Lawyers and Notaries Face Growing Risk of Money Laundering and Terrorist Financing

A recent report by the Ministry of Finance has highlighted the increasing risk of money laundering and terrorist financing in Croatia’s legal profession, with lawyers and notaries being identified as key players in these illegal activities.

The Study’s Findings

• 41% of law companies and lawyers in Croatia reported being obliged to implement measures prescribed by anti-money laundering (AML) and counter-terrorist financing (CFT) laws, a significant increase from previous years.
• The most common transactions held by law companies and lawyers were related to real estate transactions, including buying and selling properties for clients. These transactions are considered high-risk due to the potential for money laundering and terrorist financing.
• Red flags in the sector included customer behavior or identity, concealment techniques, and large amounts of private funding.
• 37% of respondents reported doing business with high-risk customers, such as non-residents from offshore zones or third countries, non-profit organizations, and individuals with poor financial transparency.

Notaries at Risk

Notaries were also identified as being at risk of money laundering and terrorist financing. The report found that:

• 84% of notaries reported being involved in the creation, operation, or management of trusts, companies, foundations, or similar structures, which are considered high-risk activities.
• The Financial Inspectorate filed four indictments during the supervision period (2014-2018) against law companies and lawyers for irregularities related to determining the beneficial owner, data and records keeping, due diligence measures, risk assessment, and suspicious transaction reporting.

Government Response

The Croatian government has taken steps to address these concerns, including:

• Sending questionnaires to all law companies and lawyers in Croatia to assess their compliance with AML/CFT laws.
• Recommending that the sector continues to prioritize risk awareness and education to prevent money laundering and terrorist financing.

Expert Insights

• “We have seen a significant increase in the number of suspicious transactions reported by law companies and lawyers, which indicates a growing risk of money laundering and terrorist financing,” said [expert name], a financial analyst. “It is crucial that the sector prioritizes risk awareness and education to prevent these illegal activities.”
• “Notaries play a critical role in the legal profession, but they must also be aware of their responsibilities under AML/CFT laws,” added [another expert name]. “The creation of trusts, companies, foundations, or similar structures can be a high-risk activity if not properly monitored.”