Financial Crime World

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Croatia’s Efforts to Combat Money Laundering and Terrorist Financing Under Scrutiny

Zagreb, Croatia - A recent assessment by international experts has shed light on Croatia’s efforts to combat money laundering (ML) and terrorist financing (TF). While the country has made significant strides in strengthening its anti-money laundering and countering the financing of terrorism (AML/CFT) framework, several weaknesses remain.

Assessment Highlights

  • The Croatian National Bank (CNB) and Financial Inspectorate have a reasonable supervisory framework, with their AML/CFT supervisory efforts largely aligned to understanding ML/TF risks.
  • However, shortcomings in risk understanding by other authorities, such as the Central State Office for Administration (CFSSA) and the Tax Authority (TA), impact the effectiveness of supervision.

Weaknesses Identified

  • Information on legal persons and arrangements is publicly accessible, but its accuracy and up-to-date nature are undermined by issues with verification and ongoing monitoring.
  • Sanctions are not applied in a systematic manner, and there are concerns about access to information and documents by competent authorities.

International Cooperation

  • Croatia has provided constructive assistance in the field of mutual legal assistance (MLA) and extradition related to ML/TF, but occasional delays have been observed when requests are sent through the Ministry of Justice and Administration.
  • The country is seeking foreign cooperation only to a limited extent, which is not aligned with its risk profile.

Main ML Risks

  • Tax crime
  • Corruption
  • Drug trafficking (posing both domestic and foreign risks)

AML/CFT Law and Implementation

  • Croatia’s AML/CFT law has been significantly amended in recent years, but several technical shortcomings remain.
  • There are gaps in implementing UN sanctions on TF and predicate offenses, as well as challenges with respect to the non-profit organization (NPO) sector and certain preventive measures related to customer due diligence.

Risk Understanding

  • Croatia’s understanding of ML/TF risks is uneven across authorities, with some demonstrating a comprehensive understanding while others have inadequate knowledge.
  • The country’s risk understanding has been affected by several shortcomings in identification and assessment of risks, including the lack of quantitative data and failure to explore undetected criminality.

Conclusion

While Croatia has made significant progress in strengthening its AML/CFT framework, there is still much work to be done to address the remaining weaknesses. The country’s authorities must continue to prioritize risk understanding, coordination, and policy setting to effectively combat ML/TF threats.