AML in Croatia

In Croatia, the banking and financial sectors have experienced substantial growth in recent times. With the evolution of the financial industry, the potential for financial crime risks has escalated. However, Croatia has effectively combated issues such as money laundering, terrorist financing, corruption, and bribery through its robust anti-money laundering laws and regulations. As a result of these efforts, the risks associated with money laundering and terrorist financing within the country remain at a low level. Notably, Croatia is also counted among the member states of the European Union.

The Croatian National Bank functions as the central bank of the Republic of Croatia and holds a position within the European Central Banks System. CNB’s principal objective is to attain price stability and ensure the overall stability of the financial system. Alongside this, the National Bank of Croatia administers monetary policy and oversees the operations of credit institutions, credit unions, payment institutions, and electronic money institutions. Entities associated with the Croatian Central Bank are obligated to guarantee compliance with Anti-Money Laundering regulations.

In Croatia, the Financial Intelligence Unit is embodied by the Anti-Money Laundering Office. This entity operates as an autonomous and distinct unit functioning within the framework of the Croatian Ministry of Finance. The primary objective of the Anti-Money Laundering Office revolves around establishing an efficient Anti-Money Laundering (AML) mechanism, aligning AML and Counter Financing of Terrorism (CFT) regulations with international standards. Furthermore, the AMLO undertakes the task of gathering, scrutinizing, and transmitting AML-related data to relevant governmental bodies. In addition to these functions, banks and other financial institutions are mandated to report any detected suspicious transactions to the Anti-Money Laundering Office.

Croatia introduced a new Money Laundering and Terrorism Financing Prevention Act in 2017 to bridge gaps between existing Anti-Money Laundering (AML) legislation and European Union standards. This article delves into Croatia’s key AML obligations under this law, spotlighting Know Your Customer (KYC), Customer Due Diligence (CDD), Enhanced Due Diligence (EDD), and Reporting of Suspicious Transactions.

Know Your Customer (KYC)

KYC procedures equip businesses to identify potential risks by amassing customer information. It’s mandatory for companies to adhere to KYC processes during customer account initiation. This entails gathering the customer’s identity particulars and financial history, followed by verification checks. These controls enable the fulfillment of KYC protocols.

Customer Due Diligence (CDD)

CDD stands as a pivotal pillar within an effective AML program, guided by a risk-based approach as per international AML norms. Employing CDD, businesses conduct risk assessments on both new and existing clients. Various techniques exist for conducting risk evaluations.

Sanction Screening: Entities subjected to government sanctions pose high risks. Screening for sanctioned individuals is conducted to identify such customers.

Politically Exposed Person (PEP) Control: PEPs, owing to their influence, can harbor bribery and corruption risks. While PEPs can engage with financial institutions, businesses must establish control processes, making PEP screening imperative.

Adverse Media Screening: Detecting adverse news involving money laundering, terrorism financing, corruption, and more is essential. Media scans help prevent relationships with individuals involved in such crimes.

Enhanced Due Diligence (EDD)

EDD protocols are deployed for high-risk clients identified during CDD processes. Before establishing relationships with these customers, companies assess all potential risks and threats, devising tailored control measures aligned with risk levels.