ANTI MONEY LAUNDERING AND TERRORIST FINANCING
 

19 February 2014


  1. About money laundering

  2. About terrorist financing

  3. Prevention of money laundering and terrorist financing

  4. Legislative framework for the prevention of money laundering and terrorist financing in the Republic of Croatia

  5. The role of the CNB in the prevention of money laundering and terrorist financing in the Republic of Croatia

  6. About the PMLTF Committee

  7. International institutions and groups engaged in the combat of money laundering and terrorist financing and their documents

 

 

I   ABOUT MONEY LAUNDERING
The term money laundering implies a range of activities in banking, monetary or other economic operations whose purpose is to conceal the actual source of money, or assets or rights acquired by means of money obtained in an unlawful manner. An important characteristic of money laundering is that it is always preceded by some unlawful activity. In general, the term money laundering implies every activity aimed at concealing unlawfully obtained income in such a way as to present such income as lawful proceeds.


The Council of Europe first used this term in 1980 in its Recommendation No. R (80) 10 on Measures Against the Transfer and the Safekeeping of Funds of Criminal Origin and in the USA the term was first officially used in a 1982 court ruling against Colombian cocaine mafia. 

The first piece of legislation on money laundering (The Money Laundering Control Act) was enacted in 1986 in the US Federal State of Washington. This act envisaged severe sanctions against persons who failed to report duly monetary transactions in excess of USD 10,000 or who failed to meet the obligation to keep receipts on business transactions involving amounts in excess of USD 3,000.

 

II   ABOUT TERRORIST FINANCING

The term terrorism, in its broadest sense, implies any use of violence for the purpose of achieving political goals. The risk of terrorist financing lies in the danger that the financial system will be used for terrorist financing, i.e. that some legal relationship, transaction or product will be used directly or indirectly for terrorist financing.

Unlike money laundering which is always preceded by an unlawful activity, terrorism may be financed from the proceeds of legal activities (humanitarian organisations, various associations, donations). This makes detection of terrorist financing very difficult, even more so if we bear in mind the fact that transaction amounts involved in terrorist financing often tend to be smaller than the amounts that under law have to be reported to the anti-money laundering office. As the measures taken to prevent money laundering are not sufficient in the fight against terrorist financing, they have to be supplemented by special measures prescribed by competent international bodies.

Below listed are links to persons and entities associated with terrorism who are under some type of sanction:

UN consolidated list

Consolidated List of Persons, Groups and Entities Subject to EU financial sanctions

OFAC Specially Designated Nationals List
 

III   PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING

The responsibility for the prevention of money laundering and terrorist financing in the Republic of Croatia does not lie with one institution but with a system which provides a legal definition of the roles of the participants, their interaction and cooperation and which consists of:

  1. prevention bodies – obligated persons (banks, housing savings banks, exchange offices, insurance undertakings, brokers, lawyers, public notaries, tax advisors, etc.) and the Office for Money Laundering Prevention as the central analytics service;
  2. supervisory bodies – the Financial Inspectorate, the Tax Administration, the CNB, the Croatian Financial Services Supervisory Agency;
  3. criminal prosecution authorities – the police, the state attorney's office and the judiciary.

 

IV   LEGISLATIVE FRAMEWORK FOR THE PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING IN THE REPUBLIC OF CROATIA
  • Criminal Code (Official Gazette 125/2011)
  • Act on the Responsibility of Legal Persons for Criminal Offences (Official Gazette 151/2003, 110/2007, 45/2011 and 143/2012)

 

GUIDELINES OF SUPERVISORY AUTHORITIES

Croatian National Bank (CNB)

  • Guidelines for the implementation of the Anti Money Laundering and Terrorist Financing Law with respect to credit institutions, credit unions and electronic money institutions
  •   PDF

    Croatian Services Supervisory Agency (HANFA)

  • Guidelines for the implementation of the Law on the Prevention of Money Laundering and the Financing of Terrorism for obligated persons who fall within the jurisdiction of the Croatian Financial Services Supervisory Agency (Croatian version only)  PDF
  • Ministry of Finance – Financial Inspectorate

  • General guidelines for the implementation of the Anti Money Laundering and Terrorist Financing Act  (Croatian version only) PDF
  • Guidelines for reporting entities subject to control by the Financial Inspectorate in relation to the enforcement of the Anti-Money Laundering and Terrorist Financing Act   PDF
  • Guidelines for the implementation of the Anti-Money Laundering and Terrorism Financing Act for audit firms, independent auditors, natural and legal persons who provide accounting and tax counselling services (Croatian version only)  PDF
  • Guidelines for the implementation of the Anti-Money Laundering and Terrorism Financing Act for lawyers and public notaries (Croatian version only)  PDF

  • V   THE ROLE OF THE CNB IN THE PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING IN THE REPUBLIC OF CROATIA

    Competences and responsibilities of the CNB

    VI   ABOUT THE PMLTF COMMITTEE
    The Committee of the Croatian National Bank for the Prevention of Money Laundering and Terrorist Financing (hereinafter: the Committee) was established in March 2007. The role of the Committee is to formulate and coordinate procedures and activities of the CNB in carrying out legislative tasks within the jurisdiction of the CNB in the field of prevention of money laundering and terrorist financing and to define its views on individual topics in that area. The Committee decides on requests for data and information submitted by other bodies, monitors the implementation of mutually assumed rights and obligations, including the exchange of information and data based on agreements entered into with other bodies, prepares and proposes entering into agreements on cooperation with other bodies, issues proposals for the drafting and adoption of subordinate legislation to competent expert services and participates in the drafting of legislation on the prevention of money laundering and terrorist financing. In co-operation with the Croatian Chamber of Economy and the Croatian Banking Association, the Committee participates in organising trainings for obligated persons under the CNB’s supervision.

    The members of the Committee include representatives of several organisational units, who are also the members of the IIWG and IDWGST. The Committee acts as an internal consultative body, which reports to the Governor on a regular basis.

    In its work, the Committee cooperates with:

    One of the tasks of the Committee is to provide interpretation of the implementation of guidelines issued by the CNB. Questions on this topic can be forwarded to the Committee at the following e-mail address: odbor-SPNFT@hnb.hr


    Committee Activities

    • Project CARDS 2003 "Prevention and Combating Money Laundering"
      Program CARDS (Community Assistance for Reconstruction, Development and Stabilisation) is a technical-financial aid programme of the European Union which was adopted in December 2000 and whose basic objective is to provide support to the countries of Southeast Europe in active participation in the stabilisation and association process and in the implementation of obligations assumed under the Stabilisation and Association Agreement (SAA). The project CARDS "Prevention and Combating Money Laundering" was completed in December 2007. Its main objective was to provide support to institutional strengthening with a view to preventing money laundering and combating terrorist financing, organised crime and in general, serious forms of financial crime.
       
    • The Croatian Chamber of Economy
      In the framework of its cooperation with the Croatian Chamber of Economy, the Committee holds a seminar for credits institutions and eletronic money institutions every year since its establishment, on new developments in the area of prevention of money laundering and terrorist financing. There is a continuous co-operation between these two institutions associated with the interpretation of the Anti-Money Laundering and Terrorism Financing Act, as well as a co-operation with the Croatian Chamber of Economy, as a professional association, in drafting of the Guidelines for credit institutions, credit unions and electronic money institutions.
       
    • The Croatian Banking Association
      In the area of prevention of money laundering and terrorist financing, the Committee co-operates and exchanges information, received by the Ministry of Foreign and European Affairs and other authorities, with the Croatian Banking Association, regarding a list of extraterritorial destinations, equivalent third countries, a list of indicators of suspicious transactions and cyber crime issues. In preparing the Guidelines for credit institutions, credit unions and electronic money institutions, the Committee co-operates with the Croatian Banking Association as a professional association.
       
    • The Croatian Financial Services Supervisory Agency (HANFA)
      The Croatian National Bank and HANFA cooperate with each other and coordinate their activities through the Working Committee for Financial System Supervision. The cooperation consists in a continuous exchange of information related to individual matters and the issuing of licenses and approvals, in initiating and adopting legislation, as well as in the supervision of entities subject to supervision within the institutions' respective fields of authority. In case of some open issues, ad hoc working groups, consisting of the representatives of both institutions, can also be set up to jointly seek possible solutions and propose the one that is the most appropriate for a given issue.
       
    • Inter-institutional Working Group for the Prevention of Money Laundering and Terrorist Financing (IIWG)
      IIWG comprises representatives of the Ministry of Justice, the State Attorney's Office, the Ministry of Interior, the Ministry of Finance (the Customs Administration, the Tax Administration, the Financial Inspectorate, the Office for Money Laundering Prevention), the Croatian Financial Services Supervisory Agency, the Ministry of Foreign and European Affairs, the Security and Intelligence Agency and the CNB.
      IIWG is responsible for coordinating the measures and reporting on the implementation of the Action Plan for the Prevention of Money Laundering and Terrorist Financing, coordinating the preparation of the reports for MONEYVAL, promoting inter-institutional cooperation in this area and proposing improvements in legislation, implementing regulations, guidelines, etc.
       
    • Inter-departmental Working Group for the Suppression of Terrorism (IDWGST)
      The Inter-departmental Working Group for the Suppression of Terrorism was established in 2005 pursuant to a decision of the Government of the Republic of Croatia with the aim of monitoring the national implementation of the provisions of the United Nations Security Council Resolutions 1267 (1999) about the measures against the Taliban (on the situation in Afghanistan), 1373 (2001) on the combat of terrorism and 1566 (2004) on the threats to international peace and security caused by terrorist acts and the implementation of other relevant international documents and initiatives in the framework of the EU, NATO and OSCE in the field of combat against terrorism.
       
    • Standing Coordinating Group (SCG) for monitoring the implementation of international restriction measures and monitoring and co-ordination of restriction measures application
      The SCG, whose members, among others, also include CNB representatives, was established by the Government of the Republic of Croatia pursuant to Article 5 of the Act on the International Restriction Measures. The terms of reference of the SCG include the implementation of the UN's sanction regime against Al Qaida and the Taliban, established by the United Nations Security Council Resolution 1267 (1999), as well as of the EU's counter-terrorism sanctions regime.
       
    VII   INTERNATIONAL INSTITUTIONS AND GROUPS ENGAGED IN THE COMBAT OF MONEY LAUNDERING AND TERRORIST FINANCING AND THEIR DOCUMENTS
    1. United Nations
    2. European Union (EU)

    3. Financial Action Task Force (FATF)

    The FATF is an intergovernmental body established in Paris in 1989 at the meeting of G-7 countries whose task is to monitor the implementation of measures for the prevention of money laundering and terrorist financing. The FATF mandate includes the introduction of standards for combating money laundering, terrorist financing, proliferation of mass destruction weapons, assessing compliance with the FATF standards, identifying threats to the integrity of the international financial system and responding to them through studying high risk jurisdictions and typologies.

    34 jurisdictions and 2 regional authorities are members of the FATF

    The recommendations issued by the FATF represent the standards for combating money laundering and terrorist financing:

    FATF regional bodies:

    • Asia/Pacific Group on Money Laundering (APG)
      The Asia/Pacific Group is an autonomous international organisation for the prevention of money laundering established in Bangkok, Thailand, in 1997. It currently consists of 41 member countries and a number of international and regional observers including the FATF, the International Monetary Fund (IMF), the World Bank, the Organisation for Economic Co-operation and Development (OECD), the UN Office on Drugs and Crime, the Asian Development Bank, the Egmont Group, and others.
       
    • Caribbean Financial Action Task Force (CFATF)
      The Caribbean FATF is an organisation of 29 states of the Caribbean Basin, which have agreed to implement common standards and measures to address the problem of money laundering. It was established as the result of meetings convened in Aruba in May 1990 and Jamaica in November 1992. It currently consists of 29 member states.
    • Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL)
      The Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures, MONEYVAL, which is responsible for monitoring the implementation of measures for the prevention of money laundering and terrorist financing, was established in 1997. MONEYVAL currently comprises 30 European countries, including the Republic of Croatia, and a large number of observers including representatives of FATF member states, the World Bank, the International Monetary Fund, the European Union, Interpol, the European Bank for Reconstruction and Development and others.

      In September 2012, a team of MONEYVAL experts paid a visit to Croatia in the context of the 4th round of evaluations. In contacts with government and private sector representatives, the evaluators gathered information to evaluate compliance of the Croatian legislation and its implementation in the field of prevention of money laundering and terrorist financing, while assessing the level of compliance with the FATF recommendations. Based on their findings, they prepared the 4th Round Evaluation Report on Croatia which was adopted at MONEYVAL's 42nd plenary session held in Strasbourg in September 2013.
       

       

    • Euroasian Group on Combating Money Laundering and Financing of Terrorism (EAG)
      The Euroasian Group on Combating Money Laundering and Financing of Terrorism was founded on 6 October 2004 on Russia's initiative and is supported by international organisations such as the FATF, the International Monetary Fund, the World Bank and its member states. Since 2011, the following countries are EAG's members: Belarus, China, India, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Turkmenistan and Uzbekistan. The organisation's head office is in Moscow.
       
    • Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
      The Eastern and Southern Africa Anti-Money Laundering Group is a FATF-style regional body founded in August 1999 that comprises 15 member states from Eastern and Southern Africa. The Group's efforts are supported by the following international organisations: the FATF, the Asia-Pacific Group on Money Laundering (APG), the Caribbean FATF (CFATF), the Commonwealth Secretariat, the Egmont Group, Interpol, the UN Office on Drugs and Crime and the World Bank.
       
    • Intergovernmental Action Group against Money-Laundering in Africa (GIABA)
      The GIABA is the institution of the Economic Community of West African States responsible for facilitating the adoption and implementation of anti-money laundering and counter-financing of terrorism in West Africa. As a FATF-style regional body, its efforts are, in addition to member states, supported by the African Development Bank, the UN Office on Drugs and Crime, the World Bank, the International Monetary Fund, Interpol, the World Customs Organisation, the Commonwealth Secretariat and the European Union.
       
    • Financial Action Task Force on Money Laundering in South America (GAFISUD)
      The GAFISUD is a FATF-style regional body in South America established on 8 December 2000. Its current member states are: Argentina, Bolivia, Brazil, Chile, Columbia, Ecuador, Mexico, Paraguay, Peru and Uruguay. The purpose of GAFISUD is to work toward developing and strengthening the legal framework among the member states and in the region for combating money laundering and terrorist financing in line with the FATF recommendations.
      Observer countries are: France, Germany, Portugal, Spain and the United States. The Group's efforts are supported by the following international organisations: the Egmont Group, the Inter-American Development Bank, Interpol, the International Monetary Fund, the Organization of American States, the Inter-American Commission against Drug Abuse (CICAD), the UN and the World Bank.
       
    • Middle East and North Africa Financial Action Task Force (MENAFATF)
      The MENAFATF is a FATF-style regional body for the Middle East and North Africa. It was established by 14 countries and regions on 30 November 2004 in Manama, Bahrain. Its member states are: Jordan, United Arab Emirates, Bahrain, Algeria, Tunisia, Saudi Arabia, Sudan, Syria, Iraq, Oman, Qatar, Kuwait, Lebanon, Egypt, Morocco, Mauritania, Libya and Yemen. The main purpose of the MENAFATF is to implement the FATF standards for combating money laundering in the region. Its head office is in Manama, Bahrain.
       
    4. CODEXTER (Committee of Experts on Terrorism)
    The CODEXTER, established in 2003, is the Committee of Experts on Terrorism of the Council of Europe. One of the main tasks of the CODEXTER is to prepare reviews of legislation and institutional counter-terrorism plans of the members of the Council of Europe. These are reports on counter-terrorism measures implemented by each of the countries through national regulations.


    5. Egmont Group

    Egmont Group was established in 1995 with a task of strengthening and facilitating international cooperation between financial intelligence units (FIUs) throughout the world. Its membership numbers currently stand at 132 members and are steadily increasing.


    6. International Association of Insurance Supervisors (IAIS)

    Established in 1994, the International Association of Insurance Supervisors (IAIS) represents insurance regulators and supervisors of some 190 jurisdictions throughout the world. The IAIS issues global insurance principles, standards and guidance, provides training and support on issues related to insurance supervision and organises meetings and seminars for insurance supervisors.


    7. Basel Committee on Banking Supervision

    The Basel Committee, established within the Bank for International Settlements (BIS) by the Group of Ten countries in 1974, meets regularly four times a year. Today the Committee's members come from the central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.


    8. The Wolfsberg Group

    The Wolfsberg Group is an association of eleven leading global banks: ABN AMRO, Banco Santanader, Bank of Tokyo-Mitsubishi-UFJ, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan Chase, Soci้t้ G้n้rale and UBS. The Wolfsberg Group came together in 2000 in Switzerland with the aim of developing and promoting banking services industry standards, and related products. The Group issued the Wolfsberg Anti-Money Laundering Principles for Private Banking in 2000 (revised in 2002 and 2012), subsequently accepted as banking industry standards.
     

    9. International Money Laundering Information Network (IMoLIN)

    IMoLIN is an international organisation established in 1998 by the United Nations on behalf of a partnership of international organisations involved in the prevention of money laundering and financing of terrorism. IMoLIN collects information on national money laundering and financing of terrorism laws and identifies areas for improvement in these laws and international co-operation.