AML and CTF law and regulation in Croatia

The Act on the Prevention of Money Laundering and Financing of Terrorism (Official Gazette No. 108/2017, 39/2019; the “Act”).

Yes, with the adoption of the Act the provisions of the 4^th AML Directive implemented into Croatian legislation. Additional amendments to the Act were adopted in April 2019, implementing the provisions of the 5th AML Directive.

There are several supervisory authorities, including the Croatian National Bank, the Financial Inspectorate, the Croatian Financial Services Supervision Agency, the Tax Administration.

The Anti-Money Laundering Office (the “Office”) is responsible for collecting, analysing and disseminating AML/CTF data and coordinates and cooperates with the supervisory and other competent authorities in in the AML/CTF matters, such as the State Attorney’s Office, the Ministry of the Interior—the General Police Directorate, the Security-Intelligence Agency, the Ministry of Foreign Affairs and European Integration, the Ministry of Justice and other state bodies.

There are more than 30 categories of reporting entities under the Act, including banks, financial institutions, payment services providers, gaming companies, investment companies, insurance companies and insurance intermediaries, lawyers, and public notaries. 

The reporting entities generally follow the scope of the of the 4^th and 5^th AML Directives.  

The KYC requirements in Croatia follow the requirements of the 4^th and 5^th AML Directives.  

Entities incorporated in Croatia, including branch offices of foreign companies, and trusts  (including foreign legal arrangements similar to trusts, which are under the obligation to obtain a Croatian ID-No/ OIB) are in certain cases obliged to register data about their UBOs in the Register of Beneficial Owners, which is maintained by the Croatian Financial Agency (“FINA”). There are certain exceptions, such as state-owned companies.

Yes, the legislation in various sectors allows for the digital onboarding of customers, provided that the requirements for customer identification and customer verification under the Act are observed.  

The main obligations of reporting entities under the Act reflect the requirement of the 4^th and 5^th AML Directives. These measures include a risk assessment of money laundering and terrorist financing, establishing policies and internal controls, client due diligence (CDD), the collection of information and documents and their storage, appointment of an authorized person for the implementation of measures, regular training and education of employees and the disclosure of information on suspicious operations, transactions, and clients. 

Yes, a National Risk Assessment for Money Laundering and Terrorist Financing (the “NRA”) was adopted in December 2016. The main identified risks of money laundering and terrorist financing concern the following sectors: 

• banking;
• financial markets;
• other financial institutions, e.g. payment service providers, leasing companies, factoring companies;
• gaming;
• insurance.

The Act provides an obligation to report any suspicion of financing of terrorism to the Office. Furthermore, other measure regarding AML requirements also apply to the CTF. Pursuant to the criminal legislation, there is a possibility to seize funds, other financial assets and economic resources, and to prohibit the provision of services. 

Money laundering and terrorist financing are criminalised under the Croatian Criminal Code as standalone crimes. The prescribed sanctions range from six months to eight years for money laundering and from one year to ten years’ imprisonment for terrorist financing. 

Legal entities can bear criminal liability under Croatian law. A monetary fine is the most common sanction and for the offences in question (money laundering and terrorist financing) it might be up to HRK 10 to 12 million (EUR 1.3 to 1.6 million).

The Act provides a range of sanctions for non-compliance with the key requirements, such as customer checks, record-keeping, and suspicious transaction reporting. The sanctions vary depending on the type of infringement, the type of infringer (e.g. banks, payment service providers), and can reach as high as HRK 38 million (EUR 5.2 million), or up to 10% of the annual turnover, including gross income, according to the consolidated accounts of the parent undertaking for the previous year. The sanctions are also prescribed for management board members and other responsible persons within legal entities. Additionally, it may be noted that ultimate beneficial owner(s) may also be sanctioned in certain cases. 

The number of prosecutions, convictions and administrative sanctions has increased in recent years.