Croatia’s Financial Sector Needs Improvement in Combating Money Laundering and Terrorist Financing
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A recent study by the NRA has revealed that Croatia’s financial sector is lagging behind in its efforts to combat money laundering (ML) and terrorist financing (TF). The study found that while some sectors, such as banks and money transfer businesses, have a good understanding of ML/TF risks, others, including authorized exchange operators, lawyers, and notaries, lack a clear grasp of these threats.
Understanding of ML/TF Risks
The report highlights that the understanding of ML/TF risks is strongest among banks and money transfer businesses, which are more likely to apply risk-based approaches to mitigate these risks. However, other sectors, such as casinos and real estate agents, have limited awareness of ML/TF risks and fail to tailor their risk-mitigating measures accordingly.
Sectors with Limited Awareness
Casinos
Real Estate Agents
Implementation of AML/CFT Obligations
The study also found that while all relevant entities (REs) could explain their anti-money laundering and combating the financing of terrorism (AML/CFT) obligations, some sectors, including authorized exchange operators, lawyers, and notaries, have a more basic level of understanding. Furthermore, many REs apply risk-mitigating measures uniformly, without considering their individual risk profiles.
Limitations in Risk-Mitigating Measures
Uniform application of measures
Lack of consideration for individual risk profiles
Recommendations for Improvement
The NRA’s findings suggest that there is a need for improvement in the implementation of customer due diligence (CDD) measures, particularly with regard to identifying beneficial owners of corporate customers and monitoring business relationships. The report also notes that some sectors, including banks and money transfer businesses, have more effective systems for detecting and reporting suspicious transactions.
Recommendations
Improve CDD measures
+ Identify beneficial owners of corporate customers
+ Monitor business relationships
Implement more effective systems for detecting and reporting suspicious transactions
Supervision by Licensing Authorities
The study also assessed the effectiveness of supervision by Croatia’s licensing authorities and SRBs, finding that while all have legislative requirements in place to prevent criminals from holding management functions or being beneficial owners of REs, some authorities, such as the CNB, apply more robust measures than others.
Variations in Supervision
Some authorities apply more robust measures than others
Conclusion
The NRA’s report concludes that there is a need for increased transparency and awareness of ML/TF risks across Croatia’s financial sector. It recommends that relevant entities improve their risk assessments, CDD measures, and reporting requirements to better combat money laundering and terrorist financing.