Croatia – Know Your Customer (KYC) Rules

 

 

Croatia is not an offshore financial center. Croatian authorities consider most money laundering in the country to be of domestic origin, involving the proceeds of illegal domestic narcotics sales and economic crimes, such as fraud and tax evasion. Although Croatia is part of a major transit route for drugs entering Europe, there is little evidence that these networks have utilized Croatia‘s financial systems. Public corruption has been linked to money laundering, and numerous investigations are underway; however, direct links have yet to be proven.

Money laundering in Croatia occurs primarily through non-resident accounts, transfers to offshore banks using counterfeit documents, deposits in foreign currency accounts, and has often been linked to the real estate market and the purchase of high-end automobiles. Authorities have increased their efforts in the investigation of financial crimes. This trend reflects a greater push in the application of related legislation than an actual rise in such crimes. There is no indication that trade-based money laundering exists in Croatia.

There is not a significant black market in Croatia. Croatia does not represent a sizeable market for smuggled goods, but is used as a transit route for goods destined for other countries in the region. Croatian authorities are concerned about the use of Croatia‘s ports and borders for the smuggling of black market goods. The Export Border Security Office is working to tighten controls and screening to prevent such smuggling.

Croatia has 13 operating free trade zones (FTZs) designed to attract investment. Companies operating in the zones benefit from lower taxes and customs as well as value-added duty-free import of raw materials. Companies operating in FTZs are subject to the same regulation and supervision as all other businesses in the country.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Croatia – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Croatian Law:

    • Banks, loan brokers, and lending companies
    • Savings banks and credit unions
    • Companies that issue payment instruments, rent safe-deposit boxes, or perform payment option services
    • The Croatian Post Office
    • Investment fund and asset management companies
    • Pension companies
    • Companies authorized to do business with financial instruments
    • Insurance companies and intermediaries
    • Issuers of electronic money
    • Authorized exchange offices
    • All gaming-related providers
    • Pawnshops
    • Leasing firms
    • Guarantors
    • Dealers in precious metals, gems, artistic or antique items
    • Auctioneers
    • Lawyers, notaries, auditors, accountants and tax advisors

Croatia – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 113 January – June 2011

Number of CTRs received and time frame: 24,912 January – June 2011

The following is a list of STR covered entities covered by Croatian Law:

    • Banks, loan brokers, and lending companies
    • Savings banks and credit unions
    • Companies that issue payment instruments, rent safe-deposit boxes, or perform payment option services
    • The Croatian Post Office
    • Investment fund and asset management companies
    • Pension companies
    • Companies authorized to do business with financial instruments
    • Insurance companies and intermediaries
    • Issuers of electronic money
    • Authorized exchange offices
    • All gaming-related providers
    • Pawnshops
    • Leasing firms
    • Guarantors
    • Dealers in precious metals, gems, artistic or antique items
    • Auctioneers
    • Lawyers, notaries, auditors, accountants and tax advisors

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: Five –  January – June 2011
Convictions: None –  January – June 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In addition to the Law on Prevention of Money Laundering and Terrorist Financing there are nine additional relevant regulations in force. Aside from cash, the laws also require covered entities to report all transactions involving gold, precious metals, and rare stones, as well as other types of monetary instruments and financial paper.

The Croatian National Bank, the Financial Inspectorate and the Croatian Financial Services Supervisory Agency oversee and examine financial institutions for compliance with anti-money laundering legislation. These offices are adequately staffed, and personnel are generally adequately trained.

Through its regulatory authority, the Ministry of Finance requires financial institutions to use specialized software to facilitate compliance with related reporting requirements. The Anti-Money Laundering Department, Croatia‘s financial intelligence unit (FIU), oversees all non-bank financial institutions and designated non-financial businesses and professions. Most suspicious activity reports in Croatia are made by banks.

Croatia is a signatory to bilateral agreements with 32 FIU counterparts and is also party to a number of bilateral agreements on law enforcement cooperation with its neighbors. Croatia actively cooperates with its Balkan neighbors in the law enforcement arena and helped establish a regional working group to address money laundering.

The Government of Croatia has sufficient mechanisms in place and tools at its disposal to effectively combat money laundering and financial crimes; incidences of these activities remain rare. However, a lack of expertise in financial crimes matters among the police and judiciary stands in the way of an even more efficient system. Attempts at educating experts in this arena have proven helpful. With Croatia expected to join the EU in July 2013, its ability to successfully combat money laundering and financial crimes is being scrutinized, a process which has already led to increased capacity and expertise in this area.

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  • EASTER ROMIG

    Good article, Thanks!