Money laundering in Albanian economy and the region, 2025

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This paper is conceived as a comprehensive analytical assessment of the dynamics, scale, and consequences of money laundering and the circulation of dirty money in Albania and the wider Western Balkans region.

The phenomenon of illicit financial flows, generated by activities such as drug trafficking, organized crime, corruption, smuggling, and tax evasion has increasingly become a systemic threat to the formal economy, governance, and public trust.

In this context, the paper sets forth several interconnected objectives, structured along the following analytical axes:

1. To map the origin and pathways of dirty money in the region

The paper seeks to identify and categorize the primary sources of illicit financial flows—ranging from the drug trade (notably cannabis and cocaine), arms trafficking, and corruption, to the misuse of cash-based sectors such as construction and tourism.

It also analyzes the main mechanisms through which this money enters the formal economy, such as informal remittance channels, strategic investments, and cross-border financial movements.

2. To quantify the economic weight of money laundering across countries

Drawing on national and international data, such as World Bank reports, Global Financial Integrity assessments, and domestic GDP figures the paper offers estimated calculations of the magnitude of dirty money in each economy.

For example, it highlights that in Albania alone, informal and illicit financial flows may account for up to 4–5 billion USD, or nearly 20–25% of GDP.

3. To assess the macroeconomic, fiscal, and social impact of money laundering

The analysis extends beyond financial quantification to explore the broader consequences:

  • Macroeconomic effects, such as market distortions, unfair competition, and the destabilization of capital flows;
  • Fiscal impacts, including massive tax revenue losses (e.g., an estimated 5 billion USD/year in Albania);
  • Social effects, such as growing inequality, the marginalization of legitimate businesses, and the erosion of institutional legitimacy.

This tri-dimensional impact analysis helps reveal how dirty money undermines sustainable economic development and increases vulnerability to systemic shocks.

4. To identify sectoral vulnerabilities and state weaknesses

By disaggregating the impact across sectors, the paper aims to show how illicit money infiltrates key economic sectors, especially construction, real estate, tourism, and finance, which are particularly susceptible to capital-intensive money laundering schemes.

 

Furthermore, it examines the institutional weaknesses (such as insufficient regulatory oversight, limited enforcement capacities, and political interference) that allow these practices to persist.

5. To compare country-specific dynamics within a regional perspective

Although each country has its own context, the paper emphasizes shared regional patterns and risk factors, showing how cross-border crime, informal networks, and weak financial supervision systems create interconnected vulnerabilities.

A comparative dimension is introduced for Albania, Kosovo, Serbia, North Macedonia, Bosnia and Herzegovina, and Montenegro to highlight both specific manifestations and regional commonalities.

6. To recommend strategic responses and policy options

The final objective is normative: to propose a framework of action for national governments and international partners. This includes:

  • Strengthening institutional transparency and anti-corruption mechanisms;
  • Enhancing regional and international cooperation, including with EU structures;
  • Promoting digitalization of public services and tax systems to reduce informality;
  • Empowering financial intelligence units to track and prosecute money laundering schemes;
  • Investing in public awareness and civil society monitoring.

By fulfilling these purposes, the paper aspires to deepen the understanding of money laundering as not just a criminal issue but a structural economic and political challenge.

It calls for a paradigm shift in how Albania and the Western Balkans address illicit finance not through fragmented, reactive measures, but through systemic reforms that uphold the rule of law, foster fair economic competition, and advance European integration.

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Description

Dirty money refers to income generated from criminal activities, including drug trafficking, corruption, tax evasion, smuggling, and organized crime. The circulation of these funds and their laundering into the formal economy is a widespread issue in Albania and neighboring countries.

This analysis aims to examine the impact of money laundering on the Albanian and regional economy, its consequences for overall economic development, and the potential approaches to address this pressing issue.

Albania

  • Main sources of dirty money:
    • Drug trafficking (mainly cannabis and cocaine).
    • Money laundering through construction and tourism sectors.
    • The informal economy, estimated at 30-35% of GDP.
  • Estimates of dirty money:
    • 2023 GDP = USD 23.7 billion.
    • Informal economy and dirty money account for up to USD 4–5 billion (according to Global Financial Integrity and World Bank reports).

Kosovo

  • Major sources: arms trafficking and corruption.
  • Dirty money influences up to 30% of the informal economy, with an estimated monetary impact of USD 3 billion in a GDP of USD 10 billion.

Serbia

  • Organized crime and links with international criminal groups contribute to money laundering in construction and energy sectors.
  • Fiscal losses due to the circulation of dirty money amount to up to USD 2 billion per year.

North Macedonia, Bosnia and Herzegovina, and Montenegro

  • Tourism is used as a key mechanism for money laundering.
  • Construction and energy sectors involve criminal activities representing 20–25% of the informal economy.

Money Laundering, a structural threat

Money laundering remains a serious challenge for Albania and its neighbors, with deep impacts on the region’s economy and society.

Its circulation represents a complex challenge requiring coordinated efforts at all levels of society and governance.

Combating this phenomenon is vital for sustainable economic development and the fulfillment of Albania and the region’s European aspirations.

Its impact has been extraordinary in the region, harming national budgets and economic stability.
Addressing this issue requires serious investment in transparency, international coordination, and digitization of economic and fiscal sectors.

Impacts of dirty money on the economy, society, and state budget

  1. Economic Impact
  • Destabilization of financial markets.
    • Sudden inflows of capital from illicit activities create volatility and uncertainty, undermining investor confidence.
  • Unfair competition.
    • Businesses that launder money gain an artificial advantage, harming legitimate companies.
    • For example, Albania’s construction sector exhibits a high share of suspicious capital, affecting prices and investments.
  • Growth of the informal economy.
    • The informal economy in Albania is estimated to reach 20–30% of GDP, resulting in substantial fiscal losses.
  • Corruption and weakening of institutions.
    • The involvement of high-level officials in laundering schemes undermines the rule of law and public trust.
  1. Effects on households and individuals
  • Widening social inequality.
    • Dirty money often concentrates in small groups with criminal ties, exacerbating existing inequalities.
  • Concentration of wealth.
    • The concentration of economic resources in select individuals or groups reduces opportunities for the wider population.
  • Distortion of opportunities.
    • Illegitimate actors gain unfair access to education, healthcare, and the labor market.
  1. Impact on social morality
  • Promotion of dishonesty culture.
    • Rapid enrichment through criminal activity fosters the perception that success does not require adherence to the law.
  • Increased social insecurity.
    • Organized crime increases fear and insecurity within communities, lowering quality of life.
  1. Effects on the State Budget
  • Reduction in tax revenues.
    • The informal economy causes major fiscal losses. In Albania, these losses are estimated at around USD 1.5 billion per year.
  • Law enforcement costs.
    • Institutions require financial resources to track and prevent money laundering.
  • Misallocated spending.
    • Public funds used abusively reduce investment in sectors like education and healthcare.
  1. Effects on Market Competition
  • Unfair competition.
    • Illicitly funded companies dominate markets through unfair strategies such as underpricing or hidden subsidies.
  • Degradation of quality standards.
    • To conceal the source of funds, the quality of products and services is often neglected.

Mechanisms of dirty money circulation

  1. Investments in Strategic Sectors
  • Construction and real estate.
    • In Albania, 40–50% of construction investments are suspected to be linked to dirty money.
    • In Montenegro, luxury developments and tourism investments serve as laundering channels.
  1. Tourism and Seasonal Activities
  • Through bookings and cash transactions, the tourism sector has become a laundering space.
  • In Albania and Montenegro, tourism growth has led to a doubling of investments in hospitality (2021–2023).
  1. International Finance
  • Cross-border transfers and the use of informal transfer systems (like Hawala) are common methods in Kosovo, Bosnia and Herzegovina, and North Macedonia.
  • Banks and small financial institutions often lack the capacity to identify suspicious transactions.

Impact on regional economies

Albania

  • Economic effect.
    • Dirty money distorts market competition and raises prices in sectors like construction and tourism.
    • Growing economic inequality. illegal-linked groups benefit more, widening the wealth gap.
  • Fiscal losses.
    • Estimated at USD 1.5 billion annually, equivalent to 14% of the national budget.

Kosovo

  • Use of remittances as a laundering source has a negative impact on the local economy.
  • The informal economy reduces available public investment funds.

Serbia

  • Corruption-linked strategic investments reduce the efficiency of public spending.
  • Links to international crime create a risky environment for foreign investment.

North Macedonia, Bosnia and Herzegovina, and Montenegro

  • Negative impact on tourism and the public sector due to unfair competition.

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