Proposal

Pursuant to Article 45, Paragraph 1 of the Law on Government (“Official Gazette of the Republic of Serbia”, No. 55/05, 71/05 – correction, 101/07, 65/08, 16/11, 68/12 – CC, 72/12, 7/14 – CC and 44/14), the Government adopts the following:

Financial Investigation Strategy for the Period from 2015 through 2016

Financial investigations are one of the Republic of Serbia’s priorities relating to combating corruption, money laundering and financial crimes. Adoption of a mid-term strategy to improve financial investigations overall, means achieving one of the objectives anticipated in the National Anti-Corruption Strategy for the period 2013-2018.

The Republic of Serbia needs an efficient and proactive tool to investigate and prosecute financial crimes because gaining assets is the underlying reason for and motivation behind most such criminal offenses. Forfeiture of assetsthat have resulted from a criminal offense supports the rule of law and the moral principle that no one can benefit from a criminal offense. The police and prosecution authorities in Serbia have had some success in this area, but their results need to be improved.

A financial investigation, according to the Criminal Procedure Code (“Official Gazette of the Republic of Serbia”, No. 72/11, 101/11, 121/12, 32/13, 45/13 and 55/14)is somewhat narrower than what has been defined by the comparative legal theory which includes in a financial investigationmoney flow investigations which are carried out in parallel with criminal investigations, with the objective to discover assets gained by a criminal offense, identify assets which can be seized and temporarily secure property to enable its subsequent confiscation. Also, The Criminal Procedure Code prescribes special evidentiary actions which help tracing the assets gained by a criminal offense.

The term “financial investigation” within the meaning of the Strategy has been made consistent withRecommendation No. 30 provided by the Financial Action Task Force (hereinafter: the FATF); itimplies an enquiry into the financial affairs related to a criminal activity with a view to: identifying the extent of criminal networks, that is, the scale of criminality, identifying and tracing the proceeds of crime, terrorist funds or any other assets that are, or may become, subject to confiscation; and developing evidence which can be used in criminal proceedings

The main objective of a financial investigation is to identify and document money flow during criminal activities, that is, to discover where the money comes from (origin), how it is transformed, used and where it flows. The connection between the origin of money, beneficiaries, the moment when the money is received and the place where it is deposited can provide information about criminal activities and evidence about the committed criminal offense.

In its efforts to combat economic crimes, Serbia has to date undertaken certain measures: trainings on integrated financial investigations have been conducted, the Law on Seizure and Confiscation of Proceeds of Crime has been adopted; the Directorate for Management of Seized and Confiscated Assets has been formed; a special financial intelligence unit has been formed within the Ministry of the Interior; special anti-corruption departments have been formed within the Republic Public Prosecutor’s Office and Appellate and High Public Prosecutor’s Offices; the Law on Criminal Liability of Legal Entities has been adopted, as well as the Law on International Legal Aid on Criminal Matters,but with insufficient effects and outcome, or rather, cases disposed.

Studies carried out in the previous period identified the following weaknesses in the Serbian system of financial investigations:

  • A financial investigation is mostly initiated after the criminal charges have been filed;
  • Any delay of a financial investigation increases the risk that the assets will be taken out of the country;
  • Obsolete models of communication between public prosecutors and the police;
  • Lack of cooperation between institutions with information relevant for financial investigations and the police and public prosecutors;
  • Lack of specialized trainings of police officers and judicial officers;
  • Lack of forensic accountantsas a special category of experts;
  • Lack of a proactive approach on the part of the police and public prosecutors;

The Financial Investigation Strategy represents a document that comprehensively addresses the problem of financial crime, rather than leaving everything to the law enforcement and prosecution authorities; it implies connections between a wide circle of government authorities, that cooperate and exchange information received and processed by specialized police departments and public prosecutors’ offices and efficiently and proactively identify and prosecute financial criminal offenders, which is an approach used for the first time in the Republic of Serbia.

The strategy is a short-term projection for the period 2015-2016.

Three sections comprise the strategy document: the introduction which defines the general goal of the Strategy and lists relevant international instruments and forms of international cooperation; its central section which presents the reform of systems responsible for financial investigations; and its third section which describes implementation and oversight over the implementation of the Strategy.

I Introduction

1. General Goal

The general goalof the Strategy is to enable efficient and effective financial investigations so as to keep track of money flows and assets and have proactive identification of criminal offenses; the efficient cooperation of relevant agencies responsible for collecting data and conducting financial investigations; advanced trainings of judicial officers and civil servants who handle financial investigations; and prevent shiftingof unlawfully gained funds into lawful business flows.

The purpose of the Strategy is to enable strategic planning and managing the reform of systems responsible for financial investigations.

The Financial Investigations Strategy anticipates aproactive and continuous fight against systemic corruption, white-collar crime and financial crime, money laundering and thefinancing of terrorism which have a serious impact on the political and economic stability of the country, national security, democracy and the rule of law.

The Republic of Serbia’s Government, by adopting this Strategy, has decided to improve the system of financial investigations with the aim to protect society from crime and its consequences, through improved cooperation of relevant agencies, by introducing new profiles of experts and by continuous training of all participants in criminal proceedings; in particular government authorities that work closely with law enforcement and prosecution authorities and that handle information important for financial investigations on a daily basis.

The final outcome of the Strategy is a modern system of financial investigations as part of a developed and efficient judiciary which successfullyresponds to crime and undertakes proactive investigations of financial crimes, that is, economic crime.

Introduction of a modern system of financial investigations will increase citizens’ trust in the police (executive power) and the judiciary because of efficient prosecution and adjudication and confiscation of assetsresultingfrom criminal offenses; a clear message that crime doesn’t pay. Efficiently gathered, usable evidence by the police for the public prosecutors should result in relatively quick convictions in criminal proceedings.

2. International Instruments

International conventions like: The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (“Official Gazette of the SFRY – International Treaties”, No. 14/90); The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (“Official Gazette of the SRY”, No. 7/02 – International Treaties); The Criminal Law Convention on Corruption(“Official Gazette of the RoS”, No. 2/02-International Treaties and “Official Gazette of the Serbia and Montenegro State Union”No. 18/05 - International Treaties); The UN Convention against Transnational Organized Crime (“Official Gazette of the SRY” No. 6/01-International Treaties); The UN Conventionagainst Corruption (“Official Gazette of the SMN”, No. 12/05International Treaties); The Convention on Laundering, Search, Seizure and Confiscation of Proceeds of Crime and on the Financing of Terrorism (“Official Gazette of the RoS”, No. 19/09- International Treaties),anticipate or demand legal mechanisms or financial investigative actions to be in place in order to make gathering evidence easier.

The Council of Europe in its Recommendation on Simultaneous Investigations, dated April 25, 2002,has recognized the necessity to improve investigative measures aimed at combating organized crime, the need to have simultaneous investigations of drug trafficking by criminal organizations and their finances and identify the assets of criminal organizations.

The framework decision,EU 2007/845/JNA,regulates the cooperation of financial institutions responsible for this area, that is, Asset Recovery Offices – AROs. According to the decision, each of the member countries needs to establish a financial intelligence unit, that is, asset recovery offices which would be responsible for simplifying, tracing and identifying assetsthat have resulted from a criminal offense or other unlawful actions which could be subject to court measures to secure them, and subject them to seizure and confiscation within criminal or civil proceedings in line with the national law of the member country. In its latest recommendations FATFstrongly recommends conducting proactive parallel investigations of money laundering, predicate offenses and the financing of terrorism, including criminal offenses committed in other countries. Relevant agencies are asked to quickly identify, trace and initiate freezing and confiscation of assets that have resulted from a criminal offense.

A set of 40 new, revised FATF recommendations expands the authority of law enforcement agencies and investigation authorities – the list of special investigative techniques has been expanded to include– controlled delivery, undercover investigations andcommunication interception accessing computer systems. The use of multidisciplinary investigation groups is recommended as well as investigations in cooperation with other countries.

The European acquis in the area of criminal law is based on the principle of mutual recognition of judgments, and considering that the criminal law of the European Union is mostly developed to protectfinancial interests, a significant number of decisions and directives have been passed to date, as follows: Framework Decision 2005/212/JHA on Confiscation of Crime-Related Proceeds Instrumentalities and Property; Framework Decision 2003/577/ЈHА on the Execution in the European Union of Orders Freezing Property or Evidence; Framework Decision 2006/783/ЈHА on the Application of the Principle of Mutual Recognition to Confiscation Orders; Framework Decision 2001/500/ЈHА on Money Laundering, the Identification, Tracing, Freezing, Seizure and Confiscation of Instrumentalities and Proceeds of Crime; Framework Decision 2005/214/ЈHА оn the Application of the Principle of Mutual Recognition of Financial Penalties; and Framework Decision 2014/42/ЕУ оn the Freezing and Confiscation of Instrumentalities and Proceeds of Crime in the European Union. In the process of harmonization of the Republic of Serbia law with the EU acquis, all relevant instruments will become part of the Serbian legal system.

3. International Cooperation

a)INTERPOL

Interpol is the International Criminal Police Organization, which included the Republic of Serbia in its membership in 2011.Interpol’s mission is to enable police cooperation at the international level and to support all organizations, bodies and agencies aiming at preventing and combating crime at the international level.

In its resolutions (AGN/52/RES/8, of 1983; AGN/57/ RES/8, of 1988; AGN/66/RES/17, of 1997,Interpol called on all member countries to focus their investigations on identification, tracing and recovering unlawfully gained assets of criminal organizations. Those resolutions also call on their members to improve the exchange of information in that area and instruct its country members’ governments to adopt laws that will enable access to financial records and confiscation of proceeds of crime. As part of the efforts of the international police community to fight against organized crime a special branch within the police department of Interpol’s General Secretariat, called FOPAC, was establishedby the General Assembly of Interpol in 1983. The General Secretariat of Interpol and FOPAC, as its special branch, closely cooperate with other international organizations with the aim to build awareness about the need to use financial investigative techniques in the fight against organized and other forms of crime.

b)EUROPOL

Europol is the law enforcement and criminal intelligence agency of the European Union which became fully operational in 1992. Although Serbia is not an EU member it became member of a consolidated information system used by Europol in April 2012 after having signed a Strategic Cooperation Agreement. The main objective of Europol is to establish close cooperation of member countries and thus enable them to jointly combat organized crime, and in particular drug trafficking, human trafficking, child pornography, money counterfeiting and sale of radioactive and nuclear substances.

c)Financial Action Task Force- FATF

FATFwas established during the G-7 Summit in Paris in 1989 as a coordinated international response to money laundering stemming from drug trafficking at the international level. The FATF is an inter-governmental body which sets standards, develops and promotes policy for combating money laundering and the financing of terrorism. Based on the efforts of the Financial Action Task Force in April 1990, the first forty recommendationswere adopted as a framework for combating money laundering and recovery of assets that have resulted from crime at the national and international levels. The forty recommendations comprise a flexibleframework which enables countries interested in its implementation to accommodate it to their economic, social and political circumstances. The forty recommendations have been amended and supplemented several times, and most recently in 2012.

d)Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)

MONEYVALwas established in 1987 with the aim to introduce efficient systems to counter money laundering and the financing of terrorism in the member countries. MONEYVALevaluates whether its member countries adhere to appropriate standards concerning combating money laundering and the financing of terrorism. The Republic of Serbia is a member of this committee of the Council of Europe.

Activities of this committee of the Council of Europe concern evaluation whether its members adhere to appropriate standards relating to combating money laundering, recovery of assets gained by crime and the financing of terrorism.

e)Egmont Group

The basic goal of this group is to provide a forum for financial intelligence units in order to improve the cooperation in the fight against money laundering and the financing of terrorism and communication between different countries. The forms of cooperation include: proliferation of systems forthe exchange of financial intelligence information; training of personnel employed by those organizations; and enabling better cooperation between FIUs by applying new technological solutions.

f)Group of States against Corruption- GREKO

GREKO is a committee of the Council of Europe established with the aim to build capacities of its members to combat corruption by monitoring whether the countries adhere to their obligations concerning this area. The process of anti-corruption capacity building is a flexible and efficient evaluation system of anti-corruption measures. Groups of experts handle evaluation, and based on the obtained results, propose concrete measures (legal, organizational and educational measures) of improvement of the anti-corruption system. The second round of evaluation which pertains to proceeds of corruption is particularly important for financial investigations. The Republic of Serbia is a member of this committee of the Council of Europe.

GREKO is, in particular, responsible to monitor whether the member countries adhere to the adopted anti-corruption principles and whether to implement measures anticipated by the Council of Europe’s legal instruments as follows:the Criminal Law Convention on Corruption; theCivil Law Convention on Corruption (“Official Gazette of the RoS” No. 102/07 – International Treaties);and Recommendation(R 10) on the Rules of Conduct for Civil Servants, adopted in 2000.

The Republic of Serbia has been included in cooperation with the above mentioned international institutions and bodies, both in the area of cooperation and improvement and harmonization of the legal and institutional framework.

The Republic of Serbia will continue to improve its international and regional cooperation and harmonize its regulations with recommendations and standards of international institutions and bodies in the future.

IIREFORM OF SYSTEMS RESPONSIBLE FOR FINANCIAL INVESTIGATIONS

The Strategy includes three basic sections with 12 objectives. Each objective is further broken down into measures which need to be taken in order for the Republic of Serbia to establish an efficient system of financial criminal investigations. Training is a separate pillar which cuts across the entire Strategy, its objectives and measures, and all three of its pillars.

– Public Prosecutor’s Offices

Criminal Police –

Left: Business Registers Agency, Central Securities Depository, Privatization Agency, State Audit Institution,

Center: Administration for the Prevention of Money Laundering, Tax Administration, Tax Police, Customs Administration, National Bank of Serbia

Right: Cadastre, Anti-Corruption Agency, Pension Fund, Property Directorate

1. EffectiveJudiciary and Prosecution Authorities

Description of the Situation

The Prosecutor’s Office for Organized Crime has been active since 2003. The authority and activities of the Prosecutor’s Office for Organized Crime in Serbia have been regulated by the Law on the Organization and Competences of the State Organs in Combating Organized Crime, Corruption and Aggravated Offences (“Official Gazette of the RoS”, No. 42/02, 27/03, 39/03, 67/03, 29/04, 58/04, 45/05, 61/05, 72/09, 72/11, 101/11 and 32/13and the Law on Public Prosecution (“Official Gazette of the RoS”, No.116/08, 104/09, 101/10, 78/11, 101/11, 38/2012, CC, 121/12, 101/13, 111/14 – CC and 117/14.

In addition to forming the Prosecutor’s Office for Organized Crime, public prosecution specialized in prosecution of corruption, and in 2008 the Anti-Corruption Department was formed in the Republic Public Prosecutor’s Office; and anti-corruption and money laundering departments were established in other public prosecutor’s offices of general jurisdiction in 2010 (in the Appellate and the Higher Public Prosecutor’s Offices).