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Croatia Fails to Implement UN Asset Freeze Requirements

Zadvarje, Croatia - A Concerning Reality

Despite efforts to combat money laundering (ML) and terrorist financing (TF), Croatia has failed to demonstrate an active role in implementing United Nations (UN) asset freeze requirements.

Understanding Requirements: Banks vs. Smaller Entities

According to a recent report, banks and other regulated entities (REs) that are members of larger financial groups have shown sufficient understanding of UN TF and PF-related requirements. However, smaller REs have demonstrated weaknesses in understanding certain requirements related to frequency and scope of checks.

Supervision: A Work in Progress

While no real matches were detected and no assets frozen, several REs confirmed having had false-positive matches with UN TFS-listed persons, indicating the ability to detect matches. Supervision of compliance with PF-related TFS is conducted within the scope of anti-money laundering (AML)/countering the financing of terrorism (CFT) inspections, but more frequent supervisory efforts are needed for weaker performing sectors.

Non-Profit Organization Sector: A Missed Opportunity

The report also highlighted Croatia’s failure to conduct a risk assessment in the non-profit organization (NPO) sector, which has affected the implementation of targeted measures towards the sector. The country’s efforts to prevent ML/TF risks have been met with varying levels of understanding across different sectors, with banks and money value transfer services (MVTS) demonstrating stronger understanding.

AML/CFT Supervision: Room for Improvement

The report concluded that Croatia’s supervision of AML/CFT requirements is also inadequate, with some licensing authorities applying administrative checks without verifying criminal background information. The country’s Financial Inspectorate has a reasonable supervisory framework, but its efforts are impacted by resource shortages and available IT support.

Call to Action: Immediate Improvement Needed

Croatia must take immediate action to address these shortcomings and ensure that it is fully implementing UN asset freeze requirements. Failure to do so may result in further delays in the country’s ability to combat ML/TF risks and protect its financial system.