Croatia Falls Short on Financial Inclusion and Money Laundering Efforts, Says Moneyval Report

Introduction

A recent report by the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and Financing of Terrorism (Moneyval) has highlighted several weaknesses in Croatia’s efforts to combat money laundering (ML) and terrorist financing (TF).

Limited Understanding of ML Risks

According to the report, Croatian authorities have a limited understanding of ML risks, with some agencies having a full understanding while others lack adequate comprehension. In contrast, the understanding of TF risks is poor across all authorities.

• The disparities are attributed to weaknesses in identifying and assessing risks, including the absence of policy objectives that address ML and TF risks.
• This lack of understanding hinders effective prevention and detection of ML and TF offenses.

Operational Cooperation

Croatian law enforcement agencies have good operational cooperation on ML/TF issues but lack sufficient strategic coordination at the policy level.

• Although the country’s legislation provides broad powers to identify and investigate ML, investigations mainly focus on predicate offenses.
• Judges and prosecutors have a limited understanding of ML offenses.

Use of Financial Intelligence Information

Croatian authorities have access to various sources of financial intelligence information but primarily use it to obtain evidence related to associated predicate offenses.

• The report noted that information is rarely used in the context of ML investigations and never used for TF investigations.
• This lack of utilization hinders effective investigation and prosecution of ML and TF offenses.

Convictions and Sanctions

The report highlighted Croatia’s poor record on ML convictions, with a low ratio between disseminated cases and launched investigations.

• Criminal sanctions applied to ML offenses have been ineffective and dissuasive.
• Confiscations related to ML have not yielded tangible results.

Non-Profit Organizations (NPOs)

Croatia has conducted two national risk assessments but failed to identify the subset of NPOs that are most vulnerable to TF abuse.

• This has hindered the implementation of targeted measures against NPOs.
• The report recommended that Croatia prioritize developing targeted measures against these vulnerable organizations.

Cooperation

The report criticized Croatia’s approach to cooperation, noting that while the country provides constructive mutual legal assistance and extradition assistance in cases involving ML/TF and predicate offenses, it lacks a mechanism for prioritizing incoming requests.

• The country also seeks foreign cooperation only to a limited extent, which is not in line with its risk profile.
• This limited cooperation hinders effective international collaboration and information sharing.

Conclusion

The report concluded that Croatia needs to improve its understanding of ML and TF risks, enhance cooperation at the policy level, and strengthen its ability to identify and investigate ML offenses. The country must also prioritize confiscations related to ML and develop targeted measures against NPOs vulnerable to TF abuse.

• Improving financial inclusion and combating money laundering and terrorist financing require a coordinated effort from all authorities.
• It is essential that Croatia addresses these weaknesses to prevent and detect ML and TF offenses effectively.