Russia undercuts Balkan republics with illicit funds

The Western Balkans are home to a stunning amount of illicit financial flow that is made possible by poor government, pervasive corruption, organized crime, and a booming shadow economy. Illegal capital is the Kremlin’s most effective sharp power tool.

The courageous resistance of Ukraine to Russia’s aggressive war has just jolted the geopolitical consciousness of the European Union. The European Commission swiftly opened up the possibility of membership to Ukraine, Moldova, and Georgia a year after the full-scale invasion.

Moreover, the three nations serve as the first line of defense against the Kremlin’s openly acknowledged ultimate objective, which is the abolition of the EU. Many, however, have doubts about whether all of the member states will remain committed to fulfilling this pledge.

The EU’s ability to complete the Western Balkans’ next round of enlargement by 2029 would be the true stress test.

Elites in the Western Balkans have long been fascinated by EU membership. Nonetheless, the prospect of a prosperous future for Europe frequently appears fanciful to many people in the continent.

Although the summit between the EU and the Western Balkans in December 2016 offered fresh hope, the protracted impasse continues, which causes dissatisfaction and paralysis. As a result, there is a void that malicious foreign actors, most notably Russia, have been deftly filling.

The region’s simmering ethnic divisions, state and media capture, and the legacy of Russian cognitive bias make it a prime target for Moscow’s ongoing hybrid war against the EU and the democratic West, with 51% of Serbs willing to vote against EU membership in a referendum and 40% still fond of Vladimir Putin despite his atrocities in Ukraine.

By building an opaque network of patronage throughout the continent to sway and drive decision-making in important markets and institutions, Russia has developed a pattern of negative economic impact throughout Europe.

Illegal capital, the Kremlin’s most effective sharp power instrument, moves astonishing amounts in and out of the WBs thanks to lax administration, widespread corruption, organized crime, and a thriving shadow economy.

On a global scale, illicit financial flows (IFFs) are thought to be worth between $1 and $1.5 trillion annually, while in the Balkans, they account for about 6% of GDP. This is twice as big as the global average in this area.

This jeopardizes the business climate, undermines the rule of law, and damages the efficiency of the criminal justice system. Illegal flows deplete public resources, scale back the range and caliber of public services, and erode trust in government institutions. Also, they build strong networks of influence that promote negative local or international objectives.

Stopping the flow of IFFs needs concerted action within the context of EU expansion and the Berlin Process, coherence within and between national and international normative frameworks, and recognition of IFFs as a global problem.

A new EU strategy for economic security is required, one that emphasizes the quick implementation of the European Anti-Money Laundering Authority as well as enhanced procedures for investment screening, asset forfeiture, and the enforcement of penalties.

The sooner such universal mechanisms for halting IFFs are able to span the Balkans, the EU, and the not-yet-EU through their larger capability, the better. This also holds true for similar law enforcement organizations like Europol, Frontex, the European Public Prosecutor’s Office, etc.

Although if not all cash that pass through IFFs come from underlying crimes, money that is made legally, somewhat legally, or clandestinely may nonetheless be transferred through shady channels and kept in foreign countries.

In order to prevent, detect, prosecute, and punish financial crimes, Balkan authorities must let money laundering to be looked into separately from other crimes and beneficial ownership transparency should be mandated.

The stronger security vetting of investments made by external parties in SEE and European businesses or operations, as well as the enforcement of transparency standards for beneficial ownership, are crucial.

Given the lower than average levels of compliance with international norms on risks from virtual assets, more focus should be paid to the cryptocurrency industry, which includes prominent new ways to move money illicitly into and out of the region.

On a policy, technological, and administrative level, much has already been done and may still be done to protect the Balkans from foreign nefarious influence and deny Moscow more chances to undermine democratic Europe.

To lay out a clear timeframe for the upcoming round of admission, the leaders of the free world must first demonstrate political vision and resolve, as they did with the region’s past enlargements.

The Balkans’ peoples stand to win freedom, peace, and prosperity from Europe’s completion of its enlargement, provided that neither side is compromised by the white-noise-disinformation cloak.

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