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Cash is King: Impact of the Ukraine War on Illicit Financial Flows in South Eastern Europe

Illicit cross-border financial flows fuel criminal behavior, undermine governments' capacity for development support, and erode the rule of law while jeopardizing the business environment. They drain public resources and reduce the scope of public services and, thus, undermine confidence in state institutions. This is particularly true when such flows originate in heavily étatist economies, with no effective division or independence of the private from the public or state-owned sector. 

Russia has established a pattern of malign economic impact in Europe through its cultivation of ‘an opaque network of patronage across the region that it uses to influence and direct decision-making’ in key markets and institutions. IFFs in the Balkan region, in particular, are manifold, multi-directional and, proportionally, large as a percentage of GDP. While global illicit outflows are 3–5% of world GDP, IFFs in the Balkans are estimated at about 6% of the region’s GDP.

The current report assess the major enablers and vulnerabilities of illicit finance in the eight Balkan countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, North Macedonia and Serbia) after Russia’s invasion of Ukraine. It delves into the primary IFFs sources and channels in the region, and identifies emerging trends all the while offers feasible recommendations for improvement.

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