CROATIA: New Guidelines for Customer Due Diligence Aim to Boost Financial Inclusion
In a move aimed at increasing financial inclusion in Croatia, the country’s anti-money laundering and countering the financing of terrorism (AML/CFT) authorities have issued new guidelines on customer due diligence. These guidelines aim to provide a more risk-based approach to combating money laundering and terrorist financing while ensuring that legitimate businesses and consumers are not excluded from the formal financial system.
Recognizing the Challenges
The guidelines recognize that applying overly cautious AML/CFT measures can have unintended consequences, including excluding low-income individuals and displaced persons such as refugees from accessing basic financial services. In response, the authorities have developed a simplified set of customer due diligence measures that can be adapted to the context of financial inclusion.
Challenges in Providing Financial Services
- Lack of reliable identity documentation and data verification
- Alternative forms of identity verification are necessary to support financial inclusion while mitigating ML/TF risks
Simplified Customer Due Diligence Measures
The new guidelines provide examples of alternative forms of identity verification, such as e-identity tools, which can support financial inclusion while also mitigating ML/TF risks.
Objective of the Updated Report
- Encourage countries to make use of the FATF Recommendations’ flexibility to provide sound financial services to the financially excluded
- Increase access to financial services for low-income individuals and displaced persons, ultimately promoting financial stability and reducing the risk of money laundering and terrorist financing
Impact on the Financial Sector
The new guidelines are expected to have a significant impact on the financial sector in Croatia, particularly for small and medium-sized enterprises (SMEs) that often struggle to comply with complex AML/CFT regulations. By providing a more streamlined approach to customer due diligence, the authorities aim to create a more level playing field for businesses of all sizes.
Benefits for Low-Income Individuals and Displaced Persons
By providing alternative forms of identity verification, these individuals will have greater access to financial products and services that can help them manage their finances and achieve economic stability.
Conclusion
Overall, the new guidelines on customer due diligence in Croatia represent an important step towards promoting financial inclusion and reducing the risk of money laundering and terrorist financing. By providing a more risk-based approach to combating these risks, while also ensuring access to financial services for all, Croatia is taking a significant step towards creating a more stable and inclusive financial system.