In 2003 the European Committee on Crime Problems (CDPC) conducted a mutual evaluation of Croatia's anti-money laundering (AML) regime which was based on the old (2002) Financial Action Task Force (FATF) methodology. The CDPC report indicated that the Croatian authorities at the time were in the process of overhauling the country's administrative and legal environment to combat money laundering in order to conform to European Union (EU) requirements. The 2005 "International Narcotics Control Strategy Report" by the U.S. Department of State (DoS) noted that in 2003 Croatia passed a new Law on the Prevention of Money Laundering (LPML) which is in accordance with the European Union Directives and incorporates crimes related to the financing of terrorism, drug trafficking, and human trafficking. The Croatian Financial Intelligence Unit (FIU), the the Ured za Sprjecavanje Pranja Novca (Anti-Money Laundering Department, or AMLD) was established pursuant to the LPML and operates within the Ministry of Finance. The 2005 U.S. DoS report indicated that Croatia's AML/CFT regime lacks proper asset forfeiture requirements and the law enforcement authorities in the country need to improve their technical skills to investigate and prosecute crimes related money laundering and terrorism. However, there has been no assessment as to Croatia's AML and Combating the Financing of Terrorism (CFT) regime pursuant to the new (2004) FATF methodology.

General Overview

In 2003, the European Committee on Crime Problems (CDPC) conducted a mutual evaluation of Croatia's anti money laundering (AML) regime which was based on the old (2002) Financial Action Task Force (FATF) methodology. The CDPC report indicated that the Croatian authorities were in the process of overhauling its administrative and legal environment to combat money laundering as to conform to EU requirements. Subsequently there has been no assessment as to Croatia's AML and Combating the Financing of Terrorism (CFT) regime pursuant to the new (2004) FATF methodology.

According to a 2005 U.S. Department of State (DoS) report, the Croatian Penal Code was amended in 1996 "to criminalize money laundering in all forms related to serious crimes." The report further noted that from 2002-2003 Croatia undertook major improvements in its AML regime and various laws were enacted so as to better combat money laundering. The most important of these new laws was the 2003 Law on the Prevention of Money Laundering (LPML) which accords with European Union (EU) Directives on the subject. Other laws relating to anti-money laundering measures in Croatia are the Law on Penal Responsibility of Legal Persons, the Law on Suppression of Organized Crime and Corruption, the Law on Banks, and amendments to the Law on Legal Proceedings. Furthermore, the U.S. DoS report added that the LPML criminalizes the financing of terrorism, the smuggling of drugs and the trafficking of persons.

The Financial Intelligence Unit in Croatia, the Ured za Sprjecavanje Pranja Novca (Anti-Money Laundering Department, or AMLD) was established pursuant to the LPML and is based within the Ministry of Finance (MoF). According to the U.S. DoS report, the LPML establishes reporting requirements for all banks and non bank financial institutions. However, the report indicated that there was still more that could be done to enhance Croatia's AML regime, particularly through improved training and technical skills of law enforcement staff, improvements in the asset forfeiture regime, and improvements in cooperation between domestic agencies.

The Principles

1. Legal Systems and Related Institutional Measures

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The 2005 U.S. DoS report noted that the Penal Code was amended in 1996 "to criminalize money laundering in all forms related to serious crimes." The report added that the 2003 Law on the Prevention of Money Laundering (LPML) further improved the Croatian AML regime and accords with EU directives on the subject. Terrorist financing is also criminalized in Croatia through changes made in 2003 to the Croatian Criminal Code. Furthermore the report noted that Croatia is party to the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime. However, apart from this descriptive information, there is little information publicly available as to Croatia's compliance with this principle.

The authorities primarily responsible for supervision, investigation and prosecution of money laundering and terrorist financing activities in Croatia, according to the 2005 U.S. DoS report, are the Financial Intelligence Unit in Croatia, the Ured za Sprjecavanje Pranja Novca (Anti-Money Laundering Department or AMLD) within the MoF, and the National Center for the Prevention of Corruption and Organized Crime (USKOK) within the State Prosecutor's Office. The AMLD has the authority to investigate suspicious transactions (STRs) and has investigated several STRs since its inception. However, according to the 2005 U.S. DoS report, these agencies lack the training and technical skills to properly prosecute money laundering activities.

The 2005 report by the U.S. DoS indicated that, although there are confiscation and asset seizure rules, "there is no civil asset forfeiture provision in Croatian law." This makes it difficult for law enforcement to freeze funds not directly related to an individual or entity listed by the United Nations. However, the report also mentions that authorities in Croatia were aware of this drawback and were in the process of addressing this issue. They had already set up an interagency working group headed by the Ministry of Internal Affairs to look into "establishing a more reasonable burden of proof for asset seizures." Finally, the DoS report noted that all cash or monetary cross-border transactions in excess of $6,500 are subject to reporting requirements in Croatia.

2. Preventive Measures - Financial Institutions

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In 2005, the U.S. DoS reported that the 1997 LPML (now revised as the 2003 LPML) requires all banks and non-bank financial institutions to report suspicious transactions and any transactions above $30,000. The report included a comparative table that lists the following requirements as applicable to Croatian banks: (1) to record large transactions in currency or other monetary instruments; (2) to keep records, especially of large or unusual transactions, for a specified period of time; (3) to record and report suspicious or unusual transactions to designated authorities; (4) to identify and verify their customers identity using reliable independent source documents, (5) to identify beneficial ownership and control; (6) to conduct ongoing due diligence and scrutiny. Apart from the above descriptive information, however, there is little information publicly available as to Croatia's compliance with this principle.

3. Preventive Measures - Designated non-Financial Business and Professions

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There is insufficient information publicly available as to Croatia's compliance with this principle. According to the 2005 U.S. DoS report, "LPML expands the list of entities subject to reporting requirements to include lawyers and notaries. "

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available as to Croatia's compliance with this principle.

5. National and International Co-operation

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There is insufficient information publicly available as to Croatia's compliance with this principle. In its 2005 report on Croatia, the U.S. DoS pointed to the lack of inter-agency cooperation as one of the drawbacks of the AML regime in Croatia. However the report also noted that this issue was being addressed and the MoF was in the process of signing memoranda of understanding (MOUs) with the Central Bank, the Securities and Exchange Commission, the Croatian pension fund supervisory body, and the Croatian insurance industry regulatory body.

However, in terms of international cooperation the 2005 U.S. DoS report stated that "the AMLD cooperates fully with foreign FIUs." Furthermore the report noted that in terms of exchanging information with foreign counterparties there are no limitations, and "Croatia is party to a number of bilateral agreements on law enforcement cooperation with its neighbors, as well as the Southeastern Europe Cooperative Initiative's Agreement to Prevent and Combat Trans-border Crime."

According to the U.S. DoS report, Croatia is a member of the Council of Europe's Select Committee of Experts (MONEYVAL), and participates in mutual evaluations with other members. Croatia is also an active member of the Egmont Group. The Croatian MoF reported that the Croatian Government had signed and ratified several international treaties: the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the UN Drug Convention; the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime; and the Convention on Transnational Organized Crime. In June 2003, Croatia signed the European Convention on the Transfer of Proceedings in Criminal Matters, but has not ratified as per information provided in the U.S. DoS' 2005 report.