The first Croatian Anti-money laundering Act was adopted in 1997 and with it, Croatia implemented international standards and sets out strong grounds for the prevention and fighting of money laundering and terrorism. In 2008, effective as of January 1, 2009, the Croatian Parliament passed a new AML Act, aligning thus to the acquis communautaire. The Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing was integrated into the local legislation, and nine years later - following the Directive (EU) 2015/849 - yet another AML Act was passed to reflect these changes. The Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing is also called the 4th EU AML Directive and it has been entirely integrated into the Croatian legislation.
The most recent and valid Croatian AML Act is the Act on the prevention of money laundering and terrorist financing, adopted on November 3, 2017 and effective as of January 1, 2018 (NN 108/2017). Compared to the old act from 2008, it sets out clearer definitions, introduces more rigorous measures but on the other hand, it also makes room for exceptions on subjects or operations that created an unnecessary administrative burden to businesses and professions.
Below is an overview of some of the most important changes:
- Risk assessment and due diligence require a more demanding approach - details are elaborated in the Ordinance on risk assessment procedure against money laundering and terrorist financing and measures on simplified and extended client due diligence, from June 2018 (NN 59/2018);
- The cash transaction threshold has been lowered from 105,000 HRK to 75,000 HRK and the obligation to monitor and report such transactions extends to all legal or physical persons with registered business involved in cash transactions;
- A Politically Exposed Person now includes any physical person who is currently holding, or has held in past 12 months, a prominent public function in a member state or third country, including his/her close family members and persons known as close associates of the politically exposed person;
- Lawyers and notaries are now subject to the AML Act only if involved in financial transactions or real estate transactions or if providing assistance in planning or conducting certain operations for a client, such as sale and purchase of real estate or legal persons, managing securities or other assets, opening and managing bank accounts, collecting funds for incorporation of a company and similar operations;
- An Ultimate Beneficial Owners Register has been set up under the Croatian Financial Agency (FINA) in order to increase transparency on the ownership and prevent the use of companies to hide the true owner;
- Subjects operating with cash deposits or foreign exchange must collect the information on the purpose and source of cash amounting to 200,000 HRK and higher;
- The Act prescribes the use of the FIU.net information system for exchange of data among the EU member states;
- Sanctions for non-compliance with the AML Act have been made more rigorous.
While drafting the Act, the Croatian government has taken into consideration not only the 4th EU AML Directive but also the best practices deriving under the previous, 2008 Act. The Act therefore introduced changes in the thresholds and exceptions from the application of the 4th Directive. For example, according to the Croatian National Risk Assessment, games of chance are not considered as low risk and their organisers must comply to the AML Act (the 4th Directive grants the possibility of exemption to member states). The National Risk Assessment showed the need to lower the threshold for cash transactions from 105,000 HRK to 75,000 HRK and to introduce the obligation on collecting data on the purpose and source of cash for amounts 200,000 HRK and above. The Foreign Exchange Offices must identify the client for all transactions exceeding 15,000 HRK.
Croatia continues the fight against money laundering and terrorist financing and we can expect further amendments to the Act by January 10, 2020 which is the deadline for adoption of the provisions of the 5th EU AML Directive 2018/843 passed on May 30, 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.