How money from drug sales in Serbia ends up on the real estate market

The real estate sector is the first target of money launderers, so illegal drug money is injected into legal flows by a member of a criminal gang who hires another member of the gang, who appears on the real estate market as an investor looking to invest in building or buying homes. However, he does so as a physical person, not as a legal person, which makes his job much easier. The status of a physical person allows him to invest a large amount of illicit money in the real estate sector without business documentation and without verifying the origin of the money, explains Saša Đorđević, coordinator for Serbia and Montenegro at the Global Initiative against Transnational Organised Crime and PhD student at the Faculty of Security Sciences in Slovenia, in an interview with N1.

The N1 portal interlocutor states that a new form of money laundering has been observed through illegal construction and legalisation of buildings.

“In the real estate sector, the highest risk of money laundering in Serbia is in investments in residential and commercial construction and in cash purchases of homes, commercial premises and land. However, this does not mean that all construction in Serbia is money laundering. There are investors who trade legally and invest the money they have earned from the sale of apartments in the construction of new buildings. “There are not a few people who do not trust banks but save by buying property, which is common in Serbia, and also those who have earned their pensions abroad and want to continue living in Serbia, so they buy an apartment,” Đorđević stresses.

Money laundering, he says, is usually estimated at two to five percent of gross social product, which in the case of Serbia, he says, amounts to between one and two and a half billion euros a year.

“Criminal money enters legal flows and financial transactions between several companies, at least one of which is operating regularly and is not suspicious. For example, there is a company that is only involved in issuing fictitious invoices with no turnover or service provision behind them. Such a company issues a fictitious invoice and charges non-existent services to regular business entities. This money is then passed on to other related companies, from whose accounts the money is withdrawn and invested in new regular businesses, most often in the purchase or construction of real estate. The fictitious accounts actually hide the real source of the money,” Đorđević stresses.

The arrival of Russians and Ukrainians is conducive to money laundering

Đorđević states that the pandemic and the war in Ukraine have clearly not had a negative impact on the construction sector, and explains the jump in property prices by a combination of high demand, rising prices of building materials and money laundering.

“One of the consequences of the influx of people from Ukraine and Russia is the dramatic jump in real estate prices in Serbia, which favours the laundering of illegally obtained money through natural persons, real estate investors – it allows money laundering a larger amount of money due to the jump in price,” Đorđević points out.

Asked what mechanisms the authorities of the Republic of Serbia use to prevent money laundering, Đorđević says that a national risk assessment is carried out in Serbia, which identifies the most vulnerable sectors for money laundering.

“Preventive monitoring of financial transactions and detection of suspicious ones is also carried out, so cooperation between banks and state authorities is very important. Finally, there are investigations by prosecutors and police and the confiscation of assets. In order to detect money laundering, it is important for institutions to carry out parallel financial investigations, i.e. to get into illicit money flows, in addition to investigations into drug trafficking, human smuggling, corruption or tax evasion, which is still not a common practice in Serbia,” Đorđević notes, adding that money laundering offences are punishable by a sentence of six months to 12 years in prison and confiscation of property./N1/