five staff are assigned full time to this office and only perform tasks within the unit’s responsibilities.

855. The unit is located inside the Non-Credit Risk Division of the BoA. This division also deals with liquidity and operational risk. The following chart shows the location of the “Compliance/AML/CFT” unit within the BoA’s organizational structure:

856. The functions of the “Compliance/AML/CFT Unit” are governed by the BoA’s “Internal regulation of supervision department” (Article 15) and include the verification of legal and regulatory compliance by entities subject to the BoA’s supervision with respect to the AML/CFT prevention of ML and FT, as well as transparency issues. In the conduct of its duties, the supervision department:

  • a) regularly monitors, through regular analyses the compliance with the requirements of the law and by-laws of the Bank with regard to the transactions activity, the prevention of money laundering and terrorist financing, the transparency of banking services and products, the accounting of regulatory capital, etc., at system/group of banks/individual banks level;
  • b) carries out regular or special analyses, at the system/group level and at the individual bank level, upon the request of managers, to identify/monitor different risks;
  • c) signals to the BoA Portfolio Managers any identified risk related to the banks’ portfolios;
  • d) participates in on-site examinations to assess the operational risk of individual entities or of the whole system, provides recommendations and proposes the implementation of administrative measures when deemed necessary; and
  • e) proposes the improvement of supervision methods and practices.

857. In practice, the inspections of financial institutions conducted by the BoA cover all types of risk with a general scope and the inspections teams vary in size depending on the entity’s size. As of 2010, every general inspection team includes a specialized AML/CFT inspector from the AML/CFT unit who performs a focused AML/CFT review.

858. The AML/CFT area review includes the assessment of internal regulations, policies and procedures and their implementation. It also includes verification of reports sent to the FIU (GDPML) and samples of transactions are reviewed to ascertain whether or not they should have been reported to the FIU. The on-site examination also verifies and evaluates the adequacy of procedures for customer identification (KYC), the documentation for customer identification, record keeping and the AML/CFT training program of the entity.

859. The AML/CFT reviews conducted by the specialized inspectors take approximately one week for small FIs and up to two to three weeks for banks. An internal AML/CFT inspection handbook is being drafted to describe the main areas to cover during an onsite inspection.

860. BoA onsite visits are planned in advance and prior notice is given to the supervised entity, usually one to two weeks before the onsite visits. The duration of the onsite prudentialvisits depends on the type of the inspection (full or partial) and the size and complexity of the entity, but the average for banks is up to two to three weeks. Before leaving the entity, the inspection team discusses with management the main findings.

861. After the inspection visit, a report is drafted from headquarters which includes an AML/CFT (transparency) section, normally as an annex. That annex (Te Tjera) reflects the main findings and recommendations in compliance, transparency, ML/TF, wire transfers, and IT issues. The report is signed by all members of the BoA’s Board and sent to the entity. However, the fact that AML/CFT is placed as an annex to the examination report runs the risk that it might not receive sufficient attention from both the BOA and the entity.

862. The entity has 30 days to respond or add any complementary information. The procedures for dealing with examination reports, including sanctions, are detailed in the “Operational Policy Manual of Supervision” and Article 75 of the Banking Law.

Off-site Supervision:

863. Prior to 2010 no specific AMl/CFT offsite surveillance was undertaken. As of the assessment date, offsite surveillance is at a very early stage due to the lack of information to allow for the monitoring and rating of entities. BoA staff underlined the fact that it would be desirerable to obtain more information from the GDPML regarding the results of the inspections it carries out on FIs under BoA supervision. The sources for BoA’s off site surveillance are mainly the results of prior inspections and external research on the internet and newspapers. This information seems too limited to build a proper monitoring system.

FSA On-Site Inspections: Scope and Internal Procedures

864. The FSA supervises the non-banking financial entities, including onsite inspections. These inspections can be:

  • Full scope covering the overall activity of the entity (at least once in 18 months);
  • Limited scope; or
  • Thematic for specified areas or issues.

865. Inspections are carried out by FSA officials based on an Order signed by the head of the FSA. Inspection procedures are contained in Guideline No. 2 of November 2007 “On the procedures for inspections at Non-banking financial Entities” which lays down detailed rules and procedures to be followed during the inspections, including for professional conduct during onsite inspections. Article 24 of AML/CFT Law states that the FSA may carry out targeted AML/CFT inspections.

866. The chart below shows the functional structure of the Financial Supervisory Authority.

867. The Supervision and Disciplinary Enforcement Department currently has twelve employees (out of eighteen specified in the structure). It is responsible, among other functions, for on-site inspections and off-site analyses (prudential supervision). The FSA is not currently carrying out AML/CFT inspections of financial institutions. The Licensing and Monitoring Department has six out of eight staff it is budgeted to have and has, amongst other functions, the responsibility to license non banking entities and collaborates on an ongoing basis with the FIU in order to prevent an ineligible person from possessing, controlling, and directly or indirectly, participating into management or administration of a supervised entity as is foreseen in the securities, insurance, pensions, and collective investment schemes laws.

868. FSA inspections of the insurance sector thus far appear to have largely focused on macro prudential issues. The FSA is receiving technical assistance from the World Bank to develop its supervisory regime which envisages the development of risk-based onsite inspections manuals, but this manual does not address ML/FT risks. The authorities claim that the insurance sector is very small and the segment of life insurance is negligible and generally tied to loans. The stock market is also very small and mainly involved in trading of treasury bills and bonds issued by the Bank of Albania.

869. Additionally, the FSA inspectors have not received adequate training on AML/CFT which has not facilitated the conduct of AML/CFT inspections.

870. FSA staff stated that in 2004 there was a joint inspection of an insurance company with the FIU. FSA inspectors reviewed the solvency risk and the FIU the ML/FT risks. The report was jointly drafted and signed by both authorities. The joint inspection was proposed by the FIU due to staff constraints of the FIU at that time (10 people).

Off- Site:

871. There is no specific AML/CFT offsite surveillance.

GDMLP (Responsible Authority)

On-Site Inspections: Scope and Internal Procedures

872. Pursuant to its broad interpretation of Article 22.d of the AML/CFT Law, the GDPML’s Inspections Section51 conducts full scope AML/CFT inspections of financial entities and DNFBPs.

873. Through its inspections the GDPML aims to: carry out an examination of subjects’ level of compliance with national AML/CFT legislation and the effectiveness of its implementation; assess internal controls systems and making recommendations; provide recommendations to entities related to remedial measures that should be taken; identify the need for training of persons responsible for entities, identify administrative violations by entities and propose administrative measures.

874. In 2010, the supervision department of the GDMLP drafted a supervision manual. According to the Inspection Manual, approved in June 2010 (No 654/12), the GDMLP may carry out three types of onsite inspections, as wll as conduct offsite monitoring, based on data from the report of self-assessment/internal audit filed by entities:

  • Full inspections;
  • Oriented inspections focused on one or two aspects covered in full inspections;
  • Thematic inspections that focus on key issues, such as employee training, development of internal procedures and regulations in place to prevent ML/FT, reporting to the GDPML, the appointment of person/s responsible, collect data, etc.; and
  • Report of self assessment.

875. Onsite visits are carried out by a team of two to three inspectors, last three days and are preannounced two weeks before by a letter which also includes a request for documentation and outlines the “plan of inspection”. The plan indicates the type of inspection to be conducted and the FIU staff to participate. Before leaving the institution, the inspection team leaves a signed copy of the report including the main findings.

876. The entities to be visited are selected using the following information: sector analysis and the perceived exposure to ML and FT, the FIUs database, analysis of previous inspection reports, analysis of the reports received by the Analysis department, analysis and verification through the Report of self-assessment (more information on this is provided under R.26).

877. GDPML staff informed the assessors thatthe goal of their inspections of FIs, considering the very limited supervision staff and the relatively large number of entities subject to its oversight (2,314), is to concentrate their inspections on the most important FIs in each sector. (See FIU inspections chart Rec. 32)

Statistics (R.32) – Inspections

BoA

878. On-site: The table below details the inspections carried out by the BoA including the AML/CFT area. In 2007, joint inspections were carried out by the BoA and the FIU of all the banks in the financial system.

YearBanks

(Full scope

Inspection)
Banks

(partial

inspection)
Non bank

Financial

Institutions
Saving &

Loan
Foreign

exchange

bureaus
Postal

services
2005111471 (+252)17
2006144535225
20071150545145
2008131113
2009815531-
201033563-

879. Before 2010 all the inspections were conducted using the “old methodology”, that is prudential inspections (general ones) including in the scope of the visit, the area of transparency/compliance. Therefore, the so-called “partial inspections” were not comparable to the “partial inspections” in the present AML/CFT methodology, as they might have focused on risks other than ML/FT. The table shows that up until the present time, ML/FT risk was not a priority risk during the BoA inspections.

880. With the new AML/CFT specialized unit within the BoA, four inspections were conducted in 2010. Two of them were still unfinished at the time of the assessment. Due to the recent implementation of the new system the assessment team could not assess the effectiveness of the new AML/CFT supervisory approach. Nevertheless the fact that a specific unit with designated and more specialized inspectors has been created appears to mark an improvement in the level of BoA commitment to AML/CFT supervision.

FSA

881. The insurance and securities sectors are not supervised for AML/CFT risk by the FSA.

GDPML (FIU)

882. Onsite visits are based on risk ratings assigned to entities by the FIU resulting in three groups of entities rated as: High, Medium, and Low risk. The on-site inspections are planned mainly on the FIU’s perception of institutional risk and the results of the previous inspections. The table below provides the 2009-2010 ratings assigned following the GDPML criteria. The criteria seem to be based more on common risk perception (see column 3 of the table) than on the results of a focused study or inspections.

Inspected entitiesRisk

level
GDMLP CriteriaVisits in 2010
InsuranceLowNo significant activity---
SecuritiesLowNo activity---
Commercial BanksMedium“The sector is the main vehicle for Money launderers to introduce illegal money into the system”8
Bureaux de changeHighCash-intensive; no ID of customers13
Leasing companiesLowNon risk; payments pass through bank accounts4
Savings and loans, and Credit UnionsLowTransactions of small

amounts
---
Non Bank institutionsMediumSmall size40*

This figure includes also onsite inspections for Saving and Credit Unions

This figure includes also onsite inspections for Saving and Credit Unions

883. The following table provides statistics on the number of inspections made by the FIU since 2005.

Inspections of FIs and non-FIs200520062007200820092010
Exchange Bureaux-5166324
Commercial Banks--17*788
Non Bank Institutions--3785
Leasing companies---34-
Saving and loans, and credit unions-----2
Insurance Agencies74105763-
ZQRP – ZVRP / CORE – LORRE51055-
Notaries--1742713
CPA---13--
GDT-461--
Travel Agencies-26-4--
Gambling and Casinos-971125
NGO-16-1--
Construction Companies---56316
Car Dealers-12191275
Dept for te Administration of State Propertu--1---
GDC-14----
Attorneys----52-
Evaluators of immovable property----5-
Real estate----317
Total1210010112314687
– of which FIs inspected---536232339
Inspections of FIs as a percentage of total number of inspections---4%36%19%15%45%
TOTAL number of FIs in the financial system (including insurance and securities)ND261226347387477
Inspections of FIs as a percentage of the total number of FIs1,9%15,9%6,6%5,4%2%

Inspections with the BoA

Inspections with the BoA

884. The table above indicates that the FIU focuses more on the non financial sectors (45% of its inspections concern FIs and 55%, DNFBPs). Besides only 5.4% of the total number of FIs were inspected by the FIU in 2009 and that precetage dropped to 2% in 2010. The table above shows that in 2010 the number of FIU inspections of FIs increased in absolute terms though fell relative to the total number of FIs, which grew considerably that year.

Power for Supervisors to Monitor AML/CFT Requirement (c. 29.1):

885. The Albanian supervisors responsible for monitoring and enforcing compliance are provided with adequate powers pursuant to Art 24 of the AMl/CFT Law, as well as their sector-specific laws as an extension and complement of their prudential supervisory powers.

886. Article 71, para 2 of the Banking Law, empowers the BoA to supervise banks, branches of foreign banks operating in Albania and branches of Albanian banks operating abroad, as well asother entities conducting “financial activities”. Additionally, Articles 12, 13 and 126 of the Banking Law empower the BoA to supervise nonbanking financial institutions and financial groups on the basis of consolidatedfinancial reports The Bank of Albania exercises its power to supervise through (Article 72 Banking Law):

  • Licensing/regulatory framework.
  • Financial analyses and forecasting, checking the data reported periodically by the banks.
  • Full or partial inspections of the bank activity.
  • Corrective measures.

887. On this side, the FSA’s prudential supervisory and monitoring powers are set out in Article 13 of the FSA Law. The FSA enjoys full rights regarding the supervision of the following subjects:

  • The securities market and participants;
  • The insurance market, including all activities of insurance, re-insurance, brokerage; and
  • The private pension market.

888. The GDMLP’s (FIU) role as an AML/CFT supervisor is set out in Articles 21 and 22 of the AML/CFT Law which describe the main duties and functions of the FIU as the “Responsible Authority”. Among other duties, the FIU has the power to supervise the compliance by entities with their obligation to file reports under the AML/CFT Law, including the conduct of onsite inspections alone or in collaboration with the relevant supervisory authorities (Article 22.d). The FIU is also required to notify the other supervisory authorities about failure by entities to comply with their reporting obligations under the AML/CFT Law.58

Authority to conduct AML/CFT Inspections by Supervisors (c. 29.2)

BoA

889. According to Article 24 of the AML/CFT Law, “On functions of supervisory authorities” the authorities responsible for carrying out the supervision in their respective sectors in the AML/CFT field are:

  • the Bank of Albania, for licensing and supervising banks, non-bank financial institutions (other than insurance companies), exchange bureaus and saving and loans and credits unions; and
  • the Financial Supervisory Authority (FSA) for the other financial institutions: securities, life insurance, re-insurance, and pension funds.

890. In addition to what is noted in the AML/CFT Law, Article 24 para 259, the BoA powers of supervision including onsite inspections, and its duties as a supervisor are contained in Article 72, of the BoA Law. Pursuant to this article the BoA exercises its duty through full-scope or partial examinations and also has the power to take corrective measures.

891. The different types of inspections, scope, and procedures are developed inan examination manual for banks, savings and loans, and credit unions entities (Cross-reference: See c.23.2 for details of supervision implementation).

FSA

892. The FSA’s supervisory powers for prudential matters are contained in paras. 19 and 20 of Article 14 of the FSA Law which state that the Board of FSA has the power to:

  • Approve inspection handbooks;
  • Set the policies for supervision, inspection of supervised subjects and the development of the non-banking financial market;

893. Inspections conducted by the FSA focus on detecting and preventing violation of laws, irregularities and errors, and provide a basis for requiring entities to take timely and appropriate corrective action. Article 121 of Insurance Law provides that the FSA also oversees insurance companies and foreign companies’ branches through onsite inspections.

894. Although the FSA is the supervisor of both the securities and insurance sectors, the authorities informed the assessors that their main efforts were focused on the supervision of the insurance sector. The supervision of securities sector is based on the trading information received periodically. This is a consequence of the FSA’s main role in securities, which is to supervise the trading in T- bonds.

895. On-site inspections of insurance companies and agents are based on written examination manuals and are carried out by inspectors from the Inspection Unit within the Supervisory Department60 (Cross-reference: Please see criterion 23.2 for further details on going supervision).

896. The table below shows the main categories of supervised FIs as defined in the FATF Glossary and its AML/CFT supervisor61.

Type of financial activity

(See glossary of the 40 Recommendations)
Type of financial

institution that performs

this activity
AML/CFT

supervisor

(Decision 343)
1. Acceptance of deposits and other repayable funds from the public (including private banking)1. Banks62

[2. Saving and credit companies and their unions]
1. Bank of Albania (BoA)
2. Lending (including consumer credit; mortgage credit; factoring, with or without recourse; and finance of commercial transactions (including forfeiting))1. Banks

2. Non-bank financial institutions63
1. BoA

2. BoA
3. Financial leasing (other than financial leasing arrangements in relation to consumer products)1. Banks

2. Non-bank financial institutions (Leasing companies)
1. BoA

2. BoA
4. The transfer of money or value (including financial activity in both the formal or informal sector (e.g. alternative remittance activity), but not including any natural or legal person that provides financial institutions solely with message or other support systems for transmitting funds)1. Banks

2. Non-bank financial institutions (Money remitters)

[3. Postal services that perform payment services]
1. BoA

2. BoA

3. BoA
5. Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller’s cheques, money orders and bankers’ drafts, electronic money)1. Banks [2. Any other physical/legal entity that issues/manages payments]1. BoA
6. Financial guarantees and commitments1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
7. Trading in:

(a) money market instruments (cheques, bills, CDs, derivatives etc.);

(b) foreign exchange;

(c) exchange, interest rate and index instruments;

(d) transferable securities;

(e) commodity futures trading
1. Banks

2. (b) Foreign Exchange Offices

[3. Stock

exchange/broker/agents]
1. BoA

2. BoA

3. FSA
8. Participation in securities issues and the provision of financial services related to such issues1. Banks

[2. Stock exchange/brokers/dealers]
1. BoA

2. FSA
9. Individual and collective portfolio management641. Banks [2. Stock

exchange/brokers/dealers]
1. BoA

2. FSA
10. Safekeeping and administration of cash or liquid securities on behalf of other persons1. Banks

2. Non-bank financial institutions
1. BoA

2. BoA
11. Otherwise investing, administering or managing funds or money on behalf of other persons1. Banks1. BoA
12. Underwriting and placement of life insurance and other investment related insurance (including insurance undertakings and to insurance intermediaries (agents and brokers))1. Life insurance companies/agents/intermed iaries/pension funds1. FSA
13. Money and currency changing1. Banks

2. Foreign exchange offices
1. BoA

2. BoA

GDPML (FIU)

897. Article 22 para d of the AML/CFT Law requires the FIU to supervise institutions’ AML/CFT compliance with their reporting obligations65 as specified in the AML/CFT Law including the conduct of on-site inspections alone or with another supervisory authority. The scope of supervision is limited to the obligations for the filing of suspicious transactions reports (STRs), cash transaction reports (CTRs) and value transfer report (VTRs).

898. As was mentioned for criterion 23.2, regarding the scope of the FIU’s supervisory powers, the assessment team and the FIU have a different interpretations of Article 22 para d of the AML/CFT Law, which the authorities believe extends beyond the reporting requirements to other preventive measures.

Power for Supervisors to Compel Production of Records (c. 29.3 and 29.3.1):

BOA

899. Article 72 para 2 of Banking Law obliges entities supervised by the BoA to provide BoA with the necessary documentation required for the performance of its supervisory duties. Additionally, in the same article 72 para 5 the Law reinforces the power to compel production or obtain access to all documentation, specifying that the BoA for the purposes of supervision of banks has the right to obtain information from commercial companies with qualifying holdings in banks. Article 12 of BoA Law also establishes the same access to any information related to a bank’s activities or bank sahreholders.

900. Complementarily, Article 71 BoA Law states that “the Bank of Albania shall be entitled to obtain from banks and other financial institutions documents or other information with respect to the relationships between each of them and the BoA” and Article 73 provides that BoA has the right to scrutinize and examine accounts, books of the company and any other data situated in the archives and request any information from the administrators and employees of a supervised bank.

901. For non banking financial entities supervised by BoA, access to documentation is also guaranteed through references in several articles: for Exchange Bureau, in Article 18 para 3 of the Exchange Bureau Law. For the remaining non banking entities supervised by BoA, the Law on the granting Non Bank financial subjects and the Regulation on Licensing Saving and Loan association their Unions cross-references what is set out for banks in the Banking Law and in BoA Law.

902. The above provisions guarantee the BoA access to any information or documentation for purposes of exercising prudential and AML/CFT supervision. In practice, the authorities confirmed that the BoA has not been challenged in this respect.

FSA

903. Article 18 of the FSA Law provides that members of the Board and supervision staff have the right to the following:

  • to obtain data regarding funds, assets, including securities and other assets in the ownership of supervised entities;
  • to inspect the accounts, trade/commercial documents, and other documentation related to transactions;
  • to lead third party inspections, which will include the review of that part of the documentation of the third party’s activity, related to the issue that the supervised subject is inspected;
  • to request from third parties66 information and documentation including certified copies of documents, statement of accounts, and other necessary data for purposes of verification.

904. According to Article 121 para d of of the Insurance Law, the FSA may require from insurance companies and foreign insurance company branches any information and documentation that is related to their activities. Insurance company and foreign company branches have to provide the FSA with any required information. In addition, Article 77 of VPF law establishes that in the course of an onsite inspection the FSA has to be provided with any requested information according with the provision of the Law. The same provision is applies to investment funds.

905. The above provisions guarantee the FSA complete access to any kind information in relation to AML/CFT. However, in practice, this power has not been exercised.

GDPML

906. Pursuant to Article 22 (c) the GDPML can “request financial information from the entities on performed transactions with the purpose of ML and TF prevention”. The drafting of the provision does not appear to provide the FIU with the authority to request information that is of a non-financial or non-transactional nature. This specific language seems also to limit the legal authority of the GDPML to request additional information from entities other than information related to the reporting obligations.

907. Despite this apparent absence of clear legal authority, the GDPML interprets the meaning of this provision more broadly and has requested various types of information including the account information which was not related to a particular transaction and information not related to the submission of an STR. The role of the GDMLP and its access to all types of documentation even to that which is not related to reported transactions should be clarified.

Organization & Adequacy of Resources (R.30):

BOA

908. The BoA (the Central Bank of the Republic of Albania) was established by the BoA Law as an independent organization for carrying out its objectives and the performance of its duties (Article 1 BoA Law). Specifically, para 3 mentions that the “Bank of Albania shall be entirely independent from any other authority in the pursuit of its objectives and performance of its task”. The BoA Law also establishes the organization and management of the supervisory authority together with the accounts and its financial statements and reports to be presented in order to guarantee a transparent and independent management.

909. According to the AML/CFT Law, the BOA has been designated as an AML/CFT supervisor and in 2010 a specialized unit was created within it, i.e., the “Compliance Unit” (Unit/Office for the Supervision of Compliance, AML/CFT, Consumer Protection/Transparency hereinafter referred to as the Compliance/ AML/CFT Unit), that, inter alia, is responsible for monitoring entities’ compliance with their AML/CFT obligations including through the conduct of on-site inspections (See cross reference c.23.2). As the budget of the AML/CFT Unit is within the general budget of the BoA supervision department, the assessors couldn’t establish the amount of financial resources assigned to this unit as the BoA didn’t provide it separately.

910. As indicated for c. 23.2, five employees are assigned to carry out off site monitoring and onsite inspections. These inspectors participate as team members in general full scope inspections conducted by the BoA inspection as well as in the conduct of targeted inspections when at least two inspectors participate. The inspections generally last between one and three weeks (depending on the scope of the inspection and the size and complexity of the entity) and the inspectors dedicate one week to AML/CFT and the other to transparency issues.

911. The profile of the staff assigned to this unit is adequate to the scope of the functions of the department. Staff working in the unit have university level qualifications in finance or accountancy, three of them have on average six years experience in banking prudential supervision, and some of them have financial private sector working experience.

912. Supervision department staff members have attended several training courses since 2005. The table below provides a detailed list of the training received by BoA staff in AML/CFT issues. There was no AML/CFT training in 2006. From 2007 to date, AML/CFT training has been strengthened in line with the increase of AML/CFT supervisory responsibilities of the BoA and the newly designed supervisory structure for this area.

Seminar

/work-

shop
attendancesOrganized

by
PlaceSeminar

/workshop
AttendancesOrganized byplace
20052008
Anti-Money laundering and Combating the Financing of Terrorism(l of IT depart)IMF+JVI67Austria on Internal controls and on-site inspections for anti-money laundering and combating the financing of terrorismRegulators1IMF+JVIAustria
Regional Workshop on Money Laundering and Financing of Terrorism for Financial Regulators in Central and Eastern Europe1OSCE68, UNODCAustriaCombating money laundering, terrorism financing and misuse of payment systems: International developments and national perspectives1Banka d’ ItaliaItalia
National Initiatives Against Money Laundering and Terrorism Financing1International Banking InstituteBulgariaFundamentals of fraud1FRSUSA
2007tackling money laundering and financial crime1CARDSGermany
“Workshop for regulators on internal controls and onsite inspections for antimoney laundering and combatting financing of terrorism1 Supervision DptJVIAustriaFight against financial deliquency and money laundering1 from Legal departmentBanque de FranceFrance
20092010
Fight against financial deliquency and money laundering1Banque de FranceFrancefight against money launderingBanque de FranceFrance
How to implement a risk based approach to AML/CFT1 Law deptCentral Banking PublicationsUK
sub-regional workshop on the domestic legal implications of united nations security council resolutions and financial sanctions against terrorism1UNODC+O SCERumania
Fight against financial deliquency and money laundering1 Law deptBanque de FranceFrance
AML/CFT course on financial supervisio n and risk based approach1FMI+JVIAustria
money laundering1 Monetary deptEgyptian Fund for technical cooperationEgypt
Countering Terrorist Financing Giessbach II1BIGSwitzerland

913. Overall and taking into account that the specialized AML/CFT Unit started operations in 2010, the structure of the organization and resources devoted to AML/CFT are consistent with the relative “newness” of the unit. Nevertheless taking in account the number of FIs under its supervision (47769 in 2010, see table c.23.1) additional resources will be needed to increase the number of inspections and implement a risk-based approach to AML/CFT supervision.

914. The Authority maintains standards of integrity of supervisory staff. The staff of the BoA are covered by professional secrecy requirements.

FSA

915. The Financial Supervisory Authority (FSA) was established pursuant to Law No. 9572 of July 3, 2006 “On the Financial Supervisory Authority”, as a consolidated regulatory body to supervise non-banking financial markets in Albania. The FSA is a public institution that is independent from the Executive Branch and reports to Parliament annually. The FSA Board is its governing and decision-making body. It is a body composed by seven members appointed by the Parliament of Albania.

916. The organizational structure of the FSA is approved by upon the recommendation of the FSA Board. According to the Law No. 9572 of July 3, 2006, Article 14, item 13, the Board approves the policy for salary and remuneration of staff and other employees of the FSA.

917. The FSA maintains standards of integrity of supervisory staff. The staff of the FSA are covered by professional secrecy requirements according to the Article 23 and 24 of the Law No 9572 of July 3, 2006 “On the Financial Supervisory Authority”.

918. With regard to financial resources, according to Art. 26 of the “FSA Law”, the FSAs mainly self-funded but for each difference between activity funds sources and expeditures, FSA will be funded by State budget until income is sufficient to guarantee normal working. At the present time the FSA has fifthy- eight employees (See organizational chart provided in criterion 23.2).

919. The FSA has the same supervisory authority status as the BoA, but FSA staff declared that with respect to staff remuneration the Council of Ministers’ decision no. 901 of December 19, 2007 affects its independence from the government and also it makes more difficult to be competitive in order to attract and retain qualified staff. This challenge is clearly stated in the FSA’s Annual Report for 2009 which states that:

“Following the structural changes, as per the suggestions laid down in council of Ministers Decree No. 901 of 19 December 2007 “On Approving Salary Structure and Levels for Public Servants, Civil Servants and Auxiliary Employees in Certain Independent Institutions,” as amended, in 2009 AFSA repeatedly submitted a Draft-Decision on an Amendment to Decision No. 98 of 30 April 2007 “On the Approval of the Structure and Staffing of the Financial Supervisory Authority”, which also includes the proposal to approve the classification of staff into Heads of Units and Experts. The implementation of the abovementioned Decision had a negative impact on the salaries of those positions and the overall salary system within the AFSA. An official response is still expected from the Parliament of Albania with regard to the Draft-Decision the AFSA submitted.”

920. As a result of the above mentioned, the Board of the Authority, in accordance with the FSA Law, is the responsible body which determines the policy on wages and remuneration of staff and other employers of the Authority. But the Law No. 9584, dated July 17, 2006 “On the wages, remuneration and the structure of the constitutional independent institutions and other independent bodies established by law” restricts the right of the Authority to determine its policies on wages and remuneration of staff and other employers of the FSA. So far, the Authority might not have the sufficient space for financial independence.

921. From the creation of the FSA in 2006, two persons have participated in workshops organized by the Center of Excellence of Finance in 2007 “On financial crime utilizing the insurance and insurance products, practical experiences in European Union, SEE and United States of America”. Other similar training courses were attended in 2009. Another two employees have participated in workshops organized by the FIU (GDMLP) on general AML/CFT issues. The FSA is concerned that its AML/CFT supervisory function under the AML/CFT Law is not being effectively implemented because of inadequately trained staff. There are not specific inspectors assigned to review ML/FT risks.

922. The lack of AML/CFT supervision of the securities and insurance sectors carried out by the FSA, and its under-resourced situation constitute a significant shortcoming in AML/CFT supervision. (Note: for further details on supervision see c.23.2).

General Directorate for the Prevention of Money Laundering (the FIU)

(Note: For more detailed GDPML organization and internal function see Rec. 26)

923. The FIU inspection’s division has three inspectors plus the director of the division, responsible for supervision and oversight of FIs and DNFBPs (out of twenty- seven employees currently at the FIU). The onsite supervision is carried out by the Inspection department which is responsible for an estimated 763 financial entities and 1,545 DNFBPs. Inspections are planned and cover a wide range of compliance issues including internal controls and staff training, and form the basis for identifying violations and proposing administrative sanctions. It seems to be a high ratio for each inspector to cover all the reporting entities to supervised, only taking the reposrting FIs, each inspector is responsible for 222 entities aproximately (Note see- cross reference criterion 23.2).

924. The professional profile of the staff assigned to this department seems to be adequate to the scope of the functions. They have university level qualifications in finance or accountancy, and have worked in private banks and insurance companies. Staff members have attended several training courses organized by different international organizations such as the Joint Vienna Institute, the Tirana PBC Institute and the courses given by the EU twinning BKA-Germany.

Sanctions: Powers of Enforcement & Sanction (c. 29.4); Availability of Effective, Proportionate & Dissuasive Sanctions (c. 17.1); Designation of Authority to Impose Sanctions (c. 17.2); Ability to Sanction Directors and Senior Management of Financial Institutions (c. 17.3): Range of Sanctions—Scope and Proportionality (c. 17.4).

Powers of Enforcement & Sanction (c. 29.4);

925. The sanctions regime set out in the AML/CFT Law for non-compliance can only be applied by the FIU. The FIU’s sanctioning powers are described in the AML/CFT Law under Articles 26 and 27.

926. Article 26 of the AML/CFT Law provides the cases when it is possible for the responsible authority to request the licensing/supervisory authority to restrict suspend or revoke the license of the reporting entity. Those cases are the followings:

  • When it ascertains or some facts lead to believe that the entity has been involved in ML/FT.
  • When the FI repeatedly commits one or several administrative violations described in the Article 27 (administrative sanctions) of the AML/CFT Law.

927. Article 26 para 2 also foresees the the situation in which the responsible authority (the GDPML) proposes and presents a case with supporting documentation and the licensing/supervisory authority (BOA/FSA) reviews the case and shall make a decision to restrict, suspend or revoke the FI license.

928. Art. 27 of the AML/CFT Law provides the cases and administrative sanctions available to be applied on the natural or legal persons covered by the law for failure to comply with the national AML/CFT requirements.

929. The AML/CFT Law and the secondary legislation adopted constitute the legal basis with regard to the requirements of criterion 29.4. The administrative process related to the administrative sanctions which might be imposed by the GDPML is described in Law No.10279, May 20th 2010 “On the administrative violations”. The procedures for the appeal against the decisions shall be performance in accordance with the Law No 7697, dated July 04, 1993 “On the Administrative violations” as amended. The execution procedures of the administrative sanctions will be enforced in accordance with Articles 510 through 526(a) of the Civil Procedures Code.

930. With respect to the two supervisory authorities (the BoA and the FSA) a cross reference is made in Article 9 of the Banking Law which provides that banks and other FIs supervised by the BoA shall implement the requirements emanating from the AML/CFT Law and in the Law “On measures against financing terrorism and other by-laws in force”. In the case of securities and insurance companies which are supervised by the FSA there are no specific references (in the relevant legislation) to the AML/CFT Law. Only the two following sector specific laws, Pensions Funds Law and Collective Investment Law, have a reference to ML/TF prevention and the obligation of the FSA to exchange information with the competent authorities (Article 92 (PF Law “prevention of ML/FT) and Article 121 (CIV Law “FSA Role’).

931. Following inspections carried out by the BoA and the FSA, the authorities notify70 and propose actions to be taken by the GDPML related to ML/FT FIs shortcomings or breaches of the law. The GDPML may or may not take into account the proposed action but in order to issue a sanction it must carry out an additional onsite inspection of the entity. This situation may make the system less effective due to the obligation of GDPML to repeat the same inspection process in order to take sanction measures. The repeated inspection may give rise to conflicts among the authorities particuarly where the results of the inspections differ. To avoid any such conflicts it is recommended that the co-ordination amongst these authorities should be enhanced and the sanction system should be reviewed in order to remove any repetition of inspections by these authorities.

932. The BoA and FSA can also sanction FIs for AML/CFT shortcomings, but instead of using the administrative sanctions regime described in the AML/CFT Law, they follow the sanctioning regime related with its role as a prudential regulator/supervisor 71 and described in the Banking Law and the FSA Law.

933. In addition the GDPML is obliged to inform the supervising/licensing authority on the sanctions imposed by it. Supervisory authorities mentioned that it would be helpful to receive updated information about the sanctions imposed by the FIU more frequently instead of through the yearly report provided by the FIU.

934. Under the Article 26 of the AML/CFT Law, only the licensing authority can restrict, suspend or revoke the license on a financial entity. Consequently, the FIU (which does not license financial entities) would need to request the relevant licensing/supervisory authority (BoA and FSA) for such action. The latter would review the proposal and the accompanying documentation, and the circumstances and facts of the case (Article 26 AML/CFT Law) and decide whether or not to revoke the licence. No such situation has ever occurred so far.

935. For actions against directors and senior management of FIs due to ML/FT issues the BOA administrative regime (Article 89 para 4 of Banking Law) includes the possibility of revoke the license for directors and senior management and FIs. This penalty is not mentioned in the AML/CFT. (See table criterion 23.3).

Availability of Effective, Proportionate & Dissuasive Sanctions (c. 17.1); Range of Sanctions—Scope and Proportionality (c. 17.4).

936. Articles 26 and 27 of the AML/CFT Law provide for a range of sanctions which can be imposed only by the FIU for failure to comply with the preventive measures specified in the AML/CFT Law. The sanctions described in the table below are applicable to all type of FIs as listed under Article 3 of the AML/CFT. The lek equivalence is aprox lek 100 = US$1.

ViolationFines in lekArticle
IndividualsLegal persons
Failure to apply monitoring and identification procedures, as well as customer due

diligence of the client and transactions according to the risk level that they present as set forth in articles 4, 5, 6, 7, 8 and articles 9 of the AML/CFT Law
100,000-500,00072500,000-1,500,00027.2
Failing to collect data in money or value transfers400,000-1,600,0001,200,000-4,000,00027.3
Failing to apply the provisions in EDD obligations or reporting the failure in completing the missing information in wire transfers500,000 -2,000,0002,000,000-5,000,00027.4
Failing to implement the prevention measures in Art.11300,000-1,500,0001,000,000-3,000,00027.5
Failing in the currency and value reporting obligations5-20% of the

amount of the

unreported

transactions
10-50% of the amount

of the unreported

transactions
27.6
Violations related to tipping off and maintaining data2,500,0005,000,00027.7
In addition if the administrative violation is committed by:
- An employee60,000-500,0007327.8
- An administrator or a manager of the entity100,000-500,0007427.8
Ascertains/facts to believe the implication in ML/FTLicense revocation26
Repeated commission of violationLicense revocation proposed by FIU and approved by supervision authorities26

937. The AML/CFT Law includes the obligation for the supervising /licensing authorities to report the GDPML immediately on every non compliance issue, information or data related to ML/FT. In practice the supervisory authorities comply with this obligation by sending the main inspection report to the GDPML, including the ML/FT findings (See criterion 17.2). Nevertheless the GDPML has to carry out its own inspections to apply the sanctions mentioned in Article 27 of the AML/CFT Law. Currently, the GDPML (the FIU) is the only authority imposing AML/CFT sanctions resulting from its inspections.

938. The AML/CFT Law sanctioning regime does not include a gradual system starting with the giving a warning (either oral or written and public or private) as the first step when non-compliance is identified. Fines are directly imposed for violations of the obligations specified in the AML/CFT Law as it shown in the table above.

939. The following table details the sanctions imposed by the FIU on FIs since 2008. All the sanctions foreseen by the AML/CFT Law, except the revocation of the license are financial fines.

200820092010
Nr.EntitiesKundravajtja

Administrative/

Sanctions (lek)
EntitiesKundravajtja

Administrative

/Sanctions (lek)
EntitiesKundravajtj

a Administrative/Sanctions

(lek)
1Exchange Office50,000SCU300,000Banka3,600,00075
2Exchange Office50,000SCU300,000Exchange office1,000,000
3Exchange Office50,000Banka5,500,000Exchange office1,000,000
5Exchange Office50,000Leasing1,000,000Exchange office5,400,000
6Non Banking Financial300,000Banka3,600,000Exchange office477,660
7Saving Credit Union5,000,000Exchang

e Office
5,000,000Bank sh.a4,500,000
8Banka2,000,000Bank sh.a2,000,000
9Banka900,000Exchange office1,800,000
Exchange

office
1,285,000
Exchange

office
958 000
Banka3,000,000
TOTAL8,400,000

(US$84,000)
TOTAL15,000,000

(US$150,000)
TOTAL25,561.000-

(US$255,610

)
Note: the lek -$ equivalence is lek 100= 4=US$1 aprox
Note: the lek -$ equivalence is lek 100= 4=US$1 aprox

940. The table shows a progressive increase of the number and amount of sanctions imposed by the GDPML from 2008 to 2010. The inspections department of the GDPML explained to the mission that among the sanctions imposed on the FIs inspected, the most common violations were related to banks’ failure to comply with the currency or value reporting obligations. With respect to non-banking FIs, the most common violations identified are failure to report, non compliance with CCD requirement and training obligations. In the case of failure to report cash transactions, the penalty for legal persons goes from 10% up to 50% of the amount of the transaction.

941. Officials from the entities visited during the assessment confirmed that the scope of the FIU inspections covers all of AML/CFT preventive systems but that the sample tests were more focused in the reporting obligations, especially value transactions reports (VTR)76 and suspicious transactions reports (SARs).

942. There were no sanctions imposed on FIs during 2007. The BoA and the FSA have never applied sanctions related with ML/TF using their administrative regime. The fact that in 2009, the sanctions were mainly imposed for non compliance with the reporting obligation, is consistent with the narrow scope of the inspection function of the FIU under Article 22 AML/CFT77. However, the fact that no other supervisor had imposed any additional sanctions narrows the full range of sanctions imposed to a very limited scope (the report obligations).

943. The FIU indicated to the assessment team that around a 95% of the FIs appeal the administrative sanctions imposed in all levels of the judiciary on the basis that they are too high. The Bankers Association has proposed to lower all the sanctions’ thresholds. No challenge of ultra vires was brought with regard to the FIU’s scope of inspection (discussed earlier). The first bank appeal was ruled by the court in favor of the FIU. However the high number of court challenges to the fines issued by the GDPML may suggest that the implementation of the sanctioning regime is not effective due to the fact that sanctions cannot be applied until the finalization of the court process.

944. Although the AML/CFT Law provides for a broad range of financial sanctions, Albanian authorities have not demonstrated to the evaluation team that the sanctions that were applied are effective and proportionate.

Designation of Authority to Impose Sanctions (c. 17.2)

945. The AML/CFT Law designates the FIU as the authority responsible for imposing administrative (financial) sanctions. Article 26.b) of the AML/CFT Law covers the case where an entity is repeatedly violating the AML/CFT Law or is linked with ML/FT and also establishes that the implementation of revoking the license to operate has to be proposed by the GDPML (FIU), but needs to be approved by the prudential supervisor. No license has ever been revoked by the BoA or FSA.

946. Regarding the rest of the administrative sanctions detailed in Article 27 of the AML/CFT Law, the GDPML (FIU) is the authority which sets the amount of the fines.

947. As previously mentioned, in order to sanction a FI for non compliance with the requirement of the AML/CFT Law, the FIU cannot use the information provided by the sector supervisory authorities and only shall imposes sanctions on FIs based on its own findings during from its own independent onsite inspection.

948. With regard to the BoA78 and the FSA, as was also pointed out before, they can impose its own regime of administrative sanctions when they detect violations of the AML/ CFT in the course of their onsite inspections. For the BoA, its sanctioning powers79 are contained in Articles 75, 79, 81, 89, and 90 of the Banking Law for the entities supervised by BOA. Regarding the non bank FI under the BoA supervision, the reference is made in Article 14 of Decision 11.

949. For the FSA, Article 31 of the FSA Law provides the sanctions for institutions subject to its oversight, namely insurance, securities and other entities. Sections related with sanctions in the FSA supervised entities Laws are the following: Articles 164-170 of the Law 9267 “on Insurance activity”, Articles 94-105 of the Pensions Funds Law”, Articles 130-134 of the CIV Law and article 147-149 of securities Law”.

950. The following table summarized the core articles of both supervisory authorities with regard to their administrative sanction regime:

AuthorityLawProvision
BOABanking LawArticle 89: Penalizing measures

“The Bank of Albania for the purposes of eliminating the breaches of a bank or branch of foreign bank, in addition to measures stipulated in Articles 75, 79 and 81 of this Law, shall order, despite their ranking, one or more of the following measures:

a) fine the administrators of the bank or branches of a foreign bank.

b) issues written warning notices to the administrators of the bank or branch of a foreign bank.

2. The Bank of Albania shall fine the administrators of the bank or branch of a foreign bank up to the amount of2.000.000-2.500.000 Lek when:

a) there are breaches of provisions of article 7 and 22 of this Law;

b) the bank or branch of a foreign bank carries out banking and financial activity included in the annex to the license;

c) the bank has established a branch outside the Republic of Albania without prior approval by the Bank of Albania;

d) there are breaches of provisions of article 24, 25, 26paragraph 1, 55, 64, 65 and 70 of this Law;

e) the bank or branch of foreign bank has not established reserves as required in articles 67 and 68 of this Law;

f) the bank or branch of foreign bank has not maintained the appropriate level of regulatory capital.

3. The Bank of Albania shall fine the administrators of the bank or branch of a foreign bank up to the amount 500.000-800.000 when it finds:

a) breaches of provisions of article 26 paragraph 2, 41, 47, 48, 52 and 53 of this Law;

b) breaches of rules pertaining to internal control;

c) there has been no rectifying measures for the elimination of breaches, or such rectifications have been taken beyond the set time limits.

4. The Bank of Albania, in the event of repetition of breaches, shall double the sanctions stipulated in paragraph 2 and 3 of this Law, as well as may:

a) suspend the administrators for up to twelve months;

b) request the removal from office of one or more of the administrators;

c) order the suspension of the remuneration for the administrators by the bank or branch of a foreign bank;

d) place the bank in conservatorship;

e) revoke the license of the bank or branch of a foreign bank in the territory of the Republic of Albania.

f) place the bank or branch of the foreign bank in liquidation

5. The Bank of Albania, in cases of the bank or branch of a foreign bank not complying with one or more of the imposed measures for the improvement of the bank’s or branch of a foreign bank’s situation or the rectification of breaches, shall escalate the penalizing measures.

6. The Bank of Albania, besides ordering one or more of the sanctions stipulated in paragraph 2 of this Article, shall also request from the shareholders to rectify the situation within 6 months in cases of the ratio of the regulatory capital of the bank and its assets carrying risk as well as off-balance sheet items is higher than half of the minimal required ratio but lower than the minimal required ratio, as defined by the Bank of Albania.

7. The Bank of Albania shall place the bank in conservatorship as stipulated in Article 96, in case the ratio of the regulatory capital of the bank and its assets carrying risk and off-balance sheet items, with the termination of the time-limit, is lower than the minimal ratio required by the Bank of Albania.

8. The Bank of Albania shall inform the bank or branch of the foreign bank as well the responsible persons for all ordered penalizing measures, within 10 calendar days from the date of the decision.

9. The Supervisory Council of the Bank of Albania determines the appropriate authority (representative organ) in the Bank of Albania for the issuance of acts pertaining to the above mentioned measures.
BOABanking LawArticle 90

The carrying out of unlicensed activity

1. The carrying out of banking activity or of any other financial activity stipulated in Article 4 as well as in Article 54 of this Law, without a license granted by the Bank of Albania shall constitute a criminal offence punished by fine or imprisonment of up to three years.

2. In cases of acts, stipulated in paragraph 1 above, resulting in heavy consequences to the interests of the citizens or the State, the commission of the act is punishable by fine or imprisonment up to seven years
FSAFSA LawArt.31Any individual who prevents the Financial Supervisory Authority and its structures or the authorized staff of its administration in the exercise of their supervisory competencies established in this law or any other act, are penalized with a fine ranging from Albanian Lek 50.000 up to Albanian Lek 75.000.

In case of a repeat of the violation from Albanian Lek 80.000 to Albanian Lek 100.000.

Any violation according to the first paragraph of this article by individuals who are shareholders or partners of the legal entity and have managerial functions of the legal entity or are partners of the commercial company receive a fine from100.000 to125.000, and in case of a repeat of the violation the fine ranges from Albanian Lek 130.000 to Albanian Lek 150.000. Administrative sanctions placed by the Board according to this article and the notification for the taken decisions are signed by the chairman of the Board. Appealing the decision via court does not hinder the execution of the decision of the Board. “

951. No sanction has ever been imposed by the BoA and the FSA for non compliance with AML/CFT requirements.

952. The Minister of Finance is the responsible authority to impose sanctions for non compliance with the requirements related to the freezing obligations stipulated by the CFT law as provided in Article 24 of Law No. 9258 “On measures against financing terrorism”.

953. During the interviews with the authorities, assessors pointed out that the way as the present administrative sanctions system is articulated, there is a risk of “double jeopardy” in that it might be possible to apply sanctions against entities for the same shortcoming by different authorities80. In the case of breaches of the AML/CFT Law, the situation may arise where a legal issue affecting the authorities’ administrative enforcement powers is involved, because an entity should not be sanctioned twice for the same violation (Ne bis in idem principle). As a consequence of the possible double penalty conflict only one supervisor sanction would be applied and this would render the sanction powers exercisable by other competent authorities ineffective in double jeopardy cases. In practice, the assessors were informed by the FIU that this kind of double jeopardy situation has never occurred.

Ability to Sanction Directors and Senior Management of Financial Institutions (c. 17.3)

954. Article 26 of the AML/CFT Law includes the possibility of sanctioning FIs as a legal person including the natural persons responsible for the administrative violation (also to the employees). The sanction is additional (added) to the one impose on legal person.

955. For the administrative sanctions that can be imposed by the licensing/supervise authorities (BoA/FSA), the laws provide for sanctions for prudentially related violations

956. The table below summarizes the sanctioning regime applicable to FIs andresponsible natural person:

LawAdministrative violationFine
AML/CFT Article 27.8 (b)In addition (…) when a legal entity is involved and the administrative violation is committed from and administrator or a manager of the entityThe person who committed the violation shall be fined fromm lek 100,000 up to 500,000.
BOA Law Article 89-The Bank of Albania shall fine the administrators of the bank or branch of a foreign bank up when it finds:

a) breaches of provisions of article 26 paragraph 2, 41, 47, 48, 52 and 53 of this Law;

b) breaches of rules pertaining to internal control;

c) there has been no rectifying measures for the elimination of breaches, or such rectifications have been taken beyond the set time limits.



-The Bank of Albania, in the event of repetition of breaches, shall double the sanctions stipulated in paragraph 2 and 3 of this Law, as well as may:

a) suspend the administrators for up to twelve months;

b) request the removal from office of one or more of the administrators;

c) order the suspension of the remuneration for the administrators by the bank or branch of a foreign bank;

d) place the bank in conservatorship;

e) revoke the license of the bank or branch of a foreign bank in the territory of the Republic of Albania.
to the amount Albanian Lek 500,000-800,000
FSA Law.

Article
Any violation according to the first paragraph of this article by individuals who are shareholders or partners of the legal entity and have managerial functions of the legal entity or are partners of the commercial company receive a fine (…)(..) Albanian lek100,000 to125,000, and in case of a repeat of the violation the fine ranges from Albanian Lek 130,000 to Albanian Lek 150,000.

957. A review of the BOA/FSA sector specific laws and the AML/CFT Law reveals that the sector specific laws provide for a wider range of sanctions and higher penalties than the AML/CFT Law including the suspension of the administrators.

Market entry:

Fit and Proper Criteria and Prevention of Criminals from Controlling Institutions (c. 23.3 & 23.3. 1.):

958. The AML/CFT under Law Article 24 (b) provides that the Supervising Authorities shall take the necessary measures to prevent an ineligible person from possessing, controlling, and directly or indirectly participating in the management, administration or operation of an entity. Nevertheless, the AML/CFT Law does not provide for a definition about the term ineligible.

959. Article 11. d) of the AML/CFT Law requires entities to apply fit and proper procedures when hiring new employees, to ensure their integrity. During meetings with the assessors, the FIU interpreted this provision as including also directors and senior managers. Assessors do not share this interpretation, noting that other provisions of the AML/CFT law (such as Art. 14) differentiate managers from employees. As noted later on there are provisions requiring fit and proper tests for FIs but they do not cover all FIs subject to the Core Principles.

Entities supervised by BOA

960. Under the Article 4 para 19 of the Banking Law, the term administrator is defined as an individue who is:

  • Member of the steering Council or Audit Committee of the Bank;
  • Executive director;
  • Director of the audit unit.

961. Regarding shareholders’s fit and proper requirements tehse can be indirectly inferred from Article 19 in the Banking Law which establishes that, for those FIs under the BoA supervision, the BoA might refuse a provisional license to operate if it is proved that a least one of the FI shareholder:

  • Is under criminal investigation or has been convicted by court for committing a serious criminal offence;
  • Is subject to a decision of a court barring him from the exercise of such activities;
  • Is under investigation or has been convicted by court for committing a criminal offence pertaining to ML or FT.

962. With regard to “fit and proper” requirements concerning the directors and senior management, Article 40 (b) of the Banking Law, provides that in order to exercise his function as an administrator of the bank, an individual must “have a good reputation” being a disqualifying criteria (Article 41) if the individual:

  • is under criminal investigation or found guilty by the court of an offence punishable in law by imprisonment;
  • has been subject a bankruptcy prodcedures not yet relieved;
  • has been penalized by the BoA in the past five years for serious breach of this Law or for carrying out activities for which was no licensed.

Entities supervised by FSA

963. The following financial sector laws that relate toentities supervised by the FSA (securities markets, insurance market, and supplementary pension schemes, voluntary pensions funds and collective investment undertaking and securities) include, explicit and implicit, provisions to prevent an ineligible person from possessing, controlling and directly or indirectly participating in the management, administration or operation of an entity:

  • Insurance and Reinsurance Law: Art.15, 17, 62, and 64.
  • Securities Law: Art 84.
  • Regulation 14 for licensing brokers, other intermediaries and investment advisors: Art. 12.
  • Regulation on the licensing and supervision of the securities exchange.
  • Decision No. 79, date January 28, 2008: Licensing and supervision rules and procedures for insurance intermediaries.
  • Regulation No. 14: Art 5-7 establishing criteria persons involved in the management of insurance and reinsurance companies.
  • Regulation No. 13: Art 12-14 for licensing insurance or reinsurance business.

964. “Fit and proper” requirements for shareholders, supervisory board members and directors board members are contained in the Collective Investment Law and Pension Funds Law, which are the newest laws (2009), as shown in the following table

965. The FSA affirmed that the Licensing and Monitoring Department collaborates with the FIU regarding AML issues including determining the source of established capital of some insurance companies and pension funds, as well as the purchase and transfer of shares

966. The following table includes the main legislation that contains provision to prevent criminals or their associates from participating in the financial system:

  • Bank of Albania Laws and by Laws: FIs supervised
LawArticleProvision
Banking LawArt.13On the subject of beneficial owner or controlling interest, the article defines the information required to give for the shareholder of the banks and the checks make to know the source of the payment.
Art. 17, paragraph 1States the application to acquire a license for a bank shall be submitted in writing to the Bank of Albania and also indicates which information and documents should accompany the application…e) evidence of taxation duties, f).. reputation of management other banks or companies
Art. 17, paragraph 6States the application to acquire a license for the branch of a foreign bank and gives the BoA rights to carry out independent checks in order to verify the accuracy of the information offered from the persona applying for a license.
Art. 19, paragraph 2Defines: The Bank of Albania shall give its initial approval for the license only after it has been satisfied that



b) the shareholders of the bank have good reputation, lawful source of their contribution in the capital, lawful registered and regulated activities, have the financial potential to contribute additional funds, in cases where the capital falls beneath the required minimum threshold set by the Bank of Albania or to effect necessary financing for the continuation of the bank’s activity.
Art.19 Paragraph 3Defines: The Bank of Albania shall refuse initial approval of a license for a bank or a branch of a foreign bank when:



(…)c) details pertaining to the identity of the shareholders with qualifying holding have not been produced;

d) it is proved that at least one of its shareholder:

(i) is under criminal investigation or has been convicted by court for committing a serious criminal

offence.

(ii) is subject to a decision of a court barring him from the exercise of such activities;

(iii) is under investigation or has been convicted by court for committing a criminal offence pertaining to money laundering or financing of terrorism.

e) fails to submit additional information requested by the Bank of Albania in accordance with paragraph 5 of Art. 17 of this Law.
Banking LawArt. 24, paragraph 1Defines in which cases a bank may not do any of the following without the prior approval in writing from the BoA. (….) finalize agreements with third parties for exercise duties of administrators, appoint one o more administrators, transfer ownership or the control of the bank to third parties, distribute capital..
Art. 25, paragraph 3/5States that: The Bank of Albania shall approve/ refuse the changes in the qualifying holding,
Art. 25, paragraph 6 Art. 25, paragraph 7States that: 6. If a person holds a qualifying holding in the bank without the prior approval of the Bank of Albania, the action resulting in such occurrence shall be deemed null and void.
Art. 25, paragraph 8States that .nobody can be a direct or indirect shareholder in a bank if that person does not have the moral reputation required by this Law or by-laws of the Bank of Albania, or who is charged or convicted at the time of the licensing of the bank of branch of a foreign bank.



States that: If the person, following the licensing or the approval of the Bank of Albania as a shareholder, does not meet any longer the requirements of this Law or by-laws on moral reputation, or is convicted, the Bank of Albania may order the transfer of the ownership of the person’s propriety rights on the shares to third parties who satisfy the criteria.
Art. 28, paragraph 1States that: The license of the bank or the branch of a foreign bank in the territory of the Republic of Albania shall be revoked only by decision of the Bank of Albania, where:



h) a transfer of the control of the bank has taken place without the initial approval of the Bank of Albania;

m) it is found or there is reliable evidence to show that the shareholders or administrators of the bank or administrators of the branch of the foreign bank are involved in illegal activities, used deception or have personally benefited in an unlawful way resulting in considerable damages to the bank;
Referring to the matter of holding a management function, including in the executive or supervisory boards, councils, etc the Banking LAW has also the following provisionsArt. 41An individual shall not be suitable for the position of the administrator or shall be released from holding such position by a decision of Shareholders’ Assembly of the bank or of foreign bank in case of the branch of the foreign bank, or of Directors’ Council, accordingly, where he:

f) is under criminal investigation or found guilty by the court of an offence punishable in law by imprisonment;
Art. 43:The Bank of Albania shall have the right to order the bank or the branch of the foreign bank to dismiss an administrator where:

a) it finds that the administrator has no adequate moral or professional integrity to serve as a director;

b) his initial approval was based upon forged documents;

c) the administrator has breached provisions of this Law or by-laws of the Bank of Albania.
Additional detailed provisions on the late are also provided in regulation of Bank of Albania no. 40, dated 27.05.2009 “On the core management principles of banks and branches of foreign banks and the criteria on the approval of their administrators”.Art. 14 on administrators approval,



paragraph 2
Defines the application qualifying holding and the documents to present which prove; (…):

(i) the person is not under a criminal investigation,

(ii) the person is not under a process for penal acts committed,

(iii) the person is never condemned by a definite decision of a court (issued by the Ministry of Justice),

iv) the person has paid all its wealth duties (issued by the Bailiff Office).

967. Apart from the AML/CFT Law, the “fit and proper” criteria for FIs are only mentioned in the CI and PF Laws as indicated in the following table.

LAWArticleProvision
Law 10198 Collective Investment UndertakingsArt. 4Requirement for authorization of FSA
CIU LawArt 16.b)(…) documents attesting that the company’s significant owners, directors, chief executive officers and internal auditor individually and collectively are fit and proper to lead the business
CIU LawArt 17. QualificationEstablishes: The executive members of the board of directors of the management company must meet all the following criteria:

b) have a clean criminal record;

c) be fit and proper to hold the position in accordance with Article 18 of this Law;
Art. 18

Fit and Proper
“Every person who is, or is to be, a significant owner, member of the board of directors or auditor in or with respect to a management company must be fit and proper to hold the particular position.

2. In determining whether a person is fit and proper to hold a particular position, the following shall be considered:

a) integrity, honesty, diligence and commitment to fulfilling the responsibilities of the position;

b) competence, professional skills and soundness of judgment for fulfilling the responsibilities of the position;

c) whether the interests of customers of the licensee or proposed licensee are, or are likely to be, in any way threatened by a conflict of interest that would arise from the person holding that position.



3. In addition to the foregoing general provisions, the previous conduct and activities in business or financial matters of the person in question shall be considered and in particular special investigations carried out as to whether any evidence exists that the person has been:

a) convicted of a crime;

b) engaged in, or associated with, any financial losses due to dishonesty, incompetence or malpractice in the provision of financial services or the management of other companies;

c) engaged in any business practices including tax evasion appearing to the Authority to be improper whether unlawful or not or which otherwise reflects discredit on the person’s approach to conducting financial services or other business.



4. Individuals that have been convicted of a crime cannot hold or be beneficial owners of a controlling interest, be managers of or hold a management position in a Management company. For the purposes of this paragraph, “controlling interest” means:

a) owning more than 50 percent of any class of voting securities;

b) having the power to elect a majority of the directors of the board or managers of any other policy-making body;

c) otherwise exercising a controlling influence over the management or policies of a management company.



5. A significant owner, director, chief executive officer or manager of a management company cannot be a significant owner, director, chief executive officer or manager of a depositary that holds the assets of the management company’s collective investment undertakings or a related party of the depositary



6. FSA shall issue a regulation to describe in detail the definition of the fit and proper requirement
Law 9879 “Securities Law” (Cross-reference with the established in the Banking Law for FIs plus)Art. 48

para 5

Application for license to operate with securities.
Detailed information on the origin and the amount of capital posed by the substantial shareholders.
Law On securitiesArt 84Criteria for the appointment of Directors and Members of the Supervisory Board of the Stock Exchange

(.d) have not been subject to any court sentencing for criminal offences in the commercial companies, taxes, economic and financial areas
Art. 63

Revocation of Broker of Investment advisor license
The Commission shall revoke a broker or investment advisor license by a decision if:

1. it establishes that the data submitted in the course of application for a license were fraudulent.

2. the broker or the investment advisor has been sentenced by a final order for criminal offences, or if a safety measure has been pronounced by the court against him/her or is in effect prohibiting him/her to work in the profession that is partly or fully included in the business activities of an intermediary company,
Pension Funds Law (N 10197)Art.24

Licensing of a management company
Requires to present: documents certifying that the company’s significant owners, directors, ultimate controller, chief executive officer, manager and internal auditor are individually and collectively fit and proper to lead the business. The documents required to determine whether these persons satisfy the requirements to be fit and proper include, as a minimum (.) iii) a statement individually signed by each person, that there is no pending or ongoing penal case or investigation, against any of them.
Art.25

Fit and Proper
Every person who is, or is to be, a significant owner, director, ultimate controller, manager or external auditor in or with respect to a management company shall be fit and proper to hold the particular position.

2. In determining whether a person is fit and proper to hold a particular position, the Authority shall assess whether the person has:

a) integrity, honesty and commitment to fulfill the responsibilities of the position;

b) competence, professional skills and soundness of judgment for fulfilling the responsibilities of the position;

c) independence so that the interests of customers of the licensee or proposed licensee are not, or are not likely to be, in any way threatened by a conflict of interest that would arise from the person holding that position.

3. In addition to the provisions above, the Authority shall appraise the conduct and activities in business or financial matters of the person in question, investigating, in particular, whether any evidence exists that the person has been:

a) convicted of a penal offence;

b) engaged in, or associated with, any financial losses due to dishonesty, incompetence or malpractice in the provision of financial services or the management of other companies;

c) engaged in any business practices, including tax evasion, appearing to the Authority to be deceitful or oppressive or otherwise improper, whether unlawful or not, or which otherwise reflect discredit on the person’s method of conducting a financial services or other business.

4. Individuals that have been convicted of a crime cannot hold or be 20 beneficial owner of a controlling interest, be director of, or hold a m