Chapter 4 in Montenegro's negotiations with the European Union (EU), which aims to enable free, simple and secure movement of capital without administrative barriers, should be closed in mid-December, announced the head of the negotiating working group, Bojana Bošković.
She explained that Chapter 4 – Free Movement of Capital refers to transactions related to money and financial instruments between countries, and these transactions are related to investment and trade.
"In this context, types of capital movements can be direct investments. These are investments in companies, firms, real estate in other countries. They can be portfolio investments. These are investments in securities, i.e. stocks or bonds. And they can be credit transactions and loans, i.e. loans approved by banks and international financial institutions," said Bošković in an interview with the Mina-business agency.
When asked what the key challenges were during the negotiation process, Bošković explained that Chapter 4 was one of the few where there were no particular systemic challenges.
She recalled that Montenegro adopted the Law on Current and Capital Transactions with Foreign Countries back in 2005, which completely liberalized all current and capital movements.
"The very fact that we did not have to change that law to close this chapter shows that we really established that regime starting in 2005. So all that happened afterwards was just fine-tuning and some perhaps minor changes to certain laws that represented the framework for the free movement of capital in Montenegro and of course this includes the area of payment transactions and the prevention of money laundering, which had to be harmonized because new regulations were adopted at the EU level in the meantime," said Bošković.
The representative of the Central Bank of Montenegro (CBCG) and member of the negotiating working group, Andrija Jovović, commented on the fulfillment of obligations under Chapter 4 in the area of payment transactions, emphasizing that this area played a key role, because it is precisely the quality, stability and compliance of the payment infrastructure that allows capital to flow smoothly, efficiently and through secure channels.
According to him, the previous period witnessed a very intensive period of harmonization, or modernization, of the payment system, which, in addition to technical, also implied the need for regulatory harmonization.
"All these activities that we have implemented are strategic and they demonstrate Montenegro's commitment to ensuring efficient capital movements, which is the very essence of this chapter. And this is proof that Montenegro is entering the final phase of negotiations with functional, efficient and European-harmonized payment systems," believes Jovović.
At the beginning of October, Montenegro became a member of the SEPA system - the Single Euro Payments Area, which is an EU initiative to simplify and standardize payment transactions, enabling faster, cheaper and safer payments and withdrawals in euros between member states. Jovović emphasized that Montenegro's accession to the SEPA zone is one of the most visible and concrete reform processes within Chapter 4.
"This is one of the segments that most directly affects the daily lives of our citizens and the functioning of the economy. SEPA has enabled payments in euros to be made in exactly the same way, regardless of whether you are making transactions to any EU member state or SEPA area," added Jovović.
According to him, SEPA has brought concrete benefits for citizens and businesses in terms of faster, simpler and significantly cheaper commissions than before, because SEPA introduced standardization that shortens execution time and eliminates all those additional costs that previously occurred through intermediary banking.
"The very feeling that the physical border in transferring money practically no longer exists represents the essence of European freedom of movement of capital," said Jovović.
He added that this is an even more important step forward for the economy, because companies from Montenegro now operate under the same rules as competing companies in the EU.
Jovović pointed out that SEPA was not just technical harmonisation, but a process of integration and entry into the European financial market.
"On October 7, when the first SEPA payment transactions began to be executed, we became part of the EU long before full membership, which is planned for 2028. And SEPA is precisely the best practical example of the benefits that full membership brings - free, simple and secure movement of capital without administrative barriers. What we have often repeated lately is that SEPA represents a quiet revolution in the process of European integration, because without much noise it brings concrete benefits and changes the way payments function," said Jovović.
Commenting on the next steps in the field of payment transactions and the new services and infrastructure that are planned, Jovović announced that we are entering a phase in which Montenegro is introducing solutions that represent the modern European top.
"This is about introducing a system for instant payments that we are implementing through the TIPS Clone project in cooperation with the Bank of Italy, the European Central Bank (ECB) and the World Bank (WB). Through the first phase, we will introduce instant payments for national payment transactions. So, there is no more waiting until tomorrow. Transactions are executed immediately and funds are available to clients in their accounts within a few seconds," said Jovović.
The second phase of this project involves regional connectivity between the countries participating in this project, and the third phase involves connecting to the real Target Instant Payment system, which is used by EU member states.
"You will then be able to receive and send money to and from any country in the EU within just a few seconds," said Jovović.
According to him, it is estimated that the annual savings from the introduction of the instant payment system, in combination with the SEPA project, will reach 160 million euros, which are significant savings at the level of the economy.
Speaking about their role in the work of the working group, Aleksandar Radović, Director of the Financial Intelligence Unit (FIU) and member of the negotiating working group, said that the unit monitors the institutional framework when it comes to the system for preventing money laundering and terrorist financing, cooperation between competent supervisory and investigative authorities, as well as international cooperation.
He explained that AML rules, which include anti-money laundering rules, are actually a mechanism that will ensure that the freedom of movement of capital is not complete freedom, that is, that so-called "dirty capital" does not pass through that capital.
Speaking about the challenges in this chapter, Radović said that the deadline for implementing EU rules, directives and regulations is very short.
"We no longer have the luxury of slowly implementing the rules. We have decided to accept the rules of the European family, because we are knocking on the door of the EU. However, sometimes those rules are not fully in line with our heritage and the situation in the country and the socio-political circumstances," said Radović.
The FIU, he said, had concrete benefits through the negotiation process, as it improved cooperation with supervisory authorities.
When asked whether Montenegro has sufficient human capacity to fully engage in the fight against money laundering, Radović replied that money laundering is a very widespread phenomenon in the world, and especially in our country.
"So, I don't know how much human capacity you can determine, they will always have work. Two and a half years ago, we had 27 employees. Later, we increased the number of jobs twice through systematization, so now it looks like 45 employees, 35 of whom are actively working. So we have ten vacant positions," said Radović.
According to him, the challenge is finding people who can do it.
"We are slowly building these capacities. At the level of the Ministry of Internal Affairs, in terms of capacities, we are at an advanced level. We can always do better, but considering all the opportunities and what we have at our disposal, we can say that we are satisfied. However, there is still so much to come," said Radovič.
Money laundering has taken on a different dimension in recent years, both in the world and in Montenegro, and rules must be written and implemented quickly and efficiently.
"It's a huge and specific job and I don't think you'll find a single country in the world that will say that it has 100 percent created a prevention system and that it is 100 percent investigating money laundering. Three to five percent of global gross domestic product relates to dirty money, and that fact shows how widespread this phenomenon is and how difficult and possible the fight is," Radović warned.
Summing up the work of the entire working group, Bošković emphasized that the EU accession process implies that institutions need to be reformed and made efficient.
"In order to have efficient institutions, we must also have efficient civil servants, because institutions are also made up of people. For us to be able to boast today about what we have done in Chapter 4 and other chapters, it means that some civil servants have worked very diligently. Colleagues have talked about the fact that we lack capacity and that we need to build that capacity. The fact that we have achieved all these reforms with so few people means that the success of those colleagues who worked is twice as great, because we did so in conditions of limited capacity," concluded Bošković.
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