New civil society report on Montenegro: comprehensive legislation not matched with practical enforcement of anti-corruption measures

22 August 2023 –

Click on the report to download it in English!

A new report by the Center for Democratic Transition finds that Montenegro has recently put in place provisions for the prevention of corruption and asset recovery (Chapter II and V of the UNCAC). While existing frameworks provide in-depth coverage of relevant actors and institutions, they lack width in scope, leaving key persons and entities outside of the law’s reach. The report is intended as a contribution to the UNCAC implementation review process in its second cycle, produced with technical and financial support from the UNCAC Coalition.

In terms of Chapter II provisions of the UNCAC, the independence of the Anti-Corruption Agency (ACA) remains questionable both in terms of legal and practical aspects. The new public administration reform strategy for 2022-2026 and an action plan for 2022-2024 were prepared and adopted in accordance with the EU and SIGMA principles of public administration. Third party financing for electoral campaigns is not recognized by law and remains beyond the control of institutions. Montenegro’s new e-procurement system became operational in January 2021. Furthermore, civil society organizations are actively involved in the monitoring of the implementation of the law on access to information.

Regarding Chapter V provisions of the UNCAC, a list of politically exposed persons (PEPs) is determined by the ACA and is available to the public on their website. Institutions lack the capacity to tackle crimes of money laundering in the country. The Asset Recovery Law regulates confiscation for longer periods of time and to some extent, non-conviction based confiscation of assets. However, challenges remain in the area of asset recovery, including how to divide powers among the relevant institutions and ensuring the effective management and disposal of confiscated assets.

The official UNCAC review process in Montenegro began in 2019, but has experienced delays since. The governmental experts list is the only second review cycle document available on Montenegro’s UNODC country profile page, while the self-assessment checklist is still currently under desk review. A country visit by peer reviewing countries Estonia and Iraq took place in March 2022 and civil society was involved in the review process. As a signatory of the UNCAC Coalition’s Transparency Pledge since August 2022, the government of Montenegro has committed to a high level of transparency and civil society inclusion in the second cycle of the UNCAC implementation review.

For all the detailed findings, read the full civil society parallel report in English.

Main findings

Anti-Corruption Bodies and Policies

Montenegro has enacted a comprehensive anti-corruption strategic and legislative framework. Anti-corruption bodies are adequately established by law, to implement preventive anti-corruption policies and practices. However, the existing legal and institutional framework needs to be further improved in line with the EU standards.

The track record on prevention of corruption improved, due to a positive trend in the work of the Anti-Corruption Agency (ACA). However, the independence of the ACA remains questionable both in terms of legal and practical aspects. Although senior public officials are required to declare details regarding their assets and liabilities to the ACA, a strong link between the results of ACA work and the detection and prosecution of illicit enrichment is still missing.

According to Transparency International‘s 2022 Corruption Perceptions Index, Montenegro is ranked 65th out of 180 countries. In October 2021, a former Montenegrin President and his son were among those listed in the Pandora Papers, an investigation by the International Consortium of Investigative Journalists (ICIJ) that revealed improprieties within the global financial system and connections between rich and powerful actors around the world.

Public Sector Employment

Montenegrin legislation has established important provisions regarding the employment of civil servants, integrating standards for merit-based recruitment and the career advancement of civil servants. In general, public sector positions are advertised and open to all possible candidates who meet the legal conditions for employment. The new public administration reform (PAR) strategy for 2022-2026 and an action plan for 2022-2024 were prepared and adopted in accordance with the EU and SIGMA principles of public administration.

However, observations in the field indicate the long-standing practice of nepotism and political influence over the process of public sector employment. Appointments to central bodies of the public administration are often made on political party lines and are generally immune to the rule of law.

Political Financing

Public funding of political parties is awarded in a fair and transparent manner according to the legal framework. Political parties have a clear obligation to keep records of all their revenues and expenditures. Relevant databases with data on financial statements of political entities, analytical assessments of all financial transactions and travel orders as well as donor data are available on the ACA website.

However, the process is still not transparent enough, due to limited public access to the financial reports of political parties and a need to further strengthen politically independent oversight of political financing. Lack of political consensus over the implementation of electoral legislation reform hinders the improvement of laws and measures for monitoring financial entities.

Codes of Conduct, Conflicts of Interest and Asset Declarations

The ACA informs the general public about its results in the areas of preventing conflicts of interest and reporting political officials’ income and assets through press releases and press conferences. A positive trend in the work and performance of ACA in conflicts of interest and asset declarations has been noted in the European Commission report on Montenegro for 2022: throughout 2021 and in the first 9 months of 2022, the number of administrative and misdemeanor proceedings initiated significantly increased compared to previous years.

Despite progress made, obstacles remain. The obligation of public officials and members of their joint household to submit asset and income declarations only applies to the country of origin of said assets. The Law on Prevention of Corruption fails to obligate public officials to grant the ACA permission to review their bank accounts, leaving the agency without a means to verify the information provided in annual reports. The Agency for Prevention of Corruption suffers from inadequate human resource capacity, particularly for conducting administrative procedures for the verification of income and assets. A code of conduct of ethics for ministers and political officials has not been drafted and adopted in Montenegro, even though guidelines have been prepared by the ACA and the Ministry of Justice.

Public Procurement

The new Public Procurement Law was adopted in 2019, along with a strategy for the period from 2021-2025 for improving public procurement and public-private partnership policies, and an action plan for 2022.The new e-procurement system has been in operation since January 2021 and encompasses the publication of procurement plans, tender documents, the public opening of tenders and tender submissions to the e-complaint system.

Nevertheless, systematic changes in the public procurement system have not been followed by an adequate capacity-building strategy for the employees of contracting authorities. All contracting authorities must obtain prior approval for their procurement plans from the Ministry of Finance which causes unnecessary delays in the process. The Montenegrin system is largely prone to corruption and misconduct, especially in cases involving large-scale projects and contracts. The system is still highly politicized with ties between political parties and companies.

Management of Public Finances

The budget adoption procedure in Montenegro involves close collaboration between the Government and the Parliament, with multiple opportunities for review and revision to ensure that the budget accurately reflects the needs and priorities of the country. The government also releases annual budget reports, which provide information on the government’s revenue and expenditure activities over the previous year.

Challenges in this area include the lack of transparency in the allocation of public funds, which creates opportunities for corruption and mismanagement. In addition, the administration of public finances is often complex and bureaucratic, making it difficult for the public to understand how tax revenue is being spent. Government agencies lack capacity, rendering them incapable of detecting and preventing financial irregularities.

Access to Information & Participation of Society

The right to free access to information possessed by state authorities is defined by the Constitution of Montenegro. The law defines a wide scope of information that should be proactively published and available to the public. Legal protection is available before the first instance and second instance courts. Civil society organizations monitor the implementation of the law on access to information on an annual basis.

 Nevertheless, transparency is not considered a priority by state authorities. The degree to which information that the government has is made available depends on the will of the institutional manager, in the absence of a systemic approach. A large number of cases have already been presented before the second instance authority for non-response to requests for information. The capacities of institutions in the field of free access to information are not sufficient for its mandate.

Montenegro has faced challenges regarding media freedom, with issues related to censorship, lack of pluralism, and intimidation of journalists. International organizations monitoring media, such as Reporters Without Borders and Freedom House have raised concerns about the state of media in Montenegro. Rhetoric targeting critical journalists and civil society has been a feature of recent governance.

Judiciary and Prosecution Services

The independence of the judiciary is guaranteed in both the Constitution and through judicial legislation. Members of the Prosecutorial Council are eminent lawyers, including one representative of civil society organizations.

However, enforcement remains lenient. Judges and prosecutors are required to declare their assets, but the verification of these declarations rarely lead to established disciplinary measures where there are violations. Furthermore, political volatility, government instability and tensions have stalled judicial decision-making and implementation. There are growing attempts at interference by the executive and legislature over the work of the judiciary, reflected in political statements on the merits of judicial decisions and more frequent commenting about judicial proceedings by representatives of the Government and the Parliament. There are widespread reports by civil society and international organizations about a lack of integrity in the judiciary. The system for detecting breaches of integrity rules is still not fully effective, objective, consistent nor credible.

Private Sector Transparency

The existing Montenegrin legal framework has created a relatively favorable business environment. Companies have established internal audit mechanisms and are also required to have external/independent audit reports. There are modalities for registering beneficial ownership.

Yet, country-wide threats to business integrity include the high level of perception of widespread, petty corruption. There is a severe lack of transparency, including around the collection of information on who owns and controls private sector entities through public beneficial ownership registries.

Anti-Money Laundering Measures

In 2022, Montenegro made efforts to improve its anti-money laundering (AML) framework to address multiple money-laundering risks. A list of politically exposed persons is determined by the Agency for the Prevention of Corruption and published on its website. The AML legislative framework is yet to provide for the non-conviction-based confiscation of assets in a civil procedure, through new legislation (currently pending) which is expected to be adopted.

Nevertheless, legislative and strategic frameworks do not fully comply with international standards. Institutional and organizational changes reflect the anti-money laundering system’s insufficient track record in the prosecution of money-laundering criminal offences. Caveats remain in implementation and cooperation between authorities responsible for tackling this issue. Institutions lack the capacity to tackle crimes of money laundering in the country.

Measures for direct recovery of property

The Montenegrin legislative and institutional framework provides measures for the direct recovery of property. On the other hand, the Montenegrin Mutual Legal Assistance Law does not have any provisions regarding the proactive sharing of information.

Confiscation tools

The Criminal Code provides all necessary tools for the confiscation of instrumentalities and proceeds of crime as well as assets where predicate offences are committed abroad. The Asset Recovery Law regulates extended confiscation and to some extent non-conviction based (NCB) confiscation of assets. Still, the freezing and confiscation of criminal proceeds, instrumentalities, and property of equivalent value remains limited due to the lack of money laundering and asset recovery proceedings.

International cooperation for the purpose of confiscation

Montenegrin defines broad international cooperation instruments for the purpose of confiscation. The Montenegrin Law on Mutual Legal Assistance (MLA) does not directly stipulate provisions regarding international cooperation intended at confiscating the proceeds of crime and its instrumentalities, including asset sharing. The Montenegrin legal framework also includes the MLA in criminal matters, which stipulates the requirements and procedures for Montenegrin authorities to process legal assistance requests in criminal matters from other countries, including those related to recovery of assets. However, Montenegro has yet to repatriate confiscated assets to a foreign jurisdiction.

The return and disposal of confiscated property

The Montenegrin legal framework recognizes and defines the return and disposal of confiscated property on a substantive level. Some improvements need to be made in regard to the return and disposal of confiscated property with clearly defined grounds and procedures in place, on an international level.

Key recommendations

 In its report, the Center for Democratic Transition makes several recommendations to the Montenegrin authorities to ensure the full implementation of the UNCAC in Montenegro, among them:

  1. Further strengthen the independence and accountability of the Anti-Corruption Agency (ACA), including through consolidated track records of the ACA’s investigations, better monitoring mechanisms by the ACA and a credible criminal justice response, in particular when it comes to high-level corruption cases;
  2. Facilitate inclusive anti-corruption efforts, taking on board input from civil society, inter alia, to strengthen public trust into the work of anti-corruption bodies;
  3. Improve public reporting on anti-corruption efforts and results, including through nation-wide consultations on anti-corruption policies and practices and greater transparency on anti-corruption measures and decisions;
  4. Strengthen mechanisms for addressing the influence of politics in public hiring, including through implementation of Public Administration Reform (PAR) Strategy measures and improving control of ACA for political party campaign employment;
  5. Improve the transparency and effective oversight of political financing;
  6. Re-organize and enhance the asset declaration regime and ensure effective implementation of integrity plans per institution, to address long-standing integrity gaps and allow for effective detection and follow-up of all cases of breaches of professional conduct;
  7. Improve company ownership transparency: undertake efforts to populate the recently established Beneficial Ownership Register with comprehensive and structured data; improve reporting by private entities on their shareholders and beneficial owners;
  8. Implement judicial independence guarantees in practice and ensure that any violations of judicial ethics and discipline in judiciary are reported, investigated, effectively addressed and sanctioned;
  9. Provide support to judicial self-regulatory bodies (such as the Judicial Council, Prosecutorial Council) in assuming their roles and prerogatives and enable them to fully function according to their composition and mandate, including through the completion of pending processes of appointment of lay members of the Judicial Council;
  10. Strengthen the implementation of anti-money laundering legislation in practice, including through further support for the FIU’s operational independence and resources; enhance national financial intelligence capacities and skills; further strengthen coordination among AML authorities; and advance the system of AML oversight, including over non-profit organizations, lottery, real estate companies and other private sector entities.
  11. Review the legal and operational approach to financial investigations, asset recovery, the fight against money laundering and ensure stronger mutual understanding between courts and the prosecution on key legal concepts such as money laundering and the quality of evidence.
  12. Improve the track record of court decisions on money laundering, the use of financial investigations and the capacity to confiscate the proceeds of crime.
  13. Foster government interaction with CSOs in the UNCAC review by organizing an open and inclusive process to ensure that the self-assessment reflects input from various stakeholders.
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