Around 20,000 frauds committed through front companies

BELGRADE - The Serbian economy has lost around EUR 255 million due to front companies that have failed to pay their liabilities to other enterprises over the past six years, Business Support Network consultant Dragoljub Rajic said on Tuesday.

"Since 2008, there have been over 19,500 cases of frauds through front companies that ordered goods and services from business partners, mostly without ever paying for those goods," he said at a conference on curbing frauds and protecting investors and creditors.

The total losses are estimated at EUR 255 million, with individual losses near EUR 13,100, he said.
"Under Serbian laws, when someone shuts down a company, you can either sue them for fraud or report them to the police," he said, adding that these options have yielded no results.

That is the very reason why those who have lost money or provided services without being paid for them can win compensation in just 2.8 percent of the cases, he said.

That makes Serbia Europe's worst performer in this regard, Rajic said.

Poor financial reports are the key reason behind business frauds, and the situation has been further worsened by the Accounting Act, adopted in June 2013, said the participants of the conference.

Blagoje Novicevic, president of the Serbian Association of Accountants and Auditors, said that the Accounting Act is a very poor act because financial reports on business operations are nowhere near as accurate as required by international standards.

Based on such inaccurate reports, banks must decide on requests for loans and assess the risk of loan repayment, he said.
"The state is the biggest loser here, and it is not even obvious. With poor legislation, it is easy to make...