Financial Crime World

Croatia Lands on Global Financial Crime Watchlist as EU’s Only Member State

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Croatia, a member state of the European Union (EU), has become the only country to be added to the Financial Action Task Force’s (FATF) “grey list” of jurisdictions under increased monitoring for deficiencies in preventing money laundering and terrorism financing. This move has sent shockwaves across the financial sector, highlighting Croatia’s lack of effective measures to combat financial crime.

FATF Identifies Strategic Deficiencies

The FATF identified several strategic deficiencies in Croatia’s anti-money laundering (AML) and counter-terrorism financing (CFT) measures. Specifically, the country failed to implement adequate measures to prevent the misuse of legal persons and legal arrangements, particularly in the real estate sector where cash transactions are prevalent.

Action Plan Required

As a result, Croatia has been tasked with implementing an action plan to address these shortcomings. The plan includes:

  • Assessing risks associated with the misuse of legal entities
  • Implementing measures to prevent the use of cash in real estate transactions
  • Strengthening its AML/CFT framework to prevent money laundering and terrorism financing

Embarrassment for the EU

Croatia’s inclusion on the grey list is a major embarrassment for the EU, as it underscores the country’s lack of effective measures to combat financial crime. The move has sparked concerns among financial institutions and investors about the safety and integrity of Croatia’s financial system.

FATF Chairman Urges Action

FATF Chairman T Raja Kumar urged Croatia to implement its action plan “as soon as possible” to address the identified deficiencies. The organization reiterated that all jurisdictions must remain vigilant against emerging risks from circumventing measures taken against Russia, which was suspended from FATF membership in February.

Ongoing Challenges

The latest developments come as no current member of the grey list has been removed following the June meeting, highlighting the ongoing challenges faced by countries in implementing effective AML/CFT measures.