Financial Crime World

Croatia’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Framework: Key Findings

The recent report on Croatia’s AML/CFT framework has highlighted several areas of concern that require improvement. Here are the main points from the Executive Summary:

Risk Understanding

  • Only a few sectors, including banks and money/value transfer services, have a good understanding of Money Laundering/ Terrorist Financing (ML/TF) risks.
  • Other sectors, such as DNFBPs (Designated Non-Financial Business and Professions), lawyers, notaries, casinos, etc., have limited or deficient understanding of ML/TF risks.

Application of Risk-Mitigating Measures

  • Banks and Money/Value Transfer Services (MVTS) demonstrated advanced practices in applying risk-based approaches.
  • Other sectors apply mitigating measures uniformly without tailoring to their risk characteristics.

Customer Due Diligence (CDD)

  • Implementation of CDD requirements for natural persons is adequate.
  • However, application of measures to identify beneficial owners of corporate customers raises concerns within all sectors.

Enhanced Due Diligence (EDD)

  • The effectiveness of EDD measures varies across sectors.
  • Financial Institutions (FIs), especially banks and MVTS, demonstrate higher levels of effectiveness than DNFBPs.

Suspicious Transaction Reporting (STRs)

  • STR reporting in the banking and MVTS sectors is consistent with expectations.
  • Non-bank FIs and some DNFBPs have low STR reporting volumes that may indicate inadequate controls or a lack of understanding of reporting requirements.

Supervision

  • All licensing authorities have legislative requirements for preventing criminals from holding management functions or being beneficial owners of Reporting Entities (REs).
  • However, the effectiveness of supervision varies across sectors.

Beneficial Ownership (BO)

  • Information on creation and types of legal persons and arrangements is publicly accessible.
  • Croatian authorities are reluctant to flag certain types of legal persons as most vulnerable vehicles for ML/TF.

Overall, the report highlights areas where Croatia’s AML/CFT framework needs improvement, particularly in terms of risk understanding, application of risk-mitigating measures, CDD, EDD, and supervision.