Money laundering and terrorism financing are criminal offences with economic repercussions. As they are global problems, their negative consequences are manifold: they undermine the stability, transparency and efficiency of a financial system, provoke economic disturbances, jeopardise reform programmes, result in diminished foreign investment and loss of a country’s reputation.
Money laundering is the practice of concealing illegal origin of money or assets that are the proceeds of crime. When material gain is obtained through a criminal offence, the perpetrator seeks ways to use money or other assets without attracting the attention of competent authorities and engages in a number of transactions which serve to present money or other assets as gained in a legal way. Money laundering consists of three main phases:
- The first is the placement phase, i.e. breaking of the direct link between money and the illegal activity instrumental in its obtainment. It involves placing the proceeds of crime in the financial system;
- The second is the layering phase, in which money that entered the legal financial system is transferred from the accounts in which it was deposited to other accounts. The main aim is to conceal the link between money and the criminal source;
- The third is the integration phase in which the “dirty” money is “legitimised”.
Within the meaning of the Law on the Prevention of Money Laundering and the Financing of Terrorism (RS Official Gazette Nos 113/2017, 91/2019 and 153/2020 – the Law), money laundering means:
- conversion or transfer of property acquired through the commission of a criminal offence;
- concealment or misrepresentation of the true nature, source, location, movement, disposition, ownership of or rights with respect to the property acquired through the commission of a criminal offence;
- acquisition, possession or use of property acquired through the commission of a criminal offence.
These activities conducted outside the territory of the Republic of Serbia are also considered money laundering.
Terrorism financing provides funds for terrorist activity. It may involve funds raised from legitimate sources, such as business profit and donations from personal sources or humanitarian organisations, as well as from criminal sources, such as drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.
Within the meaning of the Law, terrorism financing means the providing or collecting of assets, or an attempt to do so, with the intention of using it, or in the knowledge that it may be used, in full or in part:
- in order to carry out a terrorist act;
- by terrorists;
- by terrorist organizations.
Terrorism financing also means aiding and abetting in the provision and collection of assets, regardless of whether a terrorist act was committed or whether property was used for the commission of the terrorist act.