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Croatian Banks Face Tougher Sanctions Compliance Rules

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A new law has taken effect in Croatia, imposing stricter regulations on banks and other financial institutions to prevent money laundering and terrorist financing.

Enhanced Due Diligence and Reporting Procedures

The Act on Restrictive Measures, which came into force on November 15, 2023, but with some key provisions applying from May 15, 2024, aims to enhance due diligence and reporting procedures for sanctions compliance.

Key Obligations for Financial Institutions

Entities under the supervision of key institutions, including:

  • The Croatian National Bank
  • The Financial Services Supervisory Agency
  • The Financial Inspectorate
  • The Tax Administration

Must now comply with a range of obligations, including:

  • Adopting written policies on restrictive measures
  • Appointing a compliance officer
  • Establishing reporting channels
  • Maintaining records on sanctions enforcement

Consequences of Non-Compliance

Failure to comply with these requirements can result in significant fines ranging from approximately €4,500 to €90,000 for companies and up to €4,500 for individual responsible persons within those entities.

Aligning Regulatory Framework with International Standards

The new regulations are part of a broader push by the European Union to strengthen its response to global crises. In June 2024, the EU adopted its 14th package of sanctions against Russia, targeting additional individuals and entities with restrictions on access to services and resources.

The Importance of Robust Sanctions Compliance Systems

As Croatia moves closer to aligning its regulatory framework with international standards, financial institutions must ensure they are equipped to meet these new demands. The consequences of non-compliance will be severe, making it essential for banks and other firms to invest in robust sanctions compliance systems to avoid hefty fines and reputational damage.