Omerbegović Arapović for NAP: MONEYVAL's grey list - a signal of deep connections between dirty money and high politics

Written for NAP by: Prof. Dr. Adisa Omerbegović Arapović, Full Professor of Economics and Finance, International Burch University

Bosnia and Herzegovina has not yet formally ended up on the grey list, but the mere fact that MONEYVAL refused to accept the belated surge of legislative activity speaks louder than any diplomatic formulation. On Friday, it wasn't just another attempt to "pass something" that failed. The model of state governance that has relied on the same logic for years has failed: do the minimum, wait until the last moment, and believe that international institutions will look the other way once again.

This time, they might not.

For the average citizen, acronyms like FATF and MONEYVAL sound like bureaucratic jargon irrelevant to everyday life. But the consequences of their decisions are felt very concretely – through banks, investments, loan prices, international money transfers, and the country's reputation.

FATF, or the Financial Action Task Force, is an international body that sets rules for combating money laundering, terrorist financing, and the concealment of illegal capital. Its recommendations today represent the global standard for financial security.

MONEYVAL is a Council of Europe body that assesses how countries implement these standards. When MONEYVAL assesses that a country is seriously lagging or shows no ability to address weaknesses, the case ends up before FATF.

That's where the serious problem begins.

The so-called "grey list" is not a formal black mark of a failed state, but it is a warning to the international financial system that business with that country should be conducted with increased caution. This means additional checks, slower transactions, more expensive international business, and higher reputational risk. And that, in turn, means everything becomes slower and more expensive.

The list of countries currently under increased FATF scrutiny is not a company any European economy would want to be in. It includes countries like Haiti, Yemen, Syria, Venezuela, South Sudan, and Lebanon. Some European countries like Bulgaria and Monaco are also on the list, but the dominant message of the list is not geographical but institutional: countries on this list have serious problems with oversight of money flows and trust in the state.

And trust is the currency of modern economies.

For years, Bosnia and Herzegovina has been trying to convince international partners that it is ready for deeper integration into the European financial space, including access to the SEPA payment system and greater financial connectivity with the EU. At the same time, that same country has failed for months to finalize key laws on beneficial ownership of companies, confiscation of illegally acquired assets, and financial supervision.

This is not a technical oversight. It is a signal of deep connections between dirty money and high politics.

Because a modern economy does not function solely on foreign exchange reserves or tax rates. It functions on risk assessment. When international banks, investors, or regulators see that a country cannot meet even the minimum standards of financial transparency on time, they do not wait for political explanations. They simply increase the cost of doing business with that country, and the country, its economy, and its citizens pay the price.

The experiences of other countries show that the consequences of the grey list are not abstract. IMF analyses have shown that countries under increased scrutiny experience a drop in foreign capital inflows, more expensive financing, and difficult access to international money flows. Small and open economies are particularly vulnerable because they depend existentially on the trust of foreign partners.

And our economy is exactly like that.

The problem is that here, people still believe that international institutions will lower their criteria before domestic politics increases its responsibility. For years, the strategy has been the same: ignore warnings, create institutional blockades, and then in the final weeks or even days, try to fake reform under pressure from embassies and international organizations.

That model may have worked at some point. Today, it no longer works in Brussels or Strasbourg, and clearly not in MONEYVAL either.

Therefore, it is possible that Friday's decision is much more than just an unpleasant diplomatic event. It could represent the beginning of a new relationship between international financial institutions and Bosnia and Herzegovina, a relationship in which the country will no longer be seen as a "complicated political case," but as a growing regulatory and financial risk that needs to be curbed.

And once a country begins to be described in this language, the consequences spread far beyond the banking sector.

Investors become more cautious. Banks tighten procedures. International transactions become slower and more expensive. The country's reputation weakens. In the long run, even domestic companies operating properly begin to pay the price for a system that does not inspire confidence.

In a country with a currency board, reputation is a key variable. It is part of the monetary architecture. BiH does not have the luxury of cushioning a loss of confidence with exchange rates or monetary expansion, independent of the banking system and foreign currency entering our country through remittances, investments, and borrowing. If capital becomes more cautious, banks slower, and transactions more expensive, the burden falls on the real economy, on companies, exporters, public budgets, and ultimately on all citizens. In other words, the grey list does not collapse the currency board by itself, but it makes it more expensive to maintain because it weakens the flows that feed currency stability.

The greatest irony is that Bosnia and Herzegovina formally adopts European laws while simultaneously producing more and more signals of institutional instability. A country that wants to be part of the European economic area cannot afford to be treated as a high-risk banana republic by international financial institutions.

Therefore, the question is no longer just whether BiH will end up on the grey list. The question is whether international patience with BiH is starting to run out faster than domestic politics is willing to understand. And the price is the stability of the currency, the financial system, and the economy as a whole.