The Republic of Kosovo has taken a significant step toward joining the Single Euro Payments Area (SEPA) with the adoption of four landmark laws by the Kosovo Assembly. These legislative reforms are set to enhance Kosovo’s financial sector by aligning its regulatory framework with European Union (EU) standards, fostering financial transparency, stability, and integration into the European financial market.
One of the most significant changes comes with the adoption of the Law on Banks (Law 08/L-304), which introduces a more robust regulatory framework for banking institutions. This law focuses on improving the stability, transparency, and compliance of banks with international standards. It also details the process of bank resolution, equipping the Central Bank of Kosovo (CBK) with enhanced tools to handle failing banks—a notable improvement over previous legislation. Additionally, the law emphasizes consumer protection, assigning the CBK a stronger mandate for financial conduct oversight. Another key change is the increase in minimum capital requirements for banks by approximately 43%, enhancing the resilience and stability of the banking sector.
The Law on Payment Services (Law 08/L-328) represents another transformative step. It regulates the provision of payment services, creating a secure and efficient system that facilitates cross-border transactions and supports Kosovo’s integration into the European payment system. Furthermore, the law introduces the concept of Open Banking, allowing third-party financial service providers to access customer data (with consent) to offer innovative payment and banking solutions. This marks a significant modernization of Kosovo’s financial framework, as Open Banking concepts were previously absent from the country’s legislation.
In the area of combating financial crimes, the Law on Prevention of Money Laundering and Combating Terrorism Financing (Law 08/L-333) introduces several critical updates to enhance the integrity of Kosovo’s financial system. The law expands the scope of reporting entities to include crypto-asset service providers, independent legal professionals performing functions related to legal agreements, art dealers and brokers, and art storage port operators who deposit or trade works of art. It also addresses a key regulatory gap by prohibiting reporting entities from relying on third-party services to conduct customer due diligence. This ensures that due diligence responsibilities remain firmly with the reporting entities themselves, reducing vulnerabilities in the financial system.
The adoption of the Law on Ultimate Beneficiary Owners is another milestone. For the first time in Kosovo, this law establishes a beneficial ownership registry, requiring all legal entities, both existing and newly established, to register their ultimate beneficiaries. This measure, which aligns with Articles 30 and 31 of the EU Anti-Money Laundering (AML) Directives, ensures greater transparency in business ownership structures, a critical step in preventing financial crimes and fostering accountability across all sectors.
Together, these legislative changes represent a significant milestone in Kosovo’s efforts to modernize its financial sector and meet EU standards. By fostering financial transparency, inclusion, and the free movement of capital, these reforms position Kosovo as a safer and more efficient financial hub, paving the way for SEPA membership and strengthening the country’s ties with regional and international partners.
The information contained in this document does not constitute legal advice on any specific matter and is provided solely for general informational purposes.