Another Step Towards the SEPA Zone: Amendments to the Law on the Prevention of Money Laundering and the Financing of Terrorism

The latest amendments to the Law on the Prevention of Money Laundering and Terrorism Financing (“Law”) represent a clear step by the legislator towards aligning and further harmonizing our regulations with the standards and principles of the European Union (“EU”) in this field.

The adoption and implementation of such standards also constitute one of the key steps towards meeting the conditions for the Republic of Serbia’s accession to the unified euro payment market, i.e., the Single Euro Payments Area (SEPA).

An Overview of the Latest Amendments to the Law

• The Law classifies as obligors, i.e., persons who are required to undertake prescribed actions and measures, individuals engaged in the trade, organization, and auctioning of art objects, precious metals, and gemstones, as well as the storage and safekeeping of artworks, provided they earn revenue of at least 10,000 euros in its dinar equivalent through these activities, regardless of whether it concerns a single or multiple related transactions. One of the key challenges for supervisory authorities will undoubtedly be how to identify these obligors.

• The tightening of the punitive policy represents an additional preventive measure in the fight against money laundering, whereby fines may reach up to 10% of the obligor's revenue, and in cases where the amount of revenue or benefit cannot be determined, the fine may reach up to 120 million dinars.

• In the future, international organizations conducting missions in the Republic of Serbia will also be obligated to publish and update a list of prominent public officials within their structures. This will significantly facilitate the identification of these officials for obligors in the Republic of Serbia, in accordance with legal obligations.

• The authority of the Administration for the Prevention of Money Laundering has been expanded, granting this body the right to temporarily suspend the execution of a transaction if it assesses that there is a reasonable suspicion that the transaction or the person conducting it is linked to a previous criminal offense, that is an offense from which the property involved in the money laundering crime originates.

SEPA - Singe Euro Payments Area

As part of the EU accession process, the National Bank of Serbia (“NBS”) is actively working on aligning the domestic payment system with European standards through participation in the regional project 'Modernization of Payments in the Western Balkans Region'.

As early as late 2022, an initiative to join the European Central Bank's instant payment system – TIPS was launched, and in 2023, efforts were made towards joining the SEPA zone, under the guidance of the European Payments Council.

Simply put, SEPA represents a single market within which cashless transactions in euros are conducted among all users of the system.

Access to this market would enable even more efficient and cost-effective cashless transactions not only with EU countries but also with certain European countries that are not EU members but have joined the SEPA market, such as the United Kingdom.

To summarize, regulatory alignment with EU standards aims to improve various sectors, increase efficiency, and promote integration with the European market. Specifically, accession to the SEPA system would significantly contribute to the financial linkage of the Republic of Serbia, as well as the business entities operating in Serbia, with key trading partners in Europe, reducing transaction costs, while simultaneously facilitating the operations of domestic companies within the EU market.

Author:

Minja Mucić, Associate
Email: minja.mucic@prlegal.rs