Financial Crime World

Croatia’s Know Your Customer (KYC) Regulations: A Comprehensive Guide for Financial Institutions

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The Know Your Customer (KYC) regulations in Croatia are designed to prevent money laundering and terrorist financing by requiring financial institutions to verify the identity, suitability, and risks involved with maintaining a business relationship. The Anti-Money Laundering Act (AML Act), which came into force on April 25, 2019, is the primary legislation regulating AML/CTF in Croatia.

Supervisory Authorities

The Croatian National Bank (CNB), Financial Inspectorate, HANFA, Tax Administration, and other supervisory authorities are responsible for monitoring and enforcing compliance with AML regulations. The Anti-Money Laundering Office (Office) collects, analyzes, and disseminates AML/CTF data and coordinates with supervisory authorities in AML/CTF matters.

KYC Measures

According to the AML Act, KYC measures include:

  • Establishing the identity of the party
  • Verifying it through credible sources, such as:
    • Documents
    • Data
    • Information from a reliable third-party source

Banks and other financial institutions typically require face-to-face identification of clients, but some may allow representation by an authorized person with a notarized power of attorney.

Customer Due Diligence

The AML Act permits customer due diligence to be conducted by third parties who are obligated by law to comply with AML regulations. However:

  • The responsibility for implementing customer due diligence remains with the financial institution.
  • The AML obligor is permitted to outsource its customer due diligence to third parties only for specific services, such as establishing and verifying client identity.

Simplifying KYC/AML Procedures

Croatian banks have a tendency to be complex, time- consuming, and cumbersome in their KYC/AML procedures. However, it is possible to simplify these processes by relying on third-party service providers who are obligated by law to comply with AML regulations.

Third Parties for Customer Due Diligence

The AML Act explicitly lists the entities that can be relied upon as third parties for customer due diligence, including:

  • Public notaries
  • FINA
  • HP- Hrvatska pošta d. d. (Croatian Post)
  • Certain credit or financial institutions

The extent to which a credit institution will allow customer due diligence to third parties depends on its business policy and the risks involved.

Compliance Requirements

It is essential for financial institutions in Croatia to understand these regulations to ensure compliance with AML requirements and avoid potential penalties. By following these guidelines, financial institutions can reduce the risk of non-compliance and maintain a strong reputation in the market.