Institute for War and Peace Reporting | Giving Voice, Driving Change

Investigation: Serbia Losing Customs Corruption Battle

Initiatives launched against the system of border bribes have failed, and in the meantime Serbia’s economy is suffering.
By John Simpson

On Serbia’s busy border crossing with Bulgaria, near Dimitrovgrad, a man shuffles up the aisle of a state-run bus, explaining the long delay to his fellow passengers. Serbian customs officials want 15 euro before they’ll let the bus pass.

After collecting cash from the passengers, the man returned five minutes later with more bad news. “They want more money now. They have upped the price,” he said.

While the bus remained marooned in the depot, others moved smoothly through the checkpoint without delay. They are private buses whose owners have already paid the officials off, said Azemina, whose wrinkled skin testified to 20 years of travelling back and forth between Bulgaria and her home city of Nis in Serbia.

“They pay a few hundred euro to cross without being checked. But how can we afford that when all we are making is a few euro on each item we bring?” she said.


The scene at the Dimitrovgrad crossing is typical of the type of corruption that plagues Serbia’s customs service.

Though this particular incident involved demands for only a few euro, the wider phenomenon is costing the Serbian government dear and depriving the state of much-needed income.

“Corruption in Serbia remains a systemic occurrence,” said Natasa Mrvic-Petrovic, a senior associate with the Institute for Comparative Law in Belgrade.

IWPR enquiries reveal that attempts by the Serbian government and the European Union to tackle the problem appear to have largely failed. Today, the customs service is seemingly riddled by the overtly corrupt practices that were introduced in the 1990s under Slobodan Milosevic.

A study in 2002 by the Belgrade-based Centre for Liberal-Democratic Studies, CLDS, concluded that of all forms of corruption affecting public sector bodies including the judiciary, the police and education and health services, dishonesty was highest among customs officers.

Transparency International, an NGO devoted to combating corruption, ranked Serbia and Montenegro 97th out of 146 countries surveyed in its Corruption Perceptions Index 2004, which reflects the views of business people and country analysts, both resident and non-resident. Only Albania and Montenegro were deemed more corrupt among European countries.

“These results should concern both citizens and politicians in Serbia,” Transparency Serbia’s director, Nemanja Nenadic,” told IWPR. “We are one of the most unstable countries, which is not a good message to our neighbours, or to Europe.”

Norbert Mappes-Niediek, German author of The Balkan Mafia, a study of the criminal clans in south-east Europe, agreed. “Serbia [is] among the high-risk countries in which organised crime flourishes,” he said.


For most Serbian citizens, corruption in the customs service is invisible and its precise consequences for the economy are equally hard to discern.

Exactly how much money the government loses through customs corruption is difficult to estimate. Dragan Jerinic, head of the customs service, dismisses claims of widespread venality among his officers, describing them as “arbitrary stories” However, his chef de cabinet, Predrag Arsenijevic, admits that 30 per cent of the country's potential revenues from border taxes is being lost to smuggling, but said he could not say how much of this was due to corruption among customs officials.

Vladan Begovic, a former head of the Serbian customs service, said Serbia’s annual customs revenues amount to around 500 million euro, but the country loses another 150 million a year through border corruption.

Whatever the exact figure, money is clearly going missing on a considerable scale. If the losses are as large as Begovic believes - and Serbia took action to recover the money - in theory more could be given for social security, restructuring the economy or cutting the budget deficit, which in 2004 was 300 million euro.

But losses to Serbia cannot be estimated only in terms of the money that disappears at frontier crossings. Bad customs practices are deterring companies looking to trade with Serbia, and for companies already doing business in the region, the payment of bribes adds an unwelcome extra cost, making them less competitive.

All this is bad news for a country in transition where the promise of future growth largely depends on attracting foreign investment.


Corruption in the customs service takes on different forms. At the lowest level it involves extracting petty sums from people like Azemina, known as “suitcase traders” who make a few euro from reselling goods, such as cigarettes, alcohol and coffee.

Further up the chain it involves taking bribes from manufacturers like the sugar exporters who smuggled foreign sugar into Serbia in 2003 in order to re-export it to the EU, taking advantage of a trade deal with Brussels.

One border guard told IWPR that several hundred suitcase traders cross the Bulgarian-Serbian border each day, with some making the trip several times.

He told IWPR that each might hand over a chocolate bar, a pack of cigarettes or several euro to avoid paying duties, “When you have several dozen ‘suitcases’ on your shift, plus a bus or two, you can make quite a bit of money,” he said.

Dragan Stajin, the former head of a unit that combated customs corruption at the anti-Milosevic NGO Otpor and now the leader of a Belgrade association of courier companies, said the whole customs system is designed to serve organised crime.

He said there are several ways of smuggling goods into the country without paying taxes, most of which depended on complicit customs officers.

Of all the goods not cleared through customs, he said, around 20 per cent are “snuck into the country”, usually arms and drugs, while 80 per cent come in under false declarations. Those include television sets, household appliances, such as audio and video sets, and mobile phones.

Stajin explained that the practice of importing goods through false declarations often involves the use of multiple customs forms. At the border, the truck driver obtains two sets of documents from a customs official for the import of a single set of goods.

One set of documents is authentic and legal and the other a falsified inventory for a smaller quantity of items than are actually inside the truck.

Since goods are not checked at the border but at customs offices inside the country, most trucks are unloaded at a secret warehouses before reaching the office.

“These items account for most of the black market in this country,” Stajin said, adding there is hardly an import-export company in Serbia that conducts its business entirely legally. “That’s how we got multi-billionaires in this impoverished country.”

While Stajin is angered by the scale of corruption, the owner of one forwarding company that his association represents is unconcerned. “Sasa”, a trader from Cacak in central Serbia, admitted he had been clearing goods through customs at lower rates than he should have paid for years.

“The money and the gifts I give customs officers are much cheaper than the duties I would have to pay,” he said, adding he would not make a profit if it was done any other way.

There is also little sign of a backlash against this corruption in the business community at large. A survey carried out two years ago by the Belgrade consumer research agency, Argument, found 40 per cent of businessmen felt that bribing customs officers was justified if it helped their company make a profit.


In 2003, one of the worst incidents of customs corruption since the Milosevic era nearly torpedoed Serbia's valuable free trade agreement with the EU.

Under this 2000 agreement intended to help sugar-beet farmers in Serbia’s north Vojvodina province, the country was granted the right to export sugar to the EU without paying the usual tariffs demanded of non-EU states.

The sugar industry stood to benefit strongly. Exporters could expect to make big profits, as sugar cost little to produce in Serbia and could be sold for a higher price in Europe.

But some unscrupulous exporters took advantage of the agreement by illegally importing sugar from outside Serbia, repackaging it and re-exporting it as Serbian sugar to the EU. A source in the European Commission said, “The proof of origin was faked and so the sugar was exported to the EU without its true origin disclosed.”

When the EU uncovered the scam, the deal was suspended in May 2003 and the country's 100,000 sugar beet farmers faced ruin. The preferential system was eventually re-introduced in August 2004, but the scandal added to Serbia’s corrupt reputation.


Corruption has long been endemic in the customs service but only reached its current scale under Milosevic as a response to the international sanctions regime placed around Serbia in the 1990s.

Morten Torkildsen, a Norwegian financial expert hired by the Hague war crimes tribunal, to investigate state fraud in the former Yugoslavia, said the customs service became the key tool for the regime to move money abroad.

“It was one of the biggest frauds in the Balkans, perfidious and intense, with very few written traces,” Torkildsen told Belgrade’s Beta news agency.

With the help of the chief of the federal customs service, Mihalj Kertes, Torkildsen said Milosevic ordered that money from the service be transferred to Cyprus through several Belgrade banks.

He estimated that in all Kertes sent around a billion German marks, 80 million US dollars, 63 million French francs and 390 million Austrian schillings to Cyprus.

From there, through front companies, Milosevic and his cronies used the money to amass private fortunes and purchase military equipment for their war projects.

After his arrest at end of 2000, following the fall of the Milosevic regime, Kertes told the investigators that no other state bodies knew of his work and he had dealt directly with Milosevic in his customs operations.

A former customs officer from the Kertes era told IWPR that corruption became “normal practice” in the 1990s.

“Often we would receive a call from someone close to Kertes, saying the next five trucks should be let through the frontier without inspection,” he said. “After we let through their five trucks, the next five would be for us. It was the norm.”


Earnings from bribes allow corrupt officials to lead a lifestyle that is far superior to that of honest officers.

Back in 2003, the average monthly wage of customs officials was only 7,000 dinars, then worth around 100 euro.

One customs officer from Novi Sad said people nicknamed him and his colleagues the “bag people” because of the bags they carried containing the whiskey or cigarettes they had received as bribes.

Some officers build big houses or buy cars on the back of these illicit earnings, the same customs officer told IWPR.

Many of these homes have been built in an area of the border town of Subotica known to locals as “Crooks Valley” because of the expensive villas located there.

In its 2002 report, Corruption at the Customs, the CLDS suggested that low wages - in comparison to other public service employees - encouraged a culture of bribery.

However, the tripling of average customs wages in 2004 to around 300 euro a month has produced no visible improvement. Customs officers did not become any less corrupt, nor were the border crossings controlled better.

One officer told IWPR that customs workers had no intention of giving up their practice of demanding and taking bribes, saying that even with the pay increase they receive nowhere near a decent wage.

“Officers elsewhere in Europe can buy houses and cars, but we cannot do this,” he said.


As Serbia tries to get closer to the EU, the state of its borders is coming under ever-greater international supervision. Brussels expects a well-controlled border but also the efficient flow of goods, people and capital.

Some believe this offers hope.

“The one thing that can help us is the European Unions readiness to educate us, because we cannot solve the problem of corruption in customs on our own,” Stajin said.

The EC-funded customs and fiscal assistance office, CAFAO, is the body charged with bringing Serbian customs in line with European standards.

Last June, it opened a special centre where specially trained operatives target organised crime in the customs service with the help of 14 new vehicles and a speedboat.

But the new unit has little to show for its efforts. A source in CAFAO admitted to IWPR their work had produced scant results, partly because there are too few of them.

“When we train one officer and send him to a new post, is he likely to stay straight when the rest of the men are corrupt?” the source asked.

“If we are going to make real progress we might have to sack all the members of the service and start again with fresh recruits who are not dependent on bribes.”

The source underlined the fact that the problems in Serbian customs are just as evident among the republic’s neighbours.

“Romania and Bulgaria both have a terrible record on customs corruption,” the source said. “Then you have the former Yugoslav states. It is the story of the whole region.

“Often the same game is played on both sides of the border, with officials of both countries conspiring together.”

IWPR tried several times over the past few months to arrange an interview with CAFAO to discuss its work, but it was unwilling to grant one.


The governments that have been in power since the fall of the Milosevic regime have encountered repeated criticism for their failure to tackle customs corruption.

“The state still does not have a strategy for the fight against corruption,” said Nemanja Nenadic of Transparency Serbia.

Both the legal and judicial systems are widely seen to have failed to improve the situation. Whistle-blowers who have tried to report illegalities suffer for their outspokenness.

Take Bozo Djurovic, a former customs officer from Bor. He was sacked from his job after he told his superiors that he had spotted five trucks loaded with television sets crossing into Serbia in mid-2003 through an illegal border point. Djurovic claimed he was fired simply for reporting the truth.

Djurovic said corruption went further up the chain of command than the officers on the ground. “Corruption in customs is a very important segment in the organised crime chain that is still very strong,” he said.

Given his experience, it is not surprising that few officials have ever been on the receiving end of an official complaint.

Since August 2003, official complaints have been filed against 63 of Serbia’s 2,300 customs service employees, according to Predrag Arsenijevic. Of those, 38 officers have been penalised by demotion or sacking, while 19 cases are still outstanding.

To comply with international standards, the Serbian parliament adopted a new law on customs in mid-2003, granting greater powers to officers tasked with eliminating corruption within the service, such as the power to wire-tap.

But Stajin believes these changes may make the problem worse, saying the legislation gives corrupt customs officers more powers and therefore offers greater opportunities for wrong doing.

Vladan Begovic, a former customs chief, is also critical of the latest legal developments. The powers of the customs service are now far too great, he told IWPR. He is especially concerned about their impact on privacy.

“These new powers basically put the customs service on a level with the secret police,” he said. “We have no developed mechanisms to control these services. That can be very dangerous.”


The fight against corruption in the customs service in Serbia is clearly being lost. Moves to curb the phenomenon by the international community and by the Serbian government appear to have made little difference.

“I have doubts about the success of the fight against corruption in the customs service,” Stjepan Gredelj, director of the Institute for Philosophy and Social Sciences, told IWPR.

“Only once over 60 per cent of customs duties are collected will we be able to speak of the customs services adequately functioning.”

While the problem is not addressed successfully, the government continues lose revenue, much-needed investors are deterred and a clique of officials make fortunes to which they are not entitled.

On the border, small traders like Azemina continue to face long delays and the harassment of officials for small sums of money – all for a few packs of cigarettes or a bag of cheap nylon jumpers.

John Simpson is an IWPR contributor based in Belgrade. Bojovic Zelimir is Belgrade correspondent for Deutsche Welle Radio.

More IWPR's Global Voices