The Financial Inspectorate of the Republic of Croatia issued a decision by which Zagrebačka banka d.d. was found guilty because the supervision of the Croatian National Bank had established that, in the period from 1 January 2017 to 8 November 2019, it failed to implement all of the necessary measures, actions and procedures as prescribed by the Anti-Money Laundering and Terrorist Financing Act (AMLTF Act), and imposed an aggregate fine in the amount of HRK 33,000,000.
The Decision of the Financial Inspectorate was issued and became legally effective on 30 October 2020. This fine is the highest misdemeanour fine so far imposed on a credit institution in Croatia, not only in the area of anti-money laundering and terrorist financing, but in all areas for which credit institutions’ misdemeanour responsibility is prescribed. In this case, the CNB as the supervisory authority and authorised prosecutor, in meeting the obligation from the Misdemeanour Act, informed Zagrebačka banka about its right to come to an agreement, which Zagrebačka banka used, admitted guilt and agreed to accept the imposed fine.
A summary of the Financial Inspectorate’s Decision is available here (only in Croatian).
Upon supervision, the CNB established 11 misdemeanours relating to the violation of the AMLTF Act in the following areas:
- risk assessment of an individual business relationship;
- identification and tracking of suspicious, complex and unusual transactions;
- reporting suspicious transactions to the Anti-Money Laundering Office;
- carrying out customer due diligence measures;
- the internal control system for the mitigation and effective management of money laundering and terrorist financing risks.
Zagrebačka banka d.d. committed the aforementioned violations established by the CNB supervision in the period from 1 January 2017 to 8 November 2019, relating to the following omissions:
- It failed to apply the enhanced customer due diligence measures for 72 customers.
- It failed to analyse the background and purpose of 1,126 transactions identified as complex and unusual that did not have an obvious economic or visible legitimate purpose.
- It failed to use the lists of indicators as guidelines in determining the reasons for the suspicion of money laundering or terrorist financing for 2,028 transactions.
- It failed to report 1,122 suspicious transactions to the Anti-Money Laundering Office.
- It failed to establish an efficient internal control system for the mitigation and effective management of money laundering and terrorist financing risks.
The number, type and duration of identified illegalities indicated structural shortcomings in the implementation of prescribed anti-money laundering and terrorist financing measures, actions and procedures. Such conduct is particularly unacceptable given the position held by Zagrebačka banka d.d. in the financial system of the Republic of Croatia as the largest credit institution.
The amount of the fine imposed is proportional to the determined number and severity of the committed misdemeanours. At the same time, the amount of the fine imposed in this procedure realised the legally prescribed purpose of punishment for misdemeanours committed in the area of anti-money laundering and terrorist financing.
After the completion of CNB's supervision, Zagrebačka banka d.d. reorganised its operations and increased its capacity to detect and prevent money laundering and terrorist financing, and proceeded to implement supervisory measures based on the CNB’s decision. Zagrebačka banka d.d. demonstrated an appropriate degree of readiness to address the identified weaknesses within the anti-money laundering and terrorist financing system. Among other things, Zagrebačka banka d.d. was committed to implementing 75 measures to increase the efficiency and effectiveness of its anti-money laundering and terrorist financing system. In the meantime, Zagrebačka banka d.d. informed the CNB that it had implemented all of the measures it had undertaken.
This case emphasises that the implementation of measures to prevent money laundering and terrorist financing by banks remains an important priority of the CNB and that it is determined to take any measures to ensure that banks comply with regulations in the area of anti-money laundering and terrorist financing. The CNB expects of banks to have effective and efficient anti-money laundering and terrorist financing systems in place that should be proportionate to their size, type, scope and the complexity of their operations.
In accordance with the law, the CNB provided detailed information about the supervision results to the Anti-Money Laundering Office and all competent state institutions.
Zagrebačka banka d.d. is the largest bank in the Republic of Croatia with total assets worth HRK 124.9bn and a 22.8 percent market share.
The CNB conducts on-site inspections of banks’ operations with regard to the implementation of the AMLTF Act according to the annual plan of on-site inspections and on average conducts five supervisions of banks a year. The CNB exercises supervision to check whether a bank is implementing all measures it is obligated to implement pursuant to the AMLTF Act, with the aim of preventing the use of the banking system for money laundering. The CNB is not the authority authorised to conduct investigations of bank customers that are potential perpetrators of a criminal offence of money laundering. It is the competence of criminal prosecution authorities.
The anti-money laundering and terrorist financing system in the Republic of Croatia does not fall within the competence of a single institution. It is a system in which the roles of all participants and their cooperation are defined by law. Three types of authorities participate in the system: prevention authorities (banks, exchange offices, brokers, insurance companies, gambling operators, etc.), supervisory authorities (Financial Inspectorate of the Republic of Croatia, Tax Administration, Croatian National Bank and Croatian Financial Services Supervisory Agency), the financial intelligence unit (Anti-Money Laundering Office) and criminal prosecution authorities (State Attorney’s Office, judiciary and police).