In the coming years, Montenegro will become an increasingly significant user of money from the European Union, which is why, at the request of the European Commission, it must form protective mechanisms and institutions that would prevent fraud with the use of that money, such as increasing the powers of the future financial police, adopting several amendments to the law, including the Criminal Code, as well as forming a special unit in the prosecutor's office to process cases related to the spending of money from the EU and its institutions.
The Ministry of Finance has put the Draft Strategy for Combating Fraud and Managing Irregularities in the Financial Interests of the European Union for the period 2025-2028 and the accompanying Action Plan for the period 2025-2026 for public consultation, which runs until June 4.
Montenegro has had anti-fraud and irregularity management strategies to protect the EU's financial interests since 2015, and the current one, with an action plan, envisages the fulfillment of all obligations by 2028. That year has also been announced as a possible deadline for Montenegro's accession to the EU.
EU concerned about lack of convictions and asset confiscation
The draft strategy states that the European Commission, in its communication on the 2023 EU enlargement policy, stressed that the Montenegrin authorities should step up efforts to combat money laundering and financial crime, and that it is concerned about the lack of convictions and the very low level of confiscation of assets acquired through criminal activities.
"Montenegro has shown encouraging progress in the fight against organised crime, including the arrests of senior members of organised crime groups and senior officials in law enforcement agencies. However, the need for a consistent and determined fight against organised crime infiltration into the police and judiciary has been highlighted. The European Commission is concerned about the lack of convictions in the areas of tobacco smuggling, money laundering, human trafficking and cybercrime and the very low level of confiscation of assets acquired through criminal activities. Although the number of convictions for financial crimes increased in 2022, they were based exclusively on plea agreements, indicating the need to strengthen case law and process cases more efficiently," the European Commission said at the time.
Through Chapter 32 - Financial Control, which also includes the protection of the EU's financial interests, Montenegro has committed to improving discipline and transparency in the use of public funds (national and EU funds) and ensuring the protection of the EU's financial interests.
"As a beneficiary of financial resources from IPA funds, Montenegro is obliged to establish an efficient system for combating irregularities and fraud in the pre-accession period and to ensure the legal and targeted spending of these funds. They are intended to promote the development goals of Montenegro, as well as to accelerate economic and social growth. All funds that are spent for other purposes or illegally must be returned to the EU budget," the introduction to the strategy states.
So far, the Directorate for the Protection of EU Financial Interests/AFCOS has been established within the Ministry of Finance, while the Supreme State Prosecutor's Office signed a cooperation agreement with the European Public Prosecutor's Office (EPPO) in September 2022. As stated, future cooperation with the European Prosecutor's Office will be a key aspect in the management of IPA funds and the protection of the EU's financial interests.
Key financial police
It was also stated that the Fiscal Strategy for the period 2024-2027 envisages the establishment of a financial police. This police would be part of the Tax Administration, and its establishment has been announced since 2014, and in 2016 its head was even elected, but its establishment was later annulled and it was removed from the systematization of the Tax Administration.
"Given the current decentralization of institutions responsible for control in this area, the Government of Montenegro believes that by establishing the financial police, this body could more effectively combat corruption at the highest level, as well as all forms of financial fraud. Taking into account the fact that in many EU member states the financial police have jurisdiction over investigations of fraud that threaten the financial interests of the EU, it is necessary that cooperation between AFCOS and the financial police be established already during its formation and the drafting of legal acts that will regulate its functioning," the strategy states, but does not specify when it will finally be established.
In Montenegro, the level of money recovered from fraud is low, and the punishment of those responsible is even lower.
The strategy states that any improper or illegal use of money must be followed by the return of that money to the EU, as well as the taking of sanctions against the perpetrator of illegal spending.
“The reimbursement of funds to the European Commission is carried out as part of the closure process of the programme, i.e. upon receipt of a request by the European Commission; in the case of the IPARD programme, the rules for reimbursement are more precisely defined by the sectoral agreement and there are deadlines within which Montenegro must reimburse the funds during the duration of the programme... However, the fraud risk analysis showed that the reimbursement process is slow and that improvements are needed in this area. Based on data from the IMS system summarized in the analysis, as well as data provided by the Management Structure on recoveries since 2018, the recovery rate of improperly spent funds is 43%,” the strategy states.
In order to make the refund process more efficient, it is suggested to first analyze the reasons why this rate is so low, and then define further steps based on the results of the analysis.
"This is all the more important during the period of this Strategy, as significant attention will be paid to increasing the capacity for detecting irregularities and fraud by the competent institutions, and accordingly, more irregularities should be expected to be identified and funds to be successfully recovered," the document states.
In addition to the low level of recovery of European money obtained through fraud, the low level of sanctioning of such frauds was also cited as a problem.
"Even during the pre-accession period, Montenegro must ensure within its national legislation that any violation of EU law is sanctioned, regardless of whether it is carried out within the framework of administrative, civil, misdemeanor, criminal or any other procedure. In this regard, it is necessary to take into account all weaknesses of national legislation in order to take appropriate measures in a timely manner and ensure the compliance of national and EU regulations," the strategy states.
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