Montenegro still lacks a legislative framework to establish a financial police force, although its creation has been deemed essential for combating financial fraud, tax evasion, corruption, and economic crime for nearly a decade.

The Tax Administration, which is expected to become the future financial police, informed “Vijesti” that while awaiting the legal groundwork for the establishment of the financial police, they have initiated a Sector for Identifying and Collecting Unreported Income from Individuals.

The amendment to the Rulebook on Internal Organization and Systematization of the Tax Administration, which facilitated the establishment of this Sector, came into effect on March 26 of this year.

Monitoring Wealthy Individuals from Failed Enterprises

“The staffing process for the newly established sector is ongoing, alongside the preparation of technical resources for its operations. This sector comprises three departments with plans to employ between 10 and 15 individuals. It will focus on detecting and resolving issues such as hidden or unreported income sources, affluent individuals managing companies reporting losses or decreasing income, inconsistencies between declared income and lifestyle, cases of unexplained wealth, and other related matters,” the Tax Administration shared with “Vijesti”.

In March of the previous year, Prime Minister Milojko Spajic announced plans to collaborate with the Italian “Guardia di Finanza” to facilitate the establishment of a Montenegrin financial police. After a meeting with representatives from this Italian agency, led by General Vito Giordano, Spajić remarked that the Government is determined to combat crime and that external expertise, such as that from the “Guardia di Finanza”, is essential in this endeavor.

Gaining Insights from Italy’s Experience

No timeline for the formation was disclosed at that time. The Tax Administration is currently engaging with the “Guardia di Finanza” to learn from their methodologies and operational practices.

“The Tax Administration has sought assistance from the Italian Guardia di Finanza through the General Secretariat of the Government to develop methodologies for lifestyle and indirect income assessments, risk profiling for individuals with significant assets, field investigation techniques regarding economic and financial oversight, tools for identifying undeclared income and unjust enrichment, and models for cooperating with financial institutions for asset verification,” said the institution to “Vijesti”.

The Tax Administration is also enhancing collaboration with banks to gather essential data for the new sector and the future financial police.

“Last year, we entered into a Memorandum of Cooperation with the Association of Banks, enabling us to track income via transactions through commercial banks. By comparing this data with tax returns submitted, we can identify non-compliance. Currently, three commercial banks are at various stages of testing the data exchange system, with expectations that all banks will be integrated by year-end,” the Tax Administration commented.

When questioned about the official establishment of the financial police, the institution’s representatives were unable to provide a concrete answer.

“Once the legislative framework is established, along with institutional procedures, legal powers, and inter-institutional cooperation mechanisms, we can anticipate the formation of a financial police force resembling that of Italy,” stated the Tax Administration.

Since 2014, Financial Police Has Been Proposed as a Solution to Crime

The concept of a financial or tax police has been presented since November 2014, when the Government announced steps towards its establishment, primarily aimed at combating economic crime, corruption, and the shadow economy. Subsequently, the following year saw an amendment to the Law on Tax Administration and the adoption of the Rulebook on Internal Organization, which included a dedicated Tax Police sector.

At that time, the Government emphasized that the Financial Police would be a highly professional entity, operating alongside the police department combating economic crime and the Special Prosecutor’s Office, creating a formidable force against corrupt practices in the economy and criminal offenses related to payment and business operations.

“The Tax Police Sector will handle tasks associated with combating tax evasion and the shadow economy, coordinating efforts with other authorities to address money laundering, organized crime, and corrupt practices, and identifying offenses in payment transactions and economic operations,” the Government’s information detailed nine years ago.

Formation, Followed by Dissolution in 20 Days

In March 2016, Miodrag Martinović was appointed head of the sector, having previously worked at the Ministry of Internal Affairs. Before Martinović’s election, Minister of Finance Radoje Žugić had nominated two other candidates who eventually declined the position.

Four candidates, including Djordje Ivanovic, Vladan Delic, Miodrag Martinović, and Gina Radenović, passed the selection tests for the head of the tax police role. Initially, Žugić selected Ivanović, who withdrew, followed by Delić, who also backed out.

Martinović, who was considered third, accepted the role only after an order from the Administrative Inspection compelled Žugić to appoint him.

However, roughly 20 days following Martinović’s appointment, Žugić proposed the dissolution of the Tax Police.

Ultimately, the promised actions did not occur; no hires were made for the new sector, no regulations were established regarding jurisdiction and authority, and Martinović remained the sole employee without defined powers. By late 2018, the Tax Police was officially removed from the organizational structure.

The Tax Police idea resurfaced in November 2019, following a meeting between the then Tax Administration Director and representatives of the Italian Guardia di Finanza. There were, however, no tangible results.

Even after the democratic shifts in 2020, repeated announcements of establishing a financial police as a key element in combating financial crimes did not materialize.

Last Year’s Fiscal Strategy Envisions An Italian Model

The establishment of the Financial Police was included in last year’s Government Fiscal Strategy for the 2024 to 2027 period. Despite the first year of that span already having concluded, the necessary conditions for its establishment remain unmet.

“To cultivate a more favorable business climate by preventing illegal activities and combating corruption, the Ministry of Finance will propose legal measures that will outline the requirements for forming the financial police. Engaging with Italian expertise in this domain has commenced, with meetings held with relevant state institutions from the ‘Guardia di Finanza’ of Italy, where opportunities for cooperation were identified, including the training of future personnel by the ‘Guardia di Finanza’, known for its specialized institution in combatting financial fraud. Given the current decentralization of oversight bodies, the Government of Montenegro believes that the establishment of the financial police could efficiently combat high-level corruption and various financial offenses,” the fiscal strategy from last year notes.

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