Financial Crime World

Croatian Anti-Money Laundering Model: Adopting the Advanced Beneficial Ownership (ABC) Structures

Subtitle: The ABC Model in Croatia’s Anti-Money Laundering Approach under New Legislative Frame

Background

Money laundering is a persistent global issue, posing significant threats to the international financial system. The European Union’s 4th Anti-Money Laundering Directive (4AMLD) mandates member states to take necessary measures to prevent money laundering, terrorist financing, and related criminal activities. In response, the Croatian Parliament amended the relevant laws, introducing:

  • Expanded definition of “Politically Exposed Persons” (PEPs)
  • Increased monetary threshold
  • New suspicious transaction reporting requirements

ABC Model: A Key Component of Croatia’s AML Approach

In this context, the ABC (Advanced Beneficial Ownership structures) model emerges as a vital tool in Croatia’s AML strategy. This sophisticated framework aims to identify and counter complex structures used to disguise illegal funds within seemingly legitimate ones.

The ABC Model: An Overview

The ABC model focuses on the intricacies of beneficial ownership and its interrelations with individuals and entities controlling or calling the shots. It consists of three elements:

  1. Beneficial Owners: The natural persons who ultimately own or control the entity.
  2. Legal Arrangements: Trusts, foundations, and corporate structures that shield or obscure the beneficial owners.
  3. Nominees: The third parties that publicly represent or act for the benefit of the beneficial owner.

The framework also identifies three types of relationships associated with ABC structures:

  1. Ownership relationships: Legal links between beneficial owners and the entities they control.
  2. Control relationships: The power granted to beneficial owners to significantly influence the entity.
  3. Representation relationships: Nominees acting or managing on behalf of beneficial owners in a public capacity.

Countering ABC Structures in Croatia

The Croatian Financial Intelligence Unit (FIU) and other relevant authorities are taking action to address ABC structures:

  1. Enhanced Information Sharing and Coordination: Improved communication and collaboration between financial institutions and regulatory bodies to mitigate potential risks.
  2. Improved Customer Due Diligence: Comprehensive transaction assessment to identify and report suspicious activities.
  3. Advanced Technology Tools: Transaction monitoring and risk profiling technologies to analyze financial data more effectively.

Conclusion

The adoption of the ABC model in Croatia’s AML strategy is an example of a proactive response to advanced beneficial ownership structures and the risks they pose to the financial system. By focusing on beneficial ownership and its interconnections within complex structures, Croatia strengthens its position in Europe’s anti-money laundering regime.