ANTI MONEY LAUNDERING AND TERRORIST FINANCING
 

15 December 2011


  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 3000.

 
II   ABOUT TERRORIST FINANCING

The term terrorism, in its broadest sense, implies each 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 some unlawful activity, terrorism may be financed from the proceeds of legal activities (humanitarian organisations, different 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

World Compliance – Global Sanction List

A Progress Report on the Jurisdictions Surveyed by the OECD Global Forum in Implementing the Internationally Agreed Tax Standard

 
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 110/1997, 27/1998, 129/2000, 51/2001, 111/2003, 105/2004, 84/2005, 71/2006, 110/2007 and 152/2008), (Croatian version only)
  • definition of money laundering: Article 279
  • definition of terrorist financing: Article 169
  • Foreign Exchange Act (Official Gazette 96/2003, 140/2005, 132/2006, 150/2008, 92/2009 and 153/2009)
  • prevention of money laundering, Article 40
V   THE ROLE OF THE CNB IN THE PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING IN THE REPUBLIC OF CROATIA
The Croatian National Bank is responsible for the supervision of implementation of regulations in the area of money laundering and terrorist financing in banks, savings banks, housing savings banks, credit unions and electronic money institutions.
 

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, in accordance with the obligation assumed by the CNB under the Action Plan for the Prevention of Money Laundering and Terrorist Financing. 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.

The members of the Committee include representatives of several organisational units. 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 CARDS programme has been divided into two components: the national and the regional component. The national component which is intended for CARDS programme countries on an individual basis was prepared and conducted in Croatia by the Delegation of the European Union to the Republic of Croatia in cooperation with national bodies. The users of the regional component include all CARDS programme countries, and programme preparation and implementation were conducted centrally by the central bodies of the European Commission in Bruxelles.

    Project partners in the "Prevention and Combating Money Laundering" include the Agency for European Integration and Economic Development (AEI) which operates in the context of the Federal Ministry of Finance of Austria, the Ministry of Justice and the State Attorney's Office of the Republic of Croatia. The project was launched in June 2006 and 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.
    During project implementation, a Protocol on Cooperation and Establishment of Inter-institutional Working Group for Preventing Money Laundering and Terrorist Financing was signed and came into force on 1 March 2007.
     
  • The Croatian Chamber of Economy
    In the framework of cooperation with the Croatian Chamber of Economy, a seminar was held on 12 November 2008 on new developments in the area of prevention of money laundering and terrorist financing. Continuous cooperation between these two institutions associated with the interpretation of the Law on the Prevention of Money Laundering and the Financing of Terrorism and further training of obligated persons, where necessary, were agreed.
     
  • The Croatian Financial Services Supervisory Agency (HANFA)
    In the framework of cooperation with HANFA, a workshop was held between 25 and 27 March 2009 aimed at exchange of supervisory experiences between the CNB and HANFA. During that workshop, a methodology was presented which is used by supervisors in the supervision of obligated persons within their spheres of responsibility. CNB representatives presented the issue of supervision of obligated persons in the implementation of measures and activities in accordance with the Law on the Prevention of Money Laundering and the Financing of Terrorism, as one of the elements which constitute supervision.
     
  • 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 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, whose members, among others, also include the CNB, 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 (on the threats to international peace and security caused by terrorist acts), 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.
    The Government of the Republic of Croatia has issued a Decision on the establishment of a Standing Coordinating Group which monitors the implementation of international restriction measures, whose members, among others, also include CNB representatives.
     
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)

MONEYVAL
The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, MONEYVAL, was established in 1997. MONEYVAL has 28 members from European countries and a number of observers including FATF representative countries, the World Bank, the International Monetary Fund, the European Union, the Interpol, the European Bank for Reconstruction and Development and others.
In September 2006, a team of MONEYVAL experts paid a visit to Croatia in the context of the third round of evaluations. In contacts with government and private sectors 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 with the 40 general and 9 special FATF recommendations. Based on their findings, they prepared a 3rd Round Evaluation Report on Croatia which was adopted at MONEYVAL'S 26th plenary session held from 31 March to 4 April 2008 in Strasbourg. Progress report was presented at MONEYVAL'S 29th plenary session held from 16 - 20 March 2009.

The Evaluation report and the Progress report on the Republic of Croatia are available at the following web pages: CODEXTER (Committee of Experts on Terrorism)
The CODEXTER, established in 2003, is a 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. The country profile for the Republic of Croatia is available at the website below: 


3. Financial Action Task Force (FATF)

FATF is an inter-governmental body established in Paris in 1989 at the meeting of G-7 countries, whose task is to monitor measures for the prevention of money laundering and terrorist financing. FATF members currently include OECD countries, Hong Kong, Singapore, the Gulf Cooperation Council and the European Commission. Documents issued by FATF set the standards for the combat of money laundering and terrorist financing:


4. 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 116 members and are steadily increasing.


5. 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.


6. Basel Committee on Banking Supervision

The Basel Committee, established by the central-bank Governors of the Group of Ten countries at the end of 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.


7. 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 October 2000 (and revised in May 2002), subsequently accepted as banking industry standards.

8. 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.