Bosnia and Herzegovina could be re-added to the grey list this year. In February 2026, the one-year observation period imposed by the Financial Action Task Force (FATF) expired. This means the country faces a credible risk of being placed under increased monitoring, known as the grey list.
The concern reflects a wider pattern of unresolved weaknesses identified by MONEYVAL and echoed by the EU, including the failure to adopt key state-level laws on asset confiscation and targeted financial sanctions, the long-delayed creation of a beneficial ownership register, weaknesses in supervision outside the banking sector, and broader problems of institutional coordination and enforcement. Among the weaknesses include allegations that a Sarajevo-based real estate firm marketing Dubai property claimed clients could use cash or cryptocurrency without having to prove the origin of funds.
These issues are raising fresh doubts about whether Bosnia can show the level of legal coherence, operational effectiveness and political commitment needed to avoid grey listing.
A system under scrutiny again
Bosnia’s current position is not an isolated episode. The country has faced sustained criticism from the MONEYVAL for over a decade, including formal compliance procedures as far back as 2014 due to failures to align its criminal framework with international standards. The present risk of grey listing follows a December 2024 mutual evaluation that identified deficiencies across multiple pillars of the AML/CFT regime.
In February 2025, Bosnia entered a one-year observation period. That period has now expired, with repeated warnings from EU institutions that failure to demonstrate “significant progress” will likely result in grey listing. Around three quarters of the recommended actions must be implemented to avoid escalation, with several of the most critical measures still outstanding.
Bosnia will likely face renewed pressure at the next FATF plenary in Strasbourg in June. By that stage, the MONEYVAL findings will need to translate into enacted legislation, operational systems and demonstrable enforcement. Without that, Bosnia is likely to face a far more difficult assessment, with the risk of grey listing becoming more acute rather than less.
Legislative gaps and structural deficiencies
At a formal level, Bosnia has made incremental progress. It has adopted an AML/CFT law, established a coordinating body, and begun aligning with EU directives on asset recovery. Yet the core weaknesses identified by MONEYVAL remain largely unaddressed.
First, there is no effective state-level framework for confiscation and management of criminal assets. Legislative efforts are ongoing, including alignment with the EU’s asset recovery directive, yet the law itself remains stalled. Political disputes between state and entity authorities have blocked adoption, leaving confiscated assets fragmented across institutions without unified oversight or control.
Second, Bosnia lacks a comprehensive and operational register of beneficial ownership. This is a foundational expectation under both FATF standards and EU law. Without it, transparency over legal entities remains limited, particularly in higher-risk sectors.
Third, the regime for targeted financial sanctions is incomplete. The absence of a fully implemented framework covering terrorism financing and proliferation financing represents a material gap in compliance with international obligations.
These issues are compounded by wider systemic weaknesses. MONEYVAL has highlighted deficiencies in risk understanding, supervision of non-financial sectors, international cooperation, and the use of financial intelligence. There are also concerns around the enforcement of sanctions and the prosecution of terrorist financing.
Case study: Sarajevo real estate offers ‘no paperwork needed’
One recent investigation into a Sarajevo-based firm marketing Dubai real estate illustrates the practical risks within the system.
The firm reportedly offered clients the ability to purchase overseas property using cash or cryptocurrency without providing proof of funds. More strikingly, it described mechanisms designed to avoid cross-border transfers altogether, including the use of informal value transfer systems such as hawala.
Representatives were recorded stating that “no paperwork is needed” and that the origin of funds “does not matter”.
If accurate, this conduct would directly contravene Bosnia’s AML legislation, which prohibits large cash transactions in real estate and imposes obligations on intermediaries to verify the source of funds. It also exposes deeper structural issues.
Real estate remains a globally recognised high-risk sector for money laundering. In Bosnia, MONEYVAL has already noted that risk identification outside the banking sector is still underdeveloped. The use of cryptocurrency and informal transfer systems adds further complexity, particularly given the absence of clear regulatory frameworks for these channels.
The case also highlights the interaction between domestic weaknesses and international vulnerabilities. Dubai’s real estate market has been criticised for limited transparency and the ability to obscure beneficial ownership. When combined with weak controls at the point of origin, this creates a clear pathway for illicit financial flows.
Political fragmentation as a compliance risk
Unlike many jurisdictions facing pressure from the Financial Action Task Force, Bosnia and Herzegovina’s challenges are not confined to technical compliance. They are rooted in the structure of the state itself.
Bosnia operates under the constitutional framework established by the Dayton Agreement, which created a highly decentralised system composed of two main entities: the Federation of Bosnia and Herzegovina and Republika Srpska, alongside the self-governing Brčko District. Competences are divided across multiple layers of government, with state-level institutions often dependent on political agreement between entities to legislate or implement reforms. In practice, this produces a system where AML/CFT responsibilities are dispersed across ministries, agencies and supervisory bodies that do not always operate with a unified mandate.
This fragmentation has direct implications for compliance effectiveness. The stalled law on the confiscation and management of criminal assets is a clear example. One reason was a fundamental disagreement over sovereignty and control. Authorities in Republika Srpska have resisted provisions that would centralise ownership and management of confiscated assets at the state level, preferring an entity-based model. What might appear externally as a technical delay is, internally, a constitutional and political dispute about the balance of power within the state.
Similar tensions affect other core elements of the AML/CFT framework. The absence of a single, operational register of beneficial ownership reflects the difficulty of aligning entity-level systems into a coherent national structure. Supervisory practices also vary, particularly outside the banking sector, where oversight of real estate agents, notaries and other designated non-financial businesses can differ in approach and intensity between jurisdictions.
From the perspective of MONEYVAL and FATF however, Bosnia and Herzegovina is viewed as a single jurisdiction. Effectiveness requires consistent implementation, coordinated supervision and the ability to act decisively across the entire system which is proving a problem.
This creates a particular form of risk. Bosnia can demonstrate partial compliance, functioning institutions and even areas of strong supervision, especially within the banking sector. Yet the absence of cohesion at state level undermines the overall effectiveness of the regime.
What grey listing would mean in practice
The consequences of grey listing are immediate and can significantly impact a country’s economy. Financial institutions would be required to apply enhanced due diligence to transactions involving Bosnia. Correspondent banking relationships may be reassessed, and in some cases restricted. There is already evidence of early de-risking behaviour, with some foreign banks reportedly refusing transactions linked to Bosnia.
Cross-border payments would become slower and more expensive. For businesses, this translates into higher transaction costs, reduced access to international finance, and increased operational friction. For individuals, it affects remittances, access to payment platforms, and the cost of international services.
Investment is typically the most sensitive channel. Grey listing signals elevated risk to international investors, particularly in sectors already perceived as opaque. For a country that relies heavily on foreign capital and diaspora inflows, this carries macroeconomic implications.
There is also a reputational dimension. Grey listing places Bosnia in a category of jurisdictions under increased scrutiny, which can affect credit ratings and broader economic confidence.
The impact would not be confined to Bosnia. The Western Balkans operate as a connected financial and economic space, with cross-border banking groups, shared investment flows and regional supply chains.
A grey-listed Bosnia increases perceived regional risk, particularly for neighbouring jurisdictions with similar structural characteristics, spilling into Serbia and potentially impact in Croatia which was removed from the grey list in 2025. Banks operating across the region may recalibrate their risk appetite, applying stricter controls not only to Bosnia but to counterparties across the Balkans.
Bosnia’s AML/CFT framework is central to its European integration ambitions. The EU has been explicit in linking AML reforms to broader accession objectives. Deficiencies in beneficial ownership transparency, asset recovery and sanctions implementation cut directly across key chapters of the acquis communautaire.
Grey listing would complicate this trajectory. It may affect Bosnia’s ability to integrate into European financial infrastructure, including prospects for joining the Single Euro Payments Area. It also signals to EU institutions that implementation capacity remains limited, even where legislation exists. More broadly, it undermines the credibility of reform commitments. While Bosnia may have the ambition to avoid grey listing, it may lack the institutional capability without significant, and unlikely, internal reform.
