On 28 February, 2024 the Law on prevention of money laundering and financing of terrorist activities („Official Gazette of Bosnia and Herzegovina “,13/24) came into the effect. One of the control authorities for enforcing that Law is the Republic Administration for Inspection Affairs. Taking into the consideration that the control of non-financial sector is done by this authority, namely obliged entities listed in Article 93 of the Law, and in relation to the Article 5 of the Law, we use this opportunity to announce direct inspection supervision in the upcoming period.

The Law in question describes in detail the obligation of the addressees for enforcement of the law, as well as obliged entities, while the legal concept is based on adequate risk assessment and management. Traders of precious metals and stones are inter alia considered to be obliged entities when they engage in any sort of cash transaction with a client, equal to or higher than BAM 20,000.

Obliged entities from Article 5 of this Law are required to take measures, procedures and actions to prevent and to discover money laundering and terrorist activity financing and financing of the proliferation of weapons of mass destruction before, during and after conducting the transaction or establishment and duration of business relationship.

Measures, procedures and actions of the article include:

1. Conducting risk assessment of money laundering and terrorist financing;
2. Creation of policies, procedures, controls and actions
3. Monitoring of policy enforcement, controls and procedures from the item b) of this paragraph and their improvement if necessary;
4. Undertaking of stronger measures for risk management and risk mitigation where the stronger level of risk has been identified detected
5. Undertaking of simplified measures for risk management and th risk elimination where the lower level of risk is identified
6. Identification and tracking of the client in a manner and under the conditions mandated by this law
7. Submission of information, data and documentation to the Financial Intelligence Unit of the State Investigation and Protection Agency (SIPA) on transactions, funds and persons (hereinafter: FIU);
8. Appointing an authorized person and their deputy in the name of the obliger to fulfil obligations from this law and to secure the condition for their work
9. Regular professional education, training and development of employees
10. Securing regular internal control and internal and external audit of the obligations from this law
11. Creation and regular updating of the indicator list for the identification of suspicious transactions, clients or parties.
12. Record keeping and storing and protection of the data
13. Execution of other measures and actions based on this Law and bylaws adopted on the basis of this Law

An obliged entity from Article 5 of the Law is required to compile adequate policies and procedures which will be used to encompass measures defined in this article (Article 9 of the Law), for the purposes of risk management from money laundering and terrorist financing and financing the proliferation of weapons of mass destruction. Policies and procedures must be appropriate to the nature and size of the obliged entity and must be approved by the highest authority for surveillance, administration and management of the obliged entity in line with statute. Detailed decisions on establishment of policies, procedures and control actions are contained in the Article 56 of the Law.

Obligation of assessment of risk from money laundering and terrorist financing and financing of the proliferation of weapons of mass destruction is prescribed by the decision from the Article 10 of the Law  to identify, assess, understand and decrease the risk of money laundering, terrorist financing and financing the proliferation of weapons of mass destruction, taking into consideration risk factors which are related to:

1. Clients
2. Countries and geographic areas
3. Products, services and transactions
4. Channels of distribution

Risk assessment must be documented appropriately to the size of the obliged entity, type, scope and complexity of their work, and the obliged entity is required to at least once a year update and submit the documentation relating to risk assessment to a competent supervisory authority according to the Article 93 of this law (in a real case to an inspector of the Republic Administration for Inspection Affairs).

Next obligation is related to nominating an authorized person and one or more deputies of the authorized person, with a goal to deliver information to the FIU (Financial Intelligence Unit). Authorized person is required to be present during the performance of direct supervision, to directly communicate with representatives of supervisory authorities and to give them all necessary help for unhindered exercise of direct supervision. Conditions for the authorised persons and the deputies are prescribed by decisions in Articles 48 to 51, 53. and 54. of the Law.

Obligations on compiling the lists of indicators for recognizing suspicious transactions, that is means and clients with whom there are reasons for suspicion of money laundering terrorist financing and financing the proliferation of weapons of mass destruction are prescribed by the decisions in the Articles 57. and 58. of the Law and are fulfilled on the basis of information which are available and are about new trends and typology of money laundering and terrorism financing. In the case of changed conditions in the work of the obliged entity, if there are important for the implementation of this Law, the obliged entity is required to compile an amendment to the list of indicators. The obliged entity is required to deliver the list of indicators and the amendment list to FIU and the supervisor authority within thirty days from completion. The Article 58 prescribes obligations of the obliged entity of defining a procedure of an independent and anonymous reporting of violations of provision of the Law and its bylaws.

Important obligation is establishing and maintaining records, types of records as well as their content, which is regulated by Articles 59 to 61 of the Law.

The obliged entity from the Article 5 of this Law is required to secure activities and measures for preventing and discovering money laundering and terrorist financing, in the same manner and scope in its subsidiaries in which the legal entity holds a majority ownership stake, regardless of whether they are located in Bosnia and Herzegovina or a foreign country, which is explained in provisions of the Article 52 of the Law. Also, the obliged entity from the Article 5 of this Law is required to, within the scope of regular their activity for the purposes of efficient management of risk from money laundering and terrorist financing and proliferation of weapons of mass destruction, establish an internal control of execution these activities appropriate to the size and nature of its work. So, at least once a year it has to secure an independent internal and external audit of adequacy, reliability and efficiency of the risk management system dealing with money laundering and  terrorist activity financing and proliferation of weapons of mass destruction, which can be a part of prescribed external audit when the obliged entity or supervisory authority of the obliger estimate whether, taking into the account the size and nature of the work, independent internal and external audit from this stance is needed, and especially when a law or a bylaw regulate the activity of the obliged entity and prescribe the obligation of having internal and external audit (Article 55, of the Law).

Obliged entities from the Article 5 of the Law are required to establish adequate physical, organizational and technical measures and actions for data keeping and documentation delivered to the FIU or are received from the FIU that will secure them from loss, destruction and unauthorised access, unauthorized changes, unauthorised publications, review of unauthorised individual and every other misuse. With aim to implementing aforementioned, the obliged entity is required to compile adequate internal documents and procedures for implementing that have to be approved by the highest management of the obliged entity and with which, appropriate to the nature and the size of the obliged entity, will define adequate physical, organisational and technical measures and actions of data keeping and documentation (Article 89 of the Law).

On this occasion, special attention should be turned towards the provision of the Article 41 from this Law, which prescribe a prohibition on accepting cash payments if the payment for goods or services exceeds the amount of 30,000 BAM. The limitation on cash payment also applies when the payment is carried out through several connected cash transactions which total value exceeds 30,000 BAM. Individuals engaged in the sale of goods, real estate or the provision of services must receive payments from customers to their transaction account. The same procedure applies in cases of receiving and granting loans. When a sale contract for the transfer of real estate includes a transaction or transactions that is means in monetary value of 30,000 BAM or more or it is equivalent in value to foreign currency, unless it is differently regulated by another law, every transaction must be done via a payment order or a bank transfer. Legal entities and entrepreneurs which are registered for performing trade of vessels, vehicles and aircraft are forbidden to take cash from a client or third party if their payment exceeds 30,000 BAM.

Finally, the Law in question prescribes misdemeanour provisions for not respecting the aforementioned, and they range from 5,000 BAM to 20,000 BAM, from 20,000 BAM to 80,000 BAM, from 50,000 BAM to 200,000 BAM for legal entities depending on the type of offence, while the responsible persons can pay from 1,000 BAM to 5,000 BAM, from 3,000 BAM to 10,000 BAM, from 5,000 BAM to 20,000 BAM, depending on the type of offence. For not adhering to provisions of this Law penalties in the amount from 2,000 BAM to 10,000 BAM for a natural person that has independent profession are prescribed.

Also, at the address: https://inspektorat.vladars.rs/index.php/2025/09/09/aktivnosti-republicke-uprave-za-inspekcijske-poslove/ there are informative documents that contain overview of obligations in regards to measures of preventing money laundering and financing terrorist activities, including the list of indicators.

We highlight that regular monitoring is needed of the entities on whom restrictive measures are applied in line with Decision on the manner of implementing target financial sanctions of Security Council of United Nations connected with financing terrorism and financing proliferation of the weapons of mass destruction (’’Official Gazette of Bosnia and Herzegovina “18/24). Every natural person or legal entity is required during performance of their business activities to determine whether or not they have business or similar relationship with targeted person or entity, who has their property frozen by the Council of Ministers of Bosnia and Herzegovina in line with articles 6. and 7. of this Decision, or by the UN Security Council in line with Article 11. of this Decision. All natural persons and legal entities which have at their disposal assets, property and other financial assets or economic resources of marked persons or entities, their partners or supporters or individuals or entities directly or indirectly under the control or acting on their command, are required to freeze assets or other properties of marked persons or entities that have their properties frozen by Council of Ministers of Bosnia and Herzegovina in line with articles 6. and 7. of this Decision, or by the UN Security Council in line with Article 11. of this Decision without delay and without prior announcement or notice. Freezing makes assets, goods and other financial assets or economic resources unavailable for use by the marked person or entity, unless they are not explicitly exempt in line with procedures by provided Decision. So, if you determine that this is a person whose property is frozen in aforementioned way you are required to decline business relationship with such a person. All natural persons and legal entities are required immediately  to submit a written report on freezing of the property or assets to the Ministry of Security of Bosnia and Herzegovina, including every attempted transaction which the marked person or entity tried to realise with physical or legal person, together with all available data and information regarding the case, including the value and detailed list of frozen properties, assets or movable and immovable property which belongs to a specified person or an entity.